-----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, Wmh0cQWF3MrkO/GgaIY5+oQE9unovqdPuCtNr4MvnXbvE0bq+vtU0TWB+BXVW19T xVpEnCzFJon8jrjoZkFBdQ== 0001021408-01-503681.txt : 20010724 0001021408-01-503681.hdr.sgml : 20010724 ACCESSION NUMBER: 0001021408-01-503681 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010723 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICG COMMUNICATIONS INC /DE/ CENTRAL INDEX KEY: 0001013240 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841342022 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11965 FILM NUMBER: 1685757 BUSINESS ADDRESS: STREET 1: 161 INVERNESS DRIVE WEST STREET 2: PO BOX 6742 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3034145643 MAIL ADDRESS: STREET 1: 161 INVERNESS DRIVE WEST STREET 2: P O OX 6742 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: ICG HOLDINGS CANADA CO DATE OF NAME CHANGE: 19990226 FORMER COMPANY: FORMER CONFORMED NAME: ICG COMMUNICATIONS INC DATE OF NAME CHANGE: 19960430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICG HOLDINGS CANADA CO /CO/ CENTRAL INDEX KEY: 0000786343 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841128866 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-11052 FILM NUMBER: 1685758 BUSINESS ADDRESS: STREET 1: 161 INVERNESS DRIVE WEST STREET 2: P O BOX 6742 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3034145431 MAIL ADDRESS: STREET 1: 161 INVERNESS DRIVE WEST STREET 2: PO BOX 6742 CITY: ENGLEWOOD STATE: CO ZIP: 80112 FORMER COMPANY: FORMER CONFORMED NAME: ICG HOLDINGS CANADA INC DATE OF NAME CHANGE: 19970225 FORMER COMPANY: FORMER CONFORMED NAME: INTERTEL COMMUNICATIONS INC DATE OF NAME CHANGE: 19930107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICG HOLDINGS INC CENTRAL INDEX KEY: 0001001131 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 841158866 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-16223 FILM NUMBER: 1685759 BUSINESS ADDRESS: STREET 1: 161 INVERNESS DRIVE WEST STREET 2: P O BOX 6742 CITY: ENGLEWOOD STATE: CO ZIP: 80112 BUSINESS PHONE: 3034145643 MAIL ADDRESS: STREET 1: 161 INVERNESS DRIVE WEST STREET 2: SUITE 1610 CITY: ENGLEWOOD STATE: CO ZIP: 80112 10-K 1 d10k.txt FOR YEAR ENDED 12/31/2000 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K --------- [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Commission File Number 1-11965) ICG COMMUNICATIONS, INC. (Debtor-in-Possession as of November 14, 2000) (Commission File Number 1-11052) ICG HOLDINGS (CANADA) CO. (Debtor-in-Possession as of November 14, 2000) (Commission File Number 33-96540) ICG HOLDINGS, INC. (Debtor-in-Possession as of November 14, 2000) (Exact names of registrants as specified in their charters) - -------------------------------------------------------------------------------- Delaware 84-1342022 Nova Scotia Not applicable Colorado 84-1158866 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) - -------------------------------------------------------------------------------- 161 Inverness Drive West Not applicable Englewood, Colorado 80112 161 Inverness Drive West c/o ICG Communications, Inc. Englewood, Colorado 80112 161 Inverness Drive West P.O. Box 6742 Englewood, Colorado 80155-6742 161 Inverness Drive West Not applicable Englewood, Colorado 80112 (Address of principal executive offices) (Address of U.S. agent for service) - -------------------------------------------------------------------------------- Registrants' telephone numbers, including area codes: (888) 424-1144 or (303) 414-5000 Securities registered pursuant to Section 12(b) of the Act: - -------------------------------------------------------------------------------- Title of class - -------------------------------------------------------------------------------- Not applicable Not applicable Not applicable - -------------------------------------------------------------------------------- Securities registered pursuant to Section 12(g) of the Act: - -------------------------------------------------------------------------------- Name of each exchange on which Title of each class registered - -------------------------------------------------------------------------------- Common Stock, $.01 par value OTC Market (52,045,443 shares outstanding as of June 20, 2001) Not applicable Not applicable Not applicable Not applicable - -------------------------------------------------------------------------------- Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. [_] Yes [X] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of June 20, 2001 the aggregate market value of ICG Communications, Inc. Common Stock held by non-affiliates (using the closing price of $0.10 on June 20, 2001) was approximately $5,204,544. ICG Canadian Acquisition, Inc., a wholly owned subsidiary of ICG Communications, Inc., owns all of the issued and outstanding common shares of ICG Holdings (Canada) Co. ICG Holdings (Canada) Co. owns all of the issued and outstanding shares of common stock of ICG Holdings, Inc. Table of Contents PART I............................................................................................................... 1 ITEM 1. BUSINESS................................................................................................ 1 -------- Overview................................................................................................ 1 Bankruptcy Proceedings.................................................................................. 3 Asset Impairment........................................................................................ 4 Industry................................................................................................ 5 Business and Strategy................................................................................... 6 Dial-Up Services (ISP Business)...................................................................... 6 Point-to-Point Broadband, Switched Access and SS7 Services........................................... 9 Corporate Services................................................................................... 10 Sales and Marketing..................................................................................... 11 Network and Facilities.................................................................................. 12 Competition............................................................................................. 13 Regulatory Activity..................................................................................... 14 Financing Activities.................................................................................... 16 Employees............................................................................................... 17 ITEM 2. PROPERTIES.............................................................................................. 18 ---------- ITEM 3. LEGAL PROCEEDINGS....................................................................................... 18 ----------------- ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................................... 19 ---------------------------------------------------- PART II.............................................................................................................. 20 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS................................... 20 --------------------------------------------------------------------- ITEM 6. SELECTED FINANCIAL DATA................................................................................. 22 ----------------------- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................... 26 ------------------------------------------------------------------------------------- ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............................................. 45 ---------------------------------------------------------- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................................. 46 ------------------------------------------- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................... 46 ----------------------------------------------------------------------------------- PART III............................................................................................................. 47 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT.......................................................... 47 ---------------------------------------------- ITEM 11. EXECUTIVE COMPENSATION.................................................................................. 50 ---------------------- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......................................... 57 -------------------------------------------------------------- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................................................... 59 ---------------------------------------------- PART IV.............................................................................................................. 60 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORT ON FORM 8-K........................................... 60 ------------------------------------------------------------- Financial Statements.................................................................................... 60 Report on Form 8-K...................................................................................... 74 Exhibits................................................................................................ 75 Financial Statement Schedule............................................................................ 75
-i- FINANCIAL STATEMENTS..................................... F-1 FINANCIAL STATEMENT SCHEDULE............................. S-1
-ii- PART I Unless the context otherwise requires, the term "Company", "ICG" or "Registrant" means the combined business operations of ICG Communications, Inc. and its subsidiaries, including ICG Holdings (Canada) Co. ("Holdings-Canada"), ICG Holdings, Inc. ("Holdings") and ICG Services, Inc. ("ICG Services"). All dollar amounts are in U.S. dollars. The Business section and other parts of this Report contain "forward- looking statements" intended to qualify as safe harbors from liability as established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statements include words such as "intends," "anticipates," "expects," "estimates," "plans" and "believes," and other similar words. Additionally, statements that describe the Company's future plans, objectives or goals also are forward-looking statements. All forward-looking statements are subject to certain risks and uncertainties that could cause actual results or outcomes to differ materially from those currently anticipated. Factors that could affect actual results include, but are not limited to, the following: . The uncertainty of the Company's future as a result of filing for protection under bankruptcy law; . The formulation, approval and confirmation of a plan of reorganization; . The significant amount of indebtedness incurred by the Company and the Company's ability to successfully restructure this indebtedness; . The possibility of continued operating losses; . The Company's ability to successfully maintain commercial relationships with its critical vendors and suppliers; . The Company's ability to retain its major customers on profitable terms; . The extensive competition the Company will face; . The Company's ability to attract and retain qualified management and employees; . The Company's ability to access capital markets in a timely manner, at reasonable costs and on satisfactory terms and conditions; and . Changes in, or the Company's inability to comply with, existing government regulations. ITEM 1. BUSINESS -------- OVERVIEW ICG provides voice, data and Internet communication services. Headquartered in Englewood, Colorado, the Company operates an integrated metropolitan and nationwide fiber optic infrastructure offering: . Dial-Up services including primary rate interface ("PRI") and remote access services ("RAS") (sometimes referred to as "managed modem services") on a wholesale basis to national and regional Internet service providers ("ISPs"). -1- . Point-to-Point Broadband service providing traditional special access service to long distance and long-haul carriers and medium to large-sized corporate customers, as well as switched access and SS7 services. . Corporate Services, primarily retail voice and data services to businesses. Services and Customers - ---------------------- Through its Dial-Up business (referred to in previous filings as the "ISP Business"), the Company provides nationwide Internet access services to ISP customers by connecting its 27 major markets and approximately 175 data points of presence ("POPs") to its nationwide data network. ICG's customers include some of the largest national and regional ISPs. As of May 2001, the Company had approximately 570,000 ISP customer ports in service. ICG also provides Point-to-Point Broadband services to interexchange carriers ("IXCs") and end-user business customers. This service provides dedicated bandwidth and offers DS1 to OC-192 capacity to connect: (i) long-haul carriers to a local market, to large companies and to other long-haul carrier facilities; or (ii) large companies to their long distance carriers and other corporate facilities. Point-to-Point Broadband services are a rapidly expanding segment of the telecommunications market as they provide customers with dedicated capacity. The Company's Corporate Services business (referred to in previous filings primarily as the "Commercial Business") offers local, long distance, enhanced telephony and data services to businesses over its fiber optic networks located in major metropolitan areas in California, Colorado, Ohio, Texas and the Southeast. As of May 2001, Corporate Services' customers accounted for approximately 195,000 access lines. Network - ------- To provide its service offerings, ICG combines its metropolitan and regional fiber network infrastructure, 43 voice and data switches (down from 47 switches as of December 31, 2000), nationwide data backbone, data POPs, 26 asynchronous transfer mode ("ATM") switches and 67 private and seven public Internet peering arrangements. The Company's data network is supported by an OC- 48 capacity nationwide fiber optic backbone currently operating at OC-3/OC-12 capacity. The design of the physical network permits the Company to offer flexible, high-speed telecommunications services to its customers. The regional network infrastructure consists of fiber optic cables and associated advanced electronics and transmission equipment. The Company's network is generally configured in redundant synchronous optical network ("SONET") rings to make the network accessible to the largest concentration of telecommunications intensive business customers within a given market. This network architecture also offers the advantage of uninterrupted service in the event of a fiber cut or equipment failure, thereby resulting in limited outages and increased network reliability in a cost efficient manner. -2- BANKRUPTCY PROCEEDINGS During the second half of 2000, a series of financial and operational events materially impacted ICG and its subsidiaries. These events reduced the Company's expected revenue and cash flow generation for the remainder of 2000 and 2001, which in turn jeopardized the Company's ability to comply with its existing senior secured credit facility (the "Senior Facility"). As a result of these and other events, on November 14, 2000 (the "Petition Date") ICG and most of its subsidiaries (except for certain non-operating entities), filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code in the Federal Court for the District of Delaware (the "Bankruptcy Court"). The filings were made in order to facilitate the restructuring of the Company's debt, trade liabilities and other obligations. The Company and its filing subsidiaries are currently operating as debtors-in-possession under the supervision of the Bankruptcy Court. Under the Bankruptcy Code, the rights and treatment of pre-petition creditors and shareholders are expected to be substantially altered. As a result of these bankruptcy proceedings, virtually all liabilities, litigation and claims against the Debtors that were in existence as of the Petition Date are stayed unless the stay is modified or lifted or payment has been otherwise authorized by the Bankruptcy Court. At this time, it is not possible to predict the outcome of the Chapter 11 cases in general, the effects of such cases on the Company's business, or the effects on the interests of creditors and shareholders. Because of the bankruptcy filings, all of the Company's liabilities incurred prior to the Petition Date, including certain secured debt, are subject to compromise. The Company anticipates that it will present a formal plan of reorganization to the Bankruptcy Court during 2001. No assurance can be given, however, that the plan will be approved or that the Company will be successful in reorganizing its affairs within the Chapter 11 proceedings. Further, due to the bankruptcy filing and related events, there is no assurance that the carrying amounts of assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Consequently, there is substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon, but not limited to, formulation, approval, and confirmation of a plan of reorganization, adequate sources of capital, customer and employee retention, the ability to provide high quality services and the ability to sustain positive results of operations and cash flows sufficient to continue to operate. In September 2000, the Company initiated an internal restructuring process in order to conserve capital and address various financial issues. To lead the restructuring, the Company hired Randall Curran as its Chief Executive Officer. The Company also retained Zolfo Cooper, LLC as its restructuring advisor and Wasserstein Perella & Co. as its financial advisor. In conjunction with the bankruptcy filing, the Company secured a Debtor-in- Possession Revolving Credit Agreement (the "Credit Agreement") of up to $350 million, which was subsequently amended to $200 million. The Credit Agreement, combined with the Company's $214.7 million cash and short-term investments as of December 31, 2000, are expected to be sufficient to fund operations through the end of the bankruptcy process. -3- ICG is focusing on improving its overall profitability and began a restructuring process in the second half of 2000 that has resulted in a substantial reduction in operating and capital expenditures. These reductions include reducing the full-time employee count from 2,975 at the end of the second quarter of 2000 to 2,054 as of year-end 2000, and 1,433 as of May 2001. The Company has met with essential vendors in an effort to ensure continued access to required equipment and services. The Company is also executing a customer retention campaign designed to enhance customer relationships throughout the restructuring process and thereafter. ICG anticipates these restructuring efforts will conserve capital, enhance profitability and assist in retaining key customers. During the pendancy of its Chapter 11 case, the Company has continued to provide on-going services to its customers while implementing a revised strategy intended to meet customer commitments and maximize short-term cash flow. Under the revised strategy, the Company's operations will focus on existing markets where the Company has capacity thereby allowing the Company to add customers for nominal incremental cost and earn a better return on existing assets. In addition, the Company intends to focus on product sales that utilize existing infrastructure to reduce capital required in the short-term. In general, the Company will scale its geographic expansion and delivery of new products to better match its network capacity, technical capabilities and capital availability. The Company's 22-city expansion plan originally scheduled for completion at year-end 2000 has been postponed indefinitely. ASSET IMPAIRMENT As a result of adverse changes in the capital markets, downward trends in the telecommunications segment of the economy, and the subsequent deterioration in the value of telecommunication assets, including the Company's operating assets, the Company undertook an extensive analysis of its business plan during late 2000 and the first half of 2001. As a result, the Company prepared a detailed business plan that gave appropriate consideration to the environmental factors noted above and which has resulted in the Company recording a substantial asset impairment. The Company has provided for the impairment of long-lived assets, including goodwill, pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS 121). SFAS 121 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Such events include, but are not limited to, a significant decrease in the market value of an asset, a significant adverse change in the business climate that could affect the value of an asset or a current period operating or cash flow loss combined with a history of operating or cash flow losses. An impairment loss is recognized when estimated undiscounted future cash flows, before interest, expected to be generated by the asset are less than its carrying value. Measurement of the impairment loss is based on the estimated fair value of the asset, which is generally determined using valuation techniques such as the discounted present value of expected future cash flows, appraisals or other pricing models. The analysis performed by the Company indicated that there was a significant shortfall of cash flows compared to the carrying value of the Company's long-lived tangible and intangible -4- assets and that an impairment had occurred. For purposes of calculating the amount of the impairment the Company has segregated its long-lived assets into three categories: intangible assets, consisting primarily of goodwill, tangible assets to be disposed of, and tangible assets to be utilized in ongoing operations. As a result of the analysis of shortfalls of cash flows to carrying values of assets, all intangibles, consisting primarily of goodwill, have been written off as of December 31, 2000, resulting in an impairment charge of approximately $80 million. Additionally, the Company has determined that certain assets will not be utilized under the business plan and will be held for resale. The fair value of assets held for resale is based on current appraisals or purchase offers, less cost to sell. Assets held for resale are comprised primarily of: (i) assets under construction in late 2000 where the incremental capital required to place the asset in service for revenue generation was not available, and (ii) assets in service or under construction that were not required to meet expected future customer demand as defined in the business plan. The net book value of assets to be disposed of prior to the impairment was $165 million. An impairment of approximately $124 million was reflected in the financial statements as of December 31, 2000 to reduce these assets to their fair value of approximately $41 million. These assets have not been segregated as current assets in the accompanying consolidated financial statements as of December 31, 2000 and are included in property and equipment because the sales are subject to final Bankruptcy Court approval. Management, in consultation with its financial advisors, determined that the fair value of tangible assets to be utilized in ongoing operations was $550 million at December 31, 2000, based primarily on the present value of discounted cash flows; although the Company also took into consideration several other valuation techniques, including asset appraisals and current market capitalization. As a result, the Company has recorded an impairment charge as of December 31, 2000 of approximately $1.5 billion related to tangible assets to be used in the ongoing operations of the Company. The values assigned to assets if the Company emerges from bankruptcy may be different from the fair value assigned to the long-lived assets as of December 31, 2000. Under accounting guidelines commonly referred to as "Fresh Start", the fair value of all assets of the Company will be estimated as it emerges from bankruptcy in conformity with generally accepted accounting principles ("GAAP"), (specifically APB Opinion 16, Business Combinations). The assumptions regarding capital structure and availability, business environment and the enterprise value determined at the date of emergence from bankruptcy may differ from those used in the impairment analysis. INDUSTRY Industry revenue for the U.S. Internet access market is expected to increase from approximately $8 billion in 1999 to over $30 billion in 2005, reflecting expanded market size as well as enhanced service offerings. (See, JP Morgan Securities Inc. Equity Research, Telecom Services, September 8, 2000 p. 41, citing IDC, Forrester Research, Gartner Group and JPMS estimates.) The number of Internet subscribers have grown dramatically in the past two years and rapid growth is expected to continue in the coming three years. Growth in Internet use will come -5- in the form of dial-up modem access in the near-term and transition to higher growth from emerging broadband access methods. In a year 2000 report, eMarketer, which consolidates various estimates, estimated that dial-up subscribers will grow from approximately 34 million in 1999 to approximately 55 million in 2003. At the same time, broadband subscribers (cable and digital subscriber lines ("DSL")) were expected to grow from approximately 2 million to 21 million. The number of users per household and the time connected to the Internet is also expected to increase. Based on a May 2001 study by McKinsey & Company and JP Morgan H&Q, access ports serving an average of 8.9 Internet subscribers per port in 2000 will be reduced to 6.4 subscribers per port by 2005, driving increased demand for access ports to support existing dial-up subscribers. More users and increased usage of the Internet are expected to further increase the demand for ISP access ports as sold by the Company. Revenue from Point-to-Point Broadband services, also referred to as special access or private line service, is forecast to grow from an estimated industry total of approximately $13 billion in 2000 to $34 billion in 2005; a 21% compounded annual growth rate. (See JP Morgan Securities Inc. Equity Research, Telecom Services, September 8, 2000, p. 50, citing the FCC, IDC, company reports, JPMS estimates September 2000.) The Company expects to benefit from this industry growth. Local telephone and data service is estimated to generate over a $100 billion in annual revenues. According to May 2001 Federal Communications Commission ("FCC") data, competitive local exchange carriers ("CLECs") nearly doubled their market share of end-user access lines from 4.4% to 8.5% as of December 31, 1999 and 2000, respectively. CLECs such as ICG are forecast to gain an increasing share of this large market. BUSINESS AND STRATEGY As a result of the Company's financial difficulties during the second half of 2000 and its subsequent filing for bankruptcy protection, the Company has dramatically scaled back its expansion plans and has revised its business plan to better leverage its existing capital and network infrastructure. More specifically, the Company has focused its product offerings to include Dial-Up Internet access, Point-to-Point Broadband and Corporate Services, with an emphasis in growth from Dedicated Internet Access ("DIA") going forward. The Company has withdrawn certain products and services and has indefinitely postponed plans to offer certain new products and enter new markets. Moreover, the Company is transitioning all of its DSL customers to other vendors and terminating all contracts with customers using the voice over Internet protocol ("VoIP") product. Dial-Up Access (ISP Business) In early 1998, the Company acquired a nationwide data network as part of its acquisition of NETCOM On-Line Communication Services, Inc. As a result, ICG began providing Internet access services to ISPs and other customers over this data network. The data network is supported by the Company's nationwide fiber optic backbone that connects to major public and private peering connections and private peering sites with major ISPs and IXCs. The network, in combination with certain leased long-haul assets, carries data -6- traffic associated with the Company's ISP business. The design of the physical network permits the Company to offer flexible, high-speed services to its customers. The Company targets a variety of data access and transport services to ISP and corporate customers. It is not economically feasible for many ISPs to build and maintain their own networks and consequently they prefer to outsource network facilities management in order to focus internal resources on their core ISP business. To this end, ICG offers PRI, private label remote access service ("PL-RAS") and Internet remote access service ("IRAS") to ISPs to manage their Internet access requirements from connection to facilities management responsibilities. Services PRI --- PRI uses ICG's network to route ISP end-user calls from the public switched network to the ISP-owned modem banks. The end-user dials up the ISP and the call is sent through the public network and routed to the ICG switch, which then routes the call to the ISP-owned modem banks or RAS equipment. The RAS equipment is typically collocated at an ICG central office facility. If the ISP is not collocated, a Point-to-Point Broadband connection is required between the ISP's POP and the ICG central office. PRI is priced per port per month. The Company's direct costs are mainly for leased DS3 lines that connect the public network to the ICG switch or for leased T1 lines between the ICG switch and an ISP POP that is not collocated. PL-RAS ------ Remote access services are value-added services for which the customer pays network management service fees. In return, the ISP has significantly reduced capital expenditures and can quickly expand its geographical footprint over ICG's data network. PL-RAS eliminates the need to route ISP traffic to ISP-owned modem banks, because ICG acts as an aggregator of ISP -7- traffic. PL-RAS utilizes ICG-owned switches and modems to "connect and send" customer data packets to the ISP's POP, which is usually collocated in an ICG central office. From there, the ISP will either route the traffic to the Internet or to its own network. This service limits the ISP's capital deployment by eliminating the need to purchase separate modem banks in locations around the country. In 2000, the Company also offered PL-RAS service to ISPs that are not physically located in the same city. In this case, ICG RAS equipment routes the traffic to the nearest ICG hub and onto the network backbone. The traffic is carried over the Company's backbone to another ICG hub connected to the ISP. From this point, the ISP routes the traffic to the Internet or to its own system. PL-RAS is charged per port per month, typically under multi-year contracts. The Company maintains PL-RAS service to existing customers, but no longer offers PL-RAS to new customers. IRAS ---- IRAS adds an additional layer of network management as it "connects, sends and routes" customer data traffic. This service has the capability to send data directly over ICG's network to the Internet, allowing the ISP to outsource its infrastructure and create a national footprint with minimal investment in fixed assets. The Company estimates that approximately 65% of ISP traffic can bypass the ISP. IRAS is charged per port per month, typically under multi-year contracts. The Company's costs to provide this service are mainly related to the connection charges to the public network, either for a leased DS3 for on-switch traffic or for a leased PRI for off-switch traffic. Costs also include network backbone and backhaul costs to transfer traffic to the ICG hub closest to the ISP point of presence. Customers ICG's Dial-Up customers include some of the largest national and regional ISPs. As of May 2001, the Company had approximately 570,000 ISP customer ports providing PRI and remote access services. At an industry average of nine end- users per port, ICG estimates that its systems have the capacity to serve approximately 10% of all dial-up Internet subscribers in the United States. In late 1999 and early 2000, the Company experienced significant customer demand for its IRAS product, well in excess of expectations. Accordingly, aggressive build-out targets were set to meet this demand. The Company, however, experienced delays and unexpected difficulties associated with new technologies and scaling its network and operating systems. These factors, among others, contributed to the Company's network performance dropping below the agreed upon service levels between the Company and certain IRAS customers. These issues did not impact any of the Company's other services. The Company issued service credits to customers to whom service did not meet contractual requirements during the third and fourth quarters of 2000. In addition, commitments for future IRAS line installations were reduced or cancelled. -8- Network performance with respect to the IRAS product continues to be a top priority for the Company. By year-end 2000, the log-on success rate for the IRAS product had significantly improved and the Company was able to consistently meet or exceed customer expectations. Despite the Company's recent success in improving customer service, there is no assurance that the Company will not experience additional network problems. Additionally, there is no guarantee that the Company will be able to maintain existing IRAS customers or obtain new customers. In the event the Company is not successful in maintaining its IRAS customers or obtaining new customers, the Company's revenue expectations will be significantly reduced. The current economic climate has negatively impacted many business sectors including ISPs, some of which are customers of the Company's Dial-Up services. As a result, certain of the Company's ISP customers have scaled back services ordered from the Company or, in some instances, have filed for bankruptcy protection. However, the vast majority of the Company's Dial-Up access revenue is generated by large ISPs who have greater resources and are expected to maintain their businesses and ability to pay through the current economic downturn. Point-to-Point Broadband, Switched Access and SS7 Services Services Point-to-Point Broadband ------------------------ ICG provides Point-to-Point Broadband services to long distance companies, long-haul providers, ISPs and large end-user business customers. Point-to-Point Broadband involves providing a dedicated facility used: (i) to connect end-user customers to a long distance carrier's facilities; (ii) to connect a long distance carrier's facilities to the local telephone company's central offices; or (iii) to connect different facilities of the same carrier or one carrier to another within the same local calling area. Point-to-Point Broadband is offered at DS1, DS3, OC-3, OC-12, OC-48 and OC-192 capacities (with availability depending upon location). Point-to-Point Broadband services are high-margin and a growing business that currently accounts for approximately 80% of this category's revenues. Switched Access --------------- Switched access services include interstate and intrastate transport and switching of calls between two carriers or a carrier and an end-user. By using ICG to switch (terminate or originate) a call, it reduces the long distance carrier's local access cost, which is a major operating expense. SS7 --- SS7 services are used to connect long distance (including wireless) and local exchange carriers' networks, and the SS7 signals between network elements to provide faster call set-up and more efficient use of network resources. ICG is one of the largest providers of SS7 services in the U. S. -9- Customers ICG provides Point-to-Point Broadband, switched access and SS7 services to a customer base that is comprised primarily of IXCs and large-sized businesses. Approximately 40% of revenue from this category is generated from the Company's top ten customers. Corporate Services After the passage of the Federal Telecommunications Act of 1996, ICG positioned itself as a CLEC and targeted the small to medium-sized business market. The Company is currently targeting the medium to large-sized business market, which it believes represents a good growth opportunity. While the demand for voice services by businesses has been relatively stable, the demand for data services in commercial applications is expected to increase significantly over the next several years as this customer segment addresses its growing need for data connections, greater bandwidth and the need to outsource network and information technology ("IT") infrastructure. ICG has attempted to position itself to take advantage of these industry trends with its established CLEC customer base and existing voice and data networks. Services Voice ------ Competitive local dialtone service consists of basic local exchange lines and trunks with business-related voice line features (e.g. voicemail), local calling, and local toll calling. Under the Company's revised business strategy, sales of voice services will concentrate on customers with a minimum of 12 lines in areas where the Company has switch capacity. The Company's long distance service offering provides voice transmission outside of the local exchange. The Company has focused on providing voice services in the following five operating regions in the United States: California, Colorado, Ohio, Texas and parts of the Southeast. Dedicated Internet Access ("DIA") --------------------------------- DIA provides dedicated bandwidth from a customer's premises directly to the Internet at T-1 and T-3 speeds using ICG's more than 70 peering arrangements. In order to meet corporate customer needs for Internet connectivity, the Company introduced DIA service in late 2000. The Company plans to emphasize this product going forward, offering full T-1 and full/fractional T-3 connections. According to a Frost & Sullivan 2000 report, the DIA market is projected to triple between 1999 and 2005. The Company anticipates offering its DIA services in a limited number of markets in 2001 and expanding its footprint thereafter. ICG is well positioned to penetrate this market by leveraging its existing investment in metropolitan fiber and nationwide backbone capacity. Customers During 2000, ICG's Corporate Services customers were primarily small to medium-sized business customers in regional markets, purchasing voice, data or a bundled package including enhanced services. Business customer lines grew from approximately 165,000 at the beginning of 1999 to approximately 230,000 at the end of 2000. Subsequently, customer lines declined to approximately 195,000 as of May 2001. As part of the Company's revised 2001 business plan, the Company reduced the types of service and regions in which it would offer voice services. As a result, affected customers have been, or are in the process of being, transitioned to other -10- providers. Growth in the Corporate Service business is anticipated to come primarily from expansion of DIA sales and enhanced voice services to generate incremental margin. The Corporate Services business has a large customer base, of which no single customer accounts for a significant portion of revenue. SALES AND MARKETING Sales - ----- The Company's sales organization is split into a national account team, who typically handle the large Dial-Up and Point-to-Point Broadband accounts, and a regional account team, who typically handle the Company's Corporate Services' accounts. The national sales organization is made up of eight national account managers in addition to approximately ten technical and service support personnel. National account managers' responsibilities include new sales, relationship management and contract negotiation. Until recently, the Company had a separate sales force for the special access and Point-to-Point broadband services, however this sales team was merged into the national team to take advantage of the synergies inherent with a simplified sales force. The national sales group focuses on customers that will allow ICG to expand into various markets at attractive margins, thereby providing a platform from which to sell additional services. The regional sales team consists of approximately 35 managers and account executives together with a technical consultant and order coordinator for each account executive. This team is responsible for the account from the initial sale through post-installation customer care. The team structure is designed to streamline the order process and improve customer service. Teams are present in each market where the Company offers Corporate Services. In conjunction with the effort to better match sales with provisioning and economic objectives, the regional sales force has been restructured so that the number of account executives in any given market is based on existing customers, available capacity and market opportunity. In addition, the ratio of sales managers to account executives is set at five to one, reducing the need for a manager in each market. Marketing - --------- During 2000, the Company targeted smaller business customers having 50 to 100-voice and data users for Corporate Services, both large and regional ISPs for Dial-Up and primarily interexchange carriers for Point-to-Point Broadband services. Going forward, target Corporate Services customers will have 50-500 users and sales will focus on DIA with voice services targeted at the DIA customers. Point-to-Point Broadband will be marketed to large businesses as well as interexchange carriers. Sales and marketing of all services will concentrate on those regions where the Company has existing capacity and network infrastructure. Starting in the fall of 2000, the Company discontinued most of its advertising campaigns and focused its efforts on customer retention. -11- NETWORK AND FACILITIES Regional Network Assets - ----------------------- As of May 2001, ICG's regional network assets included 43 voice and data switches (down from 47 as of December 31, 2000) in 27 metropolitan service areas ("MSAs") and 5,580 miles of leased or owned regional and metropolitan fiber comprising 166,498 local fiber strand miles. In addition, the Company has two voice and data switches in hibernation that it will place into service as capacity is needed. The majority of the Company's local fiber networks are built in SONET rings that encircle a metropolitan area. This ring architecture is intended to be accessible to the largest concentration of telecommunications intensive business customers within a given market and provides fiber redundancy to ensure uninterrupted service. As of May 2001, ICG connected 8,735 buildings to its network through on-net (i.e., connected to the ICG network via ICG-owned fiber) and hybrid (i.e., connected to the ICG network via third-party fiber) applications, of which 925 buildings are connected on-net. In addition, the network is constructed to access long distance carriers as well as end-user telecommunications traffic in a cost efficient manner that lends itself to providing cost-competitive Point-to-Point Broadband and switched access services. ICG has considerable assets under various stages of construction, many of which are substantially complete. The majority of these assets are uninstalled transport and switch equipment, software development and new network construction. The Company has some switch equipment which it may or may not complete and the Company is currently reviewing options to sell these assets. Nationwide Network Architecture - ------------------------------- ICG's nationwide data backbone includes OC-3/OC-12 long-haul fiber capacity connecting nine major metropolitan areas. The fiber backbone is connected to 26 ATM switches and approximately 175 POPs with high performance routers. The Company has peering arrangements at seven public peering sites: MAE East (Washington D.C.), MAE West (Santa Clara, CA), MAE West ATM, MAE Dallas ATM, PacBell (San Jose, CA), Sprint NAP (Newark, NJ), and Ameritech (Chicago, IL). In addition, the Company has peering arrangements with approximately 70 private companies such as IXCs and major ISPs, some with multiple locations. The Company also owns and leases dedicated lines throughout the United States. The Company is currently in the process of consolidating numerous data POPs as part of its cost reduction efforts. The majority of the Company's long-haul capacity is obtained through 20 year indefeasible right of use ("IRU") agreements with Qwest. The Company currently has OC-12 capacity in service connecting: San Jose; Los Angeles; Denver; Dallas; Atlanta; Washington D.C.; Newark; and Chicago, with plans to upgrade routes from Denver and San Jose to Seattle in the third quarter of 2001 (now using OC-3 capacity). The Company has the potential to upgrade the current OC-12 routes to OC-48 capacity by placing its additional OC-12 capacity into service. -12- Certain assets are shared by each of the business sectors in order to provide integrated service and customer care for the Company's customers, including an operations support system and an advanced network operations center located in Colorado. ICG provides PRI, PL-RAS and IRAS to its ISP customers using the same local fiber and switches as utilized by the Company's Corporate Services business. COMPETITION The Company participates in several sectors of the telecommunications service industry, all of which are highly competitive. In addition, numerous competitors, including major telecommunications carriers, have rapidly expanded their network capabilities in order to service the ISP industry. The Company's competitors in the dial-up Internet access market possess (or will possess) significant network infrastructure enabling them to provide ISPs with capacity and access to the Internet. The Company's primary competitors in this revenue category include Level 3, MCI WorldCom, Genuity and the incumbent local exchange carriers ("ILECs"). While the Company believes that its network and products will enable it to compete in this industry sector, some of the Company's competitors have significantly greater market presence, brand recognition, financial, technical and personnel resources than the Company. There can be no assurance that the Company will be able to compete effectively with these companies. In the Corporate Services and Point-to-Point Broadband sectors, the Company competes in an environment dominated by the ILECs. The ILECs have long-standing relationships with their customers and provide those customers with various transmission and switching services. The ILECs also have the potential to subsidize access and switched services with revenue from a variety of businesses and historically have benefited from certain state and federal regulations that have provided the ILECs with advantages over the Company. Also included among the Company's current competitors in this sector are other CLECs, wireless service providers and private networks built by large end-users. In addition, competitors in this industry sector include IXCs such as AT&T and MCI WorldCom. Further, potential competitors have arisen using different technologies, including cable television companies, utilities, ISPs, ILECs outside their current local service areas, and the local access operations of long distance carriers. Many of the Company's actual and potential competitors have greater financial, technical and marketing resources than the Company. The Company is aware that consolidation of telecommunications companies, including mergers between certain of the ILECs, between long distance companies and cable television companies and between long distance companies and CLECs, 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, particularly in the local telephone market. Since enactment, several telecommunications companies have indicated their intention to aggressively expand into many segments of the telecommunications industry, including segments in which the Company participates or expects to participate. This may result in more participants than can ultimately be successful in a given market. -13- While strong competition currently exists in all sectors of the industry, the Company believes that the demand for voice and data services by business customers provides expanded opportunities for providers such as the Company. There can be no assurance, however, that sufficient demand will exist for the Company's network services in its selected markets, that market prices will not dramatically decline or that the Company will be successful in executing its revised business strategy in time to meet new competitors, or at all. REGULATORY ACTIVITY Each of ICG's current service categories (Dial-Up, Point-to-Point Broadband and Corporate Services) incurs some form of regulatory oversight from state and/or federal regulatory authorities. For example, most of the services offered by the Dial-Up business (i.e., managed modem services) are unregulated. However, certain regulatory provisions, including prohibitions against price discrimination, are typically enforced by state regulatory agencies. With respect to the Point-to-Point Broadband business, the Company's primary regulatory compliance responsibility relates to the collection of access charges for both originating and terminating traffic. The application and collection of access charges are regulated by both state and federal agencies. Finally, Corporate Services, including the provisioning of facilities used to carry voice traffic, has traditionally incurred significant regulatory oversight. General Operational Issues - -------------------------- The Federal Telecommunications Act of 1996 (the "Telecommunications Act") generally requires ILECs to negotiate agreements to provide interconnection and nondiscriminatory access to their local telecommunications networks and other essential facilities. However, each new agreement, as well as renewals of the original agreement, in some cases, are subject to negotiations with each ILEC. Where the parties cannot agree on negotiated terms and conditions of the agreements, the Company may petition the proper state regulatory agency to arbitrate disputed issues. The terms of an arbitrated agreement are subject to review by the federal courts. The Company has executed interconnection agreements with every major ILEC and while the initial terms of some of those agreements have expired or are soon expiring, the Company is in the process of renegotiating and extending the terms of those agreements. Reciprocal compensation has historically constituted an important source of revenue for the Company. Reciprocal compensation is payment by the carrier of an originating voice or Internet bound call to a carrier that terminates the call. In effect, the payment constitutes reimbursement of costs associated with call termination. Typically, reciprocal compensation is treated by the Company as being comprised of two separate elements. The first element, local reciprocal compensation, relates to costs incurred as a result of the termination of calls that originate and terminate within the same local access transport area ("LATA"). The second element, intra-LATA toll reciprocal compensation, refers to those calls that originate within the LATA, but are terminated in a different local calling area. The Company believes that it is entitled to receive reciprocal compensation from ILECs for the transport and termination of Internet bound calls originated by ILEC customers -14- pursuant to various interconnection agreements and as codified by a number of state utility commissions. However, as a means of gaining certainty with respect to the continued collection of reciprocal compensation revenue, the Company negotiated voluntary settlement agreements with certain ILECs that provide for the payment of compensation for terminating ISP traffic. These agreements expire at dates ranging from May 2002 to December 2003. In April 2001, the Federal Communications Commission ("FCC") issued an order on reciprocal compensation which, if not overturned on appeal, will eventually eliminate carrier-to-carrier payments for termination of ISP traffic after a 36-month transition period. The Company believes that the FCC order will have no effect on its existing interconnection agreements that require the payment of reciprocal compensation or the aforementioned voluntary settlement agreements. Thus, the FCC order will have no material affect on the ability of the Company to collect reciprocal compensation during the terms of those respective agreements. Notwithstanding the foregoing, the Company anticipates that reciprocal compensation will be a decreasing source of revenue after 2003. Federal Regulation - ------------------ The Company generally operates as a regulated carrier with fewer regulatory obligations than the ILECs. The Company must comply with the requirements of the Telecommunications Act, such as offering service on a non-discriminatory basis at just and reasonable rates. The FCC treats the Company as a non-dominant carrier. The FCC has established different levels of regulation for dominant and non-dominant carriers. Of domestic common carriers, only the ILECs are classified as dominant carriers for the provision of access services, and all other providers of domestic common carrier services are classified as non- dominant. The FCC recently eliminated the requirement that non-dominant interstate access carriers file tariffs. The Company is not subject to price cap or rate-of-return regulation, nor is it currently required to obtain FCC authorization for the installation or operation of its fiber optic network facilities used for services in the United States. State Regulation - ---------------- In general, state public utility commissions have regulatory jurisdiction over the Company when Company facilities and services are used to provide local and other intrastate telecommunications services. Under the Telecommunications Act, state commissions continue to set regulatory requirements for providers of local and intrastate long distance services, including service quality standards. State regulators typically set prices for interconnection between CLEC and ILEC networks, for the provision of unbundled network elements by the ILECs. In certain states, the utility commission has the authority to scrutinize the rates charged by CLECs for intrastate long distance and local services. The Company's provision of local dial tone and intrastate switched and dedicated services are classified as intrastate and therefore subject to state regulation. To provide intrastate service (particularly local dial tone service), the Company generally must obtain a Certificate of Public Convenience and Necessity ("CPCN") from the state regulatory agency prior to offering service. Additionally, most states require the Company to file tariffs, which articulate the terms and conditions for services that are classified as -15- regulated intrastate services. In some states, the Company may also be subject to various reporting and record-keeping requirements. Local Government Authorizations - ------------------------------- Under the Telecommunications Act, local authorities retain jurisdiction under applicable state law to control the Company's access to municipally owned or controlled rights of way and to require the Company to obtain street opening and construction permits to install and expand its fiber-optic network. In addition, many municipalities require the Company to obtain licenses or franchises (which generally have terms of 10 to 20 years) and to pay license or franchise fees, often based on a percentage of gross revenue, in order to provide telecommunications services. However, in certain states, including California and Colorado, current law limits the amount of such fees to be paid to local jurisdictions to actual costs incurred by the municipality for maintaining the public rights of way. There is no assurance that certain cities that do not impose fees will not seek to impose fees, nor is there any assurance that, following the expiration of existing franchises, fees will remain at their current levels. The Telecommunications Act requires that local governmental authorities treat telecommunications carriers in a non-discriminatory and competitively neutral manner. If any of the Company's existing franchise or license agreements are terminated prior to their expiration dates or are not renewed, and consequently the Company is forced to remove its facilities from the public rights of way, such termination could have a material adverse effect on the Company. FINANCING ACTIVITIES 2000 Activities - --------------- Credit Agreement On December 4, 2000, the Company finalized its Debtor-in-Possession Revolving Credit Agreement ("Credit Agreement") with Chase Manhattan bank. The Credit Agreement originally provided for up to $350 million in financing, subject to certain conditions. This amount was subsequently amended to provide for up to $200 million. Any amounts drawn under the Credit Agreement must first be used for repayment in full of the Company's existing Senior Facility. Borrowings under the Credit Agreement bear interest at 3% plus the greater of (i) the prime rate, (ii) the Base CD rate (as defined) plus 1%, or (iii) the Federal Funds effective rate (as defined) plus 1/2%. The Company also has the option to borrow at the adjusted LIBOR rate (as defined) plus 4%. This agreement contains certain covenants including capital expenditure limitations, EBITDA targets, indebtedness and dividend restrictions. The Credit Agreement, as amended, requires repayment in full by May 14, 2002. As of June 30, 2001, no amounts had been drawn under the Credit Agreement. Mandatorily Redeemable 8% Series A Convertible Preferred Stock On April 10, 2000, the Company sold 75,000 shares of mandatorily redeemable 8% Series A-1, A-2 and A-3 Convertible Preferred Stock of ICG (the "8% Series A Convertible Preferred Stock") and 10,000,000 warrants to purchase ICG Common Stock for net proceeds of $707.7 million. -16- 1999 Activities - --------------- Senior Facility On August 12, 1999 ICG Equipment, Inc. and ICG NetAhead, Inc. ("NetAhead") entered into a $200.0 million senior secured financing facility ("Senior Facility") consisting of a $75.0 million term loan, a $100.0 million term loan and a $25.0 million revolving line of credit. The Senior Facility is guaranteed by ICG Services and ICG Mountain View, Inc. and is secured by the assets of ICG Equipment, Inc. and NetAhead. The Company continues to make interest-only payments on the Senior Facility balance of $84.6 million at December 31, 2000, as approved by the Bankruptcy Court. Interest is paid based on the prime rate plus 4.25% on $36 million of the balance and the prime rate plus 3.875% on the remaining $48.6 million. On December 19, 2000, the United States Bankruptcy Court issued an order directing ICG Services and certain of its subsidiaries to provide adequate protection to the lenders of the Senior Facility in the form of a first priority post petition security interest. The Company is also subject to certain financial covenants based on results of operations under the Senior Facility. EMPLOYEES As of December 31, 2000, the Company employed 2,054 full-time employees. In the first quarter of 2001, the Company reduced its workforce such that by the end of May 2001, the Company had 1,433 full-time employees. The Company's employees are not represented by a union. In the fourth quarter of 2000, the Company discontinued its existing bonus program and enacted an employee retention program through July 2001. In June 2001, the Company approved a performance-based bonus plan for employees for the second half of 2001. The Company believes that the successful implementation of its business strategy will depend upon its continued ability to attract and retain qualified employees. The Company does not expect to add significant new employees to the organization in the near future. During 2000, the Company provided non-cash benefit programs, including a 401(k) program and an Employee Stock Purchase Plan. In October 2000, the Employee Stock Purchase Plan was suspended. Further, beginning with the third quarter of 2000, the 401(k) Company match was made in cash instead of ICG stock. For the third quarter 2000, the Company matched, in cash, 100% of the first 6% of employees' contributions. Beginning October 1, 2000, the Company matched, in cash, 50% of the first 6% of employees' contributions. The Company believes that it generally offers compensation packages that are comparable with those of its competitors who are similar in size and capital structure. Due to numerous factors, including the uncertainty facing the Company as a result of filing for bankruptcy, qualified personnel are difficult to recruit and retain and the Company cannot guarantee that it will be able to attract and retain the personnel necessary to implement its revised business strategy. -17- ITEM 2. PROPERTIES ---------- The Company's real estate portfolio includes numerous properties for administrative, warehouse, equipment, collocation and POP sites. As of December 31, 2000, the Company had approximately 188,000 square feet of leased office, warehouse, and equipment space in the Denver metropolitan area and approximately 1,480,000 square feet leased in other areas of the United States. As of May 2001, the Company had rejected approximately 50 leases through the bankruptcy process and through terminations directly with landlords. The Company now leases approximately 86,000 square feet of warehouse and equipment space in the Denver metropolitan area and approximately 1,215,000 square feet of space leased in other areas of the United States. The Company continues to evaluate its real estate needs and it is anticipated that additional leases will be rejected through the bankruptcy process. Effective January 1, 1999, ICG Services purchased the Company's corporate headquarters building, land and improvements (collectively, the "Corporate Headquarters") for approximately $43.4 million. The Corporate Headquarters is approximately 239,749 square feet. ICG Services financed the purchase primarily through a mortgage granted in favor of an affiliate of the seller, which encumbers the Corporate Headquarters. Effective May 1, 1999, the Corporate Headquarters was transferred to ICG 161, L.P. ("ICG 161"), a special purpose limited partnership owned 99% by a subsidiary of ICG Services and 1% by an affiliate of the mortgagee and seller, and ICG 161 assumed the loan secured by the mortgage. The partnership agreement for ICG 161 granted to the 1% limited partner an option to acquire all of ICG Services subsidiary's interest in the partnership for a purchase price of $43.1 million, which option was exercisable from January 1, 2004 through January 31, 2012, or earlier if the Company is in default. As a result of the Company's financial difficulties, on June 29, 2001 the Company, with the Bankruptcy Court's approval, sold its partnership interest to the limited partner for approximately $33.1 million in a cashless transaction. As a result of the sale, the Company remains a tenant of the Corporate Headquarters property under a long-term capital lease. The Company also owns a 30,000 square foot office building located in Englewood, Colorado. The Company listed this property for sale as of May 2001, which sale will be subject to Bankruptcy Court approval. On December 10, 1999, a subsidiary of ICG Services acquired an 8.36 acre parcel of vacant land located adjacent to the Corporate Headquarters for approximately $3.3 million. The Company had planned to use this land in connection with the expansion of its corporate headquarters. As a result of the Company's on-going restructuring, expansion plans with respect to this site have been abandoned and the property has been listed for sale since the fourth quarter of 2000. Any sale, however, will be subject to Bankruptcy Court approval. ITEM 3. LEGAL PROCEEDINGS ----------------- On November 14, 2000, the Company and most of its subsidiaries filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code in the Federal District of Delaware (Joint Case Number 00-4238 (PJW)). The Company is currently operating -18- as a debtor-in-possession under the supervision of the Bankruptcy Court. The bankruptcy petition was filed in order to preserve cash and give the Company the opportunity to restructure its debt. During the third and fourth quarters of 2000, the Company was served with fourteen lawsuits filed by various shareholders in the Federal District Court for the District of Colorado. All of the suits name as defendants the Company, the Company's former Chief Executive Officer, J. Shelby Bryan, and the Company's former President, John Kane. Additionally, one of the complaints names the Company's former President, William S. Beans, Jr., as a defendant. (Both Messrs. Bryan and Beans remain on the Company's Board of Directors.) All of the complaints seek unspecified damages for alleged violations of Rules 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaints seek class action certification for similarly situated shareholders. It is anticipated that the lawsuits will be consolidated and that the Court will choose a lead plaintiffs' counsel. The Company has tendered these claims to the Company's insurers. At this time, the claims against the Company have been stayed pursuant to the Company's filing for bankruptcy. The Company has retained legal counsel and intends to vigorously defend against these lawsuits if and when the stay is lifted. The claims against the individual defendants are proceeding and these defendants have retained separate legal counsel to prepare a defense. In January 2001, certain shareholders of ICG Funding, LLC ("Funding") a wholly-owned subsidiary of the Company, filed an adversary proceeding in the United States Bankruptcy Court for the District of Delaware (Case number 00- 04238 PJW Jointly Administered, Adversary Proceeding No. 01-000 PJW) against the Company and Funding. The shareholders in this adversary action sought to recover approximately $2.3 million from an escrow account established to fund certain dividend payments to holders of the Funding Exchangeable Preferred Securities. Because Funding filed for bankruptcy protection, Funding did not declare the last dividend that was to have been paid with the remaining proceeds of the escrow account. In April 2001, the Company and Funding finalized a settlement agreement with the shareholders that has been approved by the Bankruptcy Court. Under the terms of the settlement, the shareholders received approximately two-thirds of the funds in the escrow account and the Company received the remaining one-third of the escrowed funds, subject to certain contingencies and holdbacks related to shareholders that did not participate in the settlement. The Company is a party to certain other litigation that has arisen in the ordinary course of business. In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. The Company is not involved in any administrative or judicial proceedings relative to an environmental matter. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- None. -19- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS --------------------------------------------------------------------- ICG Common Stock, $.01 par value per share, was quoted on the NASDAQ National Market (NASDAQ) from March 25, 1997 until November 18, 2000 under the symbol "ICGX" and was previously listed on the American Stock Exchange (AMEX), from August 5, 1996 to March 24, 1997 under the symbol "ICG." Prior to August 5, 1996, Holdings-Canada's common shares had been listed on the AMEX under the symbol "ITR" from January 14, 1993 through February 28, 1996, and under the symbol "ICG" thereafter through August 2, 1996. Holdings-Canada Class A Common Shares (the Class A Shares) ceased trading on the AMEX at the close of trading on August 2, 1996. The Class A Shares, which were listed on the Vancouver Stock Exchange (VSE) under the symbol "IHC.A," ceased trading on the VSE at the close of trading on March 12, 1997. During 1998, all of the remaining Class A Shares outstanding held by third parties were exchanged into shares of ICG Common Stock. The following table sets forth the high and low sales prices of ICG Common Stock as reported on NASDAQ for the quarterly periods indicated. The NASDAQ halted trading of the Company's common stock on November 14, 2000 and delisted the stock on November 18, 2000. As of June 20, 2001, the Company's common stock continues to be traded on the over-the-counter ("OTC") market. NASDAQ National Market ---------------------- High Low -------- -------- 1999: First Quarter $ 24.13 $ 15.25 Second Quarter 28.56 16.81 Third Quarter 28.13 15.00 Fourth Quarter 21.94 13.94 2000: First Quarter $ 39.25 $ 16.31 Second Quarter 36.75 17.75 Third Quarter 23.25 0.41 The Company has never declared or paid dividends on ICG Common Stock and does not intend to pay cash dividends on ICG Common Stock in the foreseeable future. Further, as a result of the bankruptcy filings, the Company anticipates that currently outstanding ICG Common Stock will be substantially altered and likely have no future value following the Company's reorganization under the Bankruptcy Code. On April 10, 2000, the Company sold 75,000 shares of mandatorily redeemable 8% Series A-1, A-2 and A-3 Convertible Preferred Stock of ICG (the "8% Series A Convertible Preferred Stock") and 10,000,000 warrants to purchase ICG Common Stock for net proceeds of $707.7 million. Each share of 8% Series A Convertible Preferred Stock has an initial liquidation -20- preference of $10,000 per share and bears a cumulative dividend rate of 8% per annum, compounded daily. As a result of the Company's financial situation, the Company does not anticipate paying dividends on the Preferred Stock and has ceased the recognition of dividends. The value allocated to the warrants was $80.6 million at the time of the transaction. In April 1998, ICG Services sold $405.3 million principal amount at maturity ($250.0 million original issue price) of 9 7/8% Senior Discount Notes due 2008 (the 9 7/8% Notes). In February 1998, ICG Services sold $490.0 million principal amount at maturity ($300.6 million original issue price) of 10% Senior Discount Notes due 2008 (the 10% Notes). In September and October 1997, ICG Funding, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company ("Funding"), completed a private placement of $132.25 million of 6 3/4% Exchangeable Limited Liability Company Preferred Securities Mandatorily Redeemable 2009 (the 6 3/4% Preferred Securities). Dividends on the 6 3/4% Preferred Securities were cumulative at the rate of 6 3/4% per annum and were payable in cash through November 15, 2000 and, thereafter, in cash or shares of ICG Common Stock at the option of ICG Funding. The 6 3/4% Preferred Securities are exchangeable, at the option of the holder, into ICG Common Stock at an exchange price of $24.025 per share, subject to adjustment. In March 1997, Holdings sold $176.0 million principal amount at maturity ($99.9 million original issue price) of 11 5/8% Senior Discount Notes due 2007 (the 11 5/8% Notes) and 100,000 shares of 14% Preferred Stock Mandatorily Redeemable 2008 (the 14% Preferred Stock), having a liquidation preference of $1,000 per share. Each of the foregoing offerings was exempt from registration pursuant to Rule 144A under the Securities Act. Sales were made only to "qualified institutional buyers," as defined in Rule 144A under the Securities Act, and other institutional accredited investors. With the exception of the 8% Series A Convertible Preferred Stock, the securities sold in each of the foregoing offerings were subsequently registered under the Securities Act. In July 1998, the Company issued 145,997 shares of ICG Common Stock in connection with the acquisition of DataChoice Network Services, L.L.C. ("DataChoice"), valued at approximately $32.88 per share on the date of the sale (the "DataChoice Shares"). The sale of the DataChoice Shares was exempt from registration under Section 4(2) of the Securities Act because the offers and sales were made to a limited number of investors in a private transaction. Resale of the DataChoice Shares was subsequently registered on a Form S-3 registration statement that was declared effective on April 2, 1999. Also in July 1998, the Company issued 356,318 shares of ICG Common Stock in connection with the acquisition of NikoNet Inc., CompuFAX Acquisition Corp. and Enhanced Messaging Services, Inc. (collectively, "NikoNet"), valued at approximately $30.03 per share on the date of the sale (the "NikoNet Shares"). The sale of the NikoNet Shares was exempt from registration under Section 4(2) of the Securities Act because the offer and sales were made to a limited number of investors in a private transaction. In October 1997, the Company issued 687,221 shares of ICG Common Stock (the "CBG Shares") to certain shareholders of Communications Buying Group, Inc. ("CBG"), an Ohio -21- based local exchange and Centrex reseller, in connection with the acquisition of CBG for a purchase price of approximately $16.0 million. The sale of the CBG Shares was exempt from registration under Section 4(2) of the Securities Act because the offers and sales were made to a limited number of investors in a private transaction. Resale of the CBG Shares was subsequently registered on a Form S-3 registration statement that was declared effective on October 31, 1997. ITEM 6. SELECTED FINANCIAL DATA ----------------------- The selected financial data for the fiscal year ended September 30, 1996, the three months ended December 31, 1996 and the years ended December 31, 1997, 1998, 1999 and 2000 has been derived from the audited consolidated financial statements of the Company. The Company's 2000 audited consolidated financial statements include a going concern opinion. The information set forth below should be read in conjunction with the Company's audited consolidated financial statements and the notes thereto included elsewhere in this Annual Report. The Company's development and expansion activities, including acquisitions, during the periods shown below materially affect the comparability of this data from one period to another. See, "Management's Discussion and Analysis of Financial Condition and Results of Operations." -22-
Fiscal Year Ended Three Months September Ended 30, December 31, Years Ended December 31, ----------- ------------ ----------------------------------------------------- 1996 1996 1997 1998 1999 2000 ----------- ------------ --------- -------- -------- ---------- (in thousands, except per share amounts) Statement of Operations Data: Revenue /(1)/ $ 72,731 27,307 149,358 303,317 479,226 598,283 Operating costs and expenses: Operating costs 65,436 27,018 147,338 187,260 238,927 440,090 Selling, general and administrative expenses 45,150 16,895 121,884 159,939 239,756 283,965 Depreciation and amortization 24,041 8,266 49,836 91,927 174,239 318,771 Provision for impairment of long-lived assets 9,800 - 5,169 - 31,815 1,701,466 Other, net 1,030 (805) 292 4,877 387 4,108 ----------- ------------ --------- -------- -------- ---------- Total operating costs and expenses 145,457 51,374 324,519 444,003 685,124 2,748,400 Operating loss (72,726) (24,067) (175,161) (140,686) (205,898) (2,150,117) Interest expense (85,299) (24,441) (117,521) (170,015) (212,420) (233,643) Interest income 19,300 5,962 21,907 28,401 16,300 23,782 Other expense, net (5,118 (77) (503) (1,118) (2,522) (15,166) ----------- ------------ --------- -------- -------- ---------- Loss from continuing operations before reorganization expenses, income taxes, preferred dividends, share of losses, extraordinary gain and cumulative effect of change in accounting principle (143,843) (42,623) (271,278) (283,418) (404,540) (2,375,144) Reorganization expenses - - - - - (55,309) Income tax benefit (expense) 5,305 (1) - (90) (25) - Accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses (27,598) (5,529) (39,019) (55,183) (61,897) (60,043) Share of losses of joint venture (1,814) - - - - - ----------- ------------ --------- -------- -------- ---------- Loss from continuing operations before extraordinary gain and cumulative effect of change in accounting principle (167,950) (48,153) (310,297) (338,691) (466,462) (2,490,496) Net (loss) income from discontinued operations (56,969) (13,161) (50,438) (79,354) 36,789 4,342 Extraordinary gain on sales of operations of NETCOM - - - - 195,511 - Cumulative effect of change in accounting principle /(1)/ (3,453) - - - - (7,363) ----------- ------------ --------- -------- -------- ---------- Net loss (228,372) (61,314) (360,735) (418,045) (234,162) (2,493,517) Accretion of 8% Series A Convertible Preferred Stock to liquidation value and related dividends - - - - - (158,249) Charge for beneficial conversion feature of 8% Series A Convertible Preferred Stock - - - - - (159,279) ----------- ------------ --------- -------- -------- ---------- Net loss attributable to common stockholders $(228,372) (61,314) (360,735) (418,045) (234,162) (2,811,045) =========== ============ ========= ======== ======== ==========
-23-
Fiscal Year Ended Three Months September Ended 30, December 31, Years Ended December 31, ----------- ------------ ------------------------------------------------ 1996 1996 1997 1998 1999 2000 ----------- ------------ --------- ---------- ---------- ---------- (in thousands, except per share amounts) Loss per share from continuing operations - basic and diluted $ (4.55) (1.15) (7.30) (7.49) (9.90) (49.63) =========== ============ ========= ========== ========== ========== Net loss per share-basic and diluted (6.19) (1.47) (8.49) (9.25) (4.97) (56.02) =========== ============ ========= ========== ========== ========== Weighted average number of shares outstanding - basic and diluted /(2)/ 36,875 41,760 42,508 45,194 47,116 50,184 =========== ============ ========= ========== ========== ========== Other Data: Net cash (used) provided by operating activities (29,375) 200 (106,761) (100,060) (43,476) 122,483 Net cash used by investing activities (137,148) (79,621) (422,585) (343,561) (122,412) (557,619) Net cash provided (used) by financing activities 365,272 (1,741) 308,804 525,601 67,018 528,444 EBITDA /(3)/ (37,855) (16,606) (119,864) (43,882) 543 (125,772) Capital expenditures of continuing operations /(4)/ 162,510 67,515 261,318 360,980 739,061 973,584 Capital expenditures of discontinued operations /(4)/ 68,789 11,336 25,533 38,891 12,264 - Balance Sheet Data: Cash, cash equivalents and short-term investments available for sale 458,640 392,921 232,855 262,307 125,507 214,713 Net current assets (liabilities) of discontinued operations /(5)/ 62,173 68,950 58,586 66 (529) - Working capital (deficit) 499,810 415,247 263,674 294,934 (69,960) 278,738 Property and equipment, net 308,615 374,924 603,988 908,058 1,527,879 590,500 Net non-current assets of discontinued operations /(5)/ 149,378 154,481 128,206 102,774 - - Total assets 1,066,224 1,071,699 1,205,331 1,589,647 2,020,621 980,452 Liabilities subject to compromise - - - - - 2,784,627 Current portion of long-term debt and capital lease obligations 7,661 24,877 7,096 4,892 8,886 796 Long-term debt and capital lease obligations, less current portion 739,308 761,135 957,508 1,661,944 1,969,249 117,784 Redeemable preferred securities of subsidiaries 153,318 159,120 420,171 466,352 519,323 1,366,660 Common stock and additional paid-in capital 504,851 508,182 534,290 577,940 599,760 882,662 Accumulated deficit (380,859) (430,682) (791,417) (1,209,462) (1,443,624) (4,254,669) Stockholders' equity (deficit) 125,203 78,711 (256,983) (631,177) (843,864) (3,372,007)
(1) During the fiscal year ended September 30, 1996, the Company changed its method of accounting for long-term telecom services contracts to recognize revenue as services are provided. Other than the cumulative effect of adopting this new method of accounting, the effect of this change in accounting for the periods presented was not significant. During the year ended December 31, 2000, the Company adopted Staff Accounting Bulletin No. 101 (SAB 101), which requires the recognition of installation revenue over the average customer term. This change resulted in a cumulative effect of a change in accounting principle of $7.4 million and an increase in revenue for the year ended December 31, 2000 of approximately $0.9 million. -24- (2) Weighted average number of shares outstanding for the fiscal year ended September 30, 1996, the three months ended December 31, 1996, and the years ended December 31, 1997 and 1998 represents Holdings- Canada common shares outstanding for the period from October 1, 1995 through August 2, 1996, and represents ICG Common Stock and Holdings- Canada Class A Shares (not owned by the Company) outstanding for the periods from August 5, 1996 through December 31, 1998. During the year ended December 31, 1998, all of the remaining Class A Shares outstanding held by third parties were exchanged into shares of ICG Common Stock and, accordingly, weighted average number of shares outstanding for the years ended December 31, 1999 and 2000 represents ICG Common Stock only. (3) EBITDA consists of loss from continuing operations before interest, income taxes, reorganization expenses, depreciation and amortization, other expense, net, accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses, and certain nonrecurring charges such as the provision for impairment of long-lived assets and other, net operating costs and expenses, including deferred compensation and net loss (gain) on disposal of long-lived assets. EBITDA is a measure commonly used in the telecommunications industry. EBITDA is presented to enhance an understanding of the Company's operating results and is not intended to represent cash flows or results of operations in accordance with generally accepted accounting principles (GAAP) for the periods indicated. EBITDA is not a measurement under GAAP and is not necessarily comparable with similarly titled measures of other companies. Net cash flows from operating, investing and financing activities as determined using GAAP are also presented in Other Data. (4) Capital expenditures includes assets acquired under capital leases and through the issuance of debt or warrants and excludes corporate headquarters assets acquired through the issuance of long-term debt. Capital expenditures of discontinued operations include the capital expenditures of Zycom, NETCOM, Network Services and Satellite Services combined for all periods presented. (5) Net non-current assets of discontinued operations and net current assets (liabilities) of discontinued operations represent the assets and liabilities of Zycom, NETCOM, Network Services and Satellite Services combined for periods presented prior to the respective dates of each sale. -25- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND --------------------------------------------------------------- RESULTS OF OPERATIONS --------------------- The following discussion includes certain forward-looking statements that are affected by important factors including, but not limited to, the following: . The uncertainty of the Company's future as a result of filing for protection under bankruptcy law; . The formulation, approval and confirmation of a plan of reorganization; . The significant amount of indebtedness incurred by the Company and the Company's ability to successfully restructure this indebtedness; . The possibility of continued operating losses; . The Company's ability to successfully maintain commercial relationships with its critical vendors and suppliers; . The Company's ability to retain its major customers on profitable terms; . The extensive competition the Company will face; . The Company's ability to attract and retain qualified management and employees; . The Company's ability to access capital markets in a timely manner, at reasonable costs and on satisfactory terms and conditions; and . Changes in, or the Company's inability to comply with, existing government regulations. The results for the years ended December 31, 1998, 1999 and 2000 have been derived from the Company's audited consolidated financial statements included elsewhere herein. The Company's consolidated financial statements reflect the operations of Zycom, NETCOM, Network Services and Satellite Services as discontinued for all periods presented. All dollar amounts are in U.S. dollars. COMPANY OVERVIEW ICG provides voice, data and Internet communication services. Headquartered in Englewood, Colorado, the Company operates an integrated metropolitan and nationwide fiber optic infrastructure offering: . Dial-Up services including primary rate interface ("PRI") and remote access services ("RAS") (sometimes referred to as "managed modem services") on a wholesale basis to national and regional Internet service providers ("ISPs"). . Point-to-Point Broadband service providing traditional special access service to long distance and long-haul carriers and medium to large-sized corporate customers, as well as switched access and SS7 services. . Corporate Services, primarily retail voice and data services to businesses. -26- Services and Customers - ---------------------- Through its Dial-Up business (referred to in previous filings as the "ISP Business"), the Company provides nationwide Internet access services to ISP customers by connecting its 27 major markets and approximately 175 data points of presence ("POPs") to its nationwide data network. ICG's customers include some of the largest national and regional ISPs. As of May 2001, the Company had approximately 570,000 ISP customer ports in service. ICG also provides Point-to-Point Broadband services to interexchange carriers ("IXCs") and end-user business customers. This service provides dedicated bandwidth and offers DS1 to OC-192 capacity to connect: (i) long-haul carriers to a local market, to large companies and to other long-haul carrier facilities; or (ii) large companies to their long distance carriers and other corporate facilities. Point-to-Point Broadband services are a rapidly expanding segment of the telecommunications market as they provide customers with dedicated capacity. The Company's Corporate Services business (referred to in previous filings primarily as the "Commercial Business") offers local, long distance, enhanced telephony and data services to businesses over its fiber optic networks located in major metropolitan areas in California, Colorado, Ohio, Texas and the Southeast. As of May 2001, Corporate Services customers accounted for approximately 195,000 access lines in service. Network - ------- To provide its service offerings, ICG combines its metropolitan and regional fiber network infrastructure, 43 voice and data switches (down from 47 switches as of December 31, 2000), nationwide data backbone, data POPs, 26 asynchronous transfer mode ("ATM") switches and 67 private and seven public Internet peering arrangements. The Company's data network is supported by an OC- 48 capacity nationwide fiber optic backbone currently operating at OC-3/OC-12 capacity. The design of the physical network permits the Company to offer flexible, high-speed telecommunications services to its customers. The regional network infrastructure consists of fiber optic cables and associated advanced electronics and transmission equipment. The Company's network is generally configured in redundant synchronous optical network ("SONET") rings to make the network accessible to the largest concentration of telecommunications intensive business customers within a given market. This network architecture also offers the advantage of uninterrupted service in the event of a fiber cut or equipment failure, thereby resulting in limited outages and increased network reliability in a cost efficient manner. BANKRUPTCY PROCEEDINGS During the second half of 2000, a series of financial and operational events materially impacted ICG and its subsidiaries. These events reduced the Company's expected revenue and cash flow generation for the remainder of 2000 and 2001, which in turn jeopardized the Company's ability to comply with its existing senior secured credit facility (the "Senior Facility"). As a result of these and other events, on November 14, 2000 (the "Petition Date") ICG and most of its subsidiaries (except for certain non-operating entities), filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code in the Federal -27- Court for the District of Delaware (the "Bankruptcy Court"). The filings were made in order to facilitate the restructuring of the Company's debt, trade liabilities and other obligations. The Company and its filing subsidiaries are currently operating as debtors-in-possession under the supervision of the Bankruptcy Court. Under the Bankruptcy Code, the rights and treatment of pre-petition creditors and shareholders are expected to be substantially altered. As a result of these bankruptcy proceedings, virtually all liabilities, litigation and claims against the Debtors that were in existence as of the Petition Date are stayed unless the stay is modified or lifted or payment has been otherwise authorized by the Bankruptcy Court. At this time, it is not possible to predict the outcome of the Chapter 11 cases in general, the effects of such cases on the Company's business, or the effects on the interests of creditors and shareholders. Because of the bankruptcy filings, all of the Company's liabilities incurred prior to the Petition Date, including certain secured debt, are subject to compromise. The Company anticipates that it will present a formal plan of reorganization to the Bankruptcy Court during 2001. No assurance can be given, however, that the plan will be approved or that the Company will be successful in reorganizing its affairs within the Chapter 11 proceedings. Further, due to the bankruptcy filing and related events, there is no assurance that the carrying amounts of assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Consequently, there is substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon, but not limited to, formulation, approval, and confirmation of a plan of reorganization, adequate sources of capital, customer and employee retention, the ability to provide high quality services and the ability to sustain positive results of operations and cash flows sufficient to continue to operate. In September 2000, the Company initiated an internal restructuring process in order to conserve capital and address various financial issues. To lead the restructuring, the Company hired Randall Curran as its Chief Executive Officer. The Company also retained Zolfo Cooper, LLC as its restructuring advisor and Wasserstein Perella & Co. as its financial advisor. In conjunction with the bankruptcy filing, the Company entered into a Debtor-in-Possession Revolving Credit Agreement (the "Credit Agreement") of up to $350 million, which was subsequently amended to $200 million. The Credit Agreement, combined with the Company's $214.7 million cash and short-term investments balances as of December 31, 2000, are expected to be sufficient to fund operations through the end of the bankruptcy process. ICG is focusing on improving its overall profitability and began a restructuring process in the second half of 2000 that has resulted in a substantial reduction in operating and capital expenditures. These reductions include reducing the full-time employee count from 2,975 at the end of the second quarter of 2000 to 2,054 as of year-end 2000, and 1,433 as of May 2001. The Company has met with essential vendors in an effort to ensure continued access to required equipment and services. The Company is also executing a customer retention campaign designed to enhance customer relationships throughout the restructuring process and thereafter. ICG anticipates these restructuring efforts will conserve capital, enhance profitability and assist in retaining key customers. -28- During the pendancy of its Chapter 11 case, the Company has continued to provide on-going services to its customers while implementing a revised strategy intended to meet customer commitments and maximize short-term cash flow. Under the revised strategy, the Company's operations will focus on existing markets where the Company has capacity thereby allowing the Company to add customers for nominal incremental cost and earn a better return on existing assets. In addition, the Company intends to focus on product sales that utilize existing infrastructure to reduce capital required in the short-term. In general, the Company will scale its geographic expansion and delivery of new products to better match its network capacity, technical capabilities and capital availability. The Company's 22-city expansion plan originally scheduled for completion at year-end 2000 has been postponed indefinitely. ASSET IMPAIRMENT As a result of adverse changes in the capital markets, downward trends in the telecommunication segments of the economy, and the subsequent deterioration in the value of telecommunication assets, including the Company's operating assets, the Company undertook an extensive analysis of its business plan during late 2000 and the first half of 2001. As such, the Company prepared a detailed business plan that gave appropriate consideration to the environmental factors noted above and which has resulted in the Company recording a substantial asset impairment. The Company has provided for the impairment of long-lived assets, including goodwill, pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS 121). SFAS 121 requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever changes in circumstances indicate that the carrying value of an asset may not be recoverable. Such events include, but are not limited to, a significant decrease in the market value of an asset, a significant adverse change in the business climate that could affect the value of an asset or a current period operating or cash flow loss combined with a history of operating or cash flow losses. An impairment loss is recognized when estimated undiscounted future cash flows, before interest, expected to be generated by the asset are less than its carrying value. Measurement of the impairment loss is based on the estimated fair value of the asset, which is generally determined using valuation techniques such as the discounted present value of expected future cash flows, appraisals or other pricing models. The analysis performed by the Company indicated that there was a significant shortfall of cash flows compared to the carrying value of the Company's long-lived tangible and intangible assets and that an impairment had occurred. For purposes of calculating the amount of the impairment, the Company has segregated its long-lived assets into three categories: intangible assets, consisting primarily of goodwill, tangible assets to be disposed of, and tangible assets to be utilized in ongoing operations. As a result of the analysis of shortfalls of cash flows to carrying values of assets, all intangibles, consisting primarily of goodwill, have been written off as of December 31, 2000, resulting in an impairment charge of approximately $80 million. -29- Additionally, the Company has determined that certain assets will not be utilized under the business plan and will be held for resale. The fair value of assets held for resale is based on current appraisals or purchase offers, less cost to sell. Assets held for resale are comprised primarily of: (i) assets under construction in late 2000, for which the incremental capital required to place the asset in service for revenue generation is not available, and (ii) assets in service are not required to meet expected future customer demand as defined in the business plan. The net book value of assets to be disposed of prior to the impairment was $165 million. An impairment of approximately $124 million was reflected in the financial statements as of December 31, 2000 to reduce these assets to their fair value of approximately $41 million. These assets have not been segregated as current assets in the accompanying consolidated financial statements as of December 31, 2000 and are included in property and equipment because the sales are subject to final Bankruptcy Court approval. Management, in consultation with its financial advisors, determined that the fair value of tangible assets to be utilized in ongoing operations was $550 million at December 31, 2000. The determination was based primarily on the present value of discounted cash flows, although the Company also took into consideration several other valuation techniques, including asset appraisals and current market capitalization. As a result, the Company has recorded an impairment charge as of December 31, 2000 of approximately $1.5 billion related to tangible assets to be used in the ongoing operations of the Company. The values assigned to assets as the Company emerges from bankruptcy may be different from the fair value assigned to the long-lived assets as of December 31, 2000. Under accounting guidelines commonly referred to as "Fresh Start", the fair value of all assets of the Company will be estimated as it emerges from bankruptcy in conformity with generally accepted accounting principles ("GAAP"), (specifically APB Opinion 16, Business Combinations). The assumptions regarding capital structure and availability, business environment and the enterprise value determined at the date of emergence from bankruptcy may differ from those used in the impairment analysis. No adjustment was made to recorded depreciation during the year ended December 31, 2000. The net book value of the impaired assets becomes the new cost basis of the assets as of December 31, 2000. This amount is then depreciated over the remaining estimated useful life of the assets. During 1999, the provision for impairment of long-lived assets of $31.8 million relates to the impairment of software and other capitalized costs associated with Telecom Services' billing and provisioning system projects under development. The provision for impairment of long-lived assets was based on management's decision to abandon the billing and provisioning systems under development and to select new vendors for these systems, which vendors were expected to provide the Company with billing and provisioning solutions with improved functionality and earlier delivery dates at lower costs than what was proposed by the former vendors. Provision for impairment of long-lived assets was recorded based on management's estimate of the net realizable value of the Company's assets at December 31, 1999. -30- RESULTS OF OPERATIONS The following table provides certain statement of operations data and certain other financial data for the Company for the periods indicated. The table also presents revenue, operating costs and expenses, operating loss and EBITDA as a percentage of the Company's revenue.
Years Ended December 31, ------------------------------------------------------------------------ 1998 1999 2000 ------------------------------------------------------------- ---------- $ % $ % $ % ------------ ----------- ------------ ---------- ------------ ---------- ($ values in thousands) Statement of Operations Data: Revenue $ 303,317 100 479,226 100 598,283 100 Operating costs 187,260 62 238,927 50 440,090 74 Selling, general and administrative 159,939 53 239,756 50 283,965 47 Depreciation and amortization 91,927 30 174,239 36 318,771 53 Provision for impairment of - - 31,815 7 1,701,466 284 long-lived assets Other, net 4,877 1 387 - 4,108 1 ---------- ----- --------- ----- ----------- ----- Operating loss (140,686) (46) (205,898) (43) (2,150,117) (359) Other Data: Net cash provided (used) by (100,060) (43,476) 122,483 operating activities Net cash used by investing (343,561) (122,412) (557,619) activities Net cash provided by financing 525,601 67,018 528,444 activities EBITDA /(1)/ (43,882) (14) 543 - (125,772) (21) Capital expenditures of continuing 360,980 739,061 973,584 operations /(2)/ Capital expenditures of 38,891 12,264 - discontinued operations /(2)/
(1) See note 3 under "Selected Financial Data" for the definition of EBITDA. (2) See note 4 under "Selected Financial Data" for the definitions of capital expenditures of continuing operations and capital expenditures of discontinued operations. YEAR 2000 COMPARED TO YEAR 1999 Revenue ------- Year Ended December 31, -------------------------------- 1999 2000 -------------------------------- $ % $ % -------- -------- -------- ------ ($ values in thousands) Dial-Up $ 62,381 13 154,343 26 Point-to-Point Broadband 161,850 34 176,499 29 Corporate Services 112,490 23 128,378 22 Reciprocal Compensation 142,505 30 139,063 23 -------- --- ------- --- Total Revenue $479,226 100 598,283 100 ======== === ======= ==== Total revenue increased 25% to $598.3 million in 2000 compared with 1999. Dial-Up revenues increased significantly to account for 26% of the revenue generated in 2000. The contribution of reciprocal compensation as a percent of total revenue declined from 30% in 1999 to 23% in 2000 due primarily to growth in other revenue sources. The Company currently has one customer that accounts for approximately 10% of total revenue. 31 Dial-Up revenue increased 147% to $154.3 million in 2000 from $62.4 million in 1999. The increase in revenue is primarily attributable to growth in customer access ports in service of more than 100% as well as an increase in revenue received per port of more than 10%. The increase in revenue per port is due to a higher percentage of Internet remote access service ("IRAS") ports in 2000. The increase in revenue was partially offset by approximately $30 million in service credits issued to certain IRAS customers in the third and fourth quarters of 2000. The credits were issued as a result of network performance problems that affected those customers' service. In addition, the Company did not recognize approximately $5.5 million of Dial-Up revenue otherwise earned due to concerns regarding the ultimate collection of billings for such service. Point-to-Point Broadband revenue, which includes switched access and SS7 revenues, increased 9% to $176.5 million in 2000 from $161.9 million in 1999. The increase is primarily due to a 20% increase in Point-to-Point Broadband service revenue from growth in facilities and services provided, partially offset by a 24% decrease in switched access and SS7 revenue. Switched access and SS7 services generated approximately 20% of the revenues in this revenue category in 2000. Switched access revenue decreased primarily due to the expected attrition of switched access customers. Corporate Services revenue increased 14% from $112.5 million in 1999 to $128.4 million in 2000. The increase is attributable to an increase of approximately 25% in the number of access lines offset by a decrease in revenue per line. The decrease in revenue per line is primarily the result of a decline in long distance revenue. Reciprocal compensation revenue declined slightly from $142.5 in 1999 million to $139.1 million in 2000. Reciprocal compensation revenue is primarily earned under interconnection agreements with incumbent local exchange carriers ("ILECs") for terminating local traffic but also includes revenue from transport and termination of other traffic for the ILECs. Reciprocal compensation is charged based on a rate per minute of use (MOU). Reciprocal compensation MOU increased approximately 50% in 2000 from 1999 as the number of ports and access lines increased, which was offset by a decline in the average rate per MOU of approximately 30%. In 2000, the Company negotiated new interconnection agreements with several ILECs. These agreements assured the recognition and receipt of compensation for terminating ISP traffic but at rates lower than the Company had historically received. The Company anticipates that due to changes in the regulatory environment, reciprocal compensation revenue earned after 2003 will not be significant. Operating costs - --------------- Total operating costs increased from $238.9 million in 1999 to $440.1 million in 2000, an 84% increase. Operating costs increased as a percentage of revenue from 50% in 1999 to 74% in 2000. Operating costs consist primarily of payments to ILECs, other competitive local exchange carriers ("CLECs"), and long distance carriers for the use of network facilities to support Dial-Up, voice, Point-to-Point Broadband, switched access and long distance services as well as internal network operating costs, right of way fees and other operating costs. Internal network operating costs include the cost of engineering and operations personnel dedicated to the operations and maintenance of the network. Operating costs have increased as a percentage of -32- revenue due to the amount of service credits issued to IRAS customers, as noted above, and as a result of the number of lines leased in 2000. ICG incurred incremental costs associated with the advanced deployment of leased lines in expansion cities to accommodate customer requirements, resulting in an increase in operating expenses as a percent of revenue. Those lines were provisioned using either ILEC or other CLEC capacity to meet customer demand. The Company is in the process of terminating circuits which are not generating revenue and, as a result, has experienced a significant reduction in operating costs in 2001. Selling, general and administrative expenses (SG&A) - --------------------------------------------------- Total SG&A expenses increased from $239.8 million in 1999 to $284.0 million in 2000, an 18% increase. SG&A expenses as a percentage of revenue decreased from 50% in 1999 to 47% in 2000. The increase in SG&A is attributable to increases in salaries and benefits, the provision for uncollectible accounts and other expenses incurred to support the rapid expansion the Company was experiencing in the first three quarters of 2000. Average full-time equivalents ("FTE") did not change significantly in 2000 from 1999. The number of FTEs reached 3,160 at the end of the third quarter of 2000 before decreasing to 2,054 as of the end of the year. The increase in salaries and benefits is primarily attributable to the compensation plan implemented in late 1999 and early 2000. The compensation plan was designed to allow the Company to attract high quality talent required to support the Company's growth and to increase retention. The increase in the provision for uncollectible accounts was attributable to a significant increase in the aging of customer accounts due primarily to the downturn in the business environment during the last half of 2000, as well as to customers' reactions to ICG's reorganization. To a lesser extent, a reduction in resources currently being expended to pursue collection of amounts due under interconnection agreements also contributed to the increase in the provision for uncollectible accounts. SG&A expenses have been significantly reduced in 2001. Depreciation and amortization - ----------------------------- Depreciation and amortization increased from $174.2 million in 1999 to $318.8 million in 2000. The increase is primarily due to increased investment in depreciable assets resulting from the expansion of the Company's networks and services in the last half of 1999 and first half of 2000, as well as a reduction in the overall weighted-average useful life of depreciable assets in service. ICG recently invested a larger portion of its plant and equipment in assets with shorter lives such as routers and computers. Other, net - ---------- Other, net operating costs and expenses increased from $0.4 million in 1999 to $4.1 million in 2000. Other, net operating costs and expenses consists of $1.3 million of deferred compensation from an arrangement with its former chief executive officer in 1999 and 2000. In addition, the Company recorded a gain of $0.9 million in 1999 and a loss of $2.8 million in 2000 for the disposal of miscellaneous long-lived assets. -33- Interest expense - ---------------- Interest expense increased from $212.4 million in 1999 to $233.6 million in 2000. The increase in interest expense is due to the increase in debt balances under the Senior Facility and Senior discount notes through the Petition Date. Interest on debt subject to compromise ceased to accrue as of the Petition Date. Contractual interest that was not recorded due to the bankruptcy proceedings totaled $30.3 million for the period from the Petition Date through December 31, 2000. Included in interest expense for 1999 and 2000 was $197.2 million and $175.8 million of noncash interest, respectively. Additionally, interest expense is net of interest capitalized related to construction in progress of $9.0 million and $7.0 million during 1999 and 2000, respectively. Interest income - --------------- Interest income increased from $16.3 million in 1999 to $23.8 million in 2000. The increase is attributable to the increase in cash, cash equivalents and short-term investments resulting from the cash proceeds to the Company of the 8% Series A Convertible Preferred Stock. The amount of interest income attributable to increased cash balances during the bankruptcy proceedings was not material. Other expense, net, including realized gains and losses on marketable trading - ----------------------------------------------------------------------------- securities costs - ---------------- Other expense, net increased from $2.5 million in 1999 to $15.2 million in 2000. The 2000 amount primarily relates to the loss on the investment in Teligent, partially offset by a gain on litigation settlement. Other expense, net in 1999 consists of litigation settlement costs offset by a gain on the sale of the common stock of MindSpring. Reorganization expenses - ----------------------- Reorganization expenses of $55.3 million in 2000 consist of costs associated with the bankruptcy proceedings that are not directly attributable to the on-going operations of the Company. Such costs include $36.5 million for the write-off of deferred financing and offering costs, $9.6 million for severance and employee retention costs, $6.3 million in professional fees, $2.3 million in lease cancellation charges and $0.6 million of other costs. Accretion and preferred dividends on preferred securities of subsidiaries - ------------------------------------------------------------------------- Accretion of costs and preferred dividends on preferred securities of subsidiaries decreased from $61.9 million in 1999 to $60.0 million in 2000. The decrease is due primarily to the bankruptcy proceedings. The accretion of the preferred dividends and amortization of offering costs on all preferred securities which ceased as of the Petition Date. The Company fully accreted the discount and fully wrote-off the offering costs associated with the preferred stock subsequent to the Petition Date. Such amounts are included in reorganization expenses in the accompanying consolidated statement of operations. Accretion and preferred dividends on preferred securities of subsidiaries recorded during 1999 and through the Petition Date for the year ended December 31, 2000 consist of the accretion of issuance costs and the accrual of the -34- preferred securities associated with the 6 3/4% Exchangeable Limited Liability Company Preferred Securities Mandatorily Redeemable 2009 (the "6 3/4% Preferred Securities"), the 14% Exchangeable Preferred Stock Mandatorily Redeemable 2008 and the 14 1/4% Exchangeable Preferred Stock Mandatorily Redeemable 2009. Net income from discontinued operations - --------------------------------------- Net income from discontinued operations was $36.8 million and $4.3 million in 1999 and 2000, respectively. Net income for 1999 consists of the net income and gain from the sale of Satellite Services, partially offset by the net loss from operations and loss on disposal of Network Services. Net income from discontinued operations for 2000 primarily consists of adjustments to the gain (loss) on disposal of Network and Satellite Services. Extraordinary gain on the sales of operations of NETCOM - ------------------------------------------------------- The Company reported an extraordinary gain on the sales of operations of NETCOM during 1999 of $195.5 million, net of income taxes of $2.0 million. Offsetting the gain on the sales is approximately $16.6 million of net losses of operations of NETCOM from November 3, 1998 through the dates of the sales and $34.7 million of deferred sales proceeds from the sale of certain of the domestic operating assets and liabilities of NETCOM to MindSpring. The deferred proceeds were recognized on a periodic basis over the term of the Company's network capacity agreement with MindSpring. Cumulative effect of change in accounting principle - --------------------------------------------------- Cumulative effect of change in accounting principle for revenue from installation services of $7.4 million for 2000 is due to the change in accounting as a result of the adoption of SAB 101 on October 1, 2000 applied retroactively from January 1, 2000. Accretion and dividends of 8% Series A Convertible Preferred Stock to - --------------------------------------------------------------------- liquidation value and related dividends - --------------------------------------- Accretion and dividends of 8% Series A Convertible Preferred Stock to liquidation value and related dividends is comprised of the dividends and the accretion to liquidation value of the 8% Series A Convertible Preferred Stock of $158.2 million during 2000. Charge for beneficial conversion feature of 8% Series A Convertible Preferred - ----------------------------------------------------------------------------- Stock - ----- Charge for beneficial conversion of 8% Series A Convertible Preferred Stock during 2000 relates to the charge to additional paid-in capital of $159.3 million of the proceeds of the 8% Series A Convertible Preferred Stock which is the intrinsic value of the beneficial conversion feature of the convertible preferred securities. The beneficial conversion feature was recognized immediately as a return to the preferred shareholders during 2000 as the 8% Series A Convertible Preferred Stock is immediately convertible into shares of ICG common stock. -35- YEAR 1999 COMPARED TO YEAR 1998 Revenue - ------- Year Ended December 31, -------------------------------- 1998 1999 -------------------------------- $ % $ % -------- -------- ------- ------ ($ values in thousands) Dial-Up $ 20,692 7 62,381 13 Point-to-Point Broadband 120,855 40 161,850 34 Corporate Services 84,405 28 112,490 23 Reciprocal Compensation 77,365 25 142,505 30 -------- -------- ------- ------ Total Revenue $303,317 100 479,226 100 ======== ======== ======= ====== Total revenue increased 58% to $479.2 million in 1999 compared with 1998. Dial-Up revenue increased 201% from $20.7 million in 1998 to $62.4 million in 1999. The increase in revenue is primarily attributable to growth in customer access ports in service of more than 150% as well as an increase in revenue received per port. Point-to-Point Broadband revenue, which includes switched access and SS7 revenues, increased 34% from $120.9 million in 1998 to $161.9 million in 1999. The increase is primarily due to a 60% increase in Point-to-Point service revenue from growth in facilities and services provided, partially offset by a 5% decrease in switched access and SS7 revenue. Approximately 25% of the Point- to-Point revenue increase is attributable to revenue recognized under the Company's fiber optic lease agreement with a major interexchange carrier. Switched access and SS7 generated approximately 29% of the revenues in this category in 2000. Corporate Services revenue increased 33% from $84.4 million in 1998 to $112.5 million in 1999. The increase is attributable to an increase of approximately 40% in the number of access lines offset by a decrease in the revenue per line. The decrease in revenue per line was primarily the result of a decline in long distance revenue. Reciprocal compensation revenue increased 84% to $142.5 million in 1999 from $77.4 million in 1998. Reciprocal compensation revenue is primarily earned under interconnection agreements with ILECs for terminating local traffic but also includes revenue from transport and termination of other traffic for the ILECs. Reciprocal compensation is charged based on a rate per MOU. Reciprocal compensation revenue increased as the number of ports and access lines increased. However, the average rate per MOU declined by approximately 40% primarily as a result of the Company's decision to discontinue recording revenue for tandem and transport elements of reciprocal compensation on July 1, 1999. Operating costs - --------------- Operating costs increased $51.6 million, or 28%, from $187.3 million in 1998 to $238.9 million in 1999. Operating costs decreased as a percentage of revenue from 62% in 1998 to 50% -36- in 1999. Operating costs consist of payments to ILECs for the use of network facilities to support local and Point-to-Point Broadband services, internal network operating costs, right of way fees and other costs. The increase in operating costs in absolute dollars is attributable to the increase in volume of Corporate Services and Point-to-Point Broadband services and the increase in internal network operating costs which include engineering and operations personnel dedicated to the provision of local exchange services. Selling, general and administrative expenses - -------------------------------------------- Total SG&A expenses increased $79.8 million, or 50%, from $159.9 million in 1998 to $239.8 million in 1999. Total SG&A expenses decreased as a percentage of revenue from 53% in 1998 to 50% in 1999. The increase in absolute dollars is due in part to a provision for uncollectible accounts receivable of approximately $45 million recorded during the third quarter of 1999 for accounts receivable, which the Company believed may be uncollectible due to unfavorable regulatory rulings. The receivables related primarily to certain elements of reciprocal compensation and transport and termination services provided to ILECs recorded in periods prior to June 30, 1999. Depreciation and amortization - ----------------------------- Depreciation and amortization increased $82.3 million, or 90%, for 1999, compared to 1998, primarily due to increased investment in depreciable assets resulting from the continued expansion of the Company's networks and services as well as a reduction in the overall weighted-average useful life of depreciable assets. In addition, amortization increased due to goodwill recorded in conjunction with the acquisition of CSW/ICG ChoiceCom, L.P. (ChoiceCom) completed on December 31, 1998. Provision for impairment of long-lived assets - --------------------------------------------- For 1999, the provision for impairment of long-lived assets of $31.8 million relates to the impairment of software and other capitalized costs associated with billing and provisioning system projects under development. The provision for impairment of long-lived assets was based on management's decision to abandon the billing and provisioning systems under development at the time. Other, net - ---------- Other, net operating costs and expenses decreased from $4.9 million in 1998 to $0.4 million in 1999. Other, net operating costs and expenses for 1999 consists of deferred compensation expense of $1.3 million related to the Company's deferred compensation arrangement with its former chief executive officer, offset by a net gain on disposal of miscellaneous long-lived assets of $0.9 million. Other, net operating costs and expenses for 1998 relates to the write-off of certain installation costs of disconnected special access customers of $0.5 million, the write-off of certain costs associated with an abandoned operating support system project of $0.8 million and general disposal of furniture, fixtures and office equipment of $3.6 million. -37- Interest expense - ---------------- Interest expense increased $42.4 million, from $170.0 million for 1998 to $212.4 million which includes $197.2 million of non-cash interest in 1999. Interest expense increased due to the increase in long-term debt associated with the Company's purchase of the corporate headquarters, effective January 1, 1999, and the senior secured financing facility (Senior Facility) completed in August 1999. Interest income - --------------- Interest income decreased from $28.4 million in 1999 to $16.3 million in 1999 due to the decrease in cash, cash equivalents and short-term investments. Other expense, net, including realized gains and losses on marketable trading - ----------------------------------------------------------------------------- securities - ---------- Other expense, net increased from $1.1 million to $2.5 million from 1998 to 1999, respectively. The increase is due to an increase in other expenses from $1.1 million in 1998 to $2.5 million in1999. Other expenses primarily consist of litigation settlement costs offset by a gain on the sale of the common stock of MindSpring in 1999. Other expenses primarily consist of litigation settlement costs in 1999. Accretion and preferred dividends on preferred securities of subsidiaries, net - ------------------------------------------------------------------------------ of minority interest in share of losses - --------------------------------------- Accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses increased $6.7 million, from $55.2 million in 1998 to $61.9 million in 1999. The increase is due primarily to the periodic payment of dividends on the 14% Exchangeable Preferred Stock Mandatorily Redeemable 2008 (the 14% Preferred Stock) and the 14 1/4% Exchangeable Preferred Stock Mandatorily Redeemable 2009 (the 14 1/4% Preferred Stock) in additional shares of 14% Preferred Stock and 14 1/4% Preferred Stock. Accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses recorded during 1999 includes the accretion of issuance costs of $1.3 million and the accrual of the preferred securities dividends of $60.6 million associated with the 6 3/4% Exchangeable Limited Liability Company Preferred Securities Mandatorily Redeemable 2009 (the 6 3/4% Preferred Securities), the 14% Preferred Stock and the 14 1/4% Preferred Stock. Net income (loss) from discontinued operations - ---------------------------------------------- Net income (loss) from discontinued operations improved from a $79.4 million net loss in 1998 to $36.8 million net income in 1999. Net loss from discontinued operations for 1998 consists of the combined net loss of Zycom, NETCOM, Network Services and Satellite Services. Net income from discontinued operations for 1999 consists of the combined net losses of Network Services and net income of Satellite Services. Zycom terminated its normal operations on October 22, 1998 and, accordingly, the Company reported no loss from discontinued operations of Zycom for 1999. Since the Company expected to report a gain on the disposition of NETCOM, the Company deferred the net losses from operations of NETCOM from -38- November 3, 1998 (the date on which the Company's board of directors adopted the formal plan to dispose of the operations of NETCOM) through the dates of the sales and, accordingly, the Company reported no loss from discontinued operations of NETCOM prior to or subsequent to the dates of the sales for 1999. Additionally, net income from discontinued operations for 1999 includes the gain on the sale of Satellite Services of $48.7 million, offset by the loss on the sale of Network Services of $10.9 million. Net loss from discontinued operations for 1998 includes an estimated loss on the disposal of Zycom of $1.8 million. Extraordinary gain on sales of operations of NETCOM - --------------------------------------------------- The Company reported an extraordinary gain on the sales of operations of NETCOM during 1999 of $195.5 million, net of income taxes of $2.0 million. Offsetting the gain on the sales is approximately $16.6 million of net losses of operations of NETCOM from November 3, 1998 through the dates of the sales and $34.7 million of deferred sales proceeds from the sale of certain of the domestic operating assets and liabilities of NETCOM to MindSpring. The deferred proceeds were recognized on a periodic basis over the term of the Company's network capacity agreement with MindSpring. QUARTERLY RESULTS The following table presents selected unaudited operating results for three-month quarterly periods during the years ended December 31, 1999 and 2000. The Company believes that all necessary adjustments have been included in the amounts stated below to present fairly the quarterly results when read in conjunction with the Company's consolidated financial statements and related footnotes included elsewhere in this Annual Report. Results of operations for any particular quarter are not necessarily indicative of results of operations for a full year or predictive of future periods. Revenue for the third and fourth quarters of 2000 was lower, and operating loss higher, due primarily to billing credits issued for network service problems, increases in the provision for uncollectible accounts, the non- recognition of revenue from certain ISP customers and the asset impairment. Billing credits issued to IRAS customers totaled approximately $17 million and $13 million in the third and fourth quarters of 2000, respectively. The Company recorded a provision for uncollectible accounts of approximately $29 million and $53 million in the third and fourth quarters of 2000, respectively. Of those amounts, approximately $6 million and $13 million related to reciprocal compensation for the third and fourth quarters of 2000, respectively. In addition, during the fourth quarter of 2000, the Company did not recognize approximately $5.5 million of Dial-Up revenue due to concerns regarding the ultimate collection of billings. Finally, the Company recorded an impairment of long-lived assets of $1.7 billion during the fourth quarter of 2000. Operating costs and net loss in the fourth quarter of 1999 were lower, and EBITDA was higher due to an in-depth management review of network costs that was conducted during the fourth quarter of 1999 following the centralization of network functions. The analysis identified approximately $9.5 million in costs from the first nine months of 1999 that related to capital activities under the existing Company capitalization policy. Of the $9.5 million adjustment -39- booked in the fourth quarter, approximately $5.0 million related to costs that should have been capitalized in the second quarter and $4.5 million of costs that should have been capitalized in the third quarter.
Three Months Ended Three Months Ended ------------------------------------------------ --------------------------------------------- Mar. 31, June. 30, Sept. 30, Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, 1999 1999 1999 2000 2000 2000 2000 2000 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ---------- (Dollars in thousands except per share and statistical data amounts) Statement of Operations Data: Revenue/(1)/ $ 104,331 117,654 115,166 142,075 157,408 174,704 145,257 120,914 Operating loss (27,568) (59,160) (91,381) (27,789) (45,614) (51,826) (159,113) (1,893,564) Loss from continuing operations (86,206) (123,759) (156,527) (99,970) (121,450) (124,612) (237,246) (2,007,188) Net (loss) income from discontinued operations (111) (8,651) 748 44,803 - 736 - 3,606 Net income (loss) 106,712 (132,410) (155,779) (52,685) (121,450) (123,876) (237,246) (2,010,945) Net income (loss) attributable to common stockholders 106,712 (132,410) (155,779) (52,685) (121,450) (297,617) (254,520) (2,137,458) =========== =========== =========== ========== ========== ========== ========== ========== Loss per share from continuing operations - basic and diluted (1.85) (2.63) (3.31) (2.11) (2.52) (2.56) (4.58) (39.97) =========== =========== =========== ========== ========== ========== ========== ========== Weighted average number of shares outstanding - basic and diluted 46,538 46,988 47,320 47,618 48,189 48,723 51,782 50,184 =========== =========== =========== ========== ========== ========== ========== ========== Other Data: Net cash used (provided) by operating activities (47,906) 37,315 (37,604) 4,719 (7,234) 110,313 36,084 (16,680) Net cash provided (used) by investing activities 133,100 (93,611) (116,065) (45,836) (121,468) (253,990) (186,516) 4,355 Net cash provided (used) by financing activities (456) (4,390) 73,848 (1,984) 66,207 599,036 (129,412) (7,387) EBITDA / (2)/ 7,874 15,221 (45,676) 23,124 19,417 22,438 (57,637) (109,990) Capital expenditures of continuing operations / (3)/ 102,912 133,025 138,387 364,737 214,907 347,461 319,209 92,007 Capital expenditures of discontinued operations /(3)/ 2,805 3,354 4,970 1,135 - - - - Statistical Data/ (4)/: Full time employees 2,665 2,753 3,054 2,853 2,930 2,975 3,160 2,054 Telecom services: Access lines in service / (5)/ 418,610 494,405 584,827 730,975 904,629 1,112,964 1,074,469 950,447 Buildings connected: On-net 789 874 939 963 1,046 924 936 925 Hybrid /(6)/ 5,337 5,915 6,476 7,115 7,746 8,228 8,584 8,659 ----------- ----------- ----------- ---------- ---------- ---------- ----------- ---------- Total buildings connected 6,126 6,789 7,415 8,078 8,792 9,152 9,520 9,584 Operational switches: Circuit 29 29 29 31 35 43 47 47 ATM - - - 24 24 24 24 26 Frame relay 17 16 16 16 16 - - - ----------- ----------- ----------- ---------- ---------- ---------- ----------- ---------- Total operational switches 46 45 45 71 75 67 71 73 Regional fiber route miles / (7)/: Operational 4,351 4,406 4,449 4,596 4,807 4,767 4,816 5,577 Under construction - - - 531 - 495 508 - Regional fiber strand miles/(8)/: Operational 155,788 164,416 167,067 174,644 177,103 184,064 192,422 166,498 Under construction - - - 18,564 - 12,254 14,891 - Collocations with ILECs 111 126 139 147 183 188 188 160
(1) On October 10, 2000, the Company adopted SAB 101, Revenue Recognition in Financial Statements. As required by GAAP, the Company has reflected the effects of the change in accounting principle as if such change had been adopted as of January 1, 2000. This resulted in the following changes in revenue amounts previously in the Company's 2000 quarterly reports on Forms 10-Q: an increase to revenue of approximately $0.1 million for the first quarter, a decrease to revenue of approximately $1.0 million for the second quarter and an increase to revenue of approximately $0.5 million for the third quarter. (2) See note 3 under "Selected Financial Data" for the definition of EBITDA. -40- (3) See note 4 under "Selected Financial Data" for the definitions of capital expenditures of continuing operations and capital expenditures of discontinued operations. (4) Amounts presented are for three-month periods ended, or as of the end of the period presented. (5) Access lines in service includes lines provisioned through the Company's switch and through resale and other agreements with various local exchange carriers. Access lines provisioned include internal and other non-revenue generating access lines. On a go-forward basis, the Company plans to report only revenue generating access lines in service to better match line count with reported revenue. As of December 31, 2000 the provisioned lines generating revenue are approximately 940,000. (6) Hybrid buildings connected represent buildings connected to the Company's network via another carrier's facilities. (7) Regional fiber route miles refers to the number of miles of regional fiber optic cable, including leased fiber. As of December 31, 2000, the Company had 5,577 regional fiber route miles. Regional fiber route miles under construction represents fiber under construction that is expected to be operational within six months. (8) Regional fiber strand miles refers to the number of regional fiber route miles, including leased fiber, along a telecommunications path multiplied by the number of fiber strands along that path. As of December 31, 2000, the Company had 166,498 regional fiber strand miles, of which 46,097 regional fiber strand miles were leased under operating leases. Regional fiber strand miles under construction represents fiber under construction that is expected to be operational within six months. NET OPERATING LOSS CARRYFORWARDS As of December 31, 2000, the Company has federal NOL carryforwards of approximately $1.277 billion, which expire in varying amounts through December 31, 2020. Due to the provisions of Internal Revenue Code ("Code") sections 108, 382 and certain other Code and Treasury Regulations, it is anticipated the major portion of the NOLs will be reduced by cancellation of indebtedness and that a change in ownership will occur as a result of a plan of reorganization ("Plan") that is expected to be filed. If the Plan results in the issuance of new stock and or the cancellation of existing stock, the remaining amount NOLs (if any) will be limited on the amount that can be utilized each year. LIQUIDITY AND CAPITAL RESOURCES The Company has incurred significant operating and net losses as a result of the development and operation of its networks. The Company expects that its operating losses will continue as it operates as a debtor-in-possession as a result of its Chapter 11 bankruptcy filing. Further, due to the bankruptcy filing and related events, there is no assurance that the carrying amounts of assets will be realized or that liabilities will be liquidated or settled for the amounts recorded. Consequently, there is substantial doubt about the Company's ability to continue as a going concern. At December 31, 2000, the Company had cash and short-term investments of approximately $214.7 million. On December 4, 2000, the Company finalized its Debtor-in-Possession Revolving Credit Agreement with Chase Manhattan Bank (the "Credit Agreement"). The Credit Agreement originally provided for up to $350 million in financing, which was subsequently amended to $200 million. The Credit Agreement financing terms require that the Company's Senior Facility be paid off at the time of the first borrowing. Management believes that current cash, short-term investments and the Credit Agreement, along with protection under bankruptcy law, should enable the Company to fund operations through the bankruptcy -41- restructuring process. However, there can be no assurance that such resources will be sufficient for anticipated or unanticipated working capital and capital expenditure requirements, or that the Company will achieve or sustain profitability or positive EBITDA in the future. As of May 31, 2001, the Company had cash and short-term investments of $152.1 million, with no amounts drawn under the Credit Agreement. At December 31, 2000, the Company had $2,785 million of liabilities outstanding subject to compromise, including $2,167 million of indebtedness and $1,366 million of mandatorily redeemable preferred shares. As a result of filing for protection under bankruptcy law, the Company is not currently paying any of the debt service or preferred stock dividend obligations that have been outstanding since November 14, 2000, except for certain interest-only payments on some of the Company's secured debt. In addition, future payment of principal and interest on all of the outstanding indebtedness and dividends on the preferred shares is subject to court approval and may be discharged in whole or in part in bankruptcy with proceeds from the court approved plan of reorganization or liquidation of the Company. At this time, there can be no assurance as to the amount of payment, if any, that will be made to these debtors and shareholders. The Company's plan of reorganization may require additional debt and/or equity financing. There can be no assurance that additional financing arrangements will be available to the Company on acceptable terms, or at all. If adequate funds are not available, or are not available on acceptable terms, the Company may not be able to emerge from bankruptcy in the time frame it anticipates, or at all, and it may be prohibited from otherwise responding to competitive pressures. In such case, the Company's business, results of operations and financial condition will be materially adversely affected. In addition, no assurance can be given that the plan of reorganization will be approved by the Bankruptcy Court or that the Company will be successful in reorganizing its affairs within the Chapter 11 proceedings. As a result of the Company's liquidity problems, the Company's directors did not declare a dividend on the 6 3/4% Preferred Securities that was otherwise payable on November 15, 2000. In addition, the Company has not declared dividends on the 14%, 14 1/4% Preferred Stock and the 8% Series A Convertible Preferred Stock. Net Cash Provided (Used) By Operating Activities - ------------------------------------------------ The Company's operating activities used $100.1 million and $43.5 million, and provided $122.5 million during 1998, 1999 and 2000, respectively. Net cash provided (used) by operating activities is primarily due to losses from continuing operations and increases in receivables, which are partially offset by changes in deferred revenue and other working capital items and non-cash expenses, such as depreciation and amortization, deferred interest expense, accretion and preferred dividends on subsidiary preferred securities. In 2000, cash provided by operating activities included $34 million in non-cash charges related to the Company's reorganization. Also in 2000, interest of approximately $30.3 million was not recognized due to the bankruptcy proceedings. The Company's operating activities provided $122.5 million in 2000; however, this is largely attributable to the bankruptcy proceedings which have increased the amount of the -42- Company's accounts payable and accrued liabilities balances. In addition, deferred revenue increased primarily due to an agreement with an interexchange carrier. Net Cash Used By Investing Activities - -------------------------------------- Investing activities used $343.6 million, $122.4 million, and $557.6 million during 1998, 1999 and 2000, respectively. Net cash used by investing activities includes cash expended for the acquisition of property, equipment and other assets of $360.2 million, $595.3 million, and $742.8 million for 1998, 1999 and 2000, respectively. Net cash used by investing activities also includes $64.6 million and $146.3 million for 1999 and 2000, respectively, for the change in accounts payable and accrued liabilities for the purchase of long-term assets. The Company used $67.8 million during 1998 for the acquisitions of ChoiceCom, NikoNet and DataChoice combined and $9.1 million to purchase the minority interest of two of the Company's subsidiaries. During 1998, the Company received proceeds from the sale of the Company's corporate headquarters of $30.3 million and the sale of the short-term investments of $60.3 million. During 1999, the Company used $28.9 million for the purchase of long-term investments and $6.0 million to purchase the minority interest of two of the Company's subsidiaries. Offsetting the expenditures of investing activities for 1999 are the net proceeds from the sales of NETCOM, Network Services and Satellite Services combined of $404.9 million, including $30.0 million in proceeds from the sale of common stock of MindSpring, which the Company received as partial consideration for the sale of the domestic operations of NETCOM, and proceeds from the sales of short-term investments available for sale of $29.8 million. Offsetting the expenditures for investing activities for 2000 are the proceeds from the sale of short-term investments and marketable securities of $32.8 million. The Company acquired assets under capital leases and IRU agreements of $0.8 million, $143.7 million and $230.8 million during 1998, 1999 and 2000 respectively. Net Cash Provided By Financing Activities - ------------------------------------------ Financing activities provided $525.6 million, $67.0 million and $528.4 million during 1998, 1999 and 2000, respectively. Net cash provided by financing activities for these periods includes cash received in connection with the private placement of the 10% Notes and the 9 7/8% Notes in February 1998 and April 1998, respectively, the Senior Facility completed in August 1999, and the 8% Series A Convertible Preferred Stock issued in April 2000. Historically, the funds to finance the Company's business acquisitions, capital expenditures, working capital requirements and operating losses have been obtained through public and private offerings of the Company and Holdings-Canada common shares, convertible subordinated notes, convertible preferred shares of Holdings-Canada, capital lease financings and various working capital sources, including credit facilities, in addition to the private placement of the securities previously mentioned and other securities offerings. Net cash provided by financing activities for 1998, 1999 and 2000 also includes proceeds from the issuance of common stock in conjunction with the exercise of options and warrants and the Company's employee stock -43- purchase plan, offset by principal payments on long-term debt, capital leases and IRU agreements and payments of preferred dividends on preferred securities of subsidiaries. On August 12, 1999, ICG Equipment and NetAhead entered into a $200.0 million senior secured financing facility ("Senior Facility") consisting of a $75.0 million term loan, a $100.0 million term loan and a $25.0 million revolving line of credit. During 1999 and 2000, the Company borrowed approximately $80.0 million and $95.0 million, respectively, under the loans at variable interest rates. During 2000, the Company received net proceeds of $707.7 million from the issuance of the 8% Series A Convertible Preferred Stock. These proceeds were used to fund the Company's operating and expansion activities. Due to the bankruptcy proceedings, the Company has fully written off the offering costs and fully accreted the discount associated with the 8% Series A Convertible Preferred Stock totaling $118.1 million. As of December 31, 2000, the Company had an aggregate accreted value of approximately $2.0 billion outstanding under the 13 1/2% Senior Discount Notes due 2005 (the 13 1/2% Notes), the 12 1/2% Notes due 2006 (the 12 1/2% Notes), the 11 5/8% Notes, the 10% Notes, and the 9 7/8% Notes. Capital Expenditures - -------------------- The Company's capital expenditures of continuing operations (including assets acquired under capital leases) were $361.0 million, $739.1 million and $973.6 million for 1998, 1999 and 2000, respectively. There is substantial uncertainty about the Company's ability to obtain capital and to complete and place in service the Company's $232 million construction in progress balance as of December 31, 2000. Reciprocal Compensation - ----------------------- ICG has, as of December 31, 2000, a net receivable for reciprocal compensation due under interconnection agreements with ILECs of approximately $28 million. ICG received cash of approximately $175 million during the year ended December 31, 2000, from ILECs for terminating local traffic. The Company anticipates that due to changes in the regulatory environment, reciprocal compensation revenue earned after 2003 will not be significant Revenue for 1999 includes approximately $22 million for the tandem switching and common transport rate elements. Effective July 1, 1999, ICG ceased recognition of these rate elements as revenue until cash receipts are either received or the uncertainty of receipt has been removed (such as the execution of a binding agreement). ICG has continued to bill and pursue collection of all amounts due under the agreements. -44- NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 establishes accounting and reporting standards for derivative instruments and hedging activities. As amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement No. 133", and SFAS No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No.133" ("SFAS 138"). SFAS 133 and SFAS 138 are effective for all quarters and fiscal years beginning after June 15, 2000. The adoption of SFAS 133 and SFAS 138 did not have a material effect on the Company's financial position or results of operations. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- The Company's financial position and cash flows are subject to a variety of risks in the normal course of business, which include market risks associated with movements in interest rates and equity prices. The Company routinely assesses these risks and has established policies and business practices to protect against the adverse effects of these and other potential exposures. The Company does not, in the normal course of business, use derivative financial instruments for trading or speculative purposes. INTEREST RATE RISK The Company's exposure to market risk associated with changes in interest rates relates primarily to the Company's investments in marketable securities and its Senior Facility and Credit Agreement. The Company invests primarily in high-grade, short-term investments that consist of money market instruments, commercial paper, certificates of deposit, government obligations and corporate bonds, all of which are considered to be available for sale. As of December 31, 2000, the Company had approximately $214.7 million in cash, cash equivalents and short-term investments available for sale, at a weighted average fixed interest rate of 7.00%. A hypothetical 10% fluctuation in market rates of interest would not cause a material change in the fair value of the Company's investment in marketable securities at December 31, 2000, and accordingly, would not cause a material impact on the Company's financial position, results of operations or cash flows. On August 12, 1999, the Company entered into the Senior Facility, consisting of two term loans and a revolving line of credit. All components of the Senior Facility bear variable annual rates of interest, based on the change in the prime rate. No additional borrowings are available under the Senior Facility. The Company is continuing to make interest only payments which are affected by fluctuations in the prime rate. As of December 31, 2000, the Company had $84.6 million outstanding under the Senior Facility. A hypothetical change in annual interest rate of 1% per annum would result in a change in interest expense of approximately $0.8 million. -45- The Company is also subject to interest rate risk under the Credit Agreement, which bears variable annual rates of interest. However, as of December 31, 2000, the Company has not borrowed any money under the Credit Agreement. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The consolidated financial statements of the Company appear on page F-1 of this Annual Report. The financial statement schedule required under Regulation S-X is filed pursuant to Item 14 of this Annual Report, and appears on page S-1 of this Annual Report. Selected quarterly financial data required under this Item is included under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. -46- PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ---------------------------------------------- DIRECTORS AND OFFICERS OF ICG COMMUNICATIONS, INC. Set forth below are the names and certain information about the directors of the Company as of June 1, 2001: Name Age Position - ---- --- --------------------------------------- William J. Laggett/(1)(4)(5)(6)/ 71 Vice-Chairman of the Board of Directors William S. Beans, Jr. 36 Director J. Shelby Bryan 55 Director John U. Moorhead II/(2)(3)(6)/ 49 Director Leontis Teryazos/(2)(3)(4)(5)(6)/ 58 Director Walter Threadgill/(1)(3)(4)(5)(6)/ 55 Director _______________________________ (1) Term as Director expires in 2002. (2) Term as Director expires in 2003. (3) Member of Audit Committee. (4) Member of Compensation Committee. (5) Member of Stock Option Committee. (6) Member of Special Executive Committee. William J. Laggett has been Vice-Chairman of the Board of Directors since ------------------ June 1999. Prior to such time, he was Chairman of the Board of Directors from June 1995 and a Director from January 1995. Mr. Laggett was the President of Centel Cellular Company from 1988 until his retirement in 1993. From 1970 to 1988, Mr. Laggett held a variety of management positions with Centel Corporation, including Group Vice President-Products Group, President-Centel Services, and Senior Vice President-Centel Corporation. Prior to joining Centel, Mr. Laggett worked for New York Telephone Company. William S. Beans, Jr. has been a Director since April 2000. Mr. Beans --------------------- also served as President and Chief Operating Officer from January 2000 to December 2000. Prior thereto, Mr. Beans was Executive Vice President and President of Network Services from June 1999 to April 2000. Before joining the Company, Mr. Beans held several positions in Teleport Communications Group, Inc., a division of AT&T Local Services. He was National Vice President - Operations from November 1997 until June 1999, Vice President Customer Care/Customer Service from October 1995 to November 1997 and Vice President of Network Development from September 1993 to October 1995. J. Shelby Bryan has been a Director since May 1995. He also served as --------------- President, Chief Executive Officer and Director from May 1995 through August 22, 2000 and as Chairman of the Board of Directors and Chief Executive Officer from June 1999 through August -47- 22, 2000. Mr. Bryan has over 20 years of experience in the telecommunications industry, primarily in the cellular business. He co-founded Millicom International Cellular S.A., a publicly owned corporation providing cellular service internationally, served as its President and Chief Executive Officer from 1985 to 1994 and served as a Director through May 1998. John U. Moorhead II has been a Director since June 1998 and is Managing ------------------- Director of C.E. Unterberg Towbin. From 1991 until April 2001 Mr. Moorhead was Managing Director of VM Equity Partners, a firm he co-founded. Prior to founding VM Equity Partners, Mr. Moorhead worked for eight years as a senior executive in investment banking, first at EF Hutton and then at Lehman Brothers where he was Senior Vice President and Director of the New Business Group of Lehman Brothers' investment banking division from 1987 to 1990. Mr. Moorhead serves on the Board of Directors of SEMX Inc., a NASDAQ National Market company that provides specialty materials and services to the microelectronic and semiconductor industries. Leontis Teryazos has been a Director of ICG since June 1995. Mr. ---------------- Teryazos is President of Letmic Management Inc., a financial advisory firm that specializes in working with early stage telecommunications and health care companies. Mr. Teryazos also serves on the Board of Directors of Aurelium Biopharma Inc., and QR Canada Capital Inc. (QRI/CDNX), a publicly traded Canadian Venture Capital company. Mr. Teryazos is also President and CEO of QR Canada Capital Inc. Mr. Teryazos is also head of Letmic Management Reg'd, a Montreal real estate developer. Mr. Teryazos is a graduate of Cornell University in 1965 and the Taft School, Watertown, Connecticut in 1961. Walter Threadgill has been a Director since December 1997 and is the ----------------- Managing General Partner of Atlantic Coastal Ventures, L.P. Mr. Threadgill also serves on the Board of Directors of Ravisent Technologies, Inc. Previously, Mr. Threadgill was the President and Chief Executive Officer of Multimedia Broadcast Investment Corporation. He has held positions as Divisional Vice President of Fiduciary Trust Company in New York and as Senior Vice President and Chief Operating Officer of United National Bank in Washington, D.C. Mr. Threadgill chaired the Presidential Small Business Advisory Committee and served the National Association of Investment Companies as Director, Treasurer and Legislative Committee Chairman. Mr. Threadgill is a member of the Federal Communications Bar Association. EXECUTIVE OFFICERS OF ICG COMMUNICATIONS, INC. The current executive officers of the Company are as follows: Name Age Position - ---- Randall E. Curran 47 Chief Executive Officer Richard E. Fish, Jr. 36 Executive Vice President and Chief Financial Officer Michael D. Kallet 47 Executive Vice President - Operations and Chief Technology Officer Bernard L. Zuroff 45 Executive Vice President, General Counsel and Secretary -48- Randall E. Curran has been Chief Executive Officer since September 2000. ----------------- Prior thereto, Mr. Curran was Chairman, President and Chief Executive Officer of Thermadyne Holdings Corporation ("Thermadyne"). From 1995 to 2000, Mr. Curran also held several other executive positions at Thermadyne including Chief Operating Officer and Chief Financial Officer. Prior to joining Thermadyne, Mr. Curran held various finance positions with Clarke Industries, Inc., McGraw- Edison Co., and Arthur Anderson & Co. Richard E. Fish, Jr. has been Executive Vice President and Chief -------------------- Financial Officer since December 2000. Prior to this position, Mr. Fish was Senior Vice President of Finance since September 1999. Before joining the Company, Mr. Fish was Director-Access Management with AT&T Corp. from 1998 to 1999. AT&T Corp. acquired Teleport Communications Group, Inc. in 1998 where Mr. Fish was Director-Operations since 1995. Michael D. Kallet has been Executive Vice President - Operations and ----------------- Chief Technology Officer since December 2000 and was Executive Vice President, Products and Strategic Development since July 1999. Prior thereto, he was Senior Vice President of Products and Services from December 1995. He has been General Manager and Chief Operations Officer of ICG NetAhead, Inc., a subsidiary of the Company, since February 1999. Prior to joining the Company, he held several positions in the technology industry, including positions at IBM, Computer Support Corporation, Walker Interactive and Software Publishing Corporation (Harvard Graphics). Bernard L. Zuroff has been Executive Vice President, General Counsel and ----------------- Secretary since October 2000. Prior to this position, Mr. Zuroff was Assistant General Counsel and Corporate Attorney since July 1996. Before joining the Company, he had eleven years of experience as an attorney with Gorsuch Kirgis, L.L.C., the Resolution Trust Company and Infotel, Inc. There are no family relationships between any current director or officer or any other current director or officer. DIRECTORS AND OFFICERS OF ICG HOLDINGS (CANADA) CO. The sole director of ICG Holdings-Canada is Bernard L. Zuroff. Randall E. Curran is the Chief Executive Officer, Richard E. Fish, Jr. is the President and Chief Financial Officer, and Bernard L. Zuroff is the Executive Vice President, General Counsel and Secretary. DIRECTORS AND OFFICERS OF ICG HOLDINGS, INC. The directors for ICG Holdings are Randall E. Curran and Richard E. Fish, Jr. Randall E. Curran is the Chief Executive Officer, Richard E. Fish, Jr. is the President and Chief Financial Officer, and Bernard L. Zuroff is Executive Vice President, General Counsel and Secretary. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers to file with the Securities Exchange Commission reports regarding their ownership and -49- changes in ownership of the Company's stock. ICG believes that during 2000, its directors and executive officers complied with all Section 16(a) filing requirements with the following exceptions: (1) a Form 3 with respect to stock options granted to James Washington, former Executive Vice President-Network Services, was not filed on or before January 17, 2000 as required, but on February 10, 2000; (2) four Form 4s with respect to stock options granted to Michael D. Kallet, Executive Vice President-Operations and Chief Technology Officer, Cindy Z. Schonhaut, former Executive Vice President-External Affairs, H. Don Teague, former Executive Vice President, General Counsel and Secretary, and Carla J. Wolin, former Executive Vice President-People Services, were not filed on or before February 10, 2000 as required, but on March 31, 2000; (3) two Form 4s with respect to stock options granted to William J. Laggett, Director and Vice Chairman, and Walter Threadgill, Director were not filed on or before July 10, 2000 as required, but on July 18, 2000; (4) a Form 4 with respect to stock options granted to Leontis Teryazos, Director, was not filed on or before July 10, 2000, as required, but on July 13, 2000; and (5) due to a Chapter 11 related staffing shortage, a Form 3 reporting that Randall E. Curran, Chief Executive Officer does not beneficially own any derivative securities was not filed on or before October 5, 2000 as required but on October 23, 2000, a Form 3 with respect to stock options granted to Bernard L. Zuroff, Executive Vice President, General Counsel and Secretary was not filed on or before October 25, 2000 as required, but on December 1, 2000 and an amended Form 5 was filed on March 14, 2001 by William S. Beans, former President and Chief Operating Officer, with respect to a stock option grant that was inadvertently not included in the Form 5 that was timely filed on February 14, 2001. In making these statements, ICG has relied upon a review of reports on Forms 3, 4 and 5 furnished to the Company during, or with respect to its last fiscal year. ITEM 11. EXECUTIVE COMPENSATION ---------------------- EXECUTIVE OFFICER COMPENSATION The following table provides certain summary information concerning compensation paid by the Company and its subsidiaries to the three individuals who served as the Company's Chief Executive Officer during the fiscal year ended December 31, 2000; together with the four executive officers and two other most highly compensated officers or former officers (the "Named Officers") for the fiscal years ended December 31, 2000, 1999, and 1998. Neither Holdings-Canada nor Holdings pays any form of compensation to any of their respective Directors or Officers. -50-
Summary Compensation Table Annual Compensation Long-term ------------------------------------------- Compensation ----------------- All Other Annual Securities Other Name and Principal Fiscal Compensation Underlying Compensation Position Year Salary ($) Bonus ($) ($) Options ($) - --------------------------------------------------------------------------------------------------------------------- Randall E. Curran 2000 225,000 - 18,786/(1)/ - - Chief Executive Officer 1999 - - - - - 1998 - - - - - Carl E. Vogel 2000 - - - 19,480 - Former Chief Executive 1999 - - - - - Officer/(2)/ 1998 - - - - - J. Shelby Bryan 2000 1,538,011/(3)/ - 48,383/(4)/ 250,000 - Director and former Chief 1999 1,500,000/(5)/ - 98,658/(6)/ 200,000 - Executive Officer and Chairman 1998 1,435,191/(5)/ - 159,554/(7)/ - - Richard E. Fish, Jr. 2000 168,654 80,630/(8)/ 6,000/(9)/ 60,000 - Chief Financial Officer 1999 47,115 11,514/(10)/ 1,268/(9)/ 30,000 - 1998 - - - - - Michael D. Kallet 2000 283,924/(11)/ 207,020/(12)/ 71,197/(13)/ - 1,610/(14)/ EVP - Operations and 1999 240,154/(15)/ 136,838 3,000/(16)/ 55,000 - Chief Technology Officer 1998 - - - 35,000 - Bernard L. Zuroff 2000 140,000 51,837/(17)/ 7,500/(16)/ 33,300 - Executive Vice President - 1999 111,950/(18)/ 27,640/(19)/ - 3,300 - General Counsel 1998 88,034 21,028/(20)/ - 2,400 - Robert P. Athey 2000 126,346/(21)/ 22,000/(22)/ 130,449/(23)/ - - Senior Vice President - Sales 1999 89,318/(24)/ 10,757 92,150/(25)/ 11,300 - 1998 63,805/(26)/ 5,275/(27)/ 81,776/(28)/ 1,125 - John Kane/(29)/ 2000 60,328 1,000,000 - - 1,224,038/(30)/ Former President 1999 337,463 1,059,745 9,049 150,000 - 1998 157,236 101,916 4,200 110,000 - Williams S. Beans, Jr. 2000 467,981/(31)/ 326,193/(32)/ 70,924/(33)/ 100,000 7,173/(14)/ Former President and 1999 134,615 46,875 164,394/(34)/ 749,982 2,625/(35)/ Chief Operating Officer 1998 - - - - -
______________________________ (1) Consists of Mr. Curran's housing, travel and car allowances as provided for in his employment agreement. (2) Mr. Vogel resigned from the Company effective September 18, 2000. (3) Consists of amounts earned pursuant to the compensation formula in Mr. Bryan's employment agreement. This amount includes payment of $1,073,556 that was earned in 1999. (4) Consists of $48,383 for housing expenses. (5) Consists of amounts earned pursuant to the compensation formula in Mr. Bryan's employment agreement, as adjusted for amounts earned in 1998 and 1999. (6) Consists of $13,997 for car allowance, $49,583 for housing expenses and Company contributions to 401(k) Defined Contribution Plan in the amount of $35,078. (7) Consists of $24,430 for car allowance, $46,964 for housing expenses and Company contributions to 401(k) Defined Contribution Plan in the amount of $88,160. (8) Consists of $40,630 incentive bonus and $40,000 retention bonus. (9) Consists of amounts for car allowance. (10) Consists of $1,514 incentive bonus and $10,000 sign-on bonus. (11) Consists of $283,462 in annual salary and $462 of retroactive salary that was paid in 2000. -51- (12) Consists of $122,020 incentive bonus and $85,000 retention bonus. (13) Consists of $12,000 for a car allowance and $59,197 relocation payment. (14) Consists of executive life insurance payments. (15) Consists of $239,615 in annual salary and $539 of retroactive salary that was paid in 1999. (16) Consists of amounts for car allowance. (17) Consists of $38,837 incentive bonus and $13,000 retention bonus. (18) Consists of $111,103 in annual salary and $846 of retroactive salary that was paid in 1999. (19) Consists of $2,500 reward and recognition bonus and $25,140 incentive bonus. (20) Consists of $675 reward and recognition bonus and $20,353 incentive bonus. (21) Consists of $125,192 in annual salary and $1,154 of retroactive salary that was paid in 2000. (22) Consists of retention bonus. (23) Consists of $128,649 in sales commissions and $1,800 in car allowance amounts. (24) Consists of $88,741 in annual salary and $577 in retroactive salary that was paid in 2000. (25) Consists of $88,550 in sales commissions and $3,600 in car allowance amounts. (26) Consists of $62,904 in annual salary and $901 in retroactive salary that was paid in 2000. (27) Consists of $4,975 incentive bonus and $300 in recruiting bonus. (28) Consists of $78,176 in sales commissions and $3,600 in car allowance amounts. (29) Pursuant to the terms of a General Release, Covenant Not to Sue and Agreement entered into between John Kane and the Company, Mr. Kane's employment agreement was terminated and he resigned from his positions with the Company as of January 1, 2000. In addition, he received severance and bonus payments and the Company canceled $280,000 of promissory notes executed by Mr. Kane. Further, all of Mr. Kane's unvested options became fully vested. On January 19, 2000, the Company filed a complaint against Mr. Kane in Arapahoe County District Court, Colorado. Subsequently, the Company and Mr. Kane entered into a settlement agreement which provided, among other things, that 82,500 vested options to purchase 220,000 shares of ICG stock were revoked by ICG and relinquished by Mr. Kane. (30) Consists of $12,766 of COBRA premium equivalents, $931,272 in severance, and $280,000 attributable to the Company foregoing its right to seek reimbursement of promissory notes. (31) Consists of $448,077 in annual salary and $19,904 in retroactive salary which was paid in 2000. (32) Consists of $183,793 incentive bonus and $142,400 retention bonus. (33) Consists of $35,724 for car allowance and $35,200 for relocation expenses. (34) Consists of $7,800 for car allowance, $156,379 for relocation expenses and $215 for non-taxable relocation expenses. (35) Consists of taxable interest on loan. -52- Option/SAR Grants in Last Fiscal Year The Company granted no stock appreciation rights during the year ended December 31, 2000 to the Named Officers or to other employees. The following table provides information on option grants during the year ended December 31, 2000 to the Named Officers:
Potential realizable value at Individual grants assumed -------------------------------------------- Number of Percent of total Exercise annual rates of stock Securities options granted or price appreciation Underlying to employees in fiscal base Expiration for Name options year price date option term granted (#) ($/Sh) -------------------------------- 5% ($) 10% ($) - ----------------------------------------------------------------------------------------------------------------------------- Randall E. Curran - - - - - - Carl E. Vogel 14,480/(1)/ .27561% $ 32.875 4/10/10 - - 5,000/(1)/ .09516% $ 22.875 6/6/10 - - J. Shelby Bryan 250,000/(1)/ 4.7584% $ 24.375 5/9/10 - - Richard E. Fish, Jr. 60,000/(2)/ 1.14203% $ 29.75 4/27/10 - - Michael D. Kallet 40,000/(3)/ .76135% $ 18.00 1/6/10 - - 48,905/(2)/ .93085% $ 24.375 5/9/10 - - Bernard L. Zuroff 25,800/(2)/ .49107% $ 29.75 4/27/10 - - 7,500/(3)/ .14275% $34.3125 2/28/10 - - John Kane - - - - - - Robert P. Athey - - - - - - William S. Beans, Jr. 100,000/(1)/ 1.90339% $ 24.375 5/9/10 - - _____________________________________________
(1) Granted from 1998 Stock Option Plan (Amended and Restated as of September 10, 1999). (2) Granted from Year 2000 Broad-Based Long-Term Incentive Plan. (3) Granted from 1996 Stock Option Plan (Amended and Restated as of September 10, 1999). -53- Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values The following table provides information on options exercised during the year ended December 31, 2000 by the Named Officers and the value of such officers' unexercised options at December 31, 2000:
Number of securities Value of unexercised in-the- Shares underlying unexercised money options at acquired on Value options at fiscal year end (#) fiscal year end ($)/(1)/ ------------------------------ ----------------------------- Name exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - ------------------------------------------------------------------------------------------------------------------------------------ Randall E. Curran - - - - - - Carl E. Vogel - - 9,480 10,000 - - J. Shelby Bryan 150,000 1,584,375 2,033,334 166,666 - - Richard E. Fish, Jr. - - 13,500 76,500 - - Michael D. Kallet - - 126,345 138,655 - - Bernard L. Zuroff - - 10,281 29,719 - - John Kane 137,500 1,914,707 82,500 - - Robert P. Athey - - 8,244 5,181 - - William S. Beans, Jr. - - 106,945 333,055 - - - ----------------------------------------
(1) While the Company's common stock is trading on certain over the counter markets, the shares are believed by management to carry no value. DIRECTOR COMPENSATION The Company compensates its non-employee directors for attendance at meetings of the Board of Directors or a committee of the Board of Directors as follows: $4,000 for attendance at a meeting in person, plus reimbursement of expenses, and $1,500 for participation in a telephonic meeting; provided that when meetings of the Board of Directors and/or one or more committees are held on the same day, the non-employee directors are entitled to be compensated only for one such meeting. In addition, the Vice-Chairman of the Board of Directors, Mr. Laggett, receives an annual fee of $80,000 payable in quarterly installments and Messrs. Moorhead, Teryazos and Threadgill receive an annual fee of $60,000 payable in quarterly installments. On December 15, 1999, all non-employee directors of the Company were granted options for the 2000 fiscal year to purchase 20,000 shares of Common Stock under the 1998 Stock Option Plan, which vested as to 5,000 shares on the 15th day of the last month of each fiscal quarter of 2000 commencing March 15, 2000. On June 7, 2000, all non- employee Directors of the Company were granted options to purchase 5,000 shares of ICG Common Stock under the Company's 1998 Stock Option Plan. -54- EXECUTIVE EMPLOYMENT AGREEMENTS The Company and its subsidiaries have employment agreements with Randall E. Curran, Richard E. Fish, Jr., Michael D. Kallet, Bernard L. Zuroff, Robert Athey, Brian Cato, Darlinda Coe, John Colgan, Kimberly Gordon, David Hurtado, Gayle Landis, and Gary Lindgren. In July 2001, the Bankruptcy Court approved the terms of an amended employment agreement for Mr. Curran. The amended agreement will provide for the continued employment of Mr. Curran on a month to month term at an annual base salary of $900,000 which may be increased from time to time in accordance with normal business practices of the Company. Subject to the Company achieving certain financial targets established by the Company's Board and the Special Committee, the amended agreement also provides for a performance bonus of up to $900,000 in 2001 and for performance bonuses in subsequent years in amounts of up to twelve months' base salary at the rate then in effect based upon performance targets to be established at the discretion of the Company's Board or the compensation committee thereof. Mr. Curran will also be eligible to receive a reorganization bonus of up to twelve months' base salary in the event that a plan of reorganization for the Company is consummated and confirmed in its currently pending Chapter 11 case, depending on the timing thereof, or if there is a sale of all or substantially all of the Company's assets. In addition, Mr. Curran is entitled to benefits as are generally provided to the Company's senior executives including reimbursement of reasonable out-of-pocket expenses incurred on behalf of the Company. If the amended agreement is terminated by the Company for any reason other than Mr. Curran's death, disability, or for cause, or is terminated by Mr. Curran for good reason, Mr. Curran will receive a lump sum severance in an amount equal to fifteen months' base salary at the rate then in effect. If Mr. Curran's employment is terminated in the case of death, his estate will receive an amount equal to twelve months' base salary. The Company's employment agreements with Richard E. Fish, Jr., Michael D. Kallet, Bernard L. Zuroff, Robert Athey, Brian Cato, Darlinda Coe, John Colgan, Kimberly Gordon, David Hurtado, Gayle Landis, and Gary Lindgren provide for base salaries and such other benefits as are generally provided to senior executives, including reimbursement of reasonable out-of-pocket expenses incurred on behalf of the Company. Mr. Kallet's agreement also provides for a bonus payment if Mr. Kallet is actively employed upon either: (a) the consummation of a sale of all or substantially all of the Company's assets; or (b) the date a reorganization plan is confirmed. These employment agreements may be terminated by the Company with or without cause or by the employee upon the occurrence of a constructive dismissal. If an agreement is terminated by the Company for any reason other than the employee's death, disability or for cause, or if there is a constructive dismissal, the employee will receive an amount equal to twelve months' salary at the rate then in effect. 50% will be paid in a lump sum within 15 days of termination and the remaining 50% is payable in twelve installments commencing 30 days after termination. If the employee obtains new employment within such twelve month period, the severance is subject to mitigation on a dollar for dollar basis. If the employee's employment is terminated in the case of death, his/her estate will receive an amount equal to three months' base salary. Messrs. Kallet, Zuroff, Athey, Cato, Ms. Coe, Mr. Colgan, Ms. Gordon, Mr. Hurtado, Ms. Landis, and Mr. Lindgren are also subject to a ten-year confidentiality covenant and a one-year non-interference commitment following termination of employment. -55- Consulting Arrangements - ----------------------- The Company's agreement with William S. Beans, Jr. provides for Mr. Beans' resignation of employment as of February 4, 2001 and his resignation as an officer of the Company and as an officer and director of any of the Company's subsidiaries as of December 4, 2001. Mr. Beans is entitled to receive severance pay of $528,895, as well as continued participation in the Company's welfare benefit plans for a period of one (1) year. Mr. Beans continues as a Director and as a consultant during the payment period. The Company also forgave a $100,000 loan that was made to Mr. Beans in 1999. Compensation Committee Interlocks and Insider Participation - ----------------------------------------------------------- The Compensation Committee consists of three non-employee Directors: William J. Laggett, Vice-Chairman of the Board of Directors, Leontis Teryazos and Walter Threadgill. Board Compensation Committee Report on Executive Compensation - ------------------------------------------------------------- The Compensation Committee of the Board of Directors evaluates compensation levels of senior management as well as the various factors that affect the compensation of the Company's highest paid officers. The Compensation Committee established the existing executive compensation program to encourage and reward management's efforts to strengthen the Company's business. The Company operates in a competitive marketplace and needs to retain well-qualified executive talent. Executive compensation is reviewed regularly to ensure compliance within existing guidelines and for competitiveness in the marketplace. The Company has employment agreements with certain of its executive officers. See "Executive Employment Agreements" for descriptions of those agreements. All senior management are compensated with base salaries which are intended to compensate executives for their ongoing leadership skills and management responsibility. In addition, eligible employees, including executive management received incentive bonuses for the first and second quarters of 2000. The incentive bonuses were dependent upon the Company's performance as measured against certain pre-determined goals and objectives. The incentive bonus plan was suspended for the third and fourth quarters of the fiscal year as a result of the Company's filing for Chapter 11 bankruptcy protection. In its place, the Company implemented a retention bonus program that was designed to stabilize and retain the existing workforce. See "Summary Compensation Table" for the definition of Named Officers and the bonuses paid to them. On April 28, 2000, the Stock Option Committee awarded stock options to certain employees of the Company, including executive officers. These grants were based on individual performance and responsibility and were related to the executive officers' performance during the year ended December 31, 1999 as well as an incentive for continued efforts and success. Subsequently, trading of the Company's stock on the NASDAQ National Market was suspended on November 14, 2000 and delisted on November 18, 2000. See "Summary Compensation Table" for the stock options granted to the executive officers. The Compensation Committee has reviewed the compensation of the Company's executive officers and has concluded that their compensation is reasonable and appropriate. -56- The Compensation Committee continually evaluates the compensation of the Company's executive officers, including an assessment of compensation reports for comparable companies and for the telecommunications industry. The Compensation Committee believes that maintaining suitable executive compensation programs is necessary to support the future progress of the Company and its successful emergence from bankruptcy. William J. Laggett Leontis Teryazos Walter Threadgill (Members of the Compensation Committee) STOCK PERFORMANCE GRAPH The Company has not included a performance graph as the Company's stock has been delisted. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- CERTAIN BENEFICIAL OWNERS To the best of the Company's knowledge, based on filings with the Securities and Exchange Commission, the following are the only persons who own beneficially five percent or more of the Company's voting securities outstanding, as of June 1, 2001.
Series A Percent of Series Percent of Preferred A Preferred Common Common Name and Address of Beneficial Owner Stock/(1)/ Stock/(2)/ Stock/(3)/ Stock/(4)/ - ------------------------------------ ---------- ------------------ ---------- ---------- IDT Investments, Inc. /(5)/ 73,000 97.4% 38,098,994 42.3% 520 Broad Street Newark, New Jersey 07102
_________________________ (1) The Series A Preferred Stock includes the 8% Series A-1 Convertible Preferred Stock due 2015 (the "Series A-1 Preferred Stock"), the 8% Series A-2 Convertible Preferred Stock due 2015 (the "Series A-2 Preferred Stock") and the 8% Series A-3 Convertible Preferred Stock due 2015 (the "Series A-3 Preferred Stock"). Except in relation to director appointment rights, the powers, preferences and relative, participating, optional and other special rights of the Series A-1 Preferred Stock, the Series A-2 Preferred Stock and the Series A-3 Preferred Stock are identical. (2) Based on 75,000 shares of Series A Preferred Stock outstanding as of June 1, 2001. (3) Amounts include shares of Common Stock issuable upon conversion of the Series A Preferred Stock and upon exercise of warrants. This holder reported all amounts on a Schedule 13D on May 4, 2001. (4) Based on 52,045,443 shares of Common Stock issued and outstanding as of June 1, 2001, plus shares of Common Stock issuable to such beneficial owner upon conversion or exercise of Preferred Stock and warrants, as the case may be. All share percentages assume that each respective beneficial owner has converted its shares of Series A Preferred Stock, if any, into Common Stock and has exercised its warrants to purchase shares of Common Stock, if any. (5) On April 18, 2001 IDT issued 7,500 shares of Class B Common Stock and 30,000 shares of Class A Convertible Preferred Stock in exchange for 50,000 shares of the 8% Series A-1 Convertible Preferred Stock and warrants to purchase an aggregate of 6,666,667 shares of ICG Common Stock pursuant to the terms of the Stock Exchange Agreement dated April -57- 18, 2001 between IDTI, IDTC, IDT America, Corp, 225 Old NB Road, Inc., 226 Old NB Road, Inc., 60 Park Place Holding Company, Inc., Liberty Media Corporation, Microwave Holdings, L.L.C., and TP Management. Pursuant to the terms of the Certificate of Designation, each share of the Series A-1 Convertible Preferred Stock was automatically converted to a share of the 8% Series A-3 Convertible Preferred Stock. On May 2, 2001 IDT issued 8,188 shares of Series B Convertible Preferred Stock in exchange for 23,000 shares of the 8% Series A-2 Convertible Preferred Stock and warrants to purchase an aggregate of 3,066,667 shares of ICG Common Stock pursuant to the terms of the Stock Exchange Agreement dated May 2, 2001 between IDTI, IDTC, IDT America, IDT Ventures, Inc., HM4 Teligent Qualified Fund, LLC, HM4 Teligent Private Fund, LLC, NM 4-SBS Teligent Coinvestors, LLC, HM PG- IV Teligent, LLC, HM 4-EQ Teligent Coinvestors, LLC, HM4 ICG Qualified Fund, LLC, HM4 ICG Private Fund, LLC, HM PG-IV ICG, LLC, HM 4-SBS ICG Coinvestors, LLC, and HM 4-EQ ICG Coinvestors, LLC. Pursuant to the terms of the Certificate of Designation, each share of Series A-2 Convertible Preferred Stock was automatically converted to a share of the 8% Series A-3 Convertible Preferred Stock. All information is based on a Schedule 13D filed by IDT with the SEC. OWNERSHIP OF MANAGEMENT The following table sets forth, as of June 1, 2001, the number of shares of ICG voting securities owned by all executive officers, directors and nominees of ICG individually and as a group. The persons named in the table below have sole voting and investment power with respect to all of the shares of ICG voting securities owned by them, unless otherwise noted.
Amount/Nature of Name of Beneficial Owner Beneficial Ownership Percent/(1)/ - -------------------------------------------------------------------- -------------------- ------------ William J. Laggett/(2)/...................................................... 157,797 * Vice Chairman of the Board of Directors Randall E. Curran............................................................ - * Chief Executive Officer Richard D. Fish, Jr./(3)/.................................................... 13,724 * Executive Vice President, Chief Financial Officer Michael D. Kallet/(4)/....................................................... 129,016 * Executive Vice President - Operations and Chief Technology Officer Bernard L. Zuroff/(5)/....................................................... 12,622 * Executive Vice President, General Counsel & Secretary William S. Beans, Jr./(6)/................................................... 114,408 * Director, former President J. Shelby Bryan/(7)/......................................................... 2,008,763 3.9% Chairman Director, former Chief Executive Officer and Vice Chairman of the Board of Directors John U. Moorhead II/(8)/..................................................... 72,500 * Director Leontis Teryazos/(9)/........................................................ 152,500 * Director
-58-
Amount/Nature of Name of Beneficial Owner Beneficial Ownership Percent/(1)/ - -------------------------------------------------------------------- -------------------- ------------ Walter Threadgill/(10)/............................................. 82,500 * Director All current executive officers and directors as a group (10 persons)...................................................... 2,278,533 4.4%
_________________________________ * Less than one percent of the outstanding shares of Common Stock. (1) Based on 52,045,443 issued and outstanding shares of Common Stock on June 1, 2001, plus shares of Common Stock that may be acquired by the person or group indicated pursuant to any options and warrants exercisable, or pursuant to the conversion of any outstanding shares of the Company's Preferred Stock, or pursuant to any shares vesting under the Company's 401(k) Plan, within 60 days. (2) Includes 157,797 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (3) Includes 224 shares of ICG Common Stock held by a 401(k) plan in Mr. Fish's name and 13,500 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (4) Includes 1,694 shares of ICG Common Stock held by a 401(k) plan in Mr. Kallet's name, 977 shares of ICG Common Stock held in ICG's Employee Stock Purchase Plan and 126,345 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (5) Includes 1,252 shares of ICG Common Stock held by a 401(k) plan in Mr. Zuroff's name, 1,089 shares of ICG Common Stock held in ICG's Employee Stock Purchase Plan and 10,281 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (6) Includes 7,463 shares of ICG Common Stock held by a 401(k) plan in Mr. Beans's name and 106,945 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (7) Includes 58,763 shares of ICG Common Stock held by a 401(k) plan in Mr. Bryan's name and 1,950,000 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (8) Includes 72,500 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (9) Includes 152,500 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. (10) Includes 82,500 shares of ICG Common Stock that may be acquired pursuant to the exercise of outstanding stock options. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ---------------------------------------------- None. -59- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORT ON FORM 8-K ------------------------------------------------------------- (A) (1) FINANCIAL STATEMENTS The following financial statements are included in Item 8 of Part II: Page ---- Independent Auditors' Report......................................... F-2 Consolidated Balance Sheets, December 31, 1999 and 2000.............. F-4 Consolidated Statements of Operations, Years Ended December 31, 1998, 1999 and 2000................................................. F-6 Consolidated Statements of Stockholders' Deficit, Years Ended December 31, 1998, 1999 and 2000.................................... F-8 Consolidated Statements of Cash Flows, Years Ended December 31, 1998, 1999 and 2000................................................. F-9 Notes to Consolidated Financial Statements........................... F-12 (2) FINANCIAL STATEMENT SCHEDULE The following Financial Statement Schedule is submitted herewith: Independent Auditors' Report......................................... S-1 Schedule II: Valuation and Qualifying Accounts....................... S-2 (3) LIST OF EXHIBITS (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession 2.1 Plan of Arrangement under Section 192 of the Canada Business Corporations Act. [Incorporated by reference to Exhibit 2.1 to Registration Statement on Form S-4 of ICG Communications, Inc., File No. 333-4226]. (3) Corporate Organization 3.1 Certificate of Incorporation of ICG Communications, Inc. dated April 11, 1996. [Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-4 of ICG Communications, Inc., File No. 333-4226]. 3.2 By-laws of ICG Communications, Inc. [Incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-4 of ICG Communications, Inc., File No. 333-4226]. 3.3 Agreement and Plan of Reorganization by and among ICG -60- Communications, Inc., ICG Canadian Acquisition, Inc., ICG Holdings (Canada), Inc. and ICG Holdings (Canada) Co., dated November 4, 1998. [Incorporated by reference to Exhibit 3.3 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] 3.4: Order of Amalgamation between ICG Holdings (Canada), Inc. and ICG Holdings (Canada) Co., dated December 22, 1998. [Incorporated by reference to Exhibit 3.4 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] 3.5: Memorandum and Articles of Association of ICG Holdings (Canada) Co. filed with the Registrar of Joint Stock Companies, Halifax, Nova Scotia. [Incorporated by reference to Exhibit 3.5 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] (4) Instruments Defining the Rights of Security Holders, Including Indentures 4.1: Note Purchase Agreement, dated as of July 14, 1995, among the Registrant, IntelCom Group (U.S.A.), Inc., Morgan Stanley Group Inc., Princes Gate Investors, L.P., Acorn Partnership I, L.P., PGI Investments Limited, PGI Investments Limited, PGI Sweden AB, and Gregor von Opel and Morgan Stanley Group, Inc., as Agent for the Purchasers [Incorporated by reference to Exhibit 4.1 to Form 8-K of IntelCom Group Inc., dated July 18, 1995]. 4.2: 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 of IntelCom Group Inc., dated July 18, 1995]. 4.3: First Amended and Restated Articles of Incorporation of ICG Holdings, Inc. [Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-4 of IntelCom Group (U.S.A.), Inc., File No. 333-04569]. 4.4: Indenture, dated August 8, 1995, among IntelCom Group (U.S.A.) Inc., IntelCom Group Inc. and Norwest Bank Colorado, National Association [Incorporated by reference to Exhibit 4.6 to Registration Statement on Form S-4 of IntelCom Group (U.S.A.) Inc., File Number 33-96540]. 4.5: Indenture, dated April 30, 1996, among IntelCom Group (U.S.A.) Inc., IntelCom Group Inc. and Norwest Bank Colorado, National Association [Incorporated by reference to Exhibit 4.14 to Registration Statement on Form S-4 of IntelCom Group (U.S.A.) Inc., File No. 333-04569]. 4.6: Indenture, dated March 11, 1997, among ICG Holdings, Inc., ICG Communications, Inc. and Norwest Bank Colorado, National -61- Association [Incorporated by reference to Exhibit 4.15 to Registration Statement on Form S-4 of ICG Communications, Inc., File No. 333-24359]. 4.7: Written Action of the Manager of ICG Funding, LLC, dated as of September 24, 1997, with respect to the terms of the 6 3/4% Exchangeable Limited Liability Company Preferred Securities [Incorporated by reference to Exhibit 4.8 to Registration Statement on Form S-3 of ICG Funding, LLC, File No. 333-40495]. 4.8: Amended and Restated Limited Liability Company Agreement of ICG Funding, LLC, dated as of September 23, 1997 [Incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-3 of ICG Funding, LLC, File No. 333-40495]. 4.9: Indenture, between ICG Services, Inc. and Norwest Bank Colorado, National Association, dated as of February 12, 1998 [Incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-4 of ICG Services, Inc., File No. 333-51037]. 4.10: Indenture, between ICG Services, Inc. and Norwest Bank Colorado, National Association, dated as of April 27, 1998 [Incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-4 of ICG Services, Inc., File No. 333-60653, as amended]. 4.11: Second Amended and Restated Articles of Incorporation of ICG Holdings, Inc., dated March 10, 1997. [Incorporated by reference to Exhibit 4.11 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] 4.12: Loan Agreement, dated as of January 1, 1999, by and among TriNet Realty Capital, Inc. and ICG Services, Inc. [Incorporated by reference to Exhibit 10.3 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999]. 4.13: Promissory Note, dated as of January 1, 1999, by and among TriNet Realty Capital, Inc. and ICG Services, Inc. [Incorporated by reference to Exhibit 10.4 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999]. 4.14: Deed of Trust, Assignment of Rents and Security Agreement, made as of January 1, 1999, granted by ICG Services, Inc. for the benefit of TriNet Realty Capital, Inc. [Incorporated by reference to Exhibit 10.5 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999]. 4.15: Amended and Restated Loan Agreement, dated as of May 1, 1999, by and among TriNet Realty Capital, Inc. and ICG 161, L.P. [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 4.16: Credit Agreement, dated as of August 12, 1999, among ICG Equipment, Inc. and ICG NetAhead, Inc., as Borrowers, ICG -62- Services, Inc., as Parent, the Initial Lenders and the Initial Issuing Bank, as Initial Lenders and Initial Issuing Bank, Royal Bank of Canada, as Administrative Agent and Collateral Agent, Morgan Stanley Senior Funding, Inc., as Sole Book-Runner and Lead Arranger and Bank of America, N.A. and Barclays Bank Plc, as Co-Documentation Agents [Incorporated by reference to Exhibit 10.11 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 4.17: Security Agreement, dated August 12, 1999, from ICG Equipment, Inc. and ICG NetAhead, Inc., as Grantors to Royal Bank of Canada, as Collateral Agent [Incorporated by reference to Exhibit 10.12 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 4.18: Amendment No. 1 to Credit Agreement, dated as of December 31, 1999, among ICG Equipment, Inc. and ICG NetAhead, Inc., as Borrowers, ICG Services, Inc., as Parent, certain Initial Lender Parties thereto, Morgan Stanley Senior Funding, Inc., as Sole Book-Runner and Lead Arranger, Royal Bank of Canada, as Collateral Agent and as Administrative Agent for such Lender Parties, and Bank of America, N.A. and Barclays Bank Plc, as Co-Documentation Agents [Incorporated by reference to Exhibit 10.8 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 4.19: Amendment and Waiver No. 2 to the Loan Documents, dated as of December 29, 1999, among ICG Equipment, Inc., ICG NetAhead, Inc., ICG Services, Inc., as Parent, certain Initial Lender Parties party thereto, Morgan Stanley Senior Funding, Inc., as Sole Book- Runner and Lead Arranger, Royal Bank of Canada, as Collateral Agent and as Administrative Agent for such Lender Parties, Bank of America, N.A., as Documentation Agent and Barclays Bank Plc, as Co- Documentation Agent. [Incorporated by reference to Exhibit 4.19 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999.] 4.20: Amendment No. 3 to the Loan Documents, dated as of February 11, 2000, among ICG Equipment, Inc., ICG NetAhead, Inc., ICG Services, Inc., as Parent, certain Initial Lender Parties party thereto, Morgan Stanley Senior Funding, Inc., as Sole Book-Runner and Lead Arranger, Royal Bank of Canada, as Collateral Agent and as Administrative Agent for such Lender Parties, Bank of America, N.A., as Documentation Agent and Barclays Bank Plc, as Co-Documentation Agent. [Incorporated by reference to Exhibit 4.20 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1999.] 4.21: Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other Special Rights of 8% Series A-1 Convertible Preferred Stock Due 2015, 8% Series A-2 Convertible -63- Preferred Stock Due 2015 and 8% Series A-3 Convertible Preferred Stock Due 2015, and Qualifications, Limitations and Restrictions Thereof, Filed on April 7, 2000 with the Delaware Secretary of State. [Incorporated by reference to Exhibit 10.4 to ICG Communications, Inc.'s Quarterly Report of Form 10-Q for the quarterly period ended March 31, 2000.] 4.22: Registration Rights Agreement dated as of April 7, 2000, by and between ICG Communications, Inc. and Liberty Media Corporation, HMTF Bridge ICG, LLC, HM4 ICG Qualified Fund, LLC, HM4 ICG Private Fund, LLC, HM PG-IV ICG, LLC, HM 4-SBS ICG Coinvestors, LLC, HM 4-EQ ICG Coinvestors, LLC and Gleacher/ICG Investors LLC. [Incorporated by reference to Exhibit 10.5 to ICG Communications, Inc.'s Quarterly Report of Form 10-Q for the quarterly period ended March 31, 2000.] 4.23: Amendment to the Preferred Stock and Warrant Purchase Agreement dated as of April 10, 2000 between ICG Communications, Inc. and Liberty Media Corporation, HMTF Bridge ICG, LLC, HM4 ICG Qualified Fund, LLC, HM4 ICG Private Fund, LLC, HM PG-IV ICG, LLC, HM 4-SBS ICG Coinvestors, LLC, HM 4-EQ ICG Coinvestors, LLC and Gleacher/ICG Investors LLC. [Incorporated by reference to Exhibit 10.6 to ICG Communications, Inc.'s Quarterly Report of Form 10-Q for the quarterly period ended March 31, 2000.] 4.24 Form of Common Stock Warrant Agreement dated April 10, 2000. [Incorporated by reference to Exhibit 10.7 to ICG Communications, Inc.'s Quarterly Report of Form 10-Q for the quarterly period ended March 31, 2000.] 4.25 Amendment and Waiver No. 4 to the Loan Documents, dated as of September 29, 2000, among ICG Equipment, Inc., ICG NetAhead, Inc., ICG Services, Inc., as Parent, certain Initial Lender Parties party thereto, Morgan Stanley Senior Funding, Inc., as Sole Book- Runner and Lead Arranger, Royal Bank of Canada, as Collateral Agent and as Administrative Agent for such Lender Parties, Bank of America, N.A., as Documentation Agent and Barclays Bank Plc, as Co- Documentation Agent. [Incorporated by reference to Exhibit 10.4 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000.] 4.26 Revolving Credit Agreement, dated as of December 4, 2000, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, and the Chase Manhattan Bank, as Agent. 4.27 Security and Pledge Agreement, dated as of December 4, 2000 by and among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers and the Chase Manhattan Bank, as Agent. 4.28 First Amendment to Credit Agreement, dated as of January 31, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank -64- and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.29 Waiver to Credit Agreement, dated as of March 30, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.30 Amendment to Waiver to Credit Agreement, dated as of March 30, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.31 Second Amendment to Waiver to Credit Agreement, dated as of March 30, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.32 Second Amendment to Credit Agreement, dated as of May 2, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.33 Loan Modification Agreement dated as of June 28, 2001 between Trinet Realty Capital, Inc. as lender and Trinet Realty Investors V, Inc. as borrower. (9) Voting Trust Agreement None. (10) Material Contracts 10.1: Arrangement and Support Agreement dated June 27, 1996 between ICG Communications, Inc. and IntelCom Group Inc. [Incorporated by reference to Exhibit 2.1 to Registration Statement on Form S-4 of ICG Communications, Inc., File No. 333-4226]. 10.2: Incentive Stock Option Plan #2 [Incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 of IntelCom -65- Group Inc., File No. 33-86346, filed November 14, 1994]. 10.3: Form of Stock Option Agreement for Incentive Stock Option Plan #2 [Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 of IntelCom Group Inc., File No. 33-86346, filed November 14, 1994]. 10.4: Incentive Stock Option Plan #3 [Incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 of IntelCom Group Inc., File No. 33-86346, filed November 14, 1994]. 10.5: Form of Stock Option Agreement for Incentive Stock Option Plan #3 [Incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-8 of IntelCom Group Inc., File No. 33-86346, filed November 14, 1994]. 10.6: 1994 Employee Stock Option Plan [Incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-8 of IntelCom Group Inc., File No. 33-86346, filed November 14, 1994]. 10.7: Form of Stock Option Agreement for 1994 Employee Stock Option Plan [Incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-8 of IntelCom Group Inc., File No. 33-86346, filed November 14, 1994]. 10.8: Employment Agreement, dated as of May 30, 1995, between IntelCom Group Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.5 to Form 8- K of IntelCom Group Inc., as filed on August 2, 1995]. 10.9: Stock Option Agreement, dated as of May 30, 1995, between IntelCom Group Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.6 to Form 8- K of IntelCom Group Inc., as filed on August 2, 1995]. 10.10: Indemnification Agreement, dated as of May 30, 1995, between IntelCom Group Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.7 to Form 8- K of IntelCom Group Inc., as filed on August 2, 1995]. 10.11: Placement Agreement, dated as of August 3, 1995, among IntelCom Group Inc., IntelCom Group (U.S.A.), Inc., certain subsidiaries of IntelCom Group (U.S.A.), Inc. and Morgan Stanley & Co. Incorporated [Incorporated by reference to Exhibit 10.1 to Form 8- K of IntelCom Group Inc., as filed on August 9, 1995]. 10.12: ICG Communications, Inc., 401(k) Wrap Around Deferred Compensation Plan. [Incorporated by reference to Exhibit 10.42 to ICG Communications, Inc.'s Annual Report on Form 10-K/A for the fiscal year ended September 30, 1996]. 10.13: ICG Communications, Inc. 1996 Employee Stock Purchase Plan. [Incorporated by reference to the Registration Statement on Form S-8 of ICG Communications, Inc., File No. 33-14127, filed on October 14, 1996]. 10.14: Consulting Services Agreement, by and between IntelCom Group Inc. and International Communications Consulting, Inc., effective January 1, 1996 [Incorporated by reference to Exhibit 10.44 to ICG -66- Communications, Inc.'s Transition Report on Form 10- K/A for the three months ended December 31, 1996]. 10.15: Confidential General Release and Covenant Not to Sue, by and between ICG Communications, Inc. and John D. Field, dated November 5, 1996 [Incorporated by reference to Exhibit 10.45 to ICG Communications, Inc.'s Transition Report on Form 10-K/A for the three months ended December 31, 1996]. 10.16: Amendment, dated as of March 26, 1997, between ICG Communications, Inc. and J. Shelby Bryan, to Employment Agreement, dated as of May 30, 1995, between IntelCom Group Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1997]. 10.17: 1996 Stock Option Plan [Incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-8 of ICG Communications, Inc., File No. 333-25957, filed on April 28, 1997]. 10.18: Amendment No. 1 to the ICG Communications, Inc. 1996 Stock Option Plan. [Incorporated by reference to Exhibit 10.46 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997.] 10.19: Employment Agreement, dated as of April 22, 1997, between ICG Communications, Inc. and Don Teague [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1997]. 10.20: Amendment No. 2 to the ICG Communications, Inc. 1996 Stock Option Plan [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1997]. 10.21a:Purchase Agreement between ICG Holdings, Inc. and TriNet Corporate Realty Trust, Inc., dated December 9, 1997. [Incorporated by reference to Exhibit 10.52a to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997.] 10.21b:First Amendment to Purchase Agreement, by and between ICG Holdings, Inc. and TriNet Essential Facilities X, Inc., dated January 15, 1998. [Incorporated by reference to Exhibit 10.52b to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997.] 10.21c:Assignment of Purchase Agreement, by and between TriNet Corporate Realty Trust, Inc., dated January 15, 1998. [Incorporated by reference to Exhibit 10.52c to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997.] 10.21d:Commercial Lease - Net between TriNet Essential Facilities X, Inc. and ICG Holdings, Inc., dated January 15, 1998. [Incorporated by reference to Exhibit 10.52d to ICG Communications, Inc.'s -67- Annual Report on Form 10-K for the year ended December 31, 1997.] 10.21e:Continuing Lease Guaranty, by ICG Communications, Inc. to TriNet Essential Facilities X, Inc., dated January 20, 1998. [Incorporated by reference to Exhibit 10.52e to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997.] 10.21f:Continuing Lease Guaranty, by ICG Holdings (Canada), Inc. to TriNet Essential Facilities X, Inc., dated January 20, 1998. [Incorporated by reference to Exhibit 10.52f to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1997.] 10.22: Agreement and Plan of Merger, dated October 12, 1997, by and among ICG Communications, Inc., ICG Acquisition, Inc. and NETCOM On-Line Communication Services, Inc. [Incorporated by reference to Exhibit 2.1 to Form 8-K, dated January 21, 1998]. 10.23: Amendment to Agreement and Plan of Merger, dated December 15, 1997, by and among ICG Communications, Inc., ICG Acquisition, Inc. and NETCOM On-Line Communication Services, Inc. [Incorporated by reference to Exhibit 2.2 to Form 8-K, dated January 21, 1998]. 10.24: Employment Agreement, dated July 1, 1998, between ICG Communications, Inc. and Harry R. Herbst [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998]. 10.25: Employment Agreement, dated September 23, 1998, between ICG Communications, Inc. and Douglas I. Falk [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1998]. 10.26: Asset Purchase Agreement by and between MindSpring Enterprises, Inc. and NETCOM On-Line Communication Services, Inc., dated as of January 5, 1999 [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Current Report on Form 8-K, dated March 4, 1999]. 10.27: ICG Communications, Inc. 1998 Stock Option Plan. [Incorporated by reference to Attachment A to ICG Communications, Inc.'s Proxy Statement for the year ended December 31, 1997.] 10.28: Form of Stock Option Agreement for 1998 Stock Option Plan. [Incorporated by reference to Exhibit 10.28 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] 10.29: Amendment No. 1 to the ICG Communications, Inc. 1998 Stock Option Plan, dated December 15, 1998. [Incorporated by reference to Exhibit 10.29 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] -68- 10.30: Form of Agreement regarding Gross-Up Payments, by and between ICG Communications, Inc. and each of J. Shelby Bryan, Harry R. Herbst, Douglas I. Falk and H. Don Teague, dated December 16, 1998. [Incorporated by reference to Exhibit 10.30 to ICG Communications, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998.] 10.31: Extension and Amendment to Employment Agreement, dated as of March 10, 1999, by and between ICG Communications, Inc. and J. Shelby Bryan. [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999]. 10.32: Deferred Compensation Agreement, dated as of April 1, 1999, by and between ICG Communications, Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999]. 10.33: Purchase Agreement, dated as of January 1, 1999, by and among TriNet Essential Facilities X, Inc. and ICG Services, Inc. [Incorporated by reference to Exhibit 10.6 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 1999]. 10.34: Assumption and Modification Agreement, dated as of May 1, 1999, by and among ICG Services, Inc., ICG 161, L.P. and TriNet Realty Capital, Inc. [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.35: Employment Agreement, dated as of May 19, 1999, between ICG Communications, Inc. and Harry R. Herbst [Incorporated by reference to Exhibit 10.3 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.36: Employment Agreement, dated as of May 19, 1999, between ICG Communications, Inc. and H. Don Teague [Incorporated by reference to Exhibit 10.4 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.37: Employment Agreement, dated as of May 19, 1999, between ICG Communications, Inc. and John Kane [Incorporated by reference to Exhibit 10.5 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.38: Employment Agreement, dated as of June 1, 1999, between ICG Communications, Inc. and Douglas I. Falk [Incorporated by reference to Exhibit 10.6 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.39: Amendment to Employment Agreement, dated as of June 9, 1999, between ICG Communications, Inc. and John Kane [Incorporated -69- by reference to Exhibit 10.7 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.40: Employment Agreement, dated as of June 28, 1999, between ICG Communications, Inc. and William S. Beans, Jr. [Incorporated by reference to Exhibit 10.8 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.41: Share Price Appreciation Vesting Non-Qualified Stock Option Agreement, dated as of June 28, 1999, between ICG Communications, Inc. and William S. Beans, Jr. [Incorporated by reference to Exhibit 10.9 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.42: Employment Agreement, dated as of July 1, 1999, between ICG Communications, Inc. and Michael D. Kallet [Incorporated by reference to Exhibit 10.10 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1999]. 10.43: Amendment to the Stock Option Agreement between J. Shelby Bryan and IntelCom Group, Inc. dated May 30, 1995, dated as of March 10, 1999, between ICG Communications, Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.44: Amendment to the Stock Option Agreement between J. Shelby Bryan and IntelCom Group, Inc. dated November 13, 1995, dated as of March 10, 1999, between ICG Communications, Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.45: Promissory Note, dated as of August 6, 1999, between ICG Telecom Group, Inc. and John Kane [Incorporated by reference to Exhibit 10.3 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.46: Amendment to Employment Agreement, dated as of August 22, 1999, between ICG Communications, Inc. and John Kane [Incorporated by reference to Exhibit 10.4 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.47: Amendment to Employment Agreement, dated as of August 22, 1999, between ICG Communications, Inc. and Don Teague [Incorporated by reference to Exhibit 10.5 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.48: Amendment to Employment Agreement, dated as of August 22, 1999, between ICG Communications, Inc. and Harry R. Herbst -70- [Incorporated by reference to Exhibit 10.6 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.49: Amendment to Employment Agreement, dated as of September 14, 1999, between ICG Communications, Inc. and J. Shelby Bryan [Incorporated by reference to Exhibit 10.7 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 1999]. 10.50: Promissory Note, dated as of December 10, 1999, between ICG Telecom Group, Inc. and John Kane. [Incorporated by reference to Exhibit 10.50 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.51: General Release, Covenant Not to Sue and Agreement, dated as of January 1, 2000, between ICG Communications, Inc. and John Kane. [Incorporated by reference to Exhibit 10.51 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.52: Letter of Understanding to Douglas I. Falk, dated December 15, 1999, from ICG Communications, Inc. regarding Section 4 of the Employment Agreement between ICG Communications, Inc. and Douglas I. Falk. [Incorporated by reference to Exhibit 10.52 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.53: Employment Agreement, dated as of July 1, 1999, by and between ICG Communications, Inc. and Carla J. Wolin. [Incorporated by reference to Exhibit 10.53 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.54: Amendment to Employment Agreement, dated as of August 22, 1999, by and between ICG Communications, Inc. and Carla J. Wolin. [Incorporated by reference to Exhibit 10.54 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.55: Employment Agreement, dated as of January 7, 2000, by and between ICG Communications, Inc. and James Washington. [Incorporated by reference to Exhibit 10.55 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.56: General Release, Covenant Not to Sue and Agreement, dated as of January 17, 2000, between ICG Communications, Inc. and Douglas I. Falk. [Incorporated by reference to Exhibit 10.56 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.57: Employment Agreement, dated as of February 1, 2000, by and between ICG Communications, Inc. and Cindy Z. Schonhaut. [Incorporated by reference to Exhibit 10.57 to ICG -71- Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.58: Employment Agreement, dated as of March 8, 2000, by and between ICG Communications, Inc. and Pamela S. Jacobson. [Incorporated by reference to Exhibit 10.58 to ICG Communications, Inc.'s Annual Report on Form 10-K for the fiscal year ended December 31, 1999.] 10.59: Employment Agreement dated as of December 22, 1999 by and between ICG Communications, Inc. and William S. Beans, Jr. [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000.] 10.60: Employment Agreement dated as of March 23, 2000 by and between ICG Communications, Inc. and W. Terrell Wingfield, Jr. [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000.] 10.61: Deferred Compensation Agreement dated as of March 31, 2000 by and between ICG Communications, Inc. and J. Shelby Bryan. [Incorporated by reference to Exhibit 10.3 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000.] 10.62: Amendment to Employment Agreement dated as of April 13, 2000 by and between ICG Communications, Inc. and William S. Beans, Jr. [Incorporated by reference to Exhibit 10.8 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000.] 10.63: Amendment to Employment Agreement, dated as of May 10, 2000, by and between ICG Communications, Inc. and Carla J. Wolin. [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000.] 10.64: Amendment to Employment Agreement, dated as of May 10, 2000, by and between ICG Communications, Inc. and James Washington. [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000.] 10.65: Amendment to Employment Agreement, dated as of May 10, 2000, by and between ICG Communications, Inc. and Cindy Z. Schonhaut. [Incorporated by reference to Exhibit 10.3 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000.] 10.66: Amendment to Employment Agreement, dated as of May 10, 2000, by and between ICG Communications, Inc. and Don Teague. [Incorporated by reference to Exhibit 10.4 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000.] -72- 10.67: Amendment to Employment Agreement, dated as of July 12, 2000 by and between ICG Communications, Inc. and Michael D. Kallet. [Incorporated by reference to Exhibit 10.1 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000.] 10.68: Employment Agreement, dated as of August 7, 2000 by and between ICG Communications, Inc. and John Colgan. [Incorporated by reference to Exhibit 10.2 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000.] 10.69: Employment Agreement, dated as of September 24, 2000 by and between ICG Communications, Inc. and Randall Curran. [Incorporated by reference to Exhibit 10.3 to ICG Communications, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2000.] 10.70: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Robert Athey. 10.71: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Brian Cato. 10.72: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Darlinda Coe. 10.73: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and John Colgan. 10.74: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Richard E. Fish. 10.75: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Kimberly Gordon. 10.76: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and David Hurtado. 10.77: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Michael D. Kallet. 10.78: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Gayle Landis. 10.79: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Gary Lindgren. 10.80: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Bernard L. Zuroff. 10.81: Fourth Amendment to Lease, dated as of June 28, 2001 between Trinet Realty Investors V, Inc. as landlord and ICG Holdings, Inc. as tenant. 10.82: Agreement Regarding Option and Exercise of Option dated as of June 28, 2001 by Trinet Realty Investors V, Inc. and ICG Corporate Headquarters, L.L.C. 10.83: Consulting Agreement, dated January 10, 2001 by and between ICG Communications, Inc. and William S. Beans, Jr. (11) Statement re Computation of per Share Earnings Not Applicable. -73- (12) Statement re Computation of Ratios Not Applicable. (13) Annual Report to Security Holders Not Applicable. (21) Subsidiaries of the Registrant 21.1: Subsidiaries of the Registrant. (22) Published Report re Matters Submitted to Vote of Security Holders. Not Applicable. (23) Consents 23.1: Consent of KPMG LLP. (24) Power of Attorney. Not Applicable. (27) Financial Data Schedule. 27.1: Financial Data Schedule of ICG Communications, Inc. for the Year Ended December 31, 2000. (B) Report on Form 8-K The following reports on Form 8-K were filed by the Registrants during the quarter ended December 31, 2000: ICG Communications, Inc. (i) Current Report on Form 8-K dated December ICG Holdings (Canada) Co. 5,2000, announcing the resignations of Mr. ICG Holdings, Inc.: William S. Beans, Jr., President and Chief Operating Officer, Harry R. Herbst, Executive Vice President and Chief Financial Officer, Cindy Schonhaut, Executive Vice President -Government and External Affairs and Carla J. Wolin, Executive Vice President - People Services, effective as of December 4, 2000. (ii)Current Report on Form 8-K dated December 22, 2000, announcing that effective December 18, 2000, the NASDAQ National Stock Market delisted the common stock of ICG Communications, Inc., a Delaware corporation (the "Company"), due to the Company's filing for Chapter 11 bankruptcy protection. -74- (C) Exhibits The exhibits required by this Item are listed under Item 14(A)(3). (D) Financial Statement Schedule The financial statement schedule required by this Item is listed under Item 14(A)(2). -75- FINANCIAL STATEMENTS
Page -------- Independent Auditors' Report........................................................ F-2 Consolidated Balance Sheets, December 31, 1999 and 2000............................. F-3 Consolidated Statements of Operations, Years Ended December 31, 1998, 1999 and 2000.............................................................................. F-5 Consolidated Statements of Stockholders' Deficit, Years Ended December 31, 1998, 1999 and 2000..................................................................... F-7 Consolidated Statements of Cash Flows, Years Ended December 31, 1998, 1999 and 2000.............................................................................. F-8 Notes to Consolidated Financial Statements.......................................... F-11
F-1 Independent Auditors' Report The Board of Directors ICG Communications, Inc.: We have audited the accompanying consolidated balance sheets of ICG Communications, Inc. and subsidiaries (the Company) (a debtor-in-possession as of November 14, 2000) as of December 31, 1999 and 2000, and the related consolidated statements of operations, stockholders' deficit and cash flows for each of the years in the three-year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As discussed in note 3 to the consolidated financial statements, during 2000, the Company determined that the carrying value of its long-lived tangible and intangible assets had been impaired. In accordance with Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of (SFAS 121), the Company recorded an impairment charge at December 31, 2000 of approximately $1.7 billion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ICG Communications, Inc. and subsidiaries as of December 31, 1999 and 2000 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company has suffered recurring losses, has a significant net capital deficiency and, on November 14, 2000 the Company and most of its subsidiaries filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code. The consolidated financial statements do not include any adjustments to the recorded amounts or classification of assets or liabilities or reflect any amounts that may ultimately be paid to settle liabilities and contingencies which may be required in the Chapter 11 reorganization or the effect of any changes which may be made in connection with the Company's capitalization or operations resulting from a plan of reorganization. The Company has not filed a plan of reorganization which, when filed, is subject to acceptance by the Company's impaired creditors and stockholders and approval by the bankruptcy court which acceptance and approval is not assured. These factors, among others, raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. As explained in note 2 to the consolidated financial statements, during the year ended December 31, 2000, the Company changed its method of accounting for installation revenue. /s/ KPMG LLP April 6, 2001, except for note 3, as to which the date is June 28, 2001 F-2 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Balance Sheets December 31, 1999 and 2000
- ------------------------------------------------------------------------------------------------------------------------ December 31, ---------------------------------------------- Assets 1999 2000 - ------ ------------------- -------------------- (in thousands) Current assets: Cash and cash equivalents $ 103,288 196,980 Short-term investments available for sale 22,219 17,733 Receivables: Trade, net of allowance of $78.7 million and $94.3 million at December 31, 1999 and 2000, respectively 167,273 132,095 Other 1,458 994 -------------------- -------------------- Total net receivables 168,731 133,089 -------------------- -------------------- Prepaid expenses and deposits 9,189 13,234 -------------------- -------------------- Total current assets 303,427 361,036 -------------------- -------------------- Property and equipment 1,807,577 592,980 Less accumulated depreciation (279,698) (2,480) -------------------- -------------------- Net property and equipment 1,527,879 590,500 -------------------- -------------------- Restricted cash 12,537 9,278 Investments 28,939 1,650 Other assets: Goodwill, net of accumulated amortization of $31.7 million at December 31, 1999 95,187 - Deferred financing costs, net of accumulated amortization of $14.4 million and $1.2 million at December 31, 1999 and 2000, respectively 35,884 10,969 Other intangible assets, net 12,490 - Deposits 4,278 7,019 -------------------- -------------------- 147,839 17,988 -------------------- -------------------- Total Assets (note 1) $ 2,020,621 980,452 ==================== ==================== (Continued)
F-3 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Balance Sheets, Continued
- -------------------------------------------------------------------------------------------------------------------- December 31, ----------------------------------- Liabilities and Stockholders' Deficit 1999 2000 - ------------------------------------- ---------------- ---------------- (in thousands) Current liabilities not subject to compromise: Accounts payable $ 112,291 8,774 Payable pursuant to IRU agreement 135,322 - Accrued liabilities 85,709 57,888 Deferred revenue 25,175 14,840 Deferred gain on sale 5,475 - Current portion of capital lease obligations 8,090 - Current portion of long-term debt 796 796 Current liabilities of discontinued operations 529 - ---------------- -------------- Total current liabilities not subject to compromise 373,387 82,298 ---------------- -------------- Liabilities subject to compromise - 2,784,627 Long-term liabilities not subject to compromise: Capital lease obligations, less current portion 63,348 - Long-term debt, net of discount, less current portion 1,905,901 117,784 Other long-term liabilities 2,526 1,090 ---------------- -------------- Total liabilities 2,345,162 2,985,799 ---------------- -------------- Redeemable preferred stock of subsidiary ($397.9 million and $449.1 million liquidation value at December 31, 1999 and 2000, respectively) 390,895 449,056 Mandatorily redeemable preferred securities of ICG Funding ($133.4 million and $132.3 million liquidation value at December 31, 1999 and 2000, respectively) 128,428 132,251 8% Series A Convertible Preferred Stock ($785.4 million liquidation value at December 31, 2000) - 785,353 Stockholders' deficit: Common stock, $.01 par value, 100,000,000 shares authorized; 47,761,337 and 52,045,443 shares issued and outstanding at December 31, 1999 and 2000, respectively 478 520 Additional paid-in capital 599,282 882,142 Accumulated deficit (1,443,624) (4,254,669) ---------------- -------------- Total stockholders' deficit (843,864) (3,372,007) ---------------- -------------- Commitments and contingencies Total Liabilities and Stockholders' Deficit (notes 1 and 14) $ 2,020,621 980,452 ================ ============
See accompanying notes to consolidated financial statements. F-4 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Statements of Operations Years Ended December 31, 1998, 1999 and 2000 - --------------------------------------------------------------------------------
Years ended December 31, ------------------------------------------------------------- 1998 1999 2000 ------------------ ------------------ ------------------- (in thousands, except per share data) Revenue $ 303,317 479,226 598,283 ------------------ ------------------- ------------------- Operating costs and expenses: Operating costs 187,260 238,927 440,090 Selling, general and administrative expenses 159,939 239,756 283,965 Depreciation and amortization 91,927 174,239 318,771 Provision for impairment of long-lived assets - 31,815 1,701,466 Other, net 4,877 387 4,108 ------------------ ------------------- ------------------- Total operating costs and expenses 444,003 685,124 2,748,400 ------------------ ------------------- ------------------- Operating loss (140,686) (205,898) (2,150,117) Other (expense) income: Interest expense (contractual interest of $30.3 million not recorded during the year ended December 31, 2000) (170,015) (212,420) (233,643) Interest income 28,401 16,300 23,782 Other expense, net, including realized gains and losses on marketable trading securities (1,118) (2,522) (15,166) ------------------ ------------------- ------------------- (142,732) (198,642) (225,027) ------------------ ------------------- ------------------- Loss from continuing operations before reorganization expense, income taxes, accretion and preferred dividends, extraordinary gain, and cumulative effect of change in accounting principle (283,418) (404,540) (2,375,144) Reorganization expenses - - (55,309) Income tax expense (90) (25) - Accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses (55,183) (61,897) (60,043) ------------------ ------------------- ------------------- Loss from continuing operations before extraordinary gain and cumulative effect of change in accounting principle $ (338,691) (466,462) (2,490,496) ------------------ ------------------- -------------------
F-5 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Statements of Operations, Continued - --------------------------------------------------------------------------------
Years ended December 31, ------------------------------------------------------- 1998 1999 2000 ------------------ --------------- --------------- (in thousands, except per share data) Discounted operations: Gain (loss) from discontinued operations $ (77,577) (1,036) 770 Gain (loss) on disposal of discontinued operations, net of income taxes of $4.7 million in 1999 (1,777) 37,825 3,572 ------------------- ---------------- ---------------- (79,354) 36,789 4,342 ------------------- ---------------- ---------------- Net loss before extraordinary gain and cumulative effect of change in accounting principle (418,045) (429,673) (2,486,154) ------------------ ---------------- ---------------- Extraordinary gain on sales of operations of NETCOM, net of income taxes of $2.0 million - 195,511 - Cumulative effect of change in accounting principle for revenue from installation services - - (7,363) ------------------- ---------------- ---------------- Net loss (418,045) (234,162) (2,493,517) Accretion of 8% Series A Convertible Preferred Stock to liquidation - value and related dividends - (158,249) Charge for beneficial conversion feature of 8% Series A Convertible Preferred Stock - - (159,279) ------------------- ---------------- ---------------- Net loss attributable to common stockholders (418,045) (234,162) (2,811,045) =================== ================ ================ Other comprehensive loss: Foreign currency translation adjustment (263) - - ------------------- ---------------- ---------------- Other comprehensive loss (263) - - ------------------- ---------------- ---------------- Comprehensive loss $ (418,308) (234,162) (2,493,517) =================== ================ ================ Net loss per share - basic and diluted: Loss from continuing operations $ (7.49) (9.90) (49.63) Income (loss) from discontinued operations (1.76) 0.78 .09 Extraordinary gain on sales of operations of NETCOM - 4.15 - Accretion, dividends and beneficial conversion of 8% Series A Convertible Preferred Stock - - (6.33) Cumulative effect of change in accounting principle - - (.15) ------------------- ---------------- ---------------- Net loss per share - basic and diluted $ (9.25) (4.97) (56.02) =================== ================ ================ Weighted average number of shares outstanding - basic and diluted 45,194 47,116 50,184 =================== ================ ================
See accompanying notes to consolidated financial statements. F-6 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Statements of Stockholders' Deficit Years Ended December 31, 1998, 1999 and 2000
- ----------------------------------------------------------------------------------------------------------------------------------- Additional Common stock paid-in Accumulated ------------------------- Shares Amount capital deficit ------------ ----------- ------------ ------------ (in thousands) BALANCES AT JANUARY 1, 1998 43,974 $ 749 533,541 (791,417) Shares issued for cash by subsidiary, net of selling costs 127 1 3,384 - Shares issued for cash in connection with the exercise of options and warrants 1,519 15 19,268 - Shares issued in connection with business combinations 502 5 15,527 - Shares issued for cash in connection with the employee stock purchase plan 111 1 2,249 - Shares issued as contribution to 401(k) plan 127 2 3,662 - Exchange of ICG Holdings (Canada), Inc. common shares for ICG common stock - (309) 309 - Cumulative foreign currency translation adjustment - - - - Net loss - - - (418,045) ------------ ----------- ------------ ----------- BALANCES AT DECEMBER 31, 1998 46,360 464 577,940 (1,209,462) Shares issued for cash in connection with the exercise of options and warrants 935 9 12,524 - Shares issued for cash in connection with the employee stock purchase plan 206 2 3,359 - Shares issued as contribution to 401(k) plan 260 3 5,457 - Shares issued upon conversion of long-term debt - - 2 - Reversal of cumulative foreign currency translation adjustment - - - - Net loss - - - (234,162) ------------ ----------- ------------ ----------- BALANCES AT DECEMBER 31, 1999 47,761 478 599,282 (1,443,624) Shares issued for cash in connection with the exercise of options and warrants 936 9 14,366 - Shares issued for cash in connection with the employee stock purchase plan 174 1 2,728 - Shares issued as contribution to 401(k) plan 178 2 4,296 - Shares issued in exchange for long-term investment 2,996 30 21,595 - Warrants issued in connection with 8% Series A Convertible Preferred Stock - - 80,596 - Value ascribed to beneficial conversion feature of 8% Series A Convertible Preferred Stock - - 159,279 (159,279) Accretion and dividends of 8% Series A Convertible Preferred Stock - - - (158,249) Net loss - - - (2,493,517) ------------ ----------- ------------ ----------- BALANCES AT DECEMBER 31, 2000 52,045 $ 520 882,142 (4,254,669) ============ =========== ============ =========== - ---------------------------------------------------------------------------------------------------------------------- Accumulated other Total comprehensive stockholders' income (loss) deficit ----------------- --------------- (in thousands) BALANCES AT JANUARY 1, 1998 144 (256,983) Shares issued for cash by subsidiary, net of selling costs - 3,385 Shares issued for cash in connection with the exercise of options and warrants - 19,283 Shares issued in connection with business combinations - 15,532 Shares issued for cash in connection with the employee stock purchase plan - 2,250 Shares issued as contribution to 401(k) plan - 3,664 Exchange of ICG Holdings (Canada), Inc. common shares for ICG common stock - - Cumulative foreign currency translation adjustment (263) (263) Net loss - (418,045) -------------- ----------------- BALANCES AT DECEMBER 31, 1998 (119) (631,177) Shares issued for cash in connection with the exercise of options and warrants - 12,533 Shares issued for cash in connection with the employee stock purchase plan - 3,361 Shares issued as contribution to 401(k) plan - 5,460 Shares issued upon conversion of long-term debt - 2 Reversal of cumulative foreign currency translation adjustment 119 119 Net loss - (234,162) -------------- ----------------- BALANCES AT DECEMBER 31, 1999 - (843,864) Shares issued for cash in connection with the exercise of options and warrants - 14,375 Shares issued for cash in connection with the employee stock purchase plan - 2,729 Shares issued as contribution to 401(k) plan - 4,298 Shares issued in exchange for long-term investment - 21,625 Warrants issued in connection with 8% Series A Convertible Preferred Stock - 80,596 Value ascribed to beneficial conversion feature of 8% Series A Convertible Preferred Stock - - Accretion and dividends of 8% Series A Convertible Preferred Stock - (158,249) Net loss - (2,493,517) -------------- ----------------- BALANCES AT DECEMBER 31, 2000 - (3,372,007) ============== =================
See accompanying notes to consolidated financial statements. F-7 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Statements of Cash Flows Years Ended December 31, 1998, 1999 and 2000 - --------------------------------------------------------------------------------
Years ended December 31, ---------------------------------------------------------- 1998 1999 2000 ----------------- ------------------ ------------------- (in thousands) Cash flows from operating activities: Net loss $ (418,045) (234,162) (2,493,517) Net loss (income) from discontinued operations 79,354 (36,789) (4,342) Extraordinary gain on sales of discontinued operations - (195,511) - Adjustments to reconcile net loss to net cash provided (used) by operating activities: Cumulative effect of change in accounting principle - - 7,363 Recognition of deferred gain - (29,250) (6,239) Accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses 55,183 61,897 60,043 Depreciation and amortization 91,927 174,239 318,771 Provision for impairment of long-lived assets - 31,815 1,701,466 Loss on marketable trading securities - - 21,991 Deferred compensation - 1,293 1,295 Net loss (gain) on disposal of long-lived assets 4,877 (906) 2,415 Provision for uncollectible accounts 11,238 60,019 84,457 Interest expense deferred and included in long-term debt, net of amounts capitalized on assets under construction 152,601 186,080 168,779 Interest expense deferred and included in capital lease obligations 5,637 5,294 4,046 Amortization of deferred advertising costs included in selling, general and administrative expenses 1,795 - - Amortization of deferred financing costs included in interest expense 4,478 4,860 5,276 Contribution to 401(k) plan through issuance of common stock 3,664 5,460 4,298 Change in operating assets and liabilities, excluding the effects of business combinations and dispositions: Receivables (88,962) (120,857) (49,619) Prepaid expenses, deposits and inventory (1,566) 3,474 (2,392) Deferred advertising costs (1,795) - - Accounts payable and accrued and other liabilities (2,288) 18,847 95,072 Deferred revenue 1,842 20,721 169,237 ----------------- ------------------ ------------------- Net cash provided (used) by operating activities before reorganization items $ (100,060) (43,476) 88,400 ----------------- ------------------ ------------------- (Continued)
F-8 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Statements of Cash Flows, Continued - --------------------------------------------------------------------------------
Years ended December 31, --------------------------------------------------------- 1998 1999 2000 ---------------- ---------------- ----------------- (in thousands) Reorganization items: Changes in restructuring accruals - - 8,094 Changes in liabilities subject to compromise - - (10,504) Write-off of deferred financing and offering costs - - 36,493 ---------------- ---------------- ----------------- Net cash provided (used) by operating activities (100,060) (43,476) 122,483 ---------------- ---------------- ----------------- Cash flows from investing activities: Proceeds from sales of discontinued operations, net of selling costs and cash included in sales - 374,897 - Payments for business acquisitions, net of cash acquired (67,841) - - Acquisition of property, equipment and other assets (360,205) (595,346) (742,766) Change in accounts payable and accrued liabilities for purchase of long-term assets - 64,559 146,325 Proceeds from disposition of property, equipment and other assets 168 4,300 4,157 Proceeds from sale of corporate headquarters, net of selling and other costs 30,283 - - Proceeds from sale of short-term investments available for sale 60,281 29,781 22,172 Proceeds from sale of marketable securities, net of realized gain - 30,000 10,634 Purchase of investments - (28,939) (1,400) Decrease in restricted cash 7,737 4,375 3,259 Increase in long-term notes receivable from affiliate and others (4,880) - - Purchase of minority interest in subsidiaries (9,104) (6,039) - ---------------- ---------------- ----------------- Net cash used by investing activities (343,561) (122,412) (557,619) ---------------- ---------------- ----------------- Cash flows from financing activities: Proceeds from issuance of common stock 24,918 15,894 17,104 Proceeds of 8% Series A Convertible Preferred Stock, net of issuance costs - - 720,330 Proceeds from issuance of long-term debt 550,574 80,000 95,000 Deferred long-term debt issuance costs (17,591) (4,785) (7,150) Principal payments on capital lease obligations (16,509) (14,662) (20,525) Payments on IRU agreement - - (179,497) Principal payments on long-term debt (6,864) (502) (90,122) Payments of preferred dividends (8,927) (8,927) (6,696) ---------------- ---------------- ----------------- Net cash provided by financing activities 525,601 67,018 528,444 ---------------- ---------------- ----------------- Net increase (decrease) in cash and cash equivalents 81,980 (98,870) 93,308 Net cash provided (used) by discontinued operations 7,753 (8,149) 384 Cash and cash equivalents, beginning of year 120,574 210,307 103,288 ---------------- ---------------- ----------------- Cash and cash equivalents, end of year 210,307 103,288 196,980 ================ ================ ================= (Continued)
F-9 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession as of November 14, 2000) Consolidated Statements of Cash Flows, Continued - --------------------------------------------------------------------------------
Years ended December 31, --------------------------------------------------------- 1998 1999 2000 ---------------- ---------------- ----------------- (in thousands) Supplemental disclosure of cash flows information of continuing operations: Cash paid for interest $ 7,299 15,216 32,626 ================ ================ ================= Cash paid for income taxes $ 90 2,848 378 ================ ================ ================= Supplemental disclosure of non-cash investing and financing activities of continuing operations: Common stock issued in connection with business combinations $ 15,532 - - ================ ================ ================= Common stock issued in connection with long-term investment $ - - 21,625 ================ ================ ================= Acquisition of corporate headquarters assets through the issuance of long-term debt and conversion of security deposit $ - 33,077 - ================ ================ ================= Assets acquired pursuant to IRU agreement $ - 135,322 96,903 Assets acquired under capital leases 775 8,393 133,915 ---------------- ---------------- ----------------- Total $ 775 143,715 230,818 ================ ================ =================
F-10 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------ (1) Organization and Nature of Business (a) Organization ICG Communications, Inc., a Delaware corporation (ICG), was incorporated on April 11, 1996 and is the publicly-traded U.S. parent company of ICG Funding, LLC, a special purpose Delaware limited liability company and wholly owned subsidiary of ICG (ICG Funding), ICG Holdings (Canada) Co., a Nova Scotia unlimited liability company (Holdings-Canada), ICG Holdings, Inc., a Colorado corporation (Holdings), and ICG Services, Inc., a Delaware corporation (ICG Services) and their subsidiaries. ICG and its subsidiaries are collectively referred to as the "Company." The Company's common stock was traded on the NASDAQ National Market (NASDAQ) stock exchange. However, due to the bankruptcy filings described below, the NASDAQ halted trading of the Company's common stock on November 14, 2000 and delisted the stock on November 18, 2000. The Company provides voice, data and Internet communication services. Headquartered in Englewood, Colorado, the Company operates an integrated metropolitan and nationwide fiber optic infrastructure to offer: . Dial-Up Internet access services including primary rate interface and remote access services/ managed modem services on a wholesale basis to national and regional Internet service providers (ISPs). . Point-to-Point Broadband Service providing traditional special access service to long-distance and long-haul carriers and medium to large sized corporate customers as well as switched access and SS7 services. . Corporate Services, primarily retail voice and data services to businesses. (b) Bankruptcy Proceedings On November 14, 2000 (the Petition Date), ICG and all of its subsidiaries, except certain non-operating entities and ICG 161, LP, filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code in the Federal District of Delaware in order to facilitate the restructuring of the Company's debt, trade liabilities and other obligations. ICG and its bankruptcy filing subsidiaries are collectively referred to as the Debtors. The Debtors are currently operating as debtors-in-possession under the supervision of the United States District Court for the District of Delaware. The bankruptcy petitions were filed in order to preserve cash and to give the Debtors the opportunity to restructure their obligations. ICG 161, LP is a subsidiary of ICG Services whose sole purpose is the ownership of the Company's headquarters in Englewood, Colorado. F-11 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (1) Organization and Nature of Business, continued (b) Bankruptcy Proceedings, continued The consolidated financial statements contained herein have been prepared in accordance with generally accepted accounting principles applicable to a going concern, and do not purport to reflect or to provide for all of the possible consequences of the ongoing Chapter 11 reorganization cases. Specifically, the consolidated financial statements do not present the amount which will ultimately be paid to settle liabilities and contingencies which may be required in the Chapter 11 reorganization cases or the effect of any changes which may be made in connection with the Debtors' capitalization or operations resulting from a plan of reorganization. The Debtors have not filed a plan of reorganization as of this date, but expect to file one in the near term. The plan, when filed, is subject to acceptance by the Company's compromised creditors and stockholders and approval by the Bankruptcy Court. Because of the ongoing nature of the reorganization cases, the outcome of which is not presently determinable, the consolidated financial statements contained herein are subject to material uncertainties and may not be indicative of the results of the Company's future operations or financial position. No assurance can be given that the Company will be successful in reorganizing its affairs within the Chapter 11 bankruptcy proceedings. These Chapter 11 filings, together with the limitation on the Company's financing alternatives, necessitated a comprehensive examination of the Company's business operations. Because of the numerous development projects that the Company had underway and the limited opportunity that existed for completion of these projects, it was decided by management that, without additional capital, virtually none of the existing development projects could be successfully completed. As a result of the items discussed above, there is substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon, but not limited to, formulation, approval, and confirmation of a plan of reorganization, adequate sources of capital, customer and employee retention, the ability to provide high quality services and the ability to sustain positive results of operations and cash flows sufficient to continue to operate. The consolidated financial statements do not include any adjustments to the recorded amounts or classification of assets or liabilities or reflect any amounts that may ultimately be paid to settle liabilities and contingencies which may be required in the Chapter 11 reorganization or the F-12 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (1) Organization and Nature of Business, continued (b) Bankruptcy Proceedings, continued effect of any changes, which may be made in connection with the Company's capitalization or operations resulting from a plan of reorganization. (c) Accounting under Bankruptcy The December 31, 2000 financial statements have been prepared in accordance with AICPA Statement of Position 90-7 Financial Reporting by Entities in Reorganization under the Bankruptcy Code (SOP 90-7). Pursuant to SOP 90-7, an objective of financial statements issued by an entity in Chapter 11 is to reflect its financial evolution during the proceeding. For that purpose, the financial statements for periods including and subsequent to filing the Chapter 11 petition should distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Expenses and other items not directly related to ongoing operations are reflected separately in the consolidated statement of operations as reorganization expenses (see note 4). The filing of the Chapter 11 cases by the Debtors (i) automatically stayed actions by creditors and other parties in interest to recover any claim that arose prior to the commencement of the cases, and (ii) served to accelerate, for purposes of allowance, all prepetition liabilities of the Company, whether or not those liabilities were liquidated or contingent as of the Petition Date. The following table sets forth the liabilities of the Company subject to compromise as of December 31, 2000 (in thousands): Unsecured creditors $ 583,749 Priority creditors 33,385 Other secured creditors 738 Capital lease obligations 197,974 Unsecured long-term debt 1,968,781 ------------ $ 2,784,627 ============
Additionally, pre-petition debt that is subject to compromise must be recorded at the allowed claim amount, which generally results in the write-off of any deferred financing amounts associated with the debt. Interest on debt subject to compromise ceases to accrue when Bankruptcy is filed. Pre-petition debt of the Debtors that is not subject to compromise, specifically the Senior Facility and the mortgage payable with balances outstanding as of December 31, 2000 of approximately $84.6 million and $0.9 million respectively, F-13 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (1) Organization and Nature of Business, continued (c) Accounting under Bankruptcy, continued continues to accrue interest, although payment of such interest, or any principal payments, is agreed upon by the Company and the specific lenders. All arrangements are subject to Bankruptcy Court approval. The Company's creditors had until April 30, 2001 to file any adjustments to claim amounts. The Company must reconcile any differences between the claim amount and the amount per the Company's records. Under the Bankruptcy Code, the Company may elect to assume or reject real estate leases, employment contracts, personal property leases, service contracts, and other unexpired executory prepetition contracts, subject to Bankruptcy Court approval. The Company cannot presently determine with certainty the ultimate aggregate liability which will result from the filing of claims relating to such contracts which have been or may be rejected. The Bankruptcy Code accords priority, subject to certain limits and conditions, to claims and expenses in the following order: administrative expenses of the bankruptcy, wages and salaries, contributions to employee benefit plans, certain customer deposits, and certain tax claims. (d) Discontinued Operations During 1999, the Company sold the retail customer ISP business of NETCOM On-Line Communication Services, Inc. (NETCOM), but retained the national Tier 1 data network assets. Additionally, during 1999, the Company sold ICG Fiber Optic Technologies, Inc. and Fiber Optic Technologies of the Northwest, Inc., (collectively Network Services) and ICG Satellite Services, Inc. and Maritime Telecommunications Network, Inc. (collectively Satellite Services). Network Services provided information technology services and selected networking products. Satellite Services provided satellite voice, data and video services to major cruise ship lines, the U.S. Navy, the offshore oil and gas industry and integrated communications providers. (See note 5, "Sale of Assets and Discontinued Operations".) (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries and reflect the operations of F-14 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (2) Summary of Significant Accounting Policies, continued (a) Basis of Presentation, continued NETCOM, Network Services, Satellite Services and Zycom Corporation (Zycom) as discontinued for all periods presented. All significant intercompany accounts and transactions have been eliminated in consolidation. (b) Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. (c) Inventory Inventory, consisting of equipment to be utilized in the installation of telecommunications systems, services and networks for customers, is recorded at the lower of cost or market in property and equipment in the accompanying balance sheet. (d) Investments The Company invests primarily in high-grade, short-term investments that consist of money market instruments, commercial paper, certificates of deposit, government obligations and corporate bonds, all of which are considered to be available-for-sale. Investments in partnership interests and in common or preferred stock for which there is no public trading market and which represent less than a 20% equity interest in the investee company are accounted for using the cost method, unless the Company exercises significant influence and/or control over the operations of the investee company, in which case the equity method of accounting is used. Realized gains and losses and declines in value judged to be other than temporary are included in the statement of operations. (e) Property and Equipment See note 3 for a discussion of the impairment of long-lived assets. F-15 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (2) Summary of Significant Accounting Policies, continued (e) Property and Equipment, continued Property and equipment, prior to reflection of the impairment in note 3, have been stated at cost. Subsequent to the impairment, the impaired net book value of the asset held as of December 31, 2000 becomes the new cost basis of the asset and is depreciated over the remaining estimated useful life of the asset. Assets acquired subsequent to December 31, 2000 will be stated at cost to acquire and depreciated over their estimated useful life. Costs of construction have been capitalized, including interest costs related to construction, capitalized labor and other costs associated with network development, service installation and internal-use software development. The Company capitalizes costs of direct labor and other employee benefits associated with installing and provisioning local access lines for new customers and providing new services to existing customers, since these costs are directly associated with multi-period, contractual, revenue-producing activities. Direct labor costs are capitalized only when directly related to the provisioning of customer services with multi-period contracts. Capitalization begins upon the acceptance of the customer order and continues until the installation is complete and the service is operational. Capitalized service installation costs are depreciated on a straight-line basis over two years, the estimated average customer contract term. The Company capitalizes costs of direct labor and other employee benefits associated with the development of internal-use computer software in accordance with Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Internal-use software costs are depreciated over the estimated useful life of the software, typically two to five years, beginning in the period when the software is substantially complete and ready for use. F-16 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (2) Summary of Significant Accounting Policies, continued (e) Property and Equipment, continued Depreciation begins in the period the network is substantially complete and available for use and is recorded on a straight-line basis over the estimated useful life of the equipment or network, ranging from eight to 20 years. Estimated useful lives of major categories of property and equipment are as follows: Furniture, fixtures and office equipment 3 to 7 years Internal-use software costs 2 to 5 years Machinery and equipment 3 to 8 years Fiber optic equipment 8 years Switch equipment 10 years Fiber optic networks 20 years Buildings and improvements 31.5 years Site improvements 7 years Service installation costs 2 years Equipment held under capital leases is stated at the lower of the fair value of the asset or the net present value of the minimum lease payments at the inception of the lease. For equipment held under capital leases, depreciation is provided using the straight-line method over the estimated useful lives of the assets owned, or the related lease term, whichever is shorter. (f) Other Assets Goodwill resulting from the application of the purchase method of accounting for business combinations is amortized over a maximum of 20 years using the straight-line method. See note 3 for a discussion of the impairment of long-lived assets. Amounts related to the acquisition of transmission and other licenses are recorded at cost and amortized over 20 years using the straight-line method. Rights of way, minutes of use, and non-compete agreements are recorded at cost, and amortized using the straight-line method over the terms of the agreements, ranging from two to 12 years. See note 3 for a discussion of the impairment of long-lived assets. Amortization of deferred financing costs is provided over the life of the related financing agreement, the maximum term of which is ten years, and is included in interest expense. The Company has written-off deferred financing costs related to debt subject to compromise as of December 31, 2000 (see notes 4 and 11). (g) Impairment of Long-Lived Assets The Company provides for the impairment of long-lived assets, including goodwill, pursuant to Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to F-17 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (2) Summary of Significant Accounting Policies, continued (g) Impairment of Long-Lived Assets, continued be Disposed of (SFAS 121), which requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Such events include, but are not limited to, a significant decrease in the market value of an asset, a significant adverse change in the business climate that could affect the value of an asset or a current period operating or cash flow loss combined with a history of operating or cash flow losses. An impairment loss is recognized when estimated undiscounted future cash flows, before interest, expected to be generated by the asset are less than its carrying value. Measurement of the impairment loss is based on the estimated fair value of the asset, which is generally determined using valuation techniques such as the discounted present value of expected future cash flows, appraisals or other pricing models as appropriate. The Company recorded an impairment of its' long-lived assets during 2000. See note 3 for a discussion of the impairment. (h) Revenue Recognition The Company recognizes revenue from services provided to its business end-user and ISP customers as such services are provided and charges direct selling expenses to operations as incurred. Maintenance revenue is recognized as services are provided. Uncollectible receivables are accounted for using the allowance method. Generally, the Company recognizes revenue earned under indefeasible rights-of-use (IRU), of constructed fiber, in exchange for cash, ratably over the term of the agreement. In the event that the IRU meets the definition of a sales-type lease pursuant to Statement of Financial Accounting Standards No. 13, Accounting for Leases (SFAS No. 13), and the Company transfers ownership of the underlying assets to the customer, the Company will apply sales-type lease accounting and recognize revenue and related costs at the inception of the agreement. Prior to June 30, 1999, the Company applied sales-type lease accounting to IRUs that met the criteria included in SFAS No. 13, whether or not the agreement provided for the transfer of ownership of the underlying assets. Under either application, revenue recognition begins in the period that facilities are available for use by the customer. Revenue earned on the portion of IRUs attributable to the provision of maintenance services is recognized ratably over the term of the agreement. F-18 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (2) Summary of Significant Accounting Policies, continued (h) Revenue Recognition, continued Deferred revenue includes amounts billed, in compliance with customer contracts, before service is provided. On October 1, 2000, the Company adopted Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the Securities and Exchange Commission. Effective January 1, 2000, installation revenue is recognized ratably over a two-year period. Prior to the adoption of SAB 101, the Company recognized installation revenue as services were performed. As required by generally accepted accounting principles, the Company has reflected the effects of the change in accounting principle as if such change had been adopted as of January 1, 2000, and has included in the results of operations for the year ended December 31, 2000, a charge of approximately $7.4 million relating to the cumulative effect of this change in accounting principle. In addition, the change in accounting principle resulted in an increase in revenue for the year ended December 31, 2000 of approximately $0.9 million. (i) Income Taxes The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (j) Net Loss Per Share Net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding. Weighted average number of shares outstanding represents combined ICG Common Stock and Holdings-Canada Class A common shares outstanding for the year ended December 31, 1998, and ICG Common Stock only for the years ended December 31, 1999 and 2000. F-19 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (2) Summary of Significant Accounting Policies, continued (j) Net Loss Per Share, continued Net loss per share is determined in accordance with Financial Accounting Standards Board Statement No. 128, Earnings Per Share (SFAS 128). Under SFAS 128, basic loss per share is computed on the basis of weighted average common shares outstanding. Diluted loss per share considers potential common stock instruments in the calculation of weighted average common shares outstanding. Potential common stock instruments, which include options, warrants and convertible subordinated notes and preferred securities, are not included in the Company's net loss per share calculation, as their effect is anti-dilutive. (k) Stock-Based Compensation The Company accounts for its stock-based employee and non-employee director compensation plans using the intrinsic value based method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employee, (APB 25) and related Interpretations. The Company has provided pro forma disclosures of net loss and net loss per share as if the fair value based method of accounting for these plans, as prescribed by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), had been applied. Pro forma disclosures include the effects of employee and non-employee director stock options granted during the periods presented. (l) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. (m) Reclassifications Certain prior period amounts have been reclassified to conform to the current period's presentation. F-20 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (3) Provision for Impairment of Long-Lived Tangible and Intangible Assets As a result of adverse changes in the capital markets, specifically as related to the availability of capital to finance competitive local exchange carrier's growth, downward trends in certain segments of the economy, particularly with respect to expected growth of demand in technology and telecommunications segments, the Company's Chapter 11 filing and the subsequent deterioration in the value of the Company's operating assets, the Company undertook an extensive analysis of its business plan during the fourth quarter of 2000 and the first quarter of 2001. As a result, the Company prepared a detailed business plan that gave appropriate consideration to the environmental factors noted above. SFAS 121 requires that assets to be held and used are measured for impairment on the basis of undiscounted future cash flows before interest determined at the lowest level for which there are identifiable cash flows. Due to the Company's inability to allocate significant amounts of central support costs to the various markets, the impairment analysis was performed on a Company-wide basis. This analysis indicated that there was a shortfall of cash flows compared to the carrying value of the Company's long-lived tangible and intangible assets and that an impairment had occurred. For purposes of calculating the amount of the impairment the Company has segregated its long-lived assets into three categories: intangible assets, consisting primarily of goodwill, tangible assets to be disposed of, and tangible assets to be utilized in ongoing operations. As a result of the analysis of shortfalls of cash flows to carrying values of assets noted above, all intangibles, consisting primarily of goodwill, have been written off as of December 31, 2000, resulting in an impairment charge of approximately $79.8 million. Additionally, the Company has determined that certain assets that will not be utilized under the business plan will be held for resale. The fair value of assets held for resale was based on current appraisals or purchase offers, less cost to sell. Assets held for resale are comprised primarily of 1) assets which were under construction in late 2000 and for which the incremental capital required to place the asset in service for revenue generation was not available, and 2) assets in service which were not required to meet expected future customer demand as defined in the business plan. The net book value of assets to be disposed of prior to the impairment was $164.5 million. An impairment of approximately $124.0 million was reflected in the financial statements as of December 31, 2000 to reduce the assets to their fair value of approximately $40.5 million. These assets have not been segregated as current assets in the accompanying consolidated financial statements as of December 31, 2000 and are included in property and equipment because the sales are subject to final Bankruptcy Court approval. The fair value of tangible assets to be utilized in ongoing operations was determined to be $550 million. This value was derived primarily from the discounted cash flows from F-21 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (3) Provision for Impairment of Long-Lived Tangible and Intangible Assets, continued future operations; however the Company also took into consideration several other valuation techniques. The following describes the different methods used and the resulting ranges of value under those techniques. . Discounted cash flows - The Company, as noted above, developed a new business plan in late 2000 and early 2001. The Company hired external third-party consultants to assist during the bankruptcy process and help in the formulation of a business plan, including the calculation of a range of reorganization values for the Company to utilize in the development of a proposed plan of reorganization. This business plan is expected to be the basis for the plan of reorganization ultimately submitted to the Bankruptcy Court. However, the reorganization plan, when filed, is subject to acceptance by the Company's compromised creditors and stockholders and approval by the Bankruptcy Court. At the present time, the Company is unable to determine what the final reorganization value will be and therefore the amounts used to calculate the impairment reflected in the accompanying consolidated financial statements as of December 31, 2000 are based on estimates which could differ significantly from the Company's reorganization value determined upon emergence from bankruptcy, currently estimated to be late 2001 or early 2002. The Company's business plan process noted above was a comprehensive, zero-based assessment of the markets in which the Company believes it can provide profitable service offerings in the future. The Company has identified new products that leverage the Company's expertise and existing network assets. These new products are expected to generate a significant portion of the Company's future revenues. The business plan also includes substantial capital expenditures to complete the network and generate the revenues projected within the business plan. In order to fund the business plan through 2005, the plan contemplates an infusion of equity and debt of approximately $200 million which the Company estimates will be available on acceptable terms, although no commitments for such funds have been obtained and such availability cannot be assured. Additionally, the plan contemplates significant future restructuring of the Company's basic operating costs including, but not limited to, additional significant reductions in selling, general and administrative expenses and line costs. This valuation technique results in a range of fair values of the Company's long-lived assets from $400 million to $900 million. . Asset appraisal - In connection with securing the Company's Credit Agreement (see note 11), appraisals were performed with an effective date of December 22, 2000. These appraisals indicated that the value of the Company's long-lived assets ranged from $640 to $740 million. These appraisals were prepared on the basis of an orderly liquidation, which is not part of the Company's plan. F-22 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (3) Provision for Impairment of Long-Lived Tangible and Intangible Assets, continued . Current market capitalization - This analysis was based on the public market capitalization as determined by reference to recent trading prices for the Company's debt and equity securities. For this calculation, the preferred securities were assumed to have no value and the senior discount notes were valued at 8-10% of the face value based on recent trading prices. Fully secured debt balances (such as capital leases and the Senior Facility) were valued at 100% of their book value. This valuation technique resulted in a range of fair values of the Company's long-lived assets from $400 million to $600 million. Management, in consultation with its financial advisors, determined that the appropriate valuation technique was based on discounted cash flows. Under this method, the Company believes the appropriate fair value of its long-lived tangibles assets at December 31, 2000 to be $550 million. As a result, the Company has recorded an impairment charge as of December 31, 2000 of approximately $1.5 billion related to tangible assets to be used in the ongoing operations of the Company. No adjustment was made to recorded depreciation during the year ended December 31, 2000. The net book value of the impaired assets becomes the new cost basis of the assets as of December 31, 2000. This amount is then depreciated over the remaining estimated useful life of the assets. The Company, during the year ended December 31, 1999, also recorded a provision for impairment of long-lived assets of $31.8 million, which relates to the impairment of software and other capitalized costs associated with Telecom Services' billing and provisioning system projects under development. The provision for impairment of long-lived assets was based on management's decision to abandon the billing and provisioning systems under development and to select new vendors for each of these systems, which vendors were expected to provide the Company with billing and provisioning solutions with improved functionality and earlier delivery dates at significantly lower costs. The Company's billing and provisioning systems under development were either not operational or were serving minimal customers at the time management determined the carrying value of the underlying assets was not recoverable. (4) Reorganization Expenses In October 2000, the Company initiated a cost reduction strategy that focused upon reducing operating expenses and returning the Company to profitability. This plan included the filing on November 14, 2000 of voluntary petitions under Chapter 11 for the Company and the majority of its subsidiaries. Under bankruptcy accounting, the Company is required to segregate and classify certain costs as reorganization costs. F-23 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (4) Reorganization Expenses, continued The following reorganization costs were incurred during the year ended December 31, 2000 (in thousands): Write-off of deferred financing and offering costs (notes 11 and 12) $ 36,493 Severance costs 4,435 Retention bonus 5,212 Professional fees 6,260 Cancellation charges 2,337 Debtor-in-Possession commitment fees 400 Other 172 ------------------ Total $ 55,309 ================== (5) Sale of Assets and Discontinued Operations Income (loss) from discontinued operations consists of the following: Years ended December 31, ------------------------------------------------------------ 1998 1999 2000 ------------------- ------------------ ----------------- (in thousands) NETCOM (a) $ (61,090) - - Network Services (b) (8,583) (1,349) - Satellite Services (c) (3,056) 313 770 Zycom (d) (4,848) - - ------------------ ------------------ ----------------- Income (loss) from discontinued operations $ (77,577) (1,036) 770 ================== ================== =================
(a) NETCOM On February 17, 1999, in accordance with a plan of disposition adopted on November 3, 1998, the Company sold certain of the operating assets and liabilities of NETCOM to MindSpring Enterprises, Inc. (MindSpring), predecessor to EarthLink, Inc. for total proceeds of $245.0 million. Assets and liabilities sold to MindSpring included those directly related to the domestic operations of NETCOM's Internet dial-up, dedicated access and Web site hosting services. F-24 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (5) Sale of Assets and Discontinued Operations, continued (a) NETCOM, continued Additionally, on March 16, 1999, the Company sold all of the capital stock of NETCOM's international operations (including NETCOM Canada and NETCOM U.K.) for total proceeds of approximately $41.1 million. In conjunction with the sale to MindSpring, the Company entered into an agreement to lease to MindSpring for a one-year period the capacity of certain network operating assets formerly owned by NETCOM and retained by the Company (the MindSpring Capacity Agreement). Under the agreement, MindSpring utilized the Company's network capacity to provide Internet access to the dial-up services customers formerly owned by NETCOM. In addition, the Company received for a one-year period 50% of the gross revenue earned by MindSpring from the dedicated access customers formerly owned by NETCOM. As the Company expected to generate operating losses under the MindSpring Capacity Agreement, and the terms of the sale agreement were dependent upon and negotiated in conjunction with the terms of the sale of the operating assets of NETCOM, the Company deferred approximately $35.5 million of the proceeds from the sale agreement to be applied on a periodic basis to losses incurred under the MindSpring Capacity Agreement. Accordingly, the Company did not recognize any revenue, operating costs or selling, general and administrative expenses from services provided to MindSpring for the twelve-month term of the agreement which expired February 17, 2000. Any incremental revenue or costs generated by other customers, or by other services provided to MindSpring was recognized in the Company's consolidated statement of operations as incurred. As discussed above, the terms of the MindSpring Capacity Agreement were negotiated in conjunction with and were dependent upon the terms of the sale of the operating assets of NETCOM to MindSpring. As such, these transactions are collectively referred to as "Sale of Operating Assets of NETCOM". (b) Network Services On October 22, 1999, in accordance with a plan of disposition adopted on July 15, 1999, the Company completed the sale of all of the capital stock of Network Services for total proceeds of $23.9 million in cash. F-25 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (5) Sale of Assets and Discontinued Operations, continued (c) Satellite Services On November 30, 1999, in accordance with a plan of disposition adopted on July 15, 1999, the Company completed the sale of all of the capital stock of Satellite Services for total proceeds of $98.1 million in cash. (d) Zycom The Company owns a 70% interest in Zycom Corporation ("Zycom"). Zycom's board of directors approved a plan to wind down and ultimately discontinue Zycom's operations on August 25, 1998. (6) Purchase Acquisitions The acquisitions described below have been accounted for using the purchase method of accounting and, accordingly, the net assets and results of operations of the acquired businesses are included in the Company's consolidated financial statements from the respective dates of acquisition. Revenue, net loss and net loss per share on a pro forma basis, assuming the acquisitions were completed at the beginning of the periods presented, are not significantly different from the Company's historical results for the periods presented herein. On July 27, 1998, the Company acquired DataChoice Network Services, L.L.C. (DataChoice) for total consideration of $5.9 million, consisting of 145,997 shares of ICG Common Stock and approximately $1.1 million in cash. The excess of the purchase price over the fair value of the net identifiable assets acquired of $5.8 million was recorded as goodwill and, until December 31, 2000, was being amortized on a straight-line basis over five years. See note 3 for a discussion of the impairment of intangible assets. The Company completed a series of transactions on July 30, 1998 to acquire all of the capital stock of NikoNet, Inc., CompuFAX Acquisition Corp. and Enhanced Messaging Services, Inc. (collectively, NikoNet). The Company paid approximately $13.8 million in cash, assumed approximately $0.7 million in liabilities and issued 356,318 shares of ICG Common Stock with a fair market value of approximately $10.7 million on the date of the acquisition. The excess of the purchase price over the fair value of the net identifiable assets acquired of $22.6 million was recorded as goodwill and, until December 31, 2000, was being amortized on a straight-line basis over five years. See note 3 for a discussion of the impairment of intangible assets. On August 27, 1998, the Company purchased, for $9.0 million in cash, the remaining 20% equity interest in ICG Ohio LINX, Inc. (ICG Ohio LINX) which it did not already F-26 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued ________________________________________________________________________________ (6) Purchase Acquisitions, continued own. The Company's additional was recorded as goodwill and, until December 31, 2000, was being amortized on a straight-line basis over five years. See note 3 for a discussion of the impairment of intangible assets. (7) Short-term Investments Available-for-Sale Short-term investments available-for-sale are comprised of the following: December 31, ------------------------------------ 1999 2000 ---------------- --------------- (in thousands) Certificates of deposit $ 10,442 - Commercial paper 11,777 - U.S. Treasury securities - 17,733 ---------------- --------------- $ 22,219 17,733 ================ =============== At December 31, 1999 and 2000, the estimated fair value of the Company's certificates of deposit, commercial paper and U.S. Treasury securities approximated cost. All certificates of deposit, commercial paper and U.S. Treasury securities included in short-term investments available-for-sale mature within one year. (8) Property and Equipment See note 3 for a discussion regarding the impairment of long-lived assets. The property and equipment balances shown as of December 31, 2000, reflect the $1.7 billion impairment charge. F-27 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (8) Property and Equipment, continued Property and equipment, including assets held under capital leases, is comprised of the following:
December 31, ----------------------------------------- 1999 2000 ------------------ ------------------ (in thousands) Land $ 11,503 12,856 Buildings and improvements 38,502 38,162 Furniture, fixtures and office equipment 108,024 17,355 Internal-use software costs 14,797 - Machinery and equipment 32,884 9,482 Fiber optic equipment 401,676 121,398 Switch equipment 319,398 104,947 Fiber optic networks 428,195 56,242 Site improvements 37,814 824 Service installation costs 52,649 - Other 2,199 - Construction in progress 359,936 231,714 ------------- ------------- 1,807,577 592,980 Less accumulated depreciation (279,698) (2,480) ------------- ------------- $1,527,879 590,500 ============= =============
Property and equipment includes approximately $232 million of equipment that has not been placed in service at December 31, 2000, and accordingly, is not being depreciated. The majority of this amount is related to uninstalled transport and switch equipment and new network construction. At December 31, 1999, the Company had approximately $205 million of property and equipment held under capital leases on a net book value basis. As of December 31, 2000, after the impairment charge, the Company had approximately $158 million of property and equipment held under capital leases. Amortization of capital leases is included in depreciation and amortization in the Company's consolidated statements of operations for all periods presented. For the years ended December 31, 1998, 1999 and 2000, the Company capitalized interest costs on assets under construction of $10.4 million, $9.0 million and $7.0 million respectively. However, in connection with the asset impairment discussed in note 3, all capitalized interest amounts have been written-off as of December 31, 2000. The Company recognized interest expense of $170.0 million, $212.4 million and $233.6 million for the years ended December 31, 1998, 1999 and 2000, respectively. F-28 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (8) Property and Equipment, continued Also included in property and equipment at December 31, 1999 are remaining unamortized costs associated with the development of internal-use computer software of $9.0 million. The Company capitalized $10.0 million, $31.6 million and $52.9 million of such costs during the years ended December 31, 1998, 1999 and 2000 respectively. Certain of the assets described above have been pledged as security for long-term debt, specifically, substantially all of the assets of ICG Services were pledged as of December 31, 2000. The net book value of ICG Services assets included in the total above, after allocation of the impairment described in footnote 3, is approximately $430.3 million as of December 31, 2000. (9) Investments On February 22, 2000, the Company purchased restricted Series D 8% Convertible Preferred Stock (Cyras Preferred Stock) of Cyras Systems, Inc. (Cyras), for approximately $1.0 million. The Cyras Preferred Stock is automatically convertible into shares of common stock of Cyras, upon the initial public offering of the common stock of Cyras or upon the election to convert by more than 66% of all of the preferred stockholders of Cyras. On July 6, 2000, a subsidiary of the Company acquired 1,000,000 shares of unregistered common stock of Teligent, Inc., a fixed wireless broadband communications provider (Teligent), from a subsidiary of Teligent in exchange for 2,996,076 shares of ICG Common Stock. The Teligent shares were valued at $21.625 per share. As of December 31, 2000, the decrease in the value of the Teligent shares of $21.6 million, based on the market price at December 31, 2000, was deemed to be other than temporary and, accordingly, the charge related to the write-down of such shares is included in the accompanying consolidated statement of operations. On March 30, 1999, the Company purchased, for approximately $10.0 million in cash, 454,545 shares of restricted Series D-1 Preferred Stock of NorthPoint Communications Holdings, Inc. (NorthPoint), a Delaware corporation and competitive local exchange carrier based in San Francisco, California which was converted into 555,555 shares of Class B common stock of NorthPoint on May 5, 1999. The shares were sold in a series of transactions during the year ended December 31, 2000, resulting in a net gain of approximately $0.5 million. On August 11, 1999, the Company purchased 1,250,000 shares of Series C Preferred Stock of International ThinkLink Corporation (ThinkLink), for $1.0 million in cash. ThinkLink has ceased operations and, accordingly, the investment was written off. F-29 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (9) Investments, continued On November 15, 1999, the Company entered into an agreement to purchase a limited partnership interest in Centennial Strategic Partners VI, L.P. (Centennial). The primary purpose of the partnership is to invest in venture capital investments, principally by investing in equity or equity-oriented securities of privately held companies in the electronic communications industry. The Company has capital contribution commitments to Centennial of $1.0 million to be funded in installments through January 15, 2002. Through December 31, 2000, the Company had contributed approximately $0.7 million to the partnership. The Company has accounted for its investment in Centennial under the cost method of accounting. (10) Capital Lease Obligations As a result of the Company's bankruptcy proceedings, all capital lease payments are suspended and subject to negotiation on a lease by lease basis. Certain leases could be amended or rejected. However, the following table represents contractual payments due each year on or before December 31 under the original terms of the Company's capital lease obligations (in thousands): 2001 $ 91,420 2002 65,319 2003 35,832 2004 12,393 2005 12,393 Thereafter 73,811 ---------------- Total minimum lease payments 291,168 Less amounts representing interest (93,194) ---------------- Present value of net minimum lease payments 197,974 Less current portion (68,130) ---------------- $ 129,844 ================
(11) Long-term Debt As a result of the Company's bankruptcy proceedings, all contractual debt payments are suspended and subject to revised payment terms during the bankruptcy process on a specific case basis. No changes have been made in the accompanying consolidated balance sheet as to amounts or terms as a result of the filing. As of December 31, 2000, the Company is in default with respect to substantially all of its prepetition debt. However, under bankruptcy accounting, no reclassifications are made from long-term to short-term as a result of the defaults. Additionally, debt subject to compromise should be recorded at the allowed amount of the claim. Based on this, the Company has written-off all deferred financing costs related to the 9 7/8%, 10%, 11 5/8%, 12 1/2% and 13 1/2% F-30 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (11) Long-term Debt, continued Senior discount notes as of December 31, 2000. Such amounts totaled $26.8 million and are included in reorganization expenses in the accompanying consolidated statement of operations (see note 4). In addition, the Company ceased accreting the discounts or accruing interest on all debt amounts subject to compromise as of the Petition Date. Long-term debt, including amounts subject to compromise, is summarized as follows:
December 31, --------------------------------- 1999 2000 ---------------- -------------- (in thousands) Credit Agreement (a) $ - - Senior Facility with adjustable rate of interest due on scheduled maturity dates, secured by assets of ICG Equipment and NetAhead (b) 79,625 84,574 Mortgage loan payable with adjustable rate of interest (15.21% at December 31, 2000) due in full on January 31, 2013, secured by corporate headquarters (c) 33,077 33,077 Mortgage payable with interest at 8 1/2%, due monthly through 2009, secured by building 999 929 -------------- -------------- Long-term debt not subject to compromise 113,701 118,580 -------------- -------------- 9 7/8% Senior discount notes of ICG Services, net of discount (d) 293,925 319,564 10% Senior discount notes of ICG Services, net of discount (d) 361,290 393,311 11 5/8% Senior discount notes of Holdings, net of discount (d) 137,185 151,342 12 1/2% Senior discount notes of Holdings, net of discount (d) 468,344 520,264 13 1/2% Senior discount notes of Holdings, net of discount (d) 532,252 584,300 -------------- -------------- Long-term debt subject to compromise 1,792,996 1,968,781 -------------- -------------- 1,906,697 2,087,361 Less current portion (796) (796) -------------- -------------- $1,905,901 2,086,565 ============== ==============
(a) Debtor-in-Possession Financing On December 4, 2000, the Company finalized its Debtor-in-Possession Revolving Credit Agreement (the Credit Agreement) with Chase Manhattan Bank. The Credit Agreement provides for up to $350 million in financing, subject to certain conditions. This amount was subsequently amended to $200 million. Any amounts drawn under the Credit Agreement must first be used for repayment in full of the Senior Facility. Borrowings under the Credit Agreement bear interest at 3% plus the greater of (i) the prime rate, (ii) the Base CD rate (as defined) plus F-31 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (11) Long-term Debt, continued (a) Debtor-in-Possession Financing, continued 1%, or (iii) the Federal Funds effective rate (as defined) plus 1/2%. The Company also has the option to borrow at the adjusted LIBOR rate (as defined) plus 4%. The Company must pay monthly commitment fees at an annual rate of 1 1/2% on the average daily unused commitment, which are expensed monthly. This agreement contains certain covenants including capital expenditure limitations, EBITDA loss limitations, indebtedness and dividend restrictions. The Credit Agreement requires repayment in full on May 14, 2002. As of December 31, 2000, no amounts had been drawn under the Credit Agreement. (b) Senior Facility On August 12, 1999 and amended on December 29, 1999, ICG Equipment and NetAhead entered into a $200.0 million senior secured financing facility (the Senior Facility) consisting of a $75.0 million term loan, a $100.0 million term loan and a $25.0 million revolving line of credit. The Senior Facility is guaranteed by ICG Services and ICG Mountain View, Inc. and is secured by the assets of ICG Equipment and NetAhead. In October, 2000, the Company's lenders granted a sixty-day waiver, and as part of this agreement, the Company paid 50%, or $89.7 million, of the outstanding balance of the Senior Facility as of September 30, 2000. The United States Bankruptcy Court, on December 19, 2000, issued an order directing ICG Services and certain of its subsidiaries to provide adequate protection to the lenders of the Senior Facility for the unpaid balance in the form of a valid, perfected, first priority post petition security interest. The outstanding balance is therefore not subject to compromise. At December 31, 2000, the $36.0 million outstanding under the $75.0 million term loan bears annual interest at the prime rate plus 4.25%, or 13.75%. Contractually, quarterly repayments commenced September 30, 1999 and require quarterly loan balance reductions of 0.25% through June 30, 2005 with the remaining outstanding balance to be repaid during the final three quarters of the loan term. The loan matures on March 31, 2006. At December 31, 2000, the $48.6 million outstanding under the $100.0 million term loan bears annual interest at the prime rate plus 3.875%, or 13.375%. Contractually, quarterly repayments commence September 30, 2002 and require aggregate loan balance reductions of 25% through June 30, 2003, 35% through F-32 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (11) Long-term Debt, continued (b) Senior Facility, continued June 30, 2004 and 40% through June 30, 2005. The loan matures on June 30, 2005. The terms of the Senior Facility provide certain limitations on the use of proceeds, additional indebtedness, dividends, prepayment of the Senior Facility and other indebtedness and certain other transactions. Additionally, the Company is subject to certain financial covenants based on its results of operations. Due to the bankruptcy proceedings, the Company is in default with respect to the terms of the Senior Facility. The amortization of the debt issuance costs during 1999 and through the Petition Date in 2000 is included in interest expense in the accompanying consolidated statement of operations. The unamortized debt issuance cost balance was written-off as of year end and is included in reorganization expenses in the accompanying consolidated statement of operations (see note 4). Subsequent to the Chapter 11 filing, the Company continues to make interest only payments on the Senior Facility, as approved in a signed order from the Bankruptcy Court, based on the prime rate plus 4.25% and the prime rate plus 3.875% terms noted above. The Credit Agreement described in (a) requires that the Senior Facility be paid off in full with proceeds from the first draw under the Credit Agreement. (c) Mortgage Loan Payable Effective January 1, 1999, the Company purchased its corporate headquarters, land and improvements (collectively, the Corporate Headquarters) for approximately $43.4 million. The Company, through a newly formed subsidiary, ICG 161, LP, financed the purchase primarily through a loan secured by a mortgage on the Corporate Headquarters, guaranteed by ICG Services, Inc. The amended loan agreement, dated May 1, 1999, requires monthly interest payments at an initial interest rate of 14.77% per annum, which rate increases annually by 0.003% with the mortgage balance due January 31, 2013. The seller of the Corporate Headquarters has retained an option to repurchase the Corporate Headquarters at the original sales price, which option is exercisable from January 1, 2004 through January 31, 2012. ICG 161, LP, did not file for protection under Chapter 11. This mortgage is therefore not subject to compromise. F-33 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (11) Long-term Debt, continued (d) Senior Discount Notes Prior to the Petition Date, the original discount on all of the discount notes described below was being accreted over the period from the issue date to the date that the notes may first be redeemed. The accretion is included in interest expense in the accompanying consolidated statements of operations. The 9 7/8% Notes are unsecured senior obligations of ICG Services that mature on May 1, 2008, at a maturity value of $405.3 million. The 10% Notes are unsecured senior obligations of ICG Services that mature on February 15, 2008, at a maturity value of $490.0 million. The 11 5/8% Notes are unsecured senior obligations of Holdings (guaranteed by ICG) that mature on March 15, 2007, with a maturity value of $176.0 million. The 12 1/2% Notes are unsecured senior obligations of Holdings (guaranteed by ICG and Holdings-Canada) that mature on May 1, 2006, with a maturity value of $550.3 million. The 13 1/2% Notes are unsecured senior obligations of Holdings (guaranteed by ICG and Holdings-Canada) that mature on September 15, 2005, with a maturity value of $584.3 million. The sale of the notes was made in units with each unit consisting of ten notes plus unit warrants to purchase 33 common shares of Holdings - Canada. The value attributable to the warrants was approximately $6 million that was included as additional debt discount. The Unit Warrants entitled the holder to purchase one common share of Holdings-Canada, which was exchangeable into one share of ICG Common Stock, through August 8, 2005 at the exercise price of $12.51 per share. In connection with the Reorganization of Holdings-Canada, all Unit Warrants outstanding are exchangeable only for shares of ICG Common Stock on a one-for-one basis and are no longer exchangeable for shares of Holdings-Canada. F-34 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (11) Long-term Debt, continued Contractual principal maturities of long-term debt as of December 31, 2000, which are expected to be substantially altered as a result of the bankruptcy proceedings, are as follows (in thousands): Year: 2001 $ 796 2002 6,874 2003 15,826 2004 19,021 2005 594,818 Thereafter 1,687,095 ----------------- 2,324,430 Less unaccreted discount (237,069) Less current portion (796) ----------------- $ 2,086,565 ================= (12) Preferred Stock (a) Redeemable Preferred Securities of Subsidiaries As a result of the filing of voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code, the Company is prohibited from declaring or paying any preferred dividends. The Company has fully written off the offering costs and fully accreted the discount associated with the preferred stock totaling $9.7 million. Such amounts are included in reorganization expenses in the accompanying consolidated statement of operations (see note 4). Included in accretion and preferred dividends on preferred securities of subsidiaries, net of minority interest in share of losses is approximately, $55.2 million, $61.9 million and $60.0 million for the years ended December 31, 1998, 1999 and 2000 respectively, associated with the accretion of issuance costs, discount and preferred security dividend accruals for the 6 3/4% Preferred Securities, the 14% Preferred Stock and the 14 1/4% Preferred Stock and the Redeemable Preferred Stock through the Petition Date. F-35 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (12) Preferred Stock, continued (a) Redeemable Preferred Securities of Subsidiaries, continued Redeemable preferred stock of subsidiaries is summarized as follows:
December 31, ------------------------------------- 1999 2000 ---------------- ---------------- (in thousands) 14% Exchangeable preferred stock of Holdings, mandatorily redeemable in 2008 $ 144,144 165,831 14 1/4% Exchangeable preferred stock of Holdings, 246,751 283,225 mandatorily redeemable in 2007 ---------------- ---------------- $ 390,895 449,056 ================ ================ 6 3/4% Mandatorily redeemable preferred securities of ICG Funding $ 128,428 132,251 ================ ================
The 14% exchangeable preferred stock bears a cumulative dividend payable quarterly in arrears. All dividends paid through the Petition Date have been paid through the issuance of additional shares of 14% Preferred Stock. The 14 1/4% exchangeable preferred stock bears a cumulative dividend payable quarterly in arrears. All dividends paid through the Petition Date have been paid through the issuance of additional shares of 14 1/4% Preferred Stock. The 6 3/4% Preferred Securities consist of 2,645,000 exchangeable preferred securities of ICG Funding that bear a cumulative dividend at the rate of 6 3/4% per annum. The dividend is paid quarterly in arrears each February 15, May 15, August 15 and November 15, and commenced November 15, 1997. The dividend was payable in cash through November 15, 2000 and, thereafter, in cash or shares of ICG Common Stock, at the option of ICG Funding. The 6 3/4% Preferred Securities are exchangeable, at the option of the holder, at any time prior to November 15, 2009 into shares of ICG Common Stock at an exchange rate of 2.0812 shares of ICG Common Stock per preferred security, or $24.025 per share, subject to adjustment. Due to the bankruptcy proceedings, the Company did not declare or pay the dividend that was otherwise payable on November 15, 2000. On February 13, 1998, ICG made a capital contribution of 126,750 shares of ICG Common Stock to ICG Funding. Immediately thereafter, ICG Funding sold the contributed shares to unrelated third parties for proceeds of approximately $3.4 million. ICG Funding recorded the contribution of the ICG Common Stock as F-36 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (12) Preferred Stock, continued (a) Redeemable Preferred Securities of Subsidiaries, continued additional paid-in capital at the then fair market value and, consequently, ICG Funding recorded no gain or loss on the subsequent sale of those shares. Also, on February 13, 1998, ICG Funding purchased approximately $112.4 million of ICG Communications, Inc. Preferred Stock (ICG Preferred Stock) which contractually pays dividends each February 15, May 15, August 15 and November 15 in additional shares of ICG Preferred Stock through November 15, 2000. Subsequent to November 15, 2000, dividends on the ICG Preferred Stock are payable in cash or shares of ICG Common Stock, at the option of ICG. The ICG Preferred Stock is exchangeable, at the option of ICG Funding, at any time prior to November 15, 2009 into shares of ICG Common Stock at an exchange rate based on the exchange rate of the 6 3/4% Preferred Securities and is subject to mandatory redemption on November 15, 2009. The ICG Preferred Stock has been eliminated in consolidation of the Company's consolidated financial statements. (b) Mandatorily Redeemable 8% Series A Convertible Preferred Stock On April 10, 2000, the Company sold 75,000 shares of mandatorily redeemable 8% Series A-1, A-2 and A-3 Convertible Preferred Stock of ICG (the 8% Series A Convertible Preferred Stock) and 10,000,000 warrants to purchase ICG Common Stock for net proceeds of $707.7 million. Each share of 8% Series A Convertible Preferred Stock has an initial liquidation preference of $10,000 per share and bears a cumulative dividend rate of 8% per annum, compounded daily. Dividends accrue to the liquidation preference on a daily basis for five years and are thereafter payable in cash or additional liquidation preference. The value allocated to the warrants was $80.6 million at the time of the transaction. The original agreement provided for a change in control and certain conversion features. The Company has fully written off the offering costs and fully accreted the discount associated with the 8% Series A Convertible Preferred Stock totaling $118.1 million. Such amounts are included in accretion of 8% Series A Convertible Preferred Stock and related dividends in arriving at net loss attributable to common stockholders in the accompanying consolidated statement of operations. Additionally, the Company allocated $159.3 million of the proceeds from the issuance of the 8% Series A Convertible Preferred Stock to the intrinsic value of the embedded beneficial conversion feature of the convertible preferred securities F-37 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (12) Preferred Stock, continued (b) Mandatorily Redeemable 8% Series A Convertible Preferred Stock, continued to additional paid-in capital. The accompanying consolidated statement of operations includes approximately $40.1 million of accretion and dividends related to the 8% Series A Convertible Preferred Stock through the Petition Date. (13) Stockholders' Deficit (a) Stock Options and Employee Stock Purchase Plan A total of 1,849,600 options, net of cancellations, have been granted under plans established prior to 1994 through December 31, 2000 with exercise prices ranging from approximately $2.92 to $14.03. A total of 2,040,989 options, net of cancellations, have been granted under the NETCOM plan through December 31, 2000 at exercise prices ranging from $0.56 to $79.50. A total of 10,447,296 options, net of cancellations, have been granted under plans established after 1993 through December 31, 2000 at original exercise prices ranging from $5.00 to $37.88. Additionally, during the years ended December 31, 1999 and 2000, the Company's board of directors granted 1,179,511 non-qualified stock options, net of cancellations through December 31, 2000, to certain officers and employees at exercise prices ranging from $14.44 to $37.88. All of the options granted under the plans are subject to various vesting requirements, generally three and five years and expire in five and ten years from date of grant. In October 1996, the Company established an Employee Stock Purchase Plan, which the Company discontinued in the third quarter of 2000. Under this plan, employees could elect to designate 1% to 30% of their annual salary to be used to purchase shares of ICG Common Stock, up to a limit of $25,000 each year, at a 15% discount to fair market value. Stock purchases occurred four times a year on February 1, May 1, August 1 and November 1, with the price per share equaling the lower of 85% of the market price at the beginning or end of the offering period. The Company was authorized to issue a total of 1,000,000 shares of ICG Common Stock to participants in the plan. During the years ended December 31, F-38 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (13) Stockholders' Deficit, continued (a) Stock Options and Employee Stock Purchase Plan, continued 1998, 1999 and 2000, the Company sold 111,390, 205,568 and 173,772 shares of ICG Common Stock, respectively, to employees under this plan. The Company has recorded no compensation expense in connection with its stock-based employee and non-employee director compensation plans pursuant to the intrinsic value based method of APB 25 for the periods presented. Had compensation expense for the Company's plans been determined based on the fair market value of the options at the grant dates for awards under those plans consistent with the provisions of SFAS 123, the Company's pro forma net loss and loss per share would have been as presented below. Pro forma disclosures include the effects of employee and non-employee director stock options granted during the periods presented.
Years ended December 31, -------------------------------------------------------- 1998 1999 2000 ----------------- ---------------- --------------- (in thousands, except per share amounts) Net loss attributable to common stockholders: As reported $ (418,045) (234,162) (2,811,045) Pro forma (439,362) (259,362) (2,861,258) Net loss per share - basic and diluted: As reported $ (9.25) (4.97) (56.02) Pro forma (9.72) (5.50) (57.02)
The fair value of each option grant to employees and non-employee directors other than NETCOM employees and non-employee directors was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: an expected option life of three years for directors, officers and other executives, and two years for other employees, for the years ended December 31, 1998 and 1999, and five years (the average contractual life) for the year ended December 31, 2000; expected volatility of 70% for the years ended December 31, 1998 and 1999 and 250% for the year ended December 31, 2000; and risk-free interest rates ranging, 4.09% to 5.77% for the year ended December 31, 1998, 4.59% to 6.28% for the year ended December 31, 1999 and 6.00% to 6.50% for the year ended December 31, 2000. Risk-free interest rates, as were currently available on the grant date, were assigned to each granted option F-39 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (13) Stockholders' Deficit, continued (a) Stock Options and Employee Stock Purchase Plan, continued based on the zero-coupon rate of U.S. Treasury bills to be held for the same period as the assumed option life. Since the Company does not anticipate issuing any dividends on the ICG Common Stock, the dividend yield for all options granted was assumed to be zero. The weighted average fair market value of combined ICG and NETCOM options granted during the years ended December 31, 1998, 1999 and 2000 was approximately, $13.23, $10.53 and $27.15 per option, respectively. The following table summarizes the status of the Company's stock-based compensation plans:
Shares underlying Weighted average Options options exercise price exercisable ---------------------- ---------------------- --------------------- (in thousands) (in thousands) Outstanding at January 1, 1998 6,148 $ 11.97 Granted 5,968 23.34 Exercised (1,395) 12.08 Canceled (3,941) 25.62 ---------------------- Outstanding at December 31, 1998 6,780 13.95 3,299 Granted 3,374 18.50 Exercised (817) 13.55 Canceled (1,942) 17.70 ---------------------- Outstanding at December 31, 1999 7,395 15.06 3,142 Granted 7,813 26.69 Exercised (832) 15.65 Canceled (4,724) 24.26 ---------------------- Outstanding at December 31, 2000 9,652 20.02 3,276 ======================
F-40 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (13) Stockholders' Deficit, continued (a) Stock Options and Employee Stock Purchase Plan, continued The following table summarizes information about options outstanding at December 31, 2000:
Options outstanding Options exercisable --------------------------------------------------------- -------------------------------------- Weighted average Weighted Weighted Range of remaining average average exercise Number contractual exercise Number exercise prices outstanding life price exercisable price ------------------- ------------------ ----------------- ------------------ ------------------- ----------------- (in thousands) (in years) (in thousands) $ 2.60 - 7.94 1,591 4.52 $ 7.88 1,555 $ 7.89 8.44 - 17.80 2,631 7.16 15.21 1,190 15.12 17.94 - 29.00 2,987 8.89 22.47 311 20.24 29.75 - 37.88 2,443 9.27 30.17 220 30.01 ------------------ ------------------- 9,652 3,276 ================== ===================
(b) Warrants As discussed in note 12, on April 10, 2000, the Company issued warrants to purchase 10,000,000 shares of ICG Common Stock at an exercise price of $34.00 per share. The warrants were valued at $80.6 million at the time of the transaction. As of December 31, 2000, none of the warrants had been exercised. At December 31, 1999 and 2000, 1,733,000 and 1,646,000 warrants, respectively, with an expiration date of August 6, 2005 were outstanding and are exchangeable for shares of ICG Common Stock on a one-for-one basis. F-41 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - -------------------------------------------------------------------------------- (13) Stockholders' Deficit, continued (b) Warrants, continued The following table summarizes warrant activity for the three years ended December 31, 2000:
Outstanding Exercise warrants price range -------------------- ---------------------- (in thousands) Outstanding, January 1, 1998 1,974 $12.51 - 21.51 Exercised (113) 12.51 - 21.51 Canceled (9) 20.01 - 21.51 -------------------- Outstanding, December 31, 1998 1,852 12.51 Exercised (119) 12.51 -------------------- Outstanding, December 31, 1999 1,733 12.51 Granted 10,000 34.00 Exercised (87) 12.51 --------------------- Outstanding, December 31, 2000 11,646 $12.51 - 34.00 ====================
(c) Preferred Stock The Company is authorized to issue 1,000,000 shares of preferred stock, of which no shares were outstanding as of December 31, 2000. In addition, the Company has 50,000 shares of ICG Preferred Stock issued and outstanding, all of which are held by ICG Funding at December 31, 2000. (14) Commitments and Contingencies As a result of the Company's filing for bankruptcy protection, all commitments and contingencies could be substantially modified during the Company's bankruptcy restructuring process. (a) Network Capacity and Construction In January 2000, the Company signed an agreement with a major customer, whereby the Company will provide, for $126.5 million over the initial six-year term of the agreement, exclusive service over designated portions of the Company's local fiber optic networks. The Company will recognize revenue ratably over the term of the agreement, as the network capacity is available for F-42 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (14) Commitments and Contingencies, continued (a) Network Capacity and Construction, continued use. The agreement was amended in March 2000 to include additional capacity for proceeds of $53.8 million. The customer may, at its option, extend the initial term of the agreement for an additional four-year period and an additional 10-year period for incremental payment at the time the option exercises. The Company recognized approximately $3.0 million of revenue related to this agreement in the year ended December 31, 2000. The remaining $177.3 million of deferred revenue related to this agreement is reflected in liabilities subject to compromise. The Company has not yet delivered for service, as required by the contract, the majority of the fiber optic facilities and is negotiating with this customer to resolve the issue of the future services. (b) Telecommunications and Line Purchase Commitments Effective September 1998, the Company entered into two service agreements with three-year terms with a major interexchange carrier. (the "Carrier"). Under the Telecom Services Agreement, the Carrier provides, at designated rates, switched telecommunications services and other related services to the Company, including termination services, toll-free origination, switched access, dedicated access and travel card services. Under the Carrier Digital Services Agreement, the Carrier provides the Company, at designated rates, with the installation and operation of dedicated digital telecommunications interexchange services, local access and other related services, which the Company believes expedites service availability to its customers. Both agreements require that the Company provide the Carrier with certain minimum monthly revenue, which if not met, would require payment by the Company for the difference between the minimum commitment and the actual monthly revenue. Additionally, both agreements limit the Company's ability to utilize vendors other than the Carrier for certain telecommunications services specified in the agreements. (c) Other Commitments The Company has entered into various equipment and line purchase agreements with certain of its vendors. Under these agreements, if the Company does not meet a minimum purchase level in any given year, the vendor may discontinue certain discounts, allowances and incentives otherwise provided to the Company. In addition, either the Company or the vendor upon prior written notice may terminate the agreements. F-43 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (14) Commitments and Contingencies, continued (c) Other Commitments, continued Due to the current economic uncertainty of the Company's construction in progress assets, the Company may decide not to continue with these projects and incur additional termination costs. (d) Transport and Termination Charges ICG records revenue earned under interconnection agreements with incumbent local exchange carrier (ILECs) as an element of its local services revenue. Some ILECs, while paying a portion of local reciprocal compensation due to ICG, have disputed other portions of the charges. ICG has, as of December 31, 2000, a net receivable for terminating local traffic of approximately $24.0 million. ICG received cash of approximately $160.0 million, during the year ended December 31, 2000, from certain ILECs for terminating local traffic. ICG has recognized revenue of approximately $58 million, $124 million, and $116 million in each of the years ended December 31, 1998, 1999 and 2000, respectively, for terminating local traffic. Revenue for the year ended December 31, 1999 includes approximately $22.0 million for the tandem switching and common transport rate elements. ICG ceased, effective July 1, 1999, recognition of these rate elements as revenue until cash receipts are either received or the uncertainty of receipt has been removed (such as the execution of a binding agreement). ICG has continued to bill and pursue collection of all amounts due under the agreements. (e) Operating Leases Under the Bankruptcy Code, the Company may elect to assume or reject all leases noted below, subject to Bankruptcy Court approval. The Company leases office space and equipment under non-cancelable operating leases. Lease expense was approximately, $27.0 million, $21.3 million and $29.6 million for the years ended December 31, 1998, 1999 and 2000, respectively. F-44 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (14) Commitments and Contingencies, continued (e) Operating Leases, continued Minimum lease payments due each year on or before December 31 under the Company's current contractual operating leases are as follows (in thousands): 2001 $ 22,913 2002 21,433 2003 20,458 2004 18,662 2005 18,004 Thereafter 78,280 ------------------------- $ 179,750 =========================
(f) Litigation During the third and fourth quarters of 2000, the Company was served with fourteen lawsuits filed by various shareholders in the Federal District Court for the District of Colorado. All of the suits name as defendants the Company, the Company's former CEO, J. Shelby Bryan and the Company's former President, John Kane. Additionally, one of the complaints names the Company's former President, William S. Beans, Jr., as a defendant. All of the complaints seek unspecified damages for alleged violations of Rules 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaints seek class action certification for similarly situated shareholders. It is anticipated that the lawsuits will be consolidated and that the Court will choose a lead plaintiff's counsel. The Company has retained legal counsel and intends to vigorously defend against these lawsuits. The Company has also tendered these claims to the Company's insurers. At this time, the claims against the Company have been stayed pursuant to the Company's filing for bankruptcy. In January 2001, certain shareholders of ICG Funding, a wholly owned subsidiary of the Company, filed an adversary proceeding in the United States Bankruptcy Court for the District of Delaware (Case number 00-04238 PJW Jointly Administered, Adversary Proceeding No. 01-000` PJW) against the Company and Funding. The shareholders in this adversary action sought to recover approximately $2.3 million from an escrow account established to fund certain dividend payments to holders of the Funding Exchangeable Preferred Securities. Because of Funding having filed for bankruptcy protection, Funding did not declare the last dividend that was to have been paid with the remaining proceeds of the escrow account. In April 2001, the Company and Funding finalized a settlement agreement with the shareholders which has been approved by the F-45 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (14) Commitments and Contingencies, continued (f) Litigation, continued Bankruptcy Court. Under the terms of the settlement, the shareholders received approximately two thirds of the funds in the escrow account and the Company received the remaining one third of the escrowed funds, subject to certain contingencies and holdbacks related to shareholders that did not participate in the settlement. On April 4, 1997, certain shareholders of Zycom filed a shareholder derivative suit and class action complaint for unspecified damages, purportedly on behalf of all of the minority shareholders of Zycom, in the District Court of Harris County, Texas (Case No. 97-17777) against the Company, Zycom and certain of their subsidiaries. In this action, the plaintiffs alleged that the Company and certain of its subsidiaries breached certain fiduciary duties owed to the plaintiffs. The Company denied all such allegations. The Company has recently finalized a settlement agreement with these shareholders. The settlement did not have a material impact on the consolidated financial statements of the Company. The Company is a party to certain other litigation that has arisen in the ordinary course of business. In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company's financial condition, results of operations or cash flows. All prepetition claims have been stayed pursuant to the Company's filing of bankruptcy. (15) Income Taxes Current income tax expense for the years ended December 31, 1998, 1999 and 2000 represents state and federal income tax relating to operations of a subsidiary company during periods when this entity's taxable income could not be offset by the Company's current period losses or net operating loss carryforwards (NOLs). Income tax benefit differs from the amounts computed by applying the U.S. federal income tax rate to loss before income taxes primarily because the Company has not recognized the income tax benefit of certain of its net operating loss carryforwards and other deferred tax assets due to the uncertainty of realization. F-46 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (15) Income Taxes, continued The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1999 and 2000 are as follows:
December 31, ---------------------------- 1999 2000 ------------- ------------ (in thousands) Deferred income tax liabilities: Deferred revenue $ 6,598 - Property and equipment 15,427 - ------------- ------------- Net deferred income tax liabilities $ 22,025 - ------------- ------------- Deferred income tax assets: Deferred revenue - (65,000) Net operating loss carryforwards (265,076) (510,877) Property and equipment - (318,116) Unrealized loss on investments - (34,904) Accrued interest on high yield debt obligations (154,601) (194,435) Accrued expenses (18,150) (11,745) Allowance for doubtful accounts (32,141) (37,714) Less valuation allowance 447,943 1,172,791 ------------- ------------- Net deferred income tax assets (22,025) - ------------- ------------- Net deferred income tax liability $ - - ============= =============
As of December 31, 2000, the Company has federal NOL carryforwards of approximately $1.277 billion, which expire in varying amounts through December 31, 2020. Due to the provisions of Internal Revenue Code ("Code") sections 108, 382 and certain other Code and Treasury Regulations, it is anticipated the major portion of the NOLs will be reduced by cancellation of indebtedness and that a change in ownership will occur as a result of a plan of reorganization ("Plan") that is expected to be filed. If the Plan results in the issuance of new stock and or the cancellation of existing stock, the remaining amount NOLs (if any) will be limited on the amount that can be utilized each year. The Company is also subject to certain state income tax laws, which may also limit the amount and utilization of NOLs at state level. Considering the net reversals of future taxable and deductible amounts and that management is not presently able to determine when the Company will generate future taxable income, the Company has established a valuation allowance principally for the F-47 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (15) Income Taxes, continued portion of its deductible temporary differences, including NOLs that may not be available due to expirations or the limitations described above. After application of the valuation allowance, the Company's net deferred tax assets and liabilities are zero. (16) Employee Benefit Plans The Company has established salary reduction savings plans under Section 401(k) of the Code that the Company administers for participating employees. All full-time employees are covered under the plans after meeting minimum service and age requirements. Under the plan available to NETCOM employees from January 1, 1997 through July 1, 1998, the Company made a matching contribution of 100% of each NETCOM employee's contribution up to a maximum of 3% of the employee's eligible earnings. Under the plan available to all ICG employees, including NETCOM employees subsequent to July 1, 1998, the Company made matching contributions of ICG Common Stock up to a maximum of 6% of the employee's eligible earnings through the first and second quarter of 2000. During the third and fourth quarter of 2000, the Company matching was made in cash, up to 3% of the employee's eligible earnings. Aggregate matching contributions under the Company's employee benefit plans were approximately, $4.0 million, $5.5 million and $6.1 million during the years ended December 31, 1998, 1999 and 2000, respectively. The portion of this expense, which relates directly to employees of NETCOM, is included in loss from discontinued operations for all periods presented. (17) Condensed Financial Information of ICG Communications, Inc. (Parent company) The primary assets of ICG are its investments in ICG Services, ICG Funding and Holdings-Canada, including advances to those subsidiaries. Certain corporate expenses of the parent company are included in ICG's statement of operations and were, $2.2 million, $1.4 million and $2.1 million for the years ended December 31, 1998, 1999 and 2000, respectively. ICG has no operations other than those of ICG Services, ICG Funding, ICG Acquisition, Inc. and their subsidiaries. (18) Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: F-48 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (18) Fair Value of Financial Instruments, continued Cash and cash equivalents and short-term investments available-for- sale: The carrying amount approximates fair value because of the short maturities of such instruments. Long-term investments: The fair values of long-term investments for which it is practicable are estimated based on the quoted market prices for those or similar investments. The long-term investments for which it is not practicable to estimate the fair value relate to cost investments in unrelated entities for which there is no public market. Long-term debt: The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues for the Senior Discount Notes that are publicly traded. The fair value of both the Senior Facility and the mortgage loan are estimated to be the carrying amount of the debt as the debt instruments are not publicly traded and have stated fixed or LIBOR or Prime plus a fixed percent interest rates. Redeemable preferred stock: The fair value of the preferred stock, which was issued in a private placement, is included in the following table at carrying value as of December 31, 1999 as such stock is not traded in the open market and a market price is not readily available. At December 31, 2000, the fair value is estimated to be zero due to the bankruptcy proceedings. F-49 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (18) Fair Value of Financial Instruments, continued The estimated fair values of the Company's financial instruments are as follows:
December 31, ------------------------------------------------------------------ 1999 2000 ---------------------------- --------------------------------- (in thousands) Carrying Carrying Amount Fair Value Amount Fair Value ------------------------------------------------------------------ Cash and cash equivalents and short-term investments available- for-sale $ 125,507 $ 125,507 214,713 214,713 Restricted cash 12,537 12,537 9,278 9,278 Long-term investments: Practicable 27,696 31,019 - - Not practicable 1,243 - 1,650 - Long-term debt: Senior facility (79,625) (79,625) (84,574) (84,574) Senior discount notes (1,792,996) (1,504,089) (1,968,781) (176,472) Mortgage loan payable (33,077) (33,077) (33,077) (33,077) Redeemable preferred stock (519,323) (519,323) (1,366,660) -
F-50 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (19) Summarized Financial Information for Non-Bankruptcy Filing Subsidiaries (Unaudited) As discussed in note 1, the majority of the Company's subsidiaries filed voluntary petitions for protection under Chapter 11. The following table summarizes financial information as of and for the year ended December 31, 2000 for the Company's non-bankruptcy and bankruptcy filing subsidiaries:
Non-Bankrupt Bankrupt Companies Companies Eliminations Consolidated --------------------- ------------------ ------------------ ------------------- Current assets $ 201 361,036 (201) 361,036 Property and equipment, net 44,985 545,515 - 590,500 Other non-current assets, net 9,982 28,688 (9,754) 28,916 --------------------- ------------------ ------------------ ------------------- Total Assets $ 55,168 935,239 (9,955) 980,452 ===================== ================== ================== =================== Current liabilities $ 193 81,904 201 82,298 Liabilities subject to compromise - 2,767,825 16,802 2,784,627 Long-term debt, less current portion 33,077 84,707 - 117,784 Other long-term liabilities 2,500 1,090 (2,500) 1,090 Due to Intercompany 14,703 - (14,703) - Redeemable preferred stock - 1,366,660 - 1,366,660 Stockholder's equity (deficit) 4,695 (3,366,947) (9,755) (3,372,007) --------------------- ------------------ ------------------ ------------------- Total Liabilities and Stockholder's Equity (Deficit) $ 55,168 935,239 (9,955) 980,452 ===================== ================== ================== =================== Non Bankrupt Bankrupt Companies Companies Eliminations Consolidated --------------------- ----------------- ----------------- ------------------ Total revenue $ 4,995 598,283 (4,995) 598,283 Total operating costs and expenses 1,376 2,752,019 (4,995) 2,748,400 --------------------- ----------------- ----------------- ------------------ Operating income (loss) 3,619 (2,153,736) - (2,150,117) ===================== ================= ================= ================== Loss from continuing operations (1,485) (2,489,011) - (2,490,496) ===================== ================= ================= ================== Net loss $ (1,485) (2,492,032) - (2,493,517) ===================== ================= ================= ==================
(20) Summarized Financial Information of ICG Holdings, Inc. As discussed in note 11, the 11 5/8% Notes issued by Holdings during 1997 are guaranteed by ICG. The 12 1/2% Notes and the 13 1/2% Notes issued by Holdings during 1996 and 1995, respectively, are guaranteed by ICG and Holdings-Canada. The separate complete financial statements of Holdings have not been included herein because such disclosure is not considered to be material to the holders of the 11 5/8% F-51 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (20) Summarized Financial Information of ICG Holdings, Inc., continued Notes, the 12 1/2% Notes and the 13 1/2% Notes. However, summarized consolidated financial information for Holdings and its subsidiaries is as follows. The Company has provided an allowance for any net intercompany receivables owed to ICG Holdings, Inc. Summarized Consolidated Balance Sheet Information
December 31, -------------------------------------- 1999 2000 ----------------- ------------------ (in thousands) Current assets $ 263,870 173,393 Property and equipment, net 675,613 143,208 Other non-current assets, net 128,489 21,754 ----------------- ------------------ Total Assets $ 1,067,972 338,355 ================= ================== Current liabilities $ 148,042 96,287 Liabilities subject to compromise - 2,508,080 Long-term debt, less current portion 1,138,734 883 Capital lease obligations, less current portion 57,564 - Other long-term liabilities 1,233 1,090 Due to ICG Communications, Inc. 190,320 - Due to parent 14,001 - Due to ICG Services 128,893 - Redeemable preferred stock 390,895 449,057 Stockholder's deficit (1,001,710) (2,717,042) ----------------- ------------------ Total liabilities and stockholders' deficit $ 1,067,972 338,355 ================= ==================
Summarized Consolidated Statement of Operations Information
Years ended December 31, -------------------------------------------------------------- 1998 1999 2000 ------------------- ------------------- ------------------- (in thousands) Total revenue $ 305,612 478,850 570,628 Total operating costs and expenses 444,310 635,390 2,089,170 ------------------- ------------------- ------------------- Operating loss (138,698) (156,540) (1,518,542) =================== =================== =================== Loss from continuing operations (260,618) (376,725) (1,658,895) =================== =================== =================== Net loss $ (325,211) (320,073) (1,713,861) =================== =================== ===================
F-52 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES (Debtor-in-Possession) Notes to Consolidated Financial Statements, Continued - ------------------------------------------------------------------------------ (21) Condensed Financial Information of ICG Holdings (Canada) Co. Condensed financial information for Holdings-Canada only is as follows: Condensed Balance Sheet Information
December 31, ----------------------------------------------- 1999 2000 ---------------------- ---------------------- (in thousands) Current assets $ 82 82 Advances to subsidiaries 14,001 - ---------------------- ---------------------- Total assets $ 14,083 82 ====================== ====================== Current liabilities $ 73 - Liabilities subject to compromise - (11,474) Due to parent 2,442 - Share of losses of subsidiary 1,001,710 2,717,042 Shareholders' deficit (990,142) (2,705,486) ---------------------- ---------------------- Total liabilities and shareholders deficit $ 14,083 82 ====================== ======================
Condensed Statement of Operations Information
Years ended December 31, --------------------------------------------------------------- 1998 1999 2000 ------------------ ------------------ ------------------ (in thousands) Total revenue $ - - - Total operating costs and expenses 192 2,478 12 ------------------ ------------------ ------------------ Operating loss (192) (2,478) (12) ================== ================== ================== Losses of subsidiaries (325,211) (320,073) (1,715,332) ================== ================== ================== Net loss attributable to common shareholders $ (325,403) (322,551) (1,715,344) ================== ================== ==================
(22) Condensed Financial Information of ICG Communications, Inc. (Parent company) The primary assets of ICG are its investments in ICG Services, ICG Funding and Holdings-Canada, including advances to those subsidiaries. Certain corporate expenses of the parent company are included in ICG's statement of operations and were, $2.2 million, $1.4 million and $2.1 million for the years ended December 31, 1998, 1999 and 2000, respectively. ICG has no operations other than those of ICG Services, ICG Funding, ICG Acquisition, Inc. and their subsidiaries. F-53 FINANCIAL STATEMENT SCHEDULE Page ---- Independent Auditors' Report......................................... S-1 Schedule II: Valuation and Qualifying Accounts...................... S-2 Independent Auditors' Report The Board of Directors and Stockholders ICG Communications, Inc.: Under the date of June 28, 2001, we reported on the consolidated balance sheets of ICG Communications, Inc. and subsidiaries (the Company) (a debtor-in- possession as of November 14, 2000) as of December 31, 1999 and 2000 and the related consolidated statements of operations, stockholders' deficit and cash flows for each of the years in the three-year period ended December 31, 2000 as contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. In connection with our audits of the aforementioned consolidated financial statements, we have also audited the related financial statement Schedule II: Valuation and Qualifying Accounts. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, based on our audits, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. The consolidated financial statements and financial statement schedule have been prepared assuming the Company will continue as a going concern. As discussed in note 1 to the consolidated financial statements, the Company has suffered recurring losses, has a significant net capital deficiency and, on November 14, 2000 the Company and most of its subsidiaries filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code. The consolidated financial statements and financial statement schedule do not include any adjustments to the recorded amounts or classification of assets or liabilities or reflect any amounts that may ultimately be paid to settle liabilities and contingencies which may be required in the Chapter 11 reorganization or the effect of any changes which may be made in connection with the Company's capitalization or operations resulting from a plan of reorganization. The Company has not filed a plan of reorganization which, when filed, is subject to acceptance by the Company's impaired creditors and stockholders and approval by the bankruptcy court which acceptance and approval is not assured. These factors, among others, raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements and financial statement schedule do not include any adjustments that might result from the outcome of this uncertainty. As explained in note 2 to the consolidated financial statements, during the year ended December 31, 2000, the Company changed its method of accounting for installation revenue. /s/ KPMG LLP Denver, Colorado June 28, 2001 S-1 ICG COMMUNICATIONS, INC. AND SUBSIDIARIES Schedule II Valuation and Qualifying Accounts
- -------------------------------------------------------------------------------------------------------------------------- Additions -------------------------- Balance at Charged to Charged to Balance at beginning costs and other end of Description of period expenses accounts Deductions period - --------------------------------------------- --------- -------- -------- --------- ------ (in thousands) Allowance for uncollectible trade receivables: Year ended December 31, 1998 $ 3,793 11,238 -- (680) 14,351 ------- ------- ------- ------- ------- Year ended December 31, 1999 $14,351 60,019 4,312 -- 78,682 ------- ------- ------- ------- ------- Year ended December 31, 2000 $78,682 84,457 -- 68,854 94,285 ------- ------- ------- ------- ------- Allowance for uncollectible note receivable: Year ended December 31, 1998 $ 3,300 -- -- (2,000) 1,300 ------- ------- ------- ------- ------- Year ended December 31, 1999 $ 1,300 -- -- (1,300) -- ------- ------- ------- ------- ------- Year ended December 31, 2000 $ -- -- -- -- -- ------- ------- ------- ------- ------- Allowance for impairment of long-lived assets: Year ended December 31, 1998 $ 5,170 -- -- -- 5,170 ------- ------- ------- ------- ------- Year ended December 31, 1999 $ 5,170 31,815 -- (5,170) 31,815 ------- ------- ------- ------- ------- Year ended December 31, 2000 $31,815 -- -- (31,815) -- ------- ------- ------- ------- -------
See accompanying independent auditors' report. S-2 INDEX TO EXHIBITS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 EXHIBITS 4.26 Revolving Credit Agreement, dated as of December 4, 2000, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, and the Chase Manhattan Bank, as Agent. 4.27 Security and Pledge Agreement, dated as of December 4, 2000 by and among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers and the Chase Manhattan Bank, as Agent. 4.28 First Amendment to Credit Agreement, dated as of January 31, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.29 Waiver to Credit Agreement, dated as of March 30, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.30 Amendment to Waiver to Credit Agreement, dated as of March 30, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.31 Second Amendment to Waiver to Credit Agreement, dated as of March 30, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.32 Second Amendment to Credit Agreement, dated as of May 2, 2001, among ICG Communications, Inc. and each of its subsidiaries party hereto, as Borrowers, the Chase Manhattan Bank and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement, and the Chase Manhattan Bank, as Agent. 4.33 Loan Modification Agreement dated as of June 28, 2001 between Trinet Realty Capital, Inc. as lender and Trinet Realty Investors V, Inc. as borrower. 10.70: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Robert Athey. 10.71: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Brian Cato. 10.72: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Darlinda Coe. 10.73: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and John Colgan. 10.74: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Richard E. Fish. 10.75: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Kimberly Gordon. 10.76: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and David Hurtado. 10.77: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Michael D. Kallet. 10.78: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Gayle Landis. 10.79: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Gary Lindgren. 10.80: Employment Agreement, dated as of February 26, 2001 by and between ICG Communications, Inc. and Bernard L. Zuroff. 10.81: Fourth Amendment to Lease, dated as of June 28, 2001 between Trinet Realty Investors V, Inc. as landlord and ICG Holdings, Inc. as tenant. 10.82: Agreement Regarding Option and Exercise of Option dated as of June 28, 2001 by Trinet Realty Investors V, Inc. and ICG Corporate Headquarters, L.L.C. 21.1: Subsidiaries of the Registrant. 23.1: Consent of KPMG LLP. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ICG Communications, Inc. By: /s/Randall E. Curran ------------------------- Randall E. Curran Chief Executive Officer Date: July 13, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date - --------- ----- ---- /s/ Randall E. Curran Chief Executive Officer July 13, 2001 - --------------------------- Randall E. Curran Executive Vice President, Chief Financial Officer (Principal /s/ Richard E. Fish, Jr. Financial Officer) July 13, 2001 - --------------------------- Richard E. Fish, Jr. Senior Vice President, Finance /s/ John V. Colgan and Controller (Principal - --------------------------- Accounting Officer) July 13, 2001 John V. Colgan /s/ William J. Laggett Vice Chairman of the Board of - --------------------------- Directors July 13, 2001 William J. Laggett /s/ John U. Moorhead Director July 13, 2001 - --------------------------- John U. Moorhead /s/ Leontis Teryazos Director July 13, 2001 - --------------------------- Leontis Teryazos /s/ Walter Threadgill Director July 13, 2001 - --------------------------- Walter Threadgill SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ICG Holdings (Canada) Co. By: /s/Randall E. Curran --------------------------------- Randall E. Curran CEO Date: July 13, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date - --------- ----- ---- President (Principal Executive /s/Randall E. Curran Officer) July 13, 2001 - -------------------------- Randall E. Curran Executive Vice President, Chief Financial Officer (Principal /s/Richard E. Fish, Jr. Financial Officer) July 13, 2001 - -------------------------- Richard E. Fish, Jr. Vice President and Controller /s/John V. Colgan (Principal Accounting Officer) July 13, 2001 - -------------------------- John V. Colgan Executive Vice President, General /s/Bernard L. Zuroff Counsel, Secretary and Director July 13, 2001 - -------------------------- Bernard L. Zuroff SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ICG Holdings, Inc. By: /s/Randall E. Curran ----------------------------------- Randall E. Curran Chairman of the Board of Directors, President and Chief Executive Officer Date: July 13, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date --------- ----- ---- Chairman of the Board of Directors, President and Chief Executive Officer (Principal /s/Randall E. Curran Executive Officer) July 13, 2001 - -------------------------- Randall E. Curran Executive Vice President, Chief Financial Officer and Director /s/Richard E. Fish, Jr. (Principal Financial Officer July 13, 2001 - -------------------------- Richard E. Fish, Jr. Vice President and Controller /s/John V. Colgan (Principal Accounting Officer) July 13, 2001 - -------------------------- John V. Colgan Executive Vice President, General Counsel, Secretary /s/Bernard L. Zuroff and Director July 13, 2001 - -------------------------- Bernard L. Zuroff EX-4.26 2 dex426.txt REVOLVING CREDIT AGREEMENT Exhibit 4.26 - -------------------------------------------------------------------------------- REVOLVING CREDIT AGREEMENT - -------------------------------------------------------------------------------- Among ICG COMMUNICATIONS, INC. AND EACH OF ITS SUBSIDIARIES PARTY HERETO, Debtors and Debtors-in-Possession under Chapter 11 of the Bankruptcy Code as Borrowers and THE LENDERS PARTY HERETO, and THE CHASE MANHATTAN BANK, as Agent - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dated as of December 4, 2000 CONFORMED COPY REVOLVING CREDIT AGREEMENT TABLE OF CONTENTS
Page No. SECTION 1. DEFINITIONS......................................................... 2 SECTION 1.1 Defined Terms..................................................... 2 SECTION 1.2 Terms Generally................................................... 15 SECTION 2. AMOUNT AND TERMS OF CREDIT.......................................... 16 SECTION 2.1 Commitment of the Lenders......................................... 16 SECTION 2.2 Availability of Commitment; Borrowing Base........................ 16 SECTION 2.3 Letters of Credit................................................. 17 SECTION 2.4 Issuance.......................................................... 19 SECTION 2.5 Nature of Letter of Credit Obligations Absolute................... 19 SECTION 2.6 Making of Loans................................................... 20 SECTION 2.7 Repayment of Loans; Evidence of Debt.............................. 20 SECTION 2.8 Interest on Loans................................................. 21 SECTION 2.9 Default Interest.................................................. 21 SECTION 2.10 Optional Termination or Reduction of Commitment.................. 22 SECTION 2.11 Alternate Rate of Interest....................................... 22 SECTION 2.12 Refinancing of Loans............................................. 22 SECTION 2.13 Mandatory Prepayment; Commitment Termination; Cash Collateral.... 23 SECTION 2.14 Optional Prepayment of Loans; Reimbursement of Lenders........... 24 SECTION 2.15 Reserve Requirements; Change in Circumstances.................... 25 SECTION 2.16 Change in Legality............................................... 27 SECTION 2.17 Pro Rata Treatment, etc.......................................... 27 SECTION 2.18 Taxes............................................................ 28 SECTION 2.19 Certain Fees..................................................... 30 SECTION 2.20 Commitment Fee; Early Termination Fee............................ 30 SECTION 2.21 Letter of Credit Fees............................................ 31 SECTION 2.22 Nature of Fees................................................... 31 SECTION 2.23 Priority and Liens............................................... 31 SECTION 2.24 Right of Set-Off................................................. 32 SECTION 2.25 Security Interest in Letter of Credit Account.................... 33 SECTION 2.26 Payment of Obligations........................................... 33 SECTION 2.27 No Discharge; Survival of Claims................................. 33 SECTION 3. REPRESENTATIONS AND WARRANTIES...................................... 33 SECTION 3.1 Organization and Authority........................................ 33 SECTION 3.2 Due Execution..................................................... 33 SECTION 3.3 Statements Made................................................... 34 SECTION 3.4 Financial Statements.............................................. 34 SECTION 3.5 Ownership......................................................... 35
SECTION 3.6 Liens......................................................... 35 SECTION 3.7 Compliance with Law........................................... 35 SECTION 3.8 Insurance..................................................... 35 SECTION 3.9 Final Order................................................... 35 SECTION 3.10 Use of Proceeds.............................................. 36 SECTION 3.11 Litigation................................................... 36 SECTION 3.12 Intellectual Property........................................ 36 SECTION 3.13 Material Contracts........................................... 36 SECTION 4. CONDITIONS OF LENDING........................................... 36 SECTION 4.1 Conditions Precedent to Closing............................... 36 SECTION 4.2 Conditions Precedent to Each Loan and Each Letter of Credit... 38 SECTION 5. AFFIRMATIVE COVENANTS........................................... 40 SECTION 5.1 Financial Statements, Reports, etc............................ 40 SECTION 5.2 Existence..................................................... 43 SECTION 5.3 Insurance..................................................... 43 SECTION 5.4 Obligations and Taxes......................................... 43 SECTION 5.5 Notice of Event of Default, etc............................... 44 SECTION 5.6 Access to Books and Records................................... 44 SECTION 5.7 Maintenance of Sweep Account.................................. 45 SECTION 5.8 Borrowing Base Certificate.................................... 45 SECTION 6. NEGATIVE COVENANTS.............................................. 45 SECTION 6.1 Liens......................................................... 45 SECTION 6.2 Merger, etc................................................... 45 SECTION 6.3 Indebtedness.................................................. 45 SECTION 6.4 Capital Expenditures.......................................... 46 SECTION 6.5 EBITDA........................................................ 46 SECTION 6.6 Guarantees and Other Liabilities.............................. 47 SECTION 6.7 Chapter 11 Claims............................................. 47 SECTION 6.8 Dividends; Capital Stock...................................... 47 SECTION 6.9 Transactions with Affiliates.................................. 48 SECTION 6.10 Investments, Loans and Advances.............................. 48 SECTION 6.11 Disposition of Assets........................................ 48 SECTION 6.12 Nature of Business........................................... 48 SECTION 6.13 Transactions among Borrowers................................. 48 SECTION 6.14 Right of Subrogation among Borrowers......................... 48 SECTION 7. EVENTS OF DEFAULT............................................... 49 SECTION 7.1 Events of Default............................................. 49 SECTION 8. THE AGENT....................................................... 52
ii SECTION 8.1 Administration by Agent......................................... 52 SECTION 8.2 Advances and Payments........................................... 52 SECTION 8.3 Sharing of Setoffs.............................................. 52 SECTION 8.4 Agreement of Required Lenders................................... 53 SECTION 8.5 Liability of Agent.............................................. 53 SECTION 8.6 Reimbursement and Indemnification............................... 54 SECTION 8.7 Rights of Agent................................................. 54 SECTION 8.8 Independent Lenders............................................. 54 SECTION 8.9 Notice of Transfer.............................................. 54 SECTION 8.10 Successor Agent................................................ 54 SECTION 9. MISCELLANEOUS..................................................... 55 SECTION 9.1 Notices......................................................... 55 SECTION 9.2 Survival of Agreement, Representations and Warranties, etc...... 55 SECTION 9.3 Successors and Assigns.......................................... 55 SECTION 9.4 Confidentiality................................................. 58 SECTION 9.5 Expenses........................................................ 58 SECTION 9.6 Indemnity....................................................... 58 SECTION 9.7 Choice of Law................................................... 59 SECTION 9.8 No Waiver....................................................... 59 SECTION 9.9 Extension of Maturity........................................... 59 SECTION 9.10 Amendments, etc................................................ 59 SECTION 9.11 Severability................................................... 60 SECTION 9.12 Headings....................................................... 60 SECTION 9.13 Execution in Counterparts...................................... 60 SECTION 9.14 Prior Agreements............................................... 60 SECTION 9.15 Further Assurances............................................. 61 SECTION 9.16 Waiver of Jury Trial........................................... 61 SECTION 9.17 Foreign Subsidiaries........................................... 61
Annex A - Commitment Amounts Exhibit A - Form of Final Order Exhibit B - Form of Security and Pledge Agreement Exhibit C - Form of Opinion of Counsel Exhibit D - Form of Assignment and Acceptance Schedule 3.5 - Subsidiaries iii Schedule 3.6 - Liens Schedule 3.12 - Intellectual Property Schedule 3.13 - Material Contracts Schedule 5.2 - Certain Subsidiaries Schedule 6.3 - Intercompany Indebtedness Schedule 6.10 - Existing Investments Schedule 6.13 - Borrower Transaction Restrictions iv REVOLVING CREDIT AGREEMENT Dated as of December 4, 2000 REVOLVING CREDIT AGREEMENT, dated as of December 4, 2000, among ICG COMMUNICATIONS, INC., a Delaware corporation, ICG TEVIS, INC., a Delaware corporation, ICG FUNDING, LLC, a Delaware limited liability company, ICG SERVICES, INC., a Delaware corporation, ICG MOUNTAIN VIEW, INC., a Colorado corporation, ICG NETAHEAD, INC., a Delaware corporation, ICG EQUIPMENT, INC., a Colorado corporation, ICG CANADIAN ACQUISITION, INC., a Delaware corporation, ICG HOLDINGS (CANADA) CO., a Nova Scotia unlimited liability company, ICG HOLDINGS, INC., a Colorado corporation, ICG TELECOM GROUP, INC., a Colorado corporation, NIKONET, LLC, a Georgia limited liability company, ICG OHIO LINX, INC., an Ohio corporation, ICG ENHANCED SERVICES, INC., a Colorado corporation, COMMUNICATIONS BUYING GROUP, INC., an Ohio corporation, ICG TELECOM GROUP OF VIRGINIA, INC., a Virginia corporation, ICG DATACHOICE NETWORK SERVICES, L.L.C., a Nevada limited liability company, PTI HARBOR BAY, INC., a Washington corporation, BAY AREA TELEPORT, INC., a Delaware corporation, ICG ACCESS SERVICES - SOUTHEAST, INC., a Delaware corporation, TRANS AMERICAN CABLE, INC., a Kentucky corporation, ICG TELECOM OF SAN DIEGO, L.P., a California limited partnership, WESTERN PLAINS FINANCE, L.L.C., a Nevada limited liability company, ICG CHOICECOM MANAGEMENT, LLC, a Delaware limited liability company, ICG CHOICECOM, L.P., a Delaware limited partnership, and DOWNNORTH, INC., a Georgia corporation (each individually a "Borrower" and collectively the "Borrowers") , -------- --------- each of which is a debtor and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code (the cases of the Borrowers, each a "Case" and ---- collectively, the "Cases"), THE CHASE MANHATTAN BANK, a New York banking ----- corporation ("Chase"), each of the other commercial banks, finance companies, ----- insurance companies or other financial institutions or funds from time to time party hereto (together with Chase, the "Lenders") and THE CHASE MANHATTAN BANK, ------- as agent (in such capacity, the "Agent") for the Lenders. ----- INTRODUCTORY STATEMENT WHEREAS, on November 14, 2000, the Borrowers filed voluntary petitions with the Bankruptcy Court initiating the Cases and have continued in the possession of their assets and in the management of their businesses pursuant to Sections 1107 and 1108 of the Bankruptcy Code; and WHEREAS, the Borrowers have applied to the Lenders for a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $350,000,000 and initially not to be less than $200,000,000 (subject to the terms and conditions of this Agreement); and WHEREAS, the proceeds of the Loans will be used for working capital and other general corporate purposes of the Borrowers; and WHEREAS, to provide for the repayment of the Loans, the reimbursement of any draft drawn under a Letter of Credit and the payment of the other obligations of the Borrowers hereunder and under the other Loan Documents (including, without limitation, the Obligations of the Borrowers under Section 6.3(v)), the Borrowers will provide to the Agent and the Lenders the following (each as more fully described herein): (a) an allowed Superpriority Claim; (b) a perfected first priority Lien, pursuant to Section 364(c)(2) of the Bankruptcy Code, upon all unencumbered property of the Borrowers and on all cash and cash equivalents in the Letter of Credit Account, provided that -------- following the Termination Date, amounts in the Letter of Credit Account shall not be subject to the Carve-Out hereinafter referred to; (c) a perfected Lien, pursuant to Section 364(c)(3) of the Bankruptcy Code, upon all property of the Borrowers that is subject to valid and perfected Liens in existence on the Filing Date or that is subject to valid Liens in existence on the Filing Date that are perfected subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy Code or that is subject to Permitted Liens, junior to such valid and perfected Liens, provided that upon -------- repayment of all Indebtedness under the Existing Agreement, the Obligations of the Borrowers hereunder and under the Loan Documents and in respect of Indebtedness permitted by Section 6.3(v) shall automatically be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a perfected first priority Lien (subject to Liens permitted pursuant to clauses (i) or (ii) of Section 6.1) on all property of the Borrowers that then secures all Indebtedness under the Existing Agreement; and WHEREAS, all of the claims granted hereunder in the Cases to the Agent and the Lenders shall be subject to the Carve-Out to the extent provided in Section 2.23. Accordingly, the parties hereto hereby agree as follows: SECTION 1. DEFINITIONS SECTION 1.1 Defined Terms. ------------- As used in this Agreement, the following terms shall have the meanings specified below: "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans. ------------- "ABR Loan" shall mean any Loan bearing interest at a rate determined -------- by reference to the Alternate Base Rate in accordance with the provisions of Section 2. "Account" shall mean any right to payment for goods sold, regardless ------- of how such right is evidenced and whether or not it has been earned by performance. "Adjusted LIBOR Rate" shall mean, with respect to any Eurodollar ------------------- Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the quotient of (a) the LIBOR Rate in effect for such Interest Period divided 2 by (b) a percentage (expressed as a decimal) equal to 100% minus Statutory Reserves. For purposes hereof, the term "LIBOR Rate" shall mean the rate ---------- (rounded upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits approximately equal in principal amount to such Eurodollar Borrowing and for a maturity comparable to such Interest Period are offered to the principal London office of the Agent in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period. "Affiliate" shall mean, as to any Person, any other Person which, --------- directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, a Person (a "Controlled Person") shall be deemed to be "controlled by" another Person (a ----------------- "Controlling Person") if the Controlling Person possesses, directly or ------------------ indirectly, power to direct or cause the direction of the management and policies of the Controlled Person whether by contract or otherwise. "Agent" shall have the meaning set forth in the Introduction. ----- "Agreement" shall mean this Revolving Credit Agreement, as the same --------- may from time to time be further amended, modified or supplemented. "Alternate Base Rate" shall mean, for any day, a rate per annum ------------------- (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall mean the rate of interest ---------- per annum publicly announced from time to time by the Agent as its prime rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced. "Base CD ------- Rate" shall mean the sum of (a) the quotient of (i) the Three-Month Secondary CD Rate divided by (ii) a percentage expressed as a decimal equal to 100% minus Statutory Reserves and (b) the Assessment Rate. "Three-Month Secondary CD Rate" ----------------------------- shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 a.m., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it. "Federal Funds Effective Rate" shall mean, for any day, the ---------------------------- weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Agent from three Federal funds brokers of recognized standing selected by it. If for any reason the Agent shall have determined (which determination shall be 3 conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate or both for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Alternate Base Rate shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circumstances giving rise to such inability no longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate, the Three- Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "Amounts" shall have the meaning given such term in Section 2.18(a). ------- "Assessment Rate" shall mean for any date the annual rate (rounded --------------- upwards, if necessary, to the next 1/100 of 1%) most recently estimated by the Agent as the then current net annual assessment rate that will be employed in determining amounts payable by the Agent to the Federal Deposit Insurance Corporation (or any successor) for insurance by such Corporation (or any successor) of time deposits made in dollars at the Agent's domestic offices. "Assignment and Acceptance" shall mean an assignment and acceptance ------------------------- entered into by a Lender and an Eligible Assignee, and accepted by the Agent, substantially in the form of Exhibit C. --------- "Available Commitment" shall have the meaning given such term in -------------------- Section 2.2. "Bankruptcy Code" shall mean The Bankruptcy Reform Act of 1978, as --------------- heretofore and hereafter amended, and codified as 11 U.S.C. Section 101 et seq. "Bankruptcy Court" shall mean the United States Bankruptcy Court for ---------------- the District of Delaware or any other court having jurisdiction over the Cases from time to time. "Board" shall mean the Board of Governors of the Federal Reserve ----- System of the United States. "Borrower" and "Borrowers" shall have the respective meanings set -------- --------- forth in the Introduction. "Borrowing" shall mean the incurrence of Loans of a single Type made --------- from all the Lenders on a single date and having, in the case of Eurodollar Loans, a single Interest Period (with any ABR Loan made pursuant to Section 2.16 being considered a part of the related Borrowing of Eurodollar Loans). "Borrowing Base" shall mean, on any date from and after the expiration -------------- of the Initial Period, the amount (which may include certain receivables, equipment and fixtures meeting certain eligibility standards established by the Agent) determined by the Agent. Borrowing Base standards may be fixed and revised from time to time by the Agent in the Agent's exclusive judgment, with such consent of the Lenders as may be required pursuant to Section 9.10. 4 "Borrowing Base Certificate" shall mean a certificate in a form -------------------------- satisfactory to the Agent (with such changes therein as may be required by the Agent from time to time to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified by a Financial Officer of ICG Communications, Inc., which shall include appropriate exhibits and schedules as referred to therein and as provided for in Section 5.8. "Budget" shall have the meaning given such term in Section 4.1(i). ------ "Business Day" shall mean any day other than a Saturday, Sunday or ------------ other day on which banks in the State of New York are required or permitted to close (and, for a Letter of Credit, other than a day on which the Fronting Bank issuing such Letter of Credit is closed); provided, however, that when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in dollar deposits on the London interbank market. "Capital Expenditures" shall mean, for any period, the aggregate of -------------------- all expenditures (whether paid in cash and not theretofore accrued subsequent to the date of this Agreement or accrued as liabilities during such period and including that portion of Capitalized Leases which is capitalized on the consolidated balance sheet of the Borrowers and their Subsidiaries) by the Borrowers and their Subsidiaries during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, equipment or intangibles or similar fixed asset accounts reflected in the consolidated balance sheet of the Borrowers and their Subsidiaries (including equipment which is purchased simultaneously with the trade-in of existing equipment owned by any of the Borrowers or their Subsidiaries to the extent of the gross amount of such purchase price less the book value of the equipment being traded in at such time), but excluding expenditures made in connection with the replacement or restoration of assets, to the extent reimbursed or financed from insurance proceeds paid on account of the loss of or the damage to the assets being replaced or restored, or from awards of compensation arising from the taking by condemnation or eminent domain of such assets being replaced. "Capitalized Lease" shall mean, as applied to any Person, any lease of ----------------- property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Carve-Out" shall have the meaning set forth in Section 2.23. --------- "Cases" shall mean the Chapter 11 Cases of each of the Borrowers ----- pending in the Bankruptcy Court. "Change of Control" shall mean: (i) the occupation of a majority of ----------------- the seats (other than vacant seats) on the board of directors of Parent, after the Filing Date, by Persons who were neither (A) nominated by the board of directors of Parent nor (B) appointed by the directors so nominated; or (ii) following (x) the termination of the employment of the Chief Executive Officer of the Parent for any reason or (y) the assignment to the Chief Executive Officer of duties inconsistent with his position of Chief Executive Officer to provide overall management of the Parent which results in a diminution of such position, the Parent's retention 5 of a new Chief Executive Officer (or an individual discharging the customary duties and responsibilities of such officer) who is not satisfactory to the Agent. "Chase" shall have the meaning set forth in the Introduction. ----- "Closing Date" shall mean the date on which this Agreement has been ------------ executed and the conditions precedent set forth in Section 4.1 have been satisfied or waived, which date shall occur promptly after the date of this Agreement, but in no event later than ten (10) days following the entry of the Final Order. The Agent's execution and delivery of this Agreement shall constitute notice to the Borrowers of the satisfaction of the conditions precedent set forth in Section 4.1 and the occurrence of the Closing Date. "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- "Commitment" shall mean, with respect to each Lender, the commitment ---------- of each Lender hereunder in the amount set forth opposite its name on Annex A ------- hereto or as may subsequently be set forth in the Register from time to time, as the same may be reduced from time to time pursuant to this Agreement. "Commitment Fee" shall have the meaning set forth in Section 2.20. -------------- "Commitment Letter" shall mean that certain Commitment Letter dated ----------------- November 13, 2000 among the Agent, Chase Securities Inc. and the Borrowers. "Commitment Percentage" shall mean at any time, with respect to each --------------------- Lender, the percentage obtained by dividing its Commitment at such time by the Total Commitment at such time. "Consummation Date" shall mean the date of the substantial ----------------- consummation (as defined in Section 1101 of the Bankruptcy Code and which for purposes of this Agreement shall be no later than the effective date) of a Reorganization Plan of the Borrowers that is confirmed pursuant to an order of the Bankruptcy Court in the Cases. "Dollars" and "$" shall mean lawful money of the United States of ------- - America. "Early Termination Fee" shall have the meaning given such term in --------------------- Section 2.20. "EBITDA" shall mean, for any period, all as determined in accordance ------ with GAAP, the consolidated net income (or net loss) of the Borrowers and their Subsidiaries for such period, plus (a) the sum of (i) depreciation expense, (ii) ---- amortization expense, (iii) other non-cash charges, (iv) net total Federal, state and local income tax expense, (v) gross interest expense for such period less gross interest income for such period, (vi) extraordinary losses, (vii) any non-recurring charge or restructuring charge, (viii) the cumulative effect of any change in accounting principles and (ix) "Chapter 11 expenses" (or "administrative costs reflecting Chapter 11 expenses") as shown on the Borrowers' and their Subsidiaries' consolidated statement of income 6 for such period less (b) extraordinary gains plus or minus (c) the amount of ---- ---- ----- cash received or expended in such period in respect of any amount which, under clause (vii) above, was taken into account in determining EBITDA for such or any prior period. "Eligible Assignee" shall mean (i) a commercial bank having total ----------------- assets in excess of $1,000,000,000; (ii) a finance company, insurance company or other financial institution or fund, in each case acceptable to the Agent, which in the ordinary course of business extends credit of the type contemplated herein and has total assets in excess of $200,000,000 and whose becoming an assignee would not constitute a prohibited transaction under Section 4975 of ERISA; and (iii) any other financial institution satisfactory to the Borrowers and the Agent. "Environmental Lien" shall mean a Lien in favor of any Governmental ------------------ Authority for (i) any liability under federal or state environmental laws or regulations, or (ii) damages arising from or costs incurred by such Governmental Authority in response to a release or threatened release of a hazardous or toxic waste, substance or constituent, or other substance into the environment. "ERISA" shall mean the Employee Retirement Income Security Act of ----- 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" shall mean any trade or business (whether or not --------------- incorporated) which is a member of a group of which any of the Borrowers is a member and which is under common control within the meaning of Section 414(b) or (c) of the Code and the regulations promulgated and rulings issued thereunder. "Eurocurrency Liabilities" shall have the meaning assigned thereto in ------------------------ Regulation D issued by the Board, as in effect from time to time. "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar -------------------- Loans. "Eurodollar Loan" shall mean any Loan bearing interest at a rate --------------- determined by reference to the Adjusted LIBOR Rate in accordance with the provisions of Section 2. "Event of Default" shall have the meaning given such term in Section ---------------- 7. "Existing Agreement" shall mean that certain Credit Agreement dated as ------------------ of August 12, 1999 among ICG Equipment, Inc. and ICG NetAhead, Inc., as borrowers, ICG Services, Inc., as parent, the several lenders from time to time party thereto, Morgan Stanley Senior Funding, Inc, as sole book-runner and lead arranger, Royal Bank of Canada, as administrative agent and collateral agent, and Bank of America, N.A. and Barclays Bank PLC, as co-documentation agents, and shall include the "Loan Documents" (as defined therein) (each as heretofore amended, amended and restated or otherwise modified). 7 "FCC" means the Federal Communications Commission or any successor --- commission or agency of the United States of America having jurisdiction over any Borrower. "Fees" shall collectively mean the Commitment Fees, Letter of Credit ---- Fees and other fees referred to in Sections 2.19, 2.20 and 2.21. "Filing Date" shall mean November 14, 2000. ----------- "Final Order" shall have the meaning given such term in Section ----------- 4.2(d). "Financial Officer" shall mean the Chief Financial Officer, Vice ----------------- President Finance, Vice President/Operations Controller, Corporate Controller, Treasurer or Assistant Treasurer of a Borrower. "Foreign Subsidiary" shall have the meaning given such term in Section ------------------ 9.17. "Fronting Bank" shall mean Chase or such other commercial bank (which ------------- other commercial bank shall be reasonably satisfactory to the Borrowers) as may agree with Chase to act in such capacity. "GAAP" shall mean generally accepted accounting principles applied in ---- accordance with Section 1.2. "Governmental Authority" shall mean any Federal, state, municipal or ---------------------- other governmental department, commission, board, bureau, agency or instrumentality or any court, in each case whether of the United States or foreign. "Indebtedness" shall mean, at any time and with respect to any Person, ------------ (i) all indebtedness of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services (other than property, including inventory, and services purchased, and expense accruals and deferred compensation items arising, in the ordinary course of business), (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments (other than performance, surety and appeal bonds arising in the ordinary course of business), (iv) all indebtedness of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person under leases which have been or should be, in accordance with GAAP, recorded as capital leases, to the extent required to be so recorded, (vi) all reimbursement, payment or similar obligations of such Person, contingent or otherwise, under acceptance, letter of credit or similar facilities and all obligations of such Person in respect of (x) currency swap agreements, currency future or option contracts and other similar agreements designed to hedge against fluctuations in foreign interest rates and (y) interest rate swap, cap or collar agreements and interest rate future or option contracts; (vii) all Indebtedness referred to in clauses (i) through (vi) above guaranteed directly or indirectly by such Person, or in effect guaranteed directly or indirectly by such Person through an agreement (A) to pay or purchase such Indebtedness or to advance or supply funds for the payment or purchase of such Indebtedness, (B) to purchase, sell or lease (as lessee or lessor) 8 property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Indebtedness or to assure the holder of such Indebtedness against loss in respect of such Indebtedness, (C) to supply funds to or in any other manner invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered) or (D) otherwise to assure a creditor against loss in respect of such Indebtedness, and (viii) all Indebtedness referred to in clauses (i) through (vii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness. "Indemnified Party" shall have the meaning given such term in Section ----------------- 9.6. "Initial Period" shall have the meaning given such term in Section -------------- 2.2. "Insufficiency" shall mean, with respect to any Plan, the amount, if ------------- any, of its unfunded benefit liabilities within the meaning of Section 4001(a)(18) of ERISA. "Interest Payment Date" shall mean (i) as to any Eurodollar Loan, the --------------------- last day of each consecutive 30 day period running from the commencement of the applicable Interest Period, and (ii) as to all ABR Loans, the last calendar day of each month and the date on which any ABR Loans are refinanced with Eurodollar Loans pursuant to Section 2.12. "Interest Period" shall mean, as to any Borrowing of Eurodollar Loans, --------------- the period commencing on the date of such Borrowing (including as a result of a refinancing of ABR Loans) or on the last day of the preceding Interest Period applicable to such Borrowing and ending on the numerically corresponding day (or if there is no corresponding day, the last day) in the calendar month that is one or three months thereafter, as the Borrowers may elect in the related notice delivered pursuant to Sections 2.6(b) or 2.12; provided, however, that (i) if any Interest Period would end on a day which shall not be a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (ii) no Interest Period shall end later than the Termination Date. "Investments" shall have the meaning given such term in Section 6.10. ----------- "Lenders" shall have the meaning set forth in the Introduction. ------- "Letter of Credit" shall mean any irrevocable letter of credit issued ---------------- pursuant to Section 2.3, which letter of credit shall be (i) a standby or import documentary letter of credit, (ii) issued for purposes that are consistent with the ordinary course of business of the Borrowers or for such other purposes as are reasonably acceptable to the Agent, (iii) denominated in Dollars and (iv) otherwise in such form as may be reasonably approved from time to time by the Agent and the applicable Fronting Bank. "Letter of Credit Account" shall mean the account established by the ------------------------ Borrowers under the sole and exclusive control of the Agent maintained at the office of the Agent at 270 9 Park Avenue, New York, New York 10017 designated as the "ICG Communications, Inc. Letter of Credit Account" that shall be used solely for the purposes set forth in Sections 2.3(b) and 2.13. "Letter of Credit Fees" shall mean the fees payable in respect of --------------------- Letters of Credit pursuant to Section 2.21. "Letter of Credit Outstandings" shall mean, at any time, the sum of ----------------------------- (i) the aggregate undrawn stated amount of all Letters of Credit then outstanding plus (ii) all amounts theretofore drawn under Letters of Credit and not then reimbursed. "Lien" shall mean any mortgage, pledge, security interest, ---- encumbrance, lien or charge of any kind whatsoever (including any conditional sale or other title retention agreement or any lease in the nature thereof). "Loan" and "Loans" shall have the respective meanings given such terms ---- ----- in Section 2.1. "Loan Documents" shall mean this Agreement, the Letters of Credit, the -------------- Security and Pledge Agreement and any other instrument or agreement executed and delivered in connection herewith. "Material Contract" means (i) each agreement described as a master ----------------- lease agreement, and each agreement in the nature of a master lease, to which ICG Equipment, Inc. is a party as lessor, (ii) any other material lease agreement to which ICG Equipment, Inc. is a party as lessor and (iii) each other contract to which a Borrower or any of their respective Subsidiaries is a party involving aggregate consideration payable to or by such Person of $5,000,000 or more in any year or otherwise material to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrowers taken as a whole. "Maturity Date" shall initially mean November 14, 2001, subject to ------------- adjustment to a date not later than May 14, 2002 pursuant to Section 2.2(d). "Minority Lenders" shall have the meaning given such term in Section ---------------- 9.10(b). "Multiemployer Plan" shall mean a "multiemployer plan" as defined in ------------------ Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions. "Multiple Employer Plan" shall mean a Single Employer Plan, which (i) ---------------------- is maintained for employees of a Borrower or an ERISA Affiliate and at least one Person other than such Borrower and its ERISA Affiliates or (ii) was so maintained and in respect of which a Borrower or an ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such Plan has been or were to be terminated. "Net Proceeds" shall mean, in respect of any sale of assets, the ------------ proceeds of such sale after the payment of or reservation for expenses that are directly related to (or the need for 10 which arises as a result of) the transaction of sale, including, but not limited to, related severance costs, taxes payable, brokerage commissions, professional expenses, other similar costs that are directly related to the sale and the amount secured by valid and perfected Liens, if any, that are senior to the Liens on such assets held by the Agent on behalf of the Lenders. "Obligations" shall mean (a) the due and punctual payment of principal ----------- of and interest on the Loans and the reimbursement of all amounts drawn under Letters of Credit, and (b) the due and punctual payment of the Fees and all other present and future, fixed or contingent, monetary obligations of the Borrowers to the Lenders and the Agent under the Loan Documents. "Organizational Documents" shall mean (i) with respect to any ------------------------ corporation, its certificate or articles of incorporation, as amended, and its by-laws, as amended, (ii) with respect to any limited partnership, its certificate of limited partnership or formation, as amended, and its partnership agreement, as amended, (iii) with respect to any general partnership, its partnership agreement, as amended, (iv) with respect to any limited liability company, its certificate of formation or articles of organization, as amended, and its operating agreement, as amended, and (v) with respect to any unlimited liability company, its certificate of formation, as amended, and its memorandum and articles of association, as amended. In the event any term or condition of this Agreement or any other Loan Document requires any Organizational Document to be certified by a secretary of state of similar governmental official, the reference to any such "Organizational Document" shall only be to a document of a type customarily certified by such governmental official. "Other Taxes" shall have the meaning given such term in Section 2.18. ----------- "Parent" shall mean ICG Communications, Inc., a Delaware corporation. ------ "PBGC" shall mean the Pension Benefit Guaranty Corporation, or any ---- successor agency or entity performing substantially the same functions. "Pension Plan" shall mean a defined benefit pension or retirement plan ------------ which meets and is subject to the requirements of Section 401(a) of the Code. "Permitted Investments" shall mean: --------------------- (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within twelve months from the date of acquisition thereof; (b) without limiting the provisions of paragraph (d) below, investments in commercial paper maturing within six months from the date of acquisition thereof and having, at such date of acquisition, a rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; 11 (c) investments in certificates of deposit, banker's acceptances and time deposits (including Eurodollar time deposits) maturing within six months from the date of acquisition thereof issued or guaranteed by or placed with (i) any domestic office of the Agent or the bank with whom the Borrowers maintain their cash management system, provided, that if such bank is not a Lender hereunder, such bank shall have entered into an agreement with the Agent pursuant to which such bank shall have waived all rights of setoff and confirmed that such bank does not have, nor shall it claim, a security interest therein or (ii) any domestic office of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has a combined capital and surplus and undivided profits of not less than $250,000,000 and is the principal banking Subsidiary of a bank holding company having a long-term unsecured debt rating of at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (d) investments in commercial paper maturing within six months from the date of acquisition thereof and issued by (i) the holding company of the Agent or (ii) the holding company of any other commercial bank of recognized standing organized under the laws of the United States of America or any State thereof that has (A) a combined capital and surplus in excess of $250,000,000 and (B) commercial paper rated at least "A-2" or the equivalent thereof from Standard & Poor's Corporation or of at least "P-2" or the equivalent thereof from Moody's Investors Service, Inc.; (e) investments in repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clause (a) above entered into with any office of a bank or trust company meeting the qualifications specified in clause (c) above; (f) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (a) through (e) above; and (g) to the extent owned on the Filing Date, investments in the capital stock of any direct or indirect Subsidiary of the Borrowers (including, but without permitting any additional Investment in, the limited partnership interests of ICG 161, L.P., a Delaware limited partnership). "Permitted Liens" shall mean (i) Liens imposed by law (other than --------------- Environmental Liens and any Lien imposed under ERISA) for taxes, assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (ii) Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other Liens (other than Environmental Liens and any Lien imposed under ERISA) in existence on the Filing Date or thereafter imposed by law and created in the ordinary course of business; (iii) Liens (other than any Lien imposed under ERISA) incurred or deposits made (including, without limitation, surety bonds and appeal bonds) in connection with workers' compensation, unemployment insurance and other types of social security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness), statutory obligations and other similar obligations incurred in the ordinary course of business or arising as a result of progress payments under government 12 contracts; (iv) easements (including, without limitation, reciprocal easement agreements and utility agreements), rights-of-way, covenants, consents, reservations, encroachments, variations and zoning and other restrictions, charges or encumbrances (whether or not recorded) and interest of ground lessors, which do not interfere with the ordinary conduct of the business of any Borrower, and which do not detract from the value of the property to which they attach or materially impair the use thereof to any Borrower; (v) purchase money Liens (including Capitalized Leases) upon or in any property acquired or held in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness permitted by Section 6.3(iii) solely for the purpose of financing the acquisition of such property; (vi) prior to the initial extension of credit hereunder (other than Letters of Credit issued pursuant to the proviso set forth in Section 4.2(k)), Liens in favor of the collateral agent, the agent or the lenders thereunder securing obligations under the Existing Agreement; (vii) extensions, renewals or replacements, including replacement Liens granted by the Bankruptcy Court, of any Lien referred to in paragraphs (i) through (v) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby; and (viii) prior to the initial extension of credit hereunder (other than Letters of Credit issued pursuant to the proviso set forth in Section 4.2(k)), extensions, renewals or replacements, including replacement Liens granted by the Bankruptcy Court, of any Lien referred to in paragraph (vi) above, provided that the principal amount of the obligation secured thereby is not increased and that any such extension, renewal or replacement is limited to the property originally encumbered thereby. "Person" shall mean any natural person, corporation, division of a ------ corporation, partnership, trust, joint venture, association, company, estate, unincorporated organization or government or any agency or political subdivision thereof. "Plan" shall mean a Single Employer Plan or a Multiemployer Plan. ---- "Pre-Petition Payment" shall mean a payment (by way of adequate -------------------- protection or otherwise) of principal or interest or otherwise on account of any pre-petition Indebtedness or trade payables or other pre-petition claims against the Borrowers, including, without limitation, reclamation claims, but excluding refunds or credits to customers in the ordinary course of business. "PUC" means any state governmental authority having utility or --- telecommunications authority over any Borrower. "Register" shall have the meaning set forth in Section 9.3(d). -------- "Reorganization Plan" shall mean a plan of reorganization in any of ------------------- the Cases. "Required Lenders" shall mean, at any time, Lenders holding Loans ---------------- representing in excess of 50% of the aggregate principal amount of such Loans outstanding or, if no such Loans are outstanding, Lenders having Commitments representing in excess of 50% of the Total Commitment. 13 "Security and Pledge Agreement" shall have the meaning given such term ----------------------------- in Section 4.1(c). "Single Employer Plan" shall mean a single employer plan, as defined -------------------- in Section 4001(a)(15) of ERISA, that (i) is maintained for employees of a Borrower or an ERISA Affiliate or (ii) was so maintained and in respect of which a Borrower could have liability under Section 4069 of ERISA in the event such Plan has been or were to be terminated. "Statutory Reserves" shall mean on any date the percentage (expressed ------------------ as a decimal) established by the Board and any other banking authority which is (i) for purposes of the definition of Base CD Rate, the then stated maximum rate of all reserves (including, but not limited to, any emergency, supplemental or other marginal reserve requirement) for a member bank of the Federal Reserve System in New York City, for new three month negotiable nonpersonal time deposits in dollars of $100,000 or more or (ii) for purposes of the definition of Adjusted LIBOR Rate, the then stated maximum rate for all reserves (including but not limited to any emergency, supplemental or other marginal reserve requirements) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency Liabilities (or any successor category of liabilities under Regulation D issued by the Board, as in effect from time to time). Such reserve percentages shall include, without limitation, those imposed pursuant to said Regulation. The Statutory Reserves shall be adjusted automatically on and as of the effective date of any change in such percentage. "Subsidiary" shall mean, with respect to any Person (herein referred ---------- to as the "parent"), any corporation, association or other business entity (whether now existing or hereafter organized) of which at least a majority of the securities or other ownership interests having ordinary voting power for the election of directors is, at the time as of which any determination is being made, owned or controlled by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent; provided, -------- that unless otherwise qualified, for the purposes of the Loan Documents, all references to "Subsidiaries" shall refer to Subsidiaries of the Borrowers excluding ICG 161, L.P., a Delaware limited partnership. "Super-majority Lenders" shall have the meaning given such term in ---------------------- Section 9.10(b). "Superpriority Claim" shall mean a claim against any Borrower in any ------------------- of the Cases which is a superpriority administrative expense claim having priority over any or all administrative expenses of the kind specified in Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 507(b), 546(c), 726 (to the extent permitted by law), and 1112 of the Bankruptcy Code. "Taxes" shall have the meaning given such term in Section 2.18. ----- "Termination Date" shall mean the earliest to occur of (i) the ---------------- Maturity Date, (ii) the Consummation Date and (iii) the acceleration of the Loans and the termination of the Total Commitment in accordance with the terms hereof. "Termination Event" shall mean (i) a "reportable event", as such term ----------------- is described in Section 4043 of ERISA and the regulations issued thereunder (other than a 14 "reportable event" not subject to the provision for 30-day notice to the PBGC under Section 4043 of ERISA or such regulations) or an event described in Section 4068 of ERISA excluding events described in Section 4043(c)(9) of ERISA or 29 CFR (S)(S) 2615.21 or 2615.23, or (ii) the withdrawal of any Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a "substantial employer", as such term is defined in Section 4001(c) of ERISA, or the incurrence of liability by any Borrower or any ERISA Affiliate under Section 4064 of ERISA upon the termination of a Multiple Employer Plan, or (iii) providing notice of intent to terminate a Plan pursuant to Section 4041(c) of ERISA or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or (v) any other event or condition (other than the commencement of the Cases and the failure to have made any contribution accrued as of the Filing Date but not paid) which would reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the imposition of any liability under Title IV of ERISA (other than for the payment of premiums to the PBGC). "Total Commitment" shall mean, at any time, the sum of the Commitments ---------------- at such time. "Transferee" shall have the meaning given such term in Section 2.18. ---------- "Type" when used in respect of any Loan or Borrowing shall refer to ---- the Rate of interest by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, "Rate" shall mean ---- the Adjusted LIBOR Rate and the Alternate Base Rate. "Unused Total Commitment" shall mean, at any time, (i) the Total ----------------------- Commitment less (ii) the sum of (x) the aggregate outstanding principal amount of all Loans and (y) the aggregate Letter of Credit Outstandings. "Withdrawal Liability" shall have the meaning given such term under -------------------- Part I of Subtitle E of Title IV of ERISA. SECTION 1.2 Terms Generally. The definitions in Section 1.1 shall apply --------------- equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Sections, Exhibits and Schedules shall be deemed references to Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided, however, that for purposes of determining compliance with any -------- ------- covenant set forth in Section 6, such terms shall be construed in accordance with GAAP as in effect on the date of this Agreement applied on a basis consistent with the application used in the Borrowers' audited financial statements referred to in Section 3.4. 15 SECTION 2. AMOUNT AND TERMS OF CREDIT. SECTION 2.1 Commitment of the Lenders. ------------------------- (a) Each Lender severally and not jointly with the other Lenders agrees, upon the terms and subject to the conditions herein set forth (including, without limitation, the provisions of Section 2.26), to make revolving credit loans (each a "Loan" and collectively, the "Loans") in U.S. Dollars to the ---- ----- Borrowers at any time and from time to time during the period commencing on the date hereof and ending on the Termination Date (or the earlier date of termination of the Total Commitment) in an aggregate principal amount not to exceed, when added to such Lender's Commitment Percentage of the then aggregate Letter of Credit Outstandings (in excess of the amount of cash then held in the Letter of Credit Account pursuant to Section 2.3(b)), the Commitment of such Lender, which Loans may be repaid and reborrowed in accordance with the provisions of this Agreement. At no time shall the sum of the then outstanding aggregate principal amount of the Loans, plus the then aggregate Letter of Credit Outstandings, exceed (i) prior to the expiration of the Initial Period, the Available Commitment, and (ii) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base. (b) Each Borrowing shall be made by the Lenders pro rata in accordance with their respective Commitments; provided, however, that the failure of any Lender to make any Loan shall not in itself relieve the other Lenders of their obligations to lend. SECTION 2.2 Availability of Commitment; Borrowing Base. (a) Subject ------------------------------------------ to the terms and conditions hereof, from the Closing Date until (i) the completion of third-party appraisals of the Borrowers' assets, in form and substance satisfactory to the Agent in its sole discretion, and (ii) the Agent's determination of the Borrowing Base (the "Initial Period"), $200,000,000 of the -------------- Total Commitment (the "Available Commitment") shall be available to the -------------------- Borrowers, first, for repayment in full (and not in part) of all of the then Indebtedness under the Existing Agreement, and, thereafter, for working capital and other general corporate purposes of the Borrowers; provided that, to the -------- extent provided under Section 4.2(k), Letters of Credit will be available prior to repayment of the Indebtedness under the Existing Agreement. Following the Initial Period, the Borrowing Base shall become operative with respect to the availability of Loans or Letters of Credit under the Total Commitment and the amount of the Total Commitment and the Maturity Date may be adjusted pursuant to Section 2.2(d) below. (b) Notwithstanding any other provision of this Agreement to the contrary, the aggregate principal amount of all outstanding Loans plus the then aggregate Letter of Credit Outstandings shall not at any time exceed (i) prior to the expiration of the Initial Period, the Available Commitment, and (ii) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base, and no Loan shall be made or Letter of Credit issued in violation of the foregoing. (c) Prior to or simultaneously with the making of the first Loans or the issuance of the first Letter of Credit, the Agent shall have received such documentation and acknowledgments as the Agent in its sole discretion shall require, evidencing the satisfaction and 16 release of (i) all Indebtedness under the Existing Agreement; and (ii) all Liens securing that Indebtedness. (d) Notwithstanding any other provision of this Agreement to the contrary, the amount of the Total Commitment may be adjusted by the Agent, up to a maximum aggregate amount of $350,000,000, at any time and from time to time during the syndication process (as determined by the Agent) upon the Agent's calculation of the amount in excess of the Available Commitment that has been syndicated by Chase Securities, Inc. to one or more financial institutions. Prior to any such adjustment by the Agent, the Agent shall provide notice to the Borrowers of the amount of the proposed adjustment and any related proposed adjustment to the Maturity Date in connection therewith and the Borrowers shall advise the Agent, in writing within two (2) Business Days of receipt of such notice, as to the amount of the Total Commitment desired by the Borrowers and the Total Commitment shall be adjusted to reflect such increased amount desired by the Borrowers. The Borrowers, the Lenders and the Agent shall thereafter effect such adjustments to Annex A hereto as may be necessary to reflect the ------- adjustments to the Total Commitment. Concurrent with any such adjustment to the Total Commitment, the Agent and the Borrowers may agree, in writing, to adjust the Maturity Date to a date not later than May 14, 2002 as long as the amount of the Total Commitment (subject to the limitations of the Borrowing Base) is sufficient to fund the Borrowers cash needs as set forth in the Budget at all times prior to the proposed adjusted Maturity Date. SECTION 2.3 Letters of Credit. ----------------- (a) Upon the terms and subject to the conditions herein set forth, the Borrowers may request a Fronting Bank, at any time and from time to time after the date hereof and prior to the Termination Date, to issue, and, subject to the terms and conditions contained herein, such Fronting Bank shall issue, for the account of the Borrowers one or more Letters of Credit in support of obligations of the Borrowers that are acceptable to the Agent, provided that no -------- Letter of Credit shall be issued if after giving effect to such issuance (i) the aggregate Letter of Credit Outstandings would exceed $10,000,000 and (ii) the aggregate Letter of Credit Outstandings, when added to the aggregate outstanding principal amount of the Loans, would exceed (i) prior to the expiration of the Initial Period, the Available Commitment, and (ii) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base, and, provided further that no Letter of Credit shall be issued if the Fronting Bank shall have received notice from the Agent or the Required Lenders that the conditions to such issuance have not been met. (b) No Letter of Credit shall expire later than sixty (60) days after the Maturity Date, provided that if any Letter of Credit shall be outstanding on the Termination Date, the Borrowers shall, at or prior to the Termination Date, except as the Agent may otherwise agree in writing, (i) cause all Letters of Credit which expire after the Termination Date to be returned to the Fronting Bank undrawn and marked "canceled" or (ii) if the Borrowers are unable to do so in whole or in part, either (x) provide a "back-to-back" letter of credit to one or more Fronting Banks in a form satisfactory to such Fronting Bank and the Agent (in their sole discretion), issued by a bank satisfactory to such Fronting Bank and the Agent (in their sole discretion), in an amount equal to the greater of (I) an amount, as determined by the Fronting Bank and the Agent, 17 equal to the face amount of all outstanding Letters of Credit plus the sum of all projected contractual obligations to the Agent, the Fronting Bank and the Lenders of the Borrowers thereunder through the expiration date(s) of such Letters of Credit, and (II) 105% of the then undrawn stated amount of all outstanding Letters of Credit issued by such Fronting Banks and/or (y) deposit cash in the Letter of Credit Account in an amount which, together with any amounts then held in the Letter of Credit Account, is equal to the greater of (I) an amount, as determined by the Fronting Bank and the Agent, equal to the face amount of all outstanding Letters of Credit plus the sum of all projected contractual obligations to the Agent, the Fronting Bank and the Lenders of the Borrowers thereunder and (II) 105% of the then undrawn stated amount of all Letter of Credit Outstandings as collateral security for the Borrowers' reimbursement obligations in connection therewith, such cash to be remitted to the Borrowers upon the expiration, cancellation or other termination or satisfaction of such reimbursement obligations. (c) The Borrowers shall pay to each Fronting Bank, in addition to such other fees and charges as are specifically provided for in Section 2.21 hereof, such fees and charges in connection with the issuance and processing of the Letters of Credit issued by such Fronting Bank as are customarily imposed by such Fronting Bank from time to time in connection with letter of credit transactions. (d) Drafts drawn under each Letter of Credit shall be reimbursed by the Borrowers in Dollars not later than the first Business Day following the date of draw and shall bear interest from the date of draw until the first Business Day following the date of draw at a rate per annum equal to the Alternate Base Rate plus 3% and thereafter until reimbursed in full at a rate per annum equal to the Alternate Base Rate plus 5% (computed on the basis of the actual number of days elapsed over a year of 360 days). The Borrowers shall effect such reimbursement (x) if such draw occurs prior to the Termination Date (or the earlier date of termination of the Total Commitment), in cash or through a Borrowing without the satisfaction of the conditions precedent set forth in Section 4.2 or (y) if such draw occurs on or after the Termination Date (or the earlier date of termination of the Total Commitment), in cash. Each Lender agrees to make the Loans described in clause (x) of the preceding sentence notwithstanding a failure to satisfy the applicable lending conditions thereto or the provisions of Section 2.2. (e) Immediately upon the issuance of any Letter of Credit by any Fronting Bank, such Fronting Bank shall be deemed to have sold to each Lender other than such Fronting Bank and each such other Lender shall be deemed unconditionally and irrevocably to have purchased from such Fronting Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Lender's Commitment Percentage, in such Letter of Credit, each drawing thereunder and the obligations of the Borrowers under this Agreement with respect thereto. Upon any change in the Commitments pursuant to Section 9.3, it is hereby agreed that with respect to all Letter of Credit Outstandings, there shall be an automatic adjustment to the participations hereby created to reflect the new Commitment Percentages of the assigning and assignee Lenders. Any action taken or omitted by a Fronting Bank under or in connection with a Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Fronting Bank any resulting liability to any other Lender. (f) In the event that a Fronting Bank makes any payment under any Letter of Credit and the Borrowers shall not have reimbursed such amount in full to such Fronting Bank 18 pursuant to this Section, the Fronting Bank shall promptly notify the Agent, which shall promptly notify each Lender of such failure, and each Lender shall promptly and unconditionally pay to the Agent for the account of the Fronting Bank the amount of such Lender's Commitment Percentage of such unreimbursed payment in Dollars and in same day funds. If the Fronting Bank so notifies the Agent, and the Agent so notifies the Lenders prior to 11:00 a.m. (New York City time) on any Business Day, such Lenders shall make available to the Fronting Bank such Lender's Commitment Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Lender shall not have so made its Commitment Percentage of the amount of such payment available to the Fronting Bank, such Lender agrees to pay to such Fronting Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent for the account of such Fronting Bank at the Federal Funds Effective Rate. The failure of any Lender to make available to the Fronting Bank its Commitment Percentage of any payment under any Letter of Credit shall not relieve any other Lender of its obligation hereunder to make available to the Fronting Bank its Commitment Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Lender shall be responsible for the failure of any other Lender to make available to such Fronting Bank such other Lender's Commitment Percentage of any such payment. Whenever a Fronting Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Lenders pursuant to this paragraph, such Fronting Bank shall pay to each Lender which has paid its Commitment Percentage thereof, in Dollars and in same day funds, an amount equal to such Lender's Commitment Percentage thereof. SECTION 2.4 Issuance. Whenever the Borrowers desire a Fronting Bank to -------- issue a Letter of Credit, they shall give to such Fronting Bank and the Agent at least two (2) Business Days' prior written (including telegraphic, telex, facsimile or cable communication) notice (or such shorter period as may be agreed upon by the Agent, the Borrowers and the Fronting Bank) specifying the date on which the proposed Letter of Credit is to be issued (which shall be a Business Day), the stated amount of the Letter of Credit so requested, the expiration date of such Letter of Credit and the name and address of the beneficiary thereof. SECTION 2.5 Nature of Letter of Credit Obligations Absolute. The ----------------------------------------------- obligations of the Borrowers to reimburse the Lenders for drawings made under any Letter of Credit shall be joint and several, unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, setoff, defense or other right which any Borrower may have at any time against a beneficiary of any Letter of Credit or against any of the Lenders, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) any draft, demand, certificate or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by a Fronting Bank of any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit; (v) any other circumstance or happening whatsoever, which is similar to any of the foregoing; or (vi) the fact that any Event of Default shall have occurred and be continuing. 19 SECTION 2.6 Making of Loans. --------------- (a) Except as contemplated by Section 2.11, Loans shall be either ABR Loans or Eurodollar Loans as the Borrowers may request subject to and in accordance with this Section, provided that all Loans made pursuant to the same Borrowing shall, unless otherwise specifically provided herein, be Loans of the same Type. Each Lender may fulfill its Commitment with respect to any Eurodollar Loan or ABR Loan by causing any lending office of such Lender to make such Loan; provided that any such use of a lending office shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement. Each Lender shall, subject to its overall policy considerations, use reasonable efforts (but shall not be obligated) to select a lending office which will not result in the payment of increased costs by the Borrowers pursuant to Sections 2.15 or 2.18. Subject to the other provisions of this Section and the provisions of Section 2.12, Borrowings of Loans of more than one Type may be incurred at the same time, provided that no more than ten (10) Borrowings of Eurodollar Loans may be outstanding at any time. (b) The Borrowers shall give the Agent prior notice of each Borrowing hereunder of at least three (3) Business Days for Eurodollar Loans and one (1) Business Day for ABR Loans; such notice shall be irrevocable and shall specify the amount of the proposed Borrowing (which shall not be less than $5,000,000 or any integral multiple of $1,000,000 in excess thereof in the case of Eurodollar Loans and $1,000,000 in the case of ABR Loans) and the date thereof (which shall be a Business Day) and shall contain disbursement instructions. Such notice, to be effective, must be received by the Agent not later than 12:00 noon, New York City time, on the third Business Day in the case of Eurodollar Loans and the first Business Day in the case of ABR Loans, preceding the date on which such Borrowing is to be made except as provided in the last sentence of this Section 2.6(b). Such notice shall specify whether the Borrowing then being requested is to be a Borrowing of ABR Loans or Eurodollar Loans. If no election is made as to the Type of Loan, such notice shall be deemed a request for Borrowing of ABR Loans. The Agent shall promptly notify each Lender of its proportionate share of such Borrowing, the date of such Borrowing, the Type of Borrowing or Loans being requested and the Interest Period or Interest Periods applicable thereto, as appropriate. On the borrowing date specified in such notice, each Lender shall make its share of the Borrowing available at the office of the Agent at 270 Park Avenue, New York, New York 10017, no later than 12:00 noon, New York City time, in immediately available funds. Upon receipt of the funds made available by the Lenders to fund any borrowing hereunder, the Agent shall disburse such funds in the manner specified in the notice of borrowing delivered by the Borrowers. SECTION 2.7 Repayment of Loans; Evidence of Debt. ------------------------------------ (a) The Borrowers hereby jointly and severally unconditionally promise to pay to the Agent for the account of each Lender the then unpaid principal amount of each Loan on the Termination Date. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. 20 (c) The Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the Borrowers shall execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) in a form furnished by the Agent and reasonably acceptable to the Borrowers. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.3) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.8 Interest on Loans. ----------------- (a) Subject to the provisions of Section 2.9, each ABR Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the Alternate Base Rate plus 3%. (b) Subject to the provisions of Section 2.9, each Eurodollar Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal, during each Interest Period applicable thereto, to the Adjusted LIBOR Rate for such Interest Period in effect for such Borrowing plus 4%. (c) Accrued interest on all Loans shall be payable in arrears on each Interest Payment Date applicable thereto, at maturity (whether by acceleration or otherwise), after such maturity on demand and (with respect to Eurodollar Loans) upon any repayment or prepayment thereof (on the amount prepaid). SECTION 2.9 Default Interest. If any Borrower shall default in the ---------------- payment of the principal of or interest on any Loan or in the payment of any other amount becoming due hereunder (including, without limitation, the reimbursement pursuant to Section 2.3(d) of any draft drawn under a Letter of Credit), whether at stated maturity, by acceleration or otherwise, such Borrower shall on demand from time to time pay interest, to the extent permitted by law, on such defaulted amount up to (but not including) the date of actual payment (after as well as before judgment) at a rate per annum (computed on the basis of the actual number of days elapsed over a year of 360 days) equal to (x) in the case of Borrowings consisting of Eurodollar Loans, the Adjusted LIBOR Rate in effect for such Borrowing plus 6% and (y) in the case of all other amounts, the Alternate Base Rate plus 5%. 21 SECTION 2.10 Optional Termination or Reduction of Commitment. Upon at ----------------------------------------------- least two (2) Business Days' prior written notice to the Agent, the Borrowers may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Unused Total Commitment. Each such reduction or termination, as applicable, of the Unused Total Commitment shall be in the principal amount of $5,000,000 or any integral multiple of $1,000,000 in excess thereof. Any reduction or termination, as applicable, of the Unused Total Commitment pursuant to this Section shall be deemed to be a reduction or termination, as applicable, in the amount of such reduction or termination of the Total Commitment and shall be applied pro rata to reduce the Commitment of each Lender. Simultaneously with each reduction or termination, as applicable, of the Unused Total Commitment, the Borrowers shall pay to the Agent for the account of each Lender the Commitment Fee accrued on the amount of the Commitment of such Lender so terminated or reduced through the date thereof. SECTION 2.11 Alternate Rate of Interest. In the event, and on each -------------------------- occasion, that on the day two (2) Business Days prior to the commencement of any Interest Period for a Eurodollar Loan, the Agent shall have determined (which determination shall be conclusive and binding upon the Borrowers absent manifest error) that reasonable means do not exist for ascertaining the applicable Adjusted LIBOR Rate, the Agent shall, as soon as practicable thereafter, give written or telegraphic notice of such determination to the Borrowers and the Lenders, and any request by the Borrowers for a Borrowing of Eurodollar Loans (including pursuant to a refinancing with Eurodollar Loans) pursuant to Section 2.6 or 2.12 shall be deemed a request for a Borrowing of ABR Loans. After such notice shall have been given and until the circumstances giving rise to such notice no longer exist, each request for a Borrowing of Eurodollar Loans shall be deemed to be a request for a Borrowing of ABR Loans. SECTION 2.12 Refinancing of Loans. The Borrowers shall have the right, at -------------------- any time, on three (3) Business Days' prior irrevocable notice to the Agent (which notice, to be effective, must be received by the Agent not later than 1:00 p.m., New York City time, on the third Business Day preceding the date of any refinancing), (x) to refinance (without the satisfaction of the conditions set forth in Section 4 as a condition to such refinancing) any outstanding Borrowing or Borrowings of Loans of one Type (or a portion thereof) with a Borrowing of Loans of the other Type or (y) to continue an outstanding Borrowing of Eurodollar Loans for an additional Interest Period, subject to the following: (a) as a condition to the refinancing of ABR Loans with Eurodollar Loans and to the continuation of Eurodollar Loans for an additional Interest Period, no Event of Default shall have occurred and be continuing at the time of such refinancing; (b) if less than a full Borrowing of Loans shall be refinanced, such refinancing shall be made pro rata among the Lenders in accordance with the respective principal amounts of the Loans comprising such Borrowing held by the Lenders immediately prior to such refinancing; (c) the aggregate principal amount of Loans being refinanced shall be at least $5,000,000 or any integral multiple of $1,000,000 in excess thereof, provided that no partial refinancing of a Borrowing of Eurodollar Loans shall result in the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $5,000,000 in aggregate principal amount; 22 (d) each Lender shall effect each refinancing by applying the proceeds of its new Eurodollar Loan or ABR Loan, as the case may be, to its Loan being refinanced; (e) the Interest Period with respect to a Borrowing of Eurodollar Loans effected by a refinancing or in respect to the Borrowing of Eurodollar Loans being continued as Eurodollar Loans shall commence on the date of refinancing or the expiration of the current Interest Period applicable to such continuing Borrowing, as the case may be; (f) a Borrowing of Eurodollar Loans may be refinanced only on the last day of an Interest Period applicable thereto; and (g) each request for a refinancing with a Borrowing of Eurodollar Loans which fails to state an applicable Interest Period shall be deemed to be a request for an Interest Period of one month. In the event that the Borrowers shall not give notice to refinance any Borrowing of Eurodollar Loans, or to continue such Borrowing as Eurodollar Loans, or shall not be entitled to refinance or continue such Borrowing as Eurodollar Loans, in each case as provided above, such Borrowing shall automatically be refinanced with a Borrowing of ABR Loans at the expiration of the then-current Interest Period. The Agent shall, after it receives notice from the Borrowers, promptly give each Lender notice of any refinancing, in whole or part, of any Loan made by such Lender. SECTION 2.13 Mandatory Prepayment; Commitment Termination; Cash -------------------------------------------------- Collateral. (a) If at any time the aggregate principal amount of the outstanding Loans plus the aggregate Letter of Credit Outstandings exceeds (A) prior to the expiration of the Initial Period, the Available Commitment, and (B) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base, the Borrowers will within three (3) Business Days (i) prepay the Loans in an amount necessary to cause the aggregate principal amount of the outstanding Loans plus the aggregate Letter of Credit Outstandings to be equal to or less than (A) prior to the expiration of the Initial Period, the Available Commitment, and (B) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base, and (ii) if, after giving effect to the prepayment in full of the Loans, the aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account exceeds (A) prior to the expiration of the Initial Period, the Available Commitment, and (B) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base, deposit into the Letter of Credit Account an amount equal to 105% of the amount by which the aggregate Letter of Credit Outstandings in excess of the amount of cash held in the Letter of Credit Account so exceeds (A) prior to the expiration of the Initial Period, the Available Commitment, and (B) from and after the expiration of the Initial Period, the lesser of (x) the Total Commitment and (y) the Borrowing Base. (b) The Borrowers shall, within two (2) Business Days of the date of receipt of the Net Proceeds by any Borrower or any of their Subsidiaries from the sale, lease, transfer or other disposition of any assets of any Borrower or any of its Subsidiaries, jointly and severally, apply such Net Proceeds as follows: first, to prepay the then outstanding Loans; second, deposit an amount ----- ------ in the Letter of Credit Account (up to 105% of the aggregate Letter of Credit 23 Outstandings); and thereafter, such Net Proceeds may be retained by the -------------- Borrowers and invested in Permitted Investments or used for expenditures in the ordinary course of business (subject to compliance with the terms and conditions of this Agreement). To the extent such payment is made with the proceeds of a sale, lease, transfer or other disposition of assets permitted by Section 6.11, but without limiting the Agent's assessment of the effect of such sale, lease, transfer or other disposition of assets on the Borrowing Base, such prepayment of Loans shall not effect a reduction of the Total Commitment or the Available Commitment and such amounts may be reborrowed by the Borrowers, subject to the terms and conditions of this Agreement. (c) Simultaneously with the making of the first Loan or the issuance of the first Letter of Credit, the Borrowers shall have repaid all of the then Indebtedness under the Existing Agreement. In the event the lenders under the Existing Agreement are required to disgorge all or any part of such payment by the Borrowers to the extent that said payment (or portion thereof) was in excess of the final amount of the allowed secured claim of such lenders, as determined (if an objection is filed) by final order of the Court, such funds shall be paid to the Borrowers and, (i) the Borrowers shall immediately apply such disgorged amount as follows: first, to prepay the then outstanding Loans; second, deposit ----- ------ an amount in the Letter of Credit Account (up to 105% of the aggregate Letter of Credit Outstandings); and thereafter, such Net Proceeds may be retained by the -------------- Borrowers and invested in Permitted Investments or used for expenditures in the ordinary course of business (subject to compliance with the terms and conditions of this Agreement); and (ii) the Total Commitment shall be reduced in an amount equal to the disgorged amount. (d) Upon the Termination Date, the Total Commitment shall be terminated in full and the Borrowers shall pay the Loans in full and, if any Letter of Credit remains outstanding, comply with Section 2.3(b). SECTION 2.14 Optional Prepayment of Loans; Reimbursement of Lenders. ------------------------------------------------------ (a) The Borrowers shall have the right at any time and from time to time to prepay any Loans, in whole or in part, (x) with respect to Eurodollar Loans, upon at least three (3) Business Days' prior written, telex or facsimile notice to the Agent and (y) with respect to ABR Loans on the same Business Day if written, telex or facsimile notice is received by the Agent prior to 1:00 p.m., New York City time, and thereafter upon at least one Business Day's prior written, telex or facsimile notice to the Agent; provided, however, that (i) each such partial prepayment shall be in a minimum amount of $5,000,000 or integral multiples of $1,000,000 in excess thereof, (ii) no prepayment of Eurodollar Loans shall be permitted pursuant to this Section 2.14(a) other than on the last day of an Interest Period applicable thereto unless such prepayment is accompanied by the payment of the amounts described in clause (i) of the first sentence of Section 2.14(b), and (iii) no partial prepayment of a Borrowing of Eurodollar Loans shall result in the aggregate principal amount of the Eurodollar Loans remaining outstanding pursuant to such Borrowing being less than $5,000,000. Each notice of prepayment shall specify the prepayment date, the principal amount of the Loans to be prepaid and in the case of Eurodollar Loans, the Borrowing or Borrowings pursuant to which made, shall be irrevocable and shall commit the Borrowers to prepay such Loan by the amount and on the date stated therein. The Agent shall, promptly after receiving notice from the Borrowers hereunder, notify each Lender of 24 the principal amount of the Loans held by such Lender which are to be prepaid, the prepayment date and the manner of application of the prepayment. (b) The Borrowers shall reimburse each Lender on demand for any loss incurred or to be incurred by it in the reemployment of the funds released (i) resulting from any prepayment (for any reason whatsoever, including, without limitation, refinancing with ABR Loans) of any Eurodollar Loan required or permitted under this Agreement, if such Loan is prepaid other than on the last day of the Interest Period for such Loan (including, without limitation, any such prepayment in connection with the syndication of the credit facility evidenced by this Agreement) or (ii) in the event that after the Borrowers deliver a notice of borrowing under Section 2.6 in respect of Eurodollar Loans, such Loans are not made on the first day of the Interest Period specified in such notice of borrowing for any reason other than a breach by such Lender of its obligations hereunder. Such loss shall be the amount as reasonably determined by such Lender as the excess, if any, of (A) the amount of interest which would have accrued to such Lender on the amount so paid or not borrowed at a rate of interest equal to the Adjusted LIBOR Rate for such Loan, for the period from the date of such payment or failure to borrow to the last day (x) in the case of a payment or refinancing with ABR Loans other than on the last day of the Interest Period for such Loan, of the then current Interest Period for such Loan, or (y) in the case of such failure to borrow, of the Interest Period for such Loan which would have commenced on the date of such failure to borrow, over (B) the amount of interest which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the London interbank market. Each Lender shall deliver to the Borrowers from time to time one or more certificates setting forth the amount of such loss as determined by such Lender. (c) In the event the Borrowers fail to prepay any Loan on the date specified in any prepayment notice delivered pursuant to Section 2.14(a), the Borrowers on demand by any Lender shall pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any loss incurred by such Lender as a result of such failure to prepay, including, without limitation, any loss, cost or expenses incurred by reason of the acquisition of deposits or other funds by such Lender to fulfill deposit obligations incurred in anticipation of such prepayment, but without duplication of any amounts paid under Section 2.14(b). Each Lender shall deliver to the Borrowers from time to time one or more certificates setting forth the amount of such loss as determined by such Lender. (d) Any partial prepayment of the Loans by the Borrowers pursuant to Sections 2.13 or 2.14 shall be applied as specified by the Borrowers or, in the absence of such specification, as determined by the Agent, provided that in the latter case no Eurodollar Loans shall be prepaid pursuant to Section 2.13 to the extent that such Loan has an Interest Period ending after the required date of prepayment unless and until all outstanding ABR Loans and Eurodollar Loans with Interest Periods ending on such date have been repaid in full. SECTION 2.15 Reserve Requirements; Change in Circumstances. --------------------------------------------- (a) Notwithstanding any other provision herein, if after the date of this Agreement any change in applicable law or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof 25 (whether or not having the force of law) shall change the basis of taxation of payments to any Lender of the principal of or interest on any Eurodollar Loan made by such Lender or any fees or other amounts payable hereunder (other than changes in respect of Taxes, Other Taxes and taxes imposed on, or measured by, the net income or overall gross receipts or franchise taxes of such Lender by the jurisdiction in which such Lender has its principal office or in which the applicable lending office for such Eurodollar Loan is located or by any political subdivision or taxing authority therein, or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which such Lender would not be subject to tax but for the execution and performance of this Agreement), or shall impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of or credit extended by such Lender (except any such reserve requirement which is reflected in the Adjusted LIBOR Rate) or shall impose on such Lender or the London interbank market any other condition affecting this Agreement or the Eurodollar Loans made by such Lender, and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or otherwise) by an amount deemed by such Lender to be material, then the Borrowers will pay to such Lender in accordance with paragraph (c) below such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) If any Lender shall have determined that the adoption or effectiveness after the date hereof of any law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the interpretation or administration of any of the foregoing by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or any lending office of such Lender) or any Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement, the Loans made by such Lender pursuant hereto, such Lender's Commitment hereunder or the issuance of, or participation in, any Letter of Credit by such Lender to a level below that which such Lender or such Lender's holding company could have achieved but for such adoption, change or compliance (taking into account Lender's policies and the policies of such Lender's holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time the Borrowers shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of each Lender setting forth such amount or amounts as shall be necessary to compensate such Lender or its holding company as specified in paragraph (a) or (b) above, as the case may be, shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay each Lender the amount shown as due on any such certificate delivered to it within ten (10) days after its receipt of the same. Any Lender receiving any such payment shall promptly make a refund thereof to the Borrowers if the law, regulation, guideline or change in circumstances giving rise to such payment is subsequently deemed or held to be invalid or inapplicable. 26 (d) Failure on the part of any Lender to demand compensation for any increased costs or reduction in amounts received or receivable or reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's right to demand compensation with respect to such period or any other period. The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the law, rule, regulation, guideline or other change or condition which shall have occurred or been imposed. SECTION 2.16 Change in Legality. ------------------ (a) Notwithstanding anything to the contrary contained elsewhere in this Agreement, if (x) any change after the date of this Agreement in any law or regulation or in the interpretation thereof by any Governmental Authority charged with the administration thereof shall make it unlawful for a Lender to make or maintain a Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to a Eurodollar Loan or (y) at any time any Lender determines that the making or continuance of any of its Eurodollar Loans has become impracticable as a result of a contingency occurring after the date hereof which adversely affects the London interbank market or the position of such Lender in such market, then, by written notice to the Borrowers, such Lender may (i) declare that Eurodollar Loans will not thereafter be made by such Lender hereunder, whereupon any request by the Borrowers for a Eurodollar Borrowing shall, as to such Lender only, be deemed a request for an ABR Loan unless such declaration shall be subsequently withdrawn; and (ii) require that all outstanding Eurodollar Loans made by it be converted to ABR Loans, in which event all such Eurodollar Loans shall be automatically converted to ABR Loans as of the effective date of such notice as provided in paragraph (b) below. In the event any Lender shall exercise its rights under clause (i) or (ii) of this paragraph (a), all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the ABR Loans made by such Lender in lieu of, or resulting from the conversion of, such Eurodollar Loans. (b) For purposes of this Section 2.16, a notice to the Borrowers by any Lender pursuant to paragraph (a) above shall be effective, if lawful, and if any Eurodollar Loans shall then be outstanding, on the last day of the then- current Interest Period, otherwise, such notice shall be effective on the date of receipt by the Borrowers. SECTION 2.17 Pro Rata Treatment, etc. All payments and repayments of ----------------------- principal and interest in respect of the Loans (except as provided in Sections 2.15 and 2.16) shall be made pro rata among the Lenders in accordance with the then outstanding principal amount of the Loans and/or participations in Letter of Credit Outstandings and all outstanding undrawn Letters of Credit (and the unreimbursed amount of drawn Letters of Credit) hereunder and all payments of Commitment Fees and Letter of Credit Fees (other than those payable to a Fronting Bank) shall be made pro rata among the Lenders in accordance with their Commitments. All payments by the Borrowers hereunder shall be (i) except as otherwise provided in Section 2.18, net of any tax applicable to the Borrowers and (ii) made in Dollars in immediately available funds at the office of the Agent by 12:00 noon, New York City time, on the date on which such payment shall be due. Interest in respect of any Loan hereunder shall accrue from and including the date of such 27 Loan to but excluding the date on which such Loan is paid in full or converted to a Loan of a different Type. SECTION 2.18 Taxes. ----- (a) Except as otherwise provided in this Section 2.18, any and all payments by the Borrowers hereunder shall be made free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding (i) taxes imposed on or measured by the net income, net profit or overall gross receipts of the Agent or any Lender (or any transferee or assignee thereof, including a participation holder (any such entity being called a "Transferee")) ---------- and franchise taxes imposed on the Agent or any Lender (or Transferee) by the United States or any jurisdiction under the laws of which the Agent or any such Lender (or Transferee) is organized or in which the applicable lending office of any such Lender (or Transferee) or applicable office of the Agent, is located or any political subdivision thereof or by any other jurisdiction or by any political subdivision or taxing authority therein other than a jurisdiction in which the Agent or such Lender (or Transferee) would not be subject to tax but for the execution and performance of this Agreement and (ii) taxes, levies, imposts, deductions, charges or withholdings ("Amounts") with respect to ------- payments hereunder to a Lender (or Transferee) or the Agent in accordance with laws in effect on the later of the date of this Agreement and the date such Lender (or Transferee) or the Agent becomes a Lender (or Transferee or Agent, as the case may be) but not excluding, with respect to such Lender (or Transferee) or the Agent, any increase in such Amounts solely as a result of any change in such laws occurring after such later date or any Amounts that would not have been imposed but for actions (other than actions contemplated by this Agreement) taken by the Borrowers after such later date (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Borrowers shall be required by law ----- to deduct any Taxes from or in respect of any sum payable hereunder to the Lenders (or any Transferee) or the Agent, (i) the sum payable shall be increased by the amount necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such Lender (or Transferee) or the Agent (as the case may be) shall receive an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrowers shall make such deductions and (iii) the Borrowers shall pay the full amount deducted to the relevant taxing authority or other Governmental Authority in accordance with applicable law. (b) In addition, the Borrowers agree to pay any current or future stamp or documentary taxes or any other excise or property taxes, charges, assessments or similar levies that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "Other Taxes"). ----------- (c) The Borrowers will indemnify each Lender (or Transferee) and the Agent for the full amount of Taxes and Other Taxes paid by such Lender (or Transferee) or the Agent, as the case may be, and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant taxing authority or other Governmental Authority. Such indemnification 28 shall be made within thirty (30) days after the date any Lender (or Transferee) or the Agent, as the case may be, makes written demand therefor. If a Lender (or Transferee) or the Agent shall become aware that it is entitled to receive a refund in respect of Taxes or Other Taxes as to which it has been indemnified by the Borrowers pursuant to this Section, it shall promptly notify the Borrowers of the availability of such refund and shall, within thirty (30) days after receipt of a request by the Borrowers, apply for such refund at the Borrowers' expense. If any Lender (or Transferee) or the Agent receives a refund in respect of any Taxes or Other Taxes as to which it has been indemnified by the Borrowers pursuant to this Section, it shall promptly notify the Borrowers of such refund and shall, within thirty (30) days after receipt of a request by the Borrowers (or promptly upon receipt, if the Borrowers have requested application for such refund pursuant hereto), repay such refund to the Borrowers (to the extent of amounts that have been paid by the Borrowers under this Section with respect to such refund plus interest that is received by the Lender (or Transferee) or the Agent as part of the refund), net of all out-of-pocket expenses of such Lender (or Transferee) or the Agent and without additional interest thereon; provided that the Borrowers, upon the request of such Lender (or Transferee) or the Agent, agree to return such refund (plus penalties, interest or other charges) to such Lender (or Transferee) or the Agent in the event such Lender (or Transferee) or the Agent is required to repay such refund. Nothing contained in this subsection (c) shall require any Lender (or Transferee) or the Agent to make available any of its tax returns (or any other information relating to its taxes that it deems to be confidential). (d) Within thirty (30) days after the date of any payment of Taxes or Other Taxes withheld by the Borrowers in respect of any payment to any Lender (or Transferee) or the Agent, the Borrowers will furnish to the Agent, at its address referred to on the signature pages hereof, the original or a certified copy of a receipt evidencing payment thereof. (e) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section shall survive the payment in full of the principal of and interest on all Loans made hereunder. (f) Each Lender (and Transferee) and the Agent shall, if not a United States Person (as such term is defined in Section 7701(a)(30) of the Code), on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof on the Closing Date) or on or prior to the date of the Assignment and Acceptance pursuant to which it becomes a Lender (in the case of each other Lender), deliver to the Borrowers and the Agent such certificates, documents and other evidence, as required by the Code or Treasury Regulations issued pursuant thereto or by Canadian law, including two original copies of (A) Internal Revenue Service Form W-9 (unless such Lender (or Transferee) or the Agent is an "exempt recipient" as defined in Treasury Regulations Section 1.6049-4(c) for which no withholding is required) and two original copies of (B) Internal Revenue Service Forms 1001, 4224, W-8BEN or W-8ECI and any other certificate or statement of exemption required by Treasury Regulation Section 1.1441-1, 1.1441- 4 or 1.1441-6(c) or any subsequent version thereof or successors thereto, properly completed and duly executed by such Lender (or Transferee) or the Agent to establish that such payment is (i) not subject to United States Federal withholding tax under the Code because such payment is effectively connected with the conduct by such Lender (or Transferee) or the Agent of a trade or business in the United States or (ii) totally exempt from United States Federal withholding tax or 29 subject to a reduced rate of such tax under a provision of an applicable tax treaty or, (iii) in the case of a Borrower organized under the laws of Canada, totally exempt from Canadian withholding tax or subject to a reduced rate of withholding of such tax under a provision of an applicable tax treaty. Unless the Borrowers and the Agent have received forms or other documents satisfactory to them indicating that such payments hereunder are not subject to United States Federal withholding tax or are subject to such tax at a rate reduced by an applicable tax treaty, the Borrowers or the Agent shall withhold taxes from such payments at the applicable statutory rate. (g) The Borrowers shall not be required to pay any additional amounts to any Lender (or Transferee) or the Agent in respect of United States Federal withholding tax pursuant to subsection (a) above if the obligation to pay such additional amounts would not have arisen but for a failure by such Lender (or Transferee) or the Agent to comply with the provisions of subsection (f) above. (h) Any Lender (or Transferee) or the Agent claiming any additional amounts payable pursuant to this Section 2.18 shall use reasonable efforts (consistent with legal and regulatory restrictions) to file any certificate or document requested by the Borrowers or to change the jurisdiction of its applicable lending office if the making of such a filing or change would avoid the need for or reduce the amount of any such additional amounts that may thereafter accrue and would not, in the sole determination of such Lender (or Transferee) or the Agent, be otherwise materially disadvantageous to such Lender (or Transferee) or the Agent. SECTION 2.19 Certain Fees. The Borrowers shall pay to the Agent the fees ------------ set forth in that certain letter dated November 13, 2000 among the Agent, Chase Securities Inc. and the Borrowers at the times set forth therein, excluding (but without limiting the Borrowers' obligations under Section 2.20(b) below) the fee described therein as the "Early Termination Fee". SECTION 2.20 Commitment Fee; Early Termination Fee. ------------------------------------- (a) The Borrowers shall pay to the Lenders a commitment fee (the "Commitment Fee") for the period commencing on the date the Commitment Letter is -------------- executed to the Termination Date or the earlier date of termination of the Commitment, computed (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of One and One-Half Percent (1.5%) per annum on the average daily Unused Total Commitment. Such Commitment Fee, to the extent then accrued, shall be payable (x) monthly, in arrears, on the last calendar day of each month, (y) on the Termination Date and (z) as provided in Section 2.10 hereof, upon any reduction or termination in whole or in part of the Total Commitment. (b) The Borrowers shall pay to the Lenders a fee (the "Early ----- Termination Fee") in an amount equal to One Percent (1%) of the Total Commitment - --------------- (used and unused) on each of the following dates: (i) the earlier of (x) six months after the Filing Date, and (y) the sale of a material portion of the assets of the Borrowers; (ii) twelve months after the Filing Date; and (iii) in the event that the Maturity Date is more than twelve months after the Filing Date, the Maturity Date. In calculating such Fee, the amount of the Total Commitment shall mean the average daily amount of the Total Commitment (used and unused) during the six month period 30 preceding the date of such payment date, provided, however, that the Early -------- ------- Termination Fee shall not be due and payable on any of the foregoing dates occurring after the Total Commitment shall have been reduced to zero (other than as a result of the occurrence of an Event of Default) and the Obligations shall have been indefeasibly paid in full in cash. SECTION 2.21 Letter of Credit Fees. The Borrowers shall pay with respect --------------------- to each Letter of Credit (i) to the Agent on behalf of the Lenders a fee calculated (on the basis of the actual number of days elapsed over a year of 360 days) at the rate of Four Percent (4%) per annum on the undrawn stated amount thereof, and (ii) to the Fronting Bank such Fronting Bank's customary fees for fronting, issuance, amendments and processing referred to in Section 2.3. In addition, the Borrowers agree to pay each Fronting Bank for its account a fronting fee in respect of each Letter of Credit issued by such Fronting Bank, for the period from and including the date of issuance of such Letter of Credit to and including the date of termination of such Letter of Credit, computed at a rate, and payable at times, to be determined by such Fronting Bank, the Borrowers and the Agent. Accrued fees described in clause (i) of the first sentence of this paragraph in respect of each Letter of Credit shall be due and payable monthly in arrears on the last calendar day of each month and on the Termination Date, or such earlier date as the Total Commitment is terminated. Accrued fees described in clause (ii) of the first sentence of this paragraph in respect of each Letter of Credit shall be payable at times to be determined by the Fronting Bank, the Borrowers and the Agent. SECTION 2.22 Nature of Fees. All Fees shall be paid on the dates due, in -------------- immediately available funds, to the Agent for the respective accounts of the Agent and the Lenders, as provided herein and in the letter described in Section 2.19. Once paid, none of the Fees shall be refundable under any circumstances. SECTION 2.23 Priority and Liens. ------------------ (a) The Borrowers hereby covenant, represent and warrant that, upon entry of the Final Order, the Obligations of the Borrowers hereunder and under the Loan Documents and in respect of Indebtedness permitted by Section 6.3(v): (i) pursuant to Section 364(c)(1) of the Bankruptcy Code, shall at all times constitute an allowed Superpriority Claim; (ii) pursuant to Section 364(c)(2) of the Bankruptcy Code, shall at all times be secured by a perfected first priority Lien on all unencumbered property of the Borrowers and on all cash maintained in the Letter of Credit Account and any direct investments of the funds contained therein, provided that following the Termination Date amounts in the Letter of -------- Credit Account shall not be subject to the Carve-Out; and (iii) pursuant to Section 364(c)(3) of the Bankruptcy Code, shall be secured by a perfected Lien upon all property of the Borrowers that is subject to valid and perfected Liens in existence on the Filing Date or to valid Liens in existence on the Filing Date that are perfected subsequent to the Filing Date as permitted by Section 546(b) of the Bankruptcy Code or to Permitted Liens, junior to such valid and perfected Liens, including Liens securing the Indebtedness under the Existing Agreement, provided that upon repayment of all Indebtedness under the Existing -------- Agreement, the Obligations of the Borrowers hereunder and under the Loan Documents and in respect of Indebtedness permitted by Section 6.3(v) shall automatically be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a perfected first priority Lien (subject to Liens permitted pursuant to clauses (i) or (ii) of Section 6.1) on all property of the 31 Borrowers that then secures the Existing Agreement, subject in the case of clauses (i), (ii) and (iii) only to (x) in the event of the occurrence and during the continuance of an Event of Default or an event that would constitute an Event of Default with the giving of notice or lapse of time or both, the payment of allowed and unpaid professional fees and disbursements incurred by the Borrowers and any statutory committees appointed in the Cases in an aggregate amount not in excess of $3,000,000 (plus all unpaid professional fees and disbursements incurred prior to the occurrence of an Event of Default to the extent allowed by the Bankruptcy Court) and (y) the payment of fees pursuant to 28 U.S.C. (S) 1930 and to the Clerk of the Bankruptcy Court (collectively, the "Carve-Out"). The Lenders agree that so long as no Event of Default or event --------- which with the giving of notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing, the Borrowers shall be permitted to pay compensation and reimbursement of expenses allowed and payable under 11 U.S.C. (S) 330 and 11 U.S.C. (S) 331, as the same may be due and payable, and any compensation and expenses previously paid, or accrued but unpaid, prior to the occurrence of such Event of Default shall not reduce the Carve-Out. (b) As to all real property the title to which is held by a Borrower, or the possession of which is held by a Borrower pursuant to leasehold interest, the Borrowers hereby assign and convey as security, grant a security interest in, hypothecate, mortgage, pledge and set over unto the Agent on behalf of the Lenders all of the right, title and interest of the Borrowers in all of such owned real property and in all such leasehold interests, together in each case with all of the right, title and interest of the Borrowers in and to all buildings, improvements, and fixtures related thereto, any lease or sublease thereof, all general intangibles relating thereto and all proceeds thereof. The Borrowers acknowledge that, pursuant to the Final Order, the Liens in favor of the Agent on behalf of the Lenders in all of such real property and leasehold instruments shall be perfected without the recordation of any instruments of mortgage or assignment. The Borrowers further agree that, upon the request of the Agent, the Borrowers shall enter into separate fee and leasehold mortgages in recordable form with respect to such properties on terms satisfactory to the Agent. SECTION 2.24 Right of Set-Off. Subject to the provisions of Section 7.1, ---------------- upon the occurrence and during the continuance of any Event of Default, the Agent and each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law and without further order of or application to the Bankruptcy Court, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Agent and each such Lender to or for the credit or the account of any Borrower against any and all of the obligations of such Borrower now or hereafter existing under the Loan Documents, irrespective of whether or not such Lender shall have made any demand under any Loan Document and although such obligations may not have been accelerated. Each Lender and the Agent agrees promptly to notify the Borrowers after any such set-off and application made by such Lender or by the Agent, as the case may be, provided that the failure to give such notice shall not affect the validity of such set- off and application. The rights of each Lender and the Agent under this Section are in addition to other rights and remedies which such Lender and the Agent may have upon the occurrence and during the continuance of any Event of Default. 32 SECTION 2.25 Security Interest in Letter of Credit Account. Pursuant to --------------------------------------------- Section 364(c)(2) of the Bankruptcy Code, the Borrowers hereby assign and pledge to the Agent, for its benefit and for the ratable benefit of the Lenders, and hereby grant to the Agent, for its benefit and for the ratable benefit of the Lenders, a first priority security interest, senior to all other Liens, if any, in all of the Borrowers' right, title and interest in and to the Letter of Credit Account and any direct investment of the funds contained therein. Cash held in the Letter of Credit Account shall not be available for use by the Borrowers, whether pursuant to Section 363 of the Bankruptcy Code or otherwise. SECTION 2.26 Payment of Obligations. Subject to the provisions of Section ---------------------- 7.1, upon the maturity (whether by acceleration or otherwise) of any of the Obligations under this Agreement or any of the other Loan Documents of the Borrowers, the Lenders shall be entitled to immediate payment of such Obligations without further application to or order of the Bankruptcy Court. SECTION 2.27 No Discharge; Survival of Claims. Each of the Borrowers -------------------------------- agrees that (i) its obligations hereunder shall not be discharged by the entry of an order confirming a Plan of Reorganization (and each of the Borrowers, pursuant to Section 1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (ii) the Superpriority Claim granted to the Agent and the Lenders pursuant to the Order and described in Section 2.23 shall not be affected in any manner by the entry of an order confirming a Plan of Reorganization. SECTION 3. REPRESENTATIONS AND WARRANTIES In order to induce the Lenders to make Loans and issue and/or participate in Letters of Credit hereunder, each of the Borrowers jointly and severally represent and warrant as follows: SECTION 3.1 Organization and Authority. Each of the Borrowers (i) is duly -------------------------- organized, validly existing and in good standing under the law of its jurisdiction of organization; (ii) is duly qualified to do business and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the financial condition, operations, business, properties or assets of the Borrowers taken as a whole; (iii) subject to the entry by the Bankruptcy Court of the Final Order, has the requisite power and authority to effect the transactions contemplated hereby, and by the other Loan Documents to which it is a party, and (iv) subject to the entry by the Bankruptcy Court of the Final Order, has all requisite power and authority and the legal right to own and operate its properties, and to conduct its business as now or currently proposed to be conducted. SECTION 3.2 Due Execution. Upon the entry by the Bankruptcy Court of the ------------- Final Order, the execution, delivery and performance by each of the Borrowers of each of the Loan Documents to which it is a party, including, without limitation, the grant and pledge by the Borrowers of the security interests granted by the Security and Pledge Agreement, (i) are within the respective powers of each of the Borrowers, have been duly authorized by all necessary action, including the consent of shareholders, partners or members, where required, and do not (A) contravene the Organizational Documents of any of the Borrowers, (B) violate any law (including, without limitation, the Securities Exchange Act of 1934) or regulation (including, 33 without limitation, Regulations T, U or X of the Board), or any order or decree of any court or Governmental Authority, (C) conflict with or result in a breach of, or constitute a default under, any indenture, mortgage or deed of trust entered into after the Filing Date or any lease, agreement or other instrument entered into after the Filing Date binding on the Borrowers or any of their properties, or (D) result in or require the creation or imposition of any Lien upon any of the property of any of the Borrowers other than Liens granted pursuant to this Agreement; and (ii) do not require the consent, authorization by or approval of or notice to or filing or registration with any Governmental Authority other than the entry of the Final Order. Except for the entry of the Final Order, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the perfection of the security interests or, subject to Section 7.1 hereof, the exercise by the Agent or the Lenders of their respective rights and remedies under the Loan Documents. Upon the entry by the Bankruptcy Court of the Final Order, this Agreement shall have been duly executed and delivered by each of the Borrowers. Upon the entry by the Bankruptcy Court of the Final Order, this Agreement, and each of the other Loan Documents to which the Borrowers are or will be a party, when delivered hereunder or thereunder, will be, a legal, valid and binding obligation of each Borrower, enforceable against the Borrowers in accordance with its terms and the Final Order. SECTION 3.3 Statements Made. The information that has been delivered in --------------- writing by any of the Borrowers to the Agent or to the Bankruptcy Court in connection with any Loan Document, and any financial statement delivered pursuant hereto or thereto (other than to the extent that any such statements constitute projections), taken as a whole and in light of the circumstances in which made, contains no untrue statement of a material fact and does not omit to state a material fact necessary to make such statements not misleading; and, to the extent that any such information constitutes projections, such projections were prepared in good faith on the basis of assumptions, methods, data, tests and information believed by such Borrower to be reasonable at the time such projections were furnished. SECTION 3.4 Financial Statements. The Borrowers have furnished the -------------------- Lenders with copies of (i) the audited consolidated financial statement and schedules of the Borrowers and their Subsidiaries for the fiscal year ended December 31, 1999 and (ii) the unaudited consolidated financial statement and schedules of the Borrowers and their Subsidiaries for each fiscal quarter ending after December 31, 1999. Such financial statements present fairly the financial condition and results of operations of the Borrowers and their Subsidiaries on a consolidated basis as of such dates and for such periods; such balance sheets and the notes thereto disclose all liabilities, direct or contingent, of the Borrowers and their Subsidiaries as of the dates thereof required to be disclosed by GAAP and such financial statements were prepared in a manner consistent with GAAP, subject (in the case of such fiscal quarter statement) to normal year end adjustments. No material adverse change in the operations, businesses, properties, assets, prospects or condition (financial or otherwise) of the Borrowers and their Subsidiaries, taken as a whole, has occurred from that set forth in the Borrowers' and their Subsidiaries' consolidated financial statements for the fiscal year ended December 31, 1999 or the fiscal quarters ending after December 31, 1999 other than those which customarily occur as a result of events leading up to and following the commencement of a proceeding under Chapter 11 of the Bankruptcy Code and the commencement of the Cases (including, without limitation, those reflected in the financial projections heretofore made available to the Agent). 34 SECTION 3.5 Ownership. Each of the Persons listed on Schedule 3.5 is a --------- ------------ direct or indirect Subsidiary of the Borrowers and Schedule 3.5 correctly sets ------------ forth the ownership interest of each of the Borrowers in their respective Subsidiaries, in each case as of the Closing Date. None of the Borrowers owns any other Subsidiaries, whether directly or indirectly, other than as set forth on Schedule 3.5. ------------ SECTION 3.6 Liens. Except for Liens permitted pursuant to Section 6.1, ----- there are no Liens of any nature whatsoever on any assets of any of the Borrowers or their Subsidiaries. Neither the Borrowers nor their Subsidiaries are parties to any contract, agreement, lease or instrument the performance of which, either unconditionally or upon the happening of an event, will result in the creation of a valid and enforceable Lien on any assets of any Borrower or any of its Subsidiaries or otherwise result in a violation of this Agreement other than the Liens granted to the Agent and the Lenders as provided for in this Agreement. SECTION 3.7 Compliance with Law ------------------- (a) (i) The operations of the Borrowers and their Subsidiaries comply with all applicable environmental, health and safety statutes and regulations, including, without limitation, regulations promulgated under the Resource Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.); (ii) none of the operations of the Borrowers or their Subsidiaries is the subject of any Federal or state investigation evaluating whether any remedial action involving a material expenditure by the Borrowers is needed to respond to a release of any Hazardous Waste or Hazardous Substance (as such terms are defined in any applicable state or Federal environmental law or regulations) into the environment; and (iii) the Borrowers and their Subsidiaries do not have any material contingent liability in connection with any release of any Hazardous Waste or Hazardous Substance into the environment. (b) None of the Borrowers or their Subsidiaries is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any Governmental Authority the violation of which, or a default with respect to which, would have a material adverse effect on the financial condition, operations, businesses, properties or assets of the Borrowers and their Subsidiaries taken as a whole. SECTION 3.8 Insurance. All policies of insurance of any kind or nature --------- owned by or issued to the Borrowers and their Subsidiaries, including, without limitation, policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers' compensation, employee health and welfare, title, property and liability insurance, are in full force and effect and are of a nature and provide such coverage as is customarily carried by companies of the size and character of the Borrowers and their Subsidiaries. SECTION 3.9 Final Order. On the date of the making of any Loans or the ----------- issuance of any Letters of Credit hereunder, whichever first occurs, the Final Order will have been entered and will not have been stayed, amended, vacated, reversed or rescinded. Upon the maturity (whether by the acceleration or otherwise) of any of the obligations of the Borrowers hereunder and under the other Loan Documents, the Lenders shall, subject to the provisions of Section 7.1, be entitled to immediate payment of such obligations, and to enforce the remedies provided for hereunder, without further application to or order by the Bankruptcy Court. 35 SECTION 3.10 Use of Proceeds. The proceeds of the Loans shall be used for --------------- (i) repayment in full (and not in part) of all Indebtedness under the Existing Agreement in accordance with Section 2.2 and (ii) for working capital and for other general corporate purposes of the Borrowers. During the Initial Period, use of the proceeds of the Loans for capital expenditures of the Borrowers shall be limited to the applicable amounts set forth in the Budget. The Letters of Credit shall be issued in support of obligations of the Borrowers that are acceptable to the Agent. SECTION 3.11 Litigation. Except as disclosed to the Agent in writing ---------- prior to the date hereof, there are no unstayed actions, suits or proceedings pending or, to the best knowledge of the Borrowers, threatened against or affecting the Borrowers or their Subsidiaries or any of their respective properties, before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that are reasonably likely to be determined adversely to the Borrowers or their Subsidiaries and, even if so adversely determined, would have a material adverse effect on the operations, businesses, properties, assets, prospects or financial condition of the Borrowers and their Subsidiaries taken as a whole. SECTION 3.12 Intellectual Property. Set forth on Schedule 3.12 hereto is --------------------- ------------- a complete and accurate list of all patents, trademarks, trade names, service marks and copyrights, and all applications therefor and licenses thereof, of each Borrower or any of its Subsidiaries, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date. SECTION 3.13 Material Contracts. Set forth on Schedule 3.13 hereto is a ------------------ ------------- complete and accurate list of all Material Contracts of each Borrower and its Subsidiaries as of the date hereof, showing the parties and subject matter thereof. Each such Material Contract has been duly authorized, executed and delivered by the Borrower or Borrowers party thereto and, to the best of the Borrowers' knowledge, has been duly authorized, executed and delivered by the other party or parties thereto, and, as of the date hereof, has not been amended or otherwise modified on or prior to the date hereof except as set forth on Schedule 3.13. As of the date hereof, the Borrowers have not received any - ------------- written notices of termination of any of the Material Contracts from any party or parties thereto except as set forth on Schedule 3.13. ------------- SECTION 4. CONDITIONS OF LENDING SECTION 4.1 Conditions Precedent to Closing. The occurrence of the Closing ------------------------------- Date is subject to the following conditions precedent: (a) Supporting Documents. The Agent shall have received for each of -------------------- the Borrowers: (i) a copy of each Organizational Document originally executed and delivered by each Borrower, as applicable, and, to the extent applicable, certified as of a recent date by the applicable Governmental Authority, each dated the Closing Date or a recent date prior thereto; provided, that -------- the Agent may, in its discretion, accept Organizational Documents of the Borrowers certified by a Secretary or Assistant Secretary of the Borrowers in lieu of certification by Governmental Authorities (subject to receipt of an 36 undertaking from the Borrowers to effect delivery of such documents certified by a Governmental Authorities on a post-Closing Date basis); (ii) signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a party, dated as of the Closing Date; (iii) duly adopted resolutions of the board of directors or similar governing body of each Borrower approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party or by which it or its assets may be bound as of the Closing Date, certified as of the Closing Date by its secretary or assistant secretary as being in full force and effect without modification or amendment; (iv) a good standing certificate (or, to the extent available, with respect to ICG Holdings (Canada) Co., a comparable document) from the applicable Governmental Authority of each Borrower's jurisdiction of incorporation, organization or formation and in each jurisdiction in which it is qualified as a foreign corporation or other entity to do business, each dated a recent date prior to the Closing Date; and (v) such other documents as the Agent may reasonably request. (b) Security and Pledge Agreement. The Borrowers shall have duly ----------------------------- executed and delivered to the Agent a Security and Pledge Agreement in substantially the form of Exhibit B (the "Security and Pledge Agreement"). --------- ----------------------------- (c) Intellectual Property Security Agreements. The Borrowers shall ----------------------------------------- have duly executed and delivered to the Agent such patent/trademark/copyright filings as requested by the Agent in order to perfect the Agent's security interest in the property of the Borrowers which is personal property of that kind. (d) First Day Orders. All of the "first day orders" entered by the ---------------- Bankruptcy Court at the time of the commencement of the Cases shall be reasonably satisfactory in form and substance to the Agent. (e) Completion of Proceedings. All partnership, corporate, ------------------------- judicial and other proceedings and all instruments and agreements in connection with the transactions among the Borrowers, the Agent and the Lenders contemplated by this Agreement shall be satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all documents and papers, including records of partnership, corporate, judicial and other proceedings, which the Agent may have requested in connection therewith, such documents and papers where appropriate to be certified by proper partnership, corporate, governmental, judicial or other authorities. (f) Information. The Agent shall have received such information ----------- (financial or otherwise) as may be reasonably requested by the Agent and shall have discussed such information with the Borrowers' management and shall be satisfied with the nature and substance of such discussions. 37 (g) Closing Documents. The Agent shall have received all documents ----------------- required by this Agreement satisfactory in form and substance to the Agent. (h) UCC-11 Searches. The Agent shall have received UCC-11 searches --------------- conducted in the jurisdictions in which the Borrowers conduct business (dated as of a date reasonably satisfactory to the Agent), reflecting the absence of Liens and encumbrances on the assets of the Borrowers other than such Liens as may be satisfactory to the Agent. (i) Budget. The Agent shall have received from (and shall have had ------ the opportunity to discuss with) the Borrowers a budget detailing the Borrowers' anticipated cash receipts and disbursements for the period commencing on or prior to the Filing Date and ending on or after May 31, 2002 and setting forth the anticipated uses of the Total Commitment (the "Budget"), all on a monthly ------ basis and satisfactory in form and substance to the Agent. SECTION 4.2 Conditions Precedent to Each Loan and Each Letter of Credit. ----------------------------------------------------------- The obligation of the Lenders to make each Loan and of the Fronting Bank to issue each Letter of Credit, including the initial Loans and the initial Letter of Credit, is subject to the following conditions precedent: (a) Notice. The Agent shall have received a notice with respect to ------ such borrowing or issuance, as the case may be, as required by Section 2. (b) Representations and Warranties. All representations and ------------------------------ warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of each Borrowing or the issuance of each Letter of Credit hereunder with the same effect as if made on and as of such date except to the extent such representations and warranties expressly relate to an earlier date. (c) No Default. On the date of each Borrowing hereunder or the ---------- issuance of each Letter of Credit, no Event of Default or event which upon notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing. (d) Entry of Final Order. At the time of the making of the initial -------------------- Loans or at the time of the issuance of the initial Letters of Credit (including, without limitation, any Letter of Credit issued pursuant to the proviso set forth in Section 4.2(k)), whichever first occurs, but in no event later than December 21, 2000, the Agent and the Lenders shall have received a certified copy of an order of the Bankruptcy Court in substantially the form of Exhibit A (the "Final Order") approving the Loan Documents and granting the - --------- ----------- Superpriority Claim status and the other Liens described in Section 2.23, which Final Order (i) shall have been entered upon an application or motion of the Borrowers reasonably satisfactory in form and substance to the Agent, on such prior notice to such parties as may in each case be satisfactory to the Agent, (ii) shall require that, prior to any other uses of the Total Commitment by the Borrowers, the Borrowers shall repay in full all Indebtedness under the Existing Agreement, (iii) shall require that, prior to any other uses of the Total Commitment by the Borrowers, all Liens granted under the Existing Agreement shall be released to the satisfaction of the Agent upon payment in full of all Indebtedness under the Existing Agreement, (iv) shall require that, upon the repayment in full of all Indebtedness under the Existing Agreement, the Obligations of the Borrowers hereunder 38 and under the Loan Documents and in respect of Indebtedness permitted by Section 6.3(v) shall automatically be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a perfected first priority Lien (subject to Liens permitted pursuant to clauses (i) or (ii) of Section 6.1) on all property of the Borrowers that then secures the Existing Agreement, provided that following the -------- Termination Date amounts in the Letter of Credit Account shall not be subject to the Carve-Out, and (v) shall approve the payment by the Borrowers of all of the Fees set forth in Section 2.19. (e) Continued Effectiveness of Final Order. The Final Order shall be -------------------------------------- in full force and effect and shall not have been stayed, reversed, modified or amended in any respect without the prior written consent of the Agent and the Required Lenders; and, if the Final Order is the subject of a pending appeal in any respect, neither the making of such Loans nor the issuance of such Letter of Credit nor the performance by any of the Borrowers of any of their obligations hereunder or under the Loan Documents or under any other instrument or agreement referred to herein shall be the subject of a presently effective stay pending appeal. (f) Opinion of Counsel. The Agent and the Lenders shall have ------------------ received the favorable written opinion of counsel to the Borrowers, reasonably acceptable to the Agent, dated within ten (10) days following the entry of the Final Order, substantially in the form of Exhibit C. --------- (g) Payment of Fees upon Entry of Final Order. Upon entry of the ----------------------------------------- Final Order, the Borrowers shall have paid to the Agent, the Lenders and Chase Securities, Inc. the then unpaid balance of all accrued and unpaid Fees then due and payable under and pursuant to this Agreement and the letter referred to in Section 2.19. (h) Payment of Fees. The Borrowers shall have paid to the Agent the --------------- then unpaid balance of all accrued and unpaid Fees then due and payable under and pursuant to this Agreement and the letter referred to in Section 2.19. (i) Borrowing Base Certificate. Following receipt of the appraisals -------------------------- described in Section 2.2(a)(i) and the Agent's determination of the Borrowing Base, the Agent shall have received a Borrowing Base Certificate dated no more than seven (7) days prior to each Borrowing or the issuance of each Letter of Credit, which Borrowing Base Certificate shall include supporting schedules as required by the Agent. (j) Usage. The uses of such Borrowing or such Letter of Credit ----- shall be substantially consistent with the Budget. (k) Repayment of Existing Indebtedness. Prior to or simultaneously ---------------------------------- with the making of the first Loans or the issuance of the first Letter of Credit, the Agent shall have received such documentation and acknowledgments as the Agent in its sole discretion shall require, evidencing the satisfaction and release of (i) all Indebtedness under the Existing Agreement; and (ii) all Liens securing that Indebtedness; provided, however, that notwithstanding anything to -------- ------- the contrary in this Agreement, but subject to the Borrowers' satisfaction of each of the other conditions set forth in this Section 4.2 and the other applicable terms and conditions of this Agreement, prior to the satisfaction of such Indebtedness and the release of such Liens the Borrowers may request a Fronting Bank to issue, for the account of the Borrowers one or more Letters of Credit in support of obligations of the Borrowers to 39 Governmental Authorities or that are otherwise acceptable to the Agent, provided -------- that no Letter of Credit shall be issued prior to the satisfaction of the condition set forth in this Section 4.2(k) if after giving effect to such issuance the aggregate Letter of Credit Outstanding would exceed $2,000,000. The request by the Borrowers for, and the acceptance by the Borrowers of, each extension of credit hereunder shall be deemed to be a representation and warranty by each of the Borrowers that the conditions specified in this Section have been satisfied or waived at that time. SECTION 5. AFFIRMATIVE COVENANTS From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.3(b)), or any amount shall remain outstanding or unpaid under this Agreement, each of the Borrowers agrees that, unless the Required Lenders shall otherwise consent in writing, each of the Borrowers will: SECTION 5.1 Financial Statements, Reports, etc. Deliver to the Agent and ---------------------------------- each of the Lenders: (a) within ninety (90) days after the end of each fiscal year, the Borrowers' consolidated and consolidating balance sheets and related statements of income, stockholders' equity and cash flows, showing the financial condition of the Borrowers and their Subsidiaries on a consolidated basis as of the close of such fiscal year and the results of their respective operations during such year, the consolidated statements of the Borrowers to be audited for the Borrowers and their Subsidiaries by their current independent auditor or other independent public accountants of recognized national standing acceptable to the Required Lenders and accompanied by an opinion of such accountants (which shall not be qualified other than with respect to the Cases or a going concern qualification) and to be certified by a Financial Officer of Parent to the effect that such consolidated financial statements fairly present the financial condition and results of operations of the Borrowers and their Subsidiaries on a consolidated basis in accordance with GAAP; (b) within forty five (45) days after the end of each of the first three fiscal quarters and within ninety (90) days after the end of the fourth fiscal quarter of each fiscal year, the Borrowers' consolidated and consolidating balance sheets and related statements of income, stockholders' equity and cash flows, showing the financial condition of the Borrowers and their Subsidiaries on a consolidated basis as of the close of such fiscal quarter and the results of their operations during such fiscal quarter and the then elapsed portion of the fiscal year, each certified by a Financial Officer of Parent as fairly presenting the financial condition and results of operations of the Borrowers and their Subsidiaries on a consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments; (c) concurrently with any delivery of financial statements under (a) or (b) above as applicable, (i) a certificate of a Financial Officer of each of the Borrowers certifying such statements (A) certifying that no Event of Default or event which upon notice or lapse of 40 time or both would constitute an Event of Default has occurred, or, if such an Event of Default or event has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (B) setting forth computations in reasonable detail satisfactory to the Agent demonstrating compliance with the provisions of Sections 6.3, 6.4, 6.5 and 6.10 and (ii) a certificate of such accountants accompanying the audited consolidated financial statements delivered under (a) above certifying that, in the course of the regular audit of the business of the Borrowers and their Subsidiaries, such accountants have obtained no knowledge that an Event of Default has occurred and is continuing, or if, in the opinion of such accountants, an Event of Default has occurred and is continuing, specifying the nature thereof and all relevant facts with respect thereto; (d) as soon as available, but no more than forty five (45) days after the end of each month, the unaudited monthly cash flow reports of the Borrowers on a consolidated basis and as of the close of such fiscal month and the results of their operations during such fiscal period and the then elapsed portion of the fiscal year; (e) concurrently with any delivery of financial statements under (b) above, monthly financial projections for the following six fiscal month period; (f) as soon as possible, and in any event within forty five (45) days of the Closing Date, a consolidated pro forma balance sheet of the Borrowers' financial condition as of the Filing Date; (g) concurrently with any delivery of financial statements under (b) above, updates of the Budget, satisfactory in form and substance to the Agent; (h) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by it with the Securities and Exchange Commission, or any governmental authority succeeding to any of or all the functions of said commission, or with any national securities exchange, as the case may be; (i) as soon as available and in any event (A) within thirty (30) days after any Borrower or any of their ERISA Affiliates knows or has reason to know that any Termination Event described in clause (i) of the definition of Termination Event with respect to any Single Employer Plan of any of the Borrowers or such ERISA Affiliate has occurred and (B) within ten (10) days after any of the Borrowers or any of their ERISA Affiliates knows or has reason to know that any other Termination Event with respect to any such Plan has occurred, a statement of a Financial Officer of such Borrower describing such Termination Event and the action, if any, which such Borrower or such ERISA Affiliate proposes to take with respect thereto; (j) promptly and in any event within ten (10) days after receipt thereof by any of the Borrowers or any of their ERISA Affiliates from the PBGC copies of each notice received by such Borrower or any such ERISA Affiliate of the PBGC's intention to terminate any Single Employer Plan of such Borrower or such ERISA Affiliate or to have a trustee appointed to administer any such Plan; 41 (k) if requested by the Agent, promptly and in any event within thirty (30) days after the filing thereof with the Internal Revenue Service, copies of each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) with respect to each Single Employer Plan of any of the Borrowers or any of their ERISA Affiliates; (l) within ten (10) days after notice is given or required to be given to the PBGC under Section 302(f)(4)(A) of ERISA of the failure of any of the Borrowers or any of their ERISA Affiliates to make timely payments to a Plan, a copy of any such notice filed and a statement of a Financial Officer of such Borrower setting forth (A) sufficient information necessary to determine the amount of the lien under Section 302(f)(3), (B) the reason for the failure to make the required payments and (C) the action, if any, which the Borrowers or any of their ERISA Affiliates proposed to take with respect thereto; (m) promptly and in any event within ten (10) days after receipt thereof by any of the Borrowers or any ERISA Affiliate from a Multiemployer Plan sponsor, a copy of each notice received by such Borrower or any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability by a Multiemployer Plan, (B) the determination that a Multiemployer Plan is, or is expected to be, in reorganization within the meaning of Title IV of ERISA, (C) the termination of a Multiemployer Plan within the meaning of Title IV of ERISA, or (D) the amount of liability incurred, or which may be incurred, by the Borrowers or any ERISA Affiliate in connection with any event described in clause (A), (B) or (C) above; (n) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of any Borrower, or compliance with the terms of any material loan or financing agreements as the Agent, at the request of any Lender, may reasonably request; (o) promptly after the same is available, copies of all pleadings, motions, applications, judicial information, financial information and other documents filed by or on behalf of any of the Borrowers with the Bankruptcy Court in the Cases, or distributed by or on behalf of any of the Borrowers to any official committee appointed in the Cases, providing copies of same to counsel for the Agent; (p) no later than the 25th of each month, a reconciliation of the results of the Borrowers' business operations for the preceding month as compared to the corresponding period in the Budget; (q) promptly, and in any event within ten (10) Business Days, after (i) any Borrower obtains knowledge of (x) a material default (or shall have received notice alleging a material default from the other party or parties thereto) in respect of a Borrower's performance or service obligations under a Material Contract or (y) any other default thereunder which could reasonably be expected to have a material adverse effect on the benefits of such Material Contract to the Borrower or Borrowers party thereto, (ii) any Material Contract is terminated or amended in a manner that is materially adverse to the Borrower(s) party thereto, or (iii) any new Material Contract is entered into by a Borrower, a written statement describing such event, with copies of such material amendments or new contracts, delivered to the Agent (to the extent such delivery is permitted by the terms of any such Material Contract, provided that no prohibition on 42 delivery shall be effective if it were bargained for by such Borrower with the intent of avoiding compliance with this Section 5.1(q)), and an explanation of any actions being taken with respect thereto; and (r) as soon as practicable following the date hereof, a schedule of Material Contracts providing information regarding, as of the date hereof, (i) any material defaults (or notices received by the Borrowers alleging a material default from the other party or parties thereto) in respect of a Borrower's performance or service obligations under a Material Contract or (ii) any other default under a Material Contract which could reasonably be expected to have a material adverse effect on the benefits of such Material Contract to the Borrower or Borrowers party thereto. SECTION 5.2 Existence. Preserve and maintain in full force and effect all --------- governmental rights, privileges, qualifications, permits, licenses and franchises (including, without limitation, any permits, licenses, approvals, privileges and franchises issued to such Borrower by the FCC or any PUC) necessary or desirable in the normal conduct of its businesses except (i) (A) if in the reasonable business judgment of such Borrower it is in its best economic interest not to preserve and maintain such rights, privileges, qualifications, permits, licenses and franchises, and (B) such failure to preserve the same could not, in the aggregate, reasonably be expected to have a material adverse effect on the operations, business, properties, assets, prospects or condition (financial or otherwise) of the Borrowers, taken as a whole, and (ii) as otherwise permitted in connection with sales of assets permitted by Section 6.11; provided that each of the entities listed in Schedule 5.2 attached hereto may be dissolved or liquidated without consent of the Agent or any Lender. SECTION 5.3 Insurance. (a) Keep its insurable properties insured at all --------- times, against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size in the same or similar businesses; and maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any properties owned, occupied or controlled by any Borrower in such amounts and with such deductibles as are customary with companies of the same or similar size in the same or similar businesses and in the same geographic area; and (b) maintain such other insurance or self insurance as may be required by law. SECTION 5.4 Obligations and Taxes. With respect to each Borrower, pay all --------------------- its material obligations arising after the Filing Date promptly and in accordance with their terms and pay and discharge promptly all material taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property arising after the Filing Date, before the same shall become in default, as well as all material lawful claims for labor, materials and supplies or otherwise arising after the Filing Date which, if unpaid, would become a Lien or charge upon such properties or any part thereof; provided, however, that each Borrower shall not be required to pay and -------- ------- discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings (if the Borrowers shall have set aside on their books adequate reserves therefor). 43 SECTION 5.5 Notice of Event of Default, etc. Promptly give to the Agent -------------------------------- notice in writing of: (a) any Event of Default or the occurrence of any event or circumstance which with the passage of time or giving of notice or both would constitute an Event of Default; and (b) any litigation, investigations or proceedings which may exist at any time between any Borrower and any Governmental Authority. SECTION 5.6 Access to Books and Records. (a) Maintain or cause to be --------------------------- maintained at all times true and complete books and records in accordance with GAAP of the financial operations of the Borrowers and their Subsidiaries; and provide the Agent and its representatives access to all such books and records during regular business hours, in order that the Agent may examine and make abstracts from such books, accounts, records and other papers for the purpose of verifying the accuracy of the various reports delivered by the Borrowers to the Agent or the Lenders pursuant to this Agreement or for otherwise ascertaining compliance with this Agreement. The Borrowers will permit (and will cause their Subsidiaries to permit) any representatives designated by the Agent, upon reasonable prior notice, to discuss its affairs, finances and condition with its officers and independent accounts, all at such reasonable times and as often as reasonably requested. (b) The Borrowers will permit any representatives designated by the Agent (including any consultants, accountants, lawyers and appraisers retained by the Agent) to conduct evaluations and appraisals of the Borrowers' computation of the Borrowing Base and the assets included in the Borrowing Base, all at such reasonable times and as often as reasonably requested. The Borrowers shall pay the reasonable fees (including reasonable and customary internally allocated fees of employees of the Agent as to which invoices have been furnished) and expenses of any such representatives retained by the Agent as to which invoices have been furnished to conduct any such evaluation or appraisal, including the reasonable fees and expenses associated with collateral monitoring services performed by the Collateral Agent Services Group of the Agent. To the extent required by the Agent as a result of any such evaluation, appraisal or monitoring, the Borrowers also agree to modify or adjust the computation of the Borrowing Base (which may include maintaining additional reserves, modifying the advance rates or modifying the eligibility criteria for the components of the Borrowing Base). (c) In the event that historical accounting practices, systems or reserves relating to the components of the Borrowing Base are modified in a manner that is adverse to the Lenders in any material respect, the Borrowers will agree to maintain such additional reserves (for purposes of computing the Borrowing Base) in respect to the components of the Borrowing Base and make such other adjustments to its parameters for including the components of the Borrowing Base as the Agent shall reasonably require based upon such modifications. (d) The Borrowers will grant the Agent access to and the right to inspect all reports, audits and other internal information of the Borrowers relating to environmental matters upon reasonable notice, and obtain any third party verification of matters relating to compliance with environmental laws and regulations requested by the Agent at any time and from time to time. 44 SECTION 5.7 Maintenance of Sweep Account. The Borrowers shall, within ---------------------------- thirty (30) days after the Closing Date, and at all times thereafter, maintain with the Agent an account or accounts to be used by the Borrowers as their principal sweep accounts into which shall be swept the available balances in the Borrowers' operating accounts at the end of each Business Day. SECTION 5.8 Borrowing Base Certificate. Commencing upon the end of the -------------------------- Initial Period, furnish to the Agent, no later than (i) three (3) Business Days after each of the weeks ended, a completed Borrowing Base Certificate as of the last day of the immediately preceding one week period, (ii) five (5) Business Days following the immediately preceding fiscal month ended, a completed Borrowing Base Certificate showing the Borrowing Base as of the close of business on the last day of such fiscal month, and (iii) if requested by the Agent, at any other time when the Agent reasonably believes that the then existing Borrowing Base Certificate is materially inaccurate, as soon as reasonably available but in no event later than five (5) Business Days after such request, a completed Borrowing Base Certificate showing the Borrowing Base as of the date so requested, in each case with supporting documentation and additional reports with respect to the Borrowing Base as the Agent may reasonably request. The components of the Borrowing Base consisting of property, plant and equipment shall be updated from time to time upon receipt of periodic valuation updates received from the Agent's asset valuation experts. SECTION 6. NEGATIVE COVENANTS From the date hereof and for so long as any Commitment shall be in effect or any Letter of Credit shall remain outstanding (in a face amount in excess of the amount of cash then held in the Letter of Credit Account, or in excess of the face amount of back-to-back letters of credit delivered, in each case pursuant to Section 2.3(b)) or any amount shall remain outstanding or unpaid under this Agreement, unless the Required Lenders shall otherwise consent in writing, each of the Borrowers will not (and will not apply to the Bankruptcy Court for authority to), and will cause each of their respective Subsidiaries not to: SECTION 6.1 Liens. Incur, create, assume or suffer to exist any Lien on ----- any asset of the Borrowers now owned or hereafter acquired by any of such Borrowers other than (i) Liens which were existing on the Filing Date as reflected on Schedule 3.6 hereto; (ii) Permitted Liens; and (iii) Liens in favor ------------ of the Agent and the Lenders. SECTION 6.2 Merger, etc. Except for the consolidation or merger of any ----------- Borrower or any of their Subsidiaries listed on Schedule 5.2 with any other Borrower, consolidate or merge with or into another Person. SECTION 6.3 Indebtedness. Contract, create, incur, assume or suffer to ------------ exist any Indebtedness, except for (i) Indebtedness under this Agreement; (ii) Indebtedness incurred prior to the Filing Date (including existing Capitalized Leases); (iii) Indebtedness incurred subsequent to the Filing Date secured by purchase money Liens or Capitalized Leases in an aggregate amount not to exceed $2,000,000 to the extent permitted by Section 6.4; (iv) Indebtedness arising from Investments among the Borrowers that are permitted hereunder; (v) Indebtedness owed to Chase or any of its banking Affiliates in respect of any overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds; (vi) inter-company Indebtedness among Borrowers and set 45 forth on Schedule 6.3 or incurred subsequent to the date hereof; and (vii) ------------ Indebtedness consisting of guaranties permitted by Section 6.6. SECTION 6.4 Capital Expenditures. Make cumulative Capital Expenditures for -------------------- each fiscal quarter ending on each date listed below in excess of the amount opposite such date (as calculated on a consolidated basis for the Borrowers and their Subsidiaries): Fiscal Quarter Ending Capital Expenditures (millions) --------------------- ------------------------------- December 31, 2000 [1-1/2 months] $12.0 (commencing November 15, 2000) March 31, 2001 $51.1 June 30, 2001 $18.0 September 30, 2001 $18.0 December 31, 2001 $18.0 March 31, 2002 $18.0 April 30, 2002 [1 month] $ 6.0 Commencing January 1, 2001 and for each succeeding fiscal quarter, fifty percent (50%) of any amount of the foregoing that is not expended during a particular quarter may be added to the amount permitted to be expended in the next quarter. In addition to (but without duplication of) the foregoing, (a) up to $22,600,000 of the amount permitted to be expended in the quarter ending March 31, 2001 that is not expended during such quarter may be added to the amount permitted to be expended in the quarter ending June 30, 2001 solely for the purpose of the purchase of capital equipment to permit the Borrowers to fulfill their obligations under that certain contract with Genuity Solutions, Inc. dated as of September 13, 2000, and (b) up to an additional $10,000,000 of the amount permitted to be expended in the quarter ending March 31, 2001 that is not expended during such quarter may be added to the amount permitted to be expended during any quarter ending prior to December 31, 2001 solely for the purpose of the purchase of capital equipment for future special access customers of the Borrowers. SECTION 6.5 EBITDA. ------ (a) As of the end of each fiscal month of the Borrowers, permit cumulative EBITDA loss (calculated on a consolidated basis for Borrowers and their Subsidiaries) to be more than the amount specified opposite the fiscal months ending set forth below: Fiscal Month Ending EBITDA (millions) ------------------- ----------------- November 30, 2000 ($ 20.0) (commencing November 15, 2000) December 31, 2000 ($ 60.0) January 31, 2001 ($100.0) February 28, 2001 ($125.0) March 31, 2001 ($165.0) April 30, 2001 ($195.0) 46 May 31, 2001 ($220.0) June 30, 2001 ($230.0) July 31, 2001 ($245.0) August 31, 2001 ($255.0) September 30, 2001 ($255.0) October 31, 2001 ($250.0) November 30, 2001 ($240.0) December 31, 2001 ($230.0) January 31, 2002 ($220.0) February 28, 2002 ($210.0) March 31, 2002 ($200.0) April 30, 2002 ($185.0) The foregoing EBITDA amounts include an estimate of retention bonuses to be paid by the Borrowers to certain of their officers and employees with the approval of the Bankruptcy Court. The Borrowers covenant and agree that in the event the Bankruptcy Court does not enter an order in the Cases on or prior to March 1, 2001 approving the payment of such amounts or reduces the payments from the amounts set forth in the Budget delivered to the Agent pursuant to Section 4.1(i), the foregoing covenant amounts shall be adjusted on a dollar for dollar basis by adding the reduction in the amounts of the retention bonus payments to the amount of the permitted cumulative EBITDA loss (thereby effecting a reduction in the permitted cumulative EBITDA loss). (b) Permit the EBITDA loss to be more than ($20,000,000) for any fiscal month of the Borrowers, commencing with August 2001. SECTION 6.6 Guarantees and Other Liabilities. Purchase or repurchase (or -------------------------------- agree, contingently or otherwise, so to do) the Indebtedness of, or assume, guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance of any obligation or capability of so doing, or otherwise), endorse or otherwise become liable, directly or indirectly, for the obligations, stock or dividends of any Person, except (i) for any guaranty of Indebtedness or other obligations (or otherwise becoming liable for any of the obligations) of any of the Borrowers if such Indebtedness is permitted by this Agreement and (ii) by endorsement of negotiable instruments for deposit or collection in the ordinary course of business. SECTION 6.7 Chapter 11 Claims. Incur, create, assume, suffer to exist or ----------------- permit any other Superpriority Claim or Lien which is pari passu with or senior ---------- to the claims or the Liens of the Agent and the Lenders against the Borrowers hereunder, except for the Carve-Out and Liens permitted pursuant to clauses (i) or (ii) of Section 6.1. SECTION 6.8 Dividends; Capital Stock. Except for distributions or payments ------------------------ from one Borrower to another Borrower (subject to the limitations on Investments set forth in Section 9.17) and except for dividends on preferred shares of ICG Funding, LLC in an amount up to $2,300,000 (subject to the approval of the Bankruptcy Court), declare or pay, directly or indirectly, any dividends or make any other distribution or payment, whether in cash, property, 47 securities or a combination thereof, with respect to (whether by reduction of capital or otherwise) any shares of capital stock (or any options, warrants, rights or other equity securities or agreements relating to any capital stock), or set apart any sum for the aforesaid purposes on anything other than an arm's- length basis. SECTION 6.9 Transactions with Affiliates. Sell or transfer any property ---------------------------- or assets to, or otherwise engage in or permit to exist any other material transactions with, any of its non-Borrower Affiliates, including, without limitation, ICG 161, L.P., other than in the ordinary course of the Borrowers' businesses in good faith and at prices and on terms and conditions not less favorable to the Borrowers than could be obtained on an arm's-length basis from unrelated third parties. The Borrowers shall not make any payments in respect of any mechanics liens which encumber in any respect the partially constructed parking garage located at 161 Inverness Drive West, Englewood, Colorado or any other property or assets of ICG 161, L.P. SECTION 6.10 Investments, Loans and Advances. Purchase, hold or acquire ------------------------------- any capital stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any investment in, any other Person (all of the foregoing, "Investments"), except ----------- for (i) ownership by the Borrowers of the capital stock or other equity interests of each of the Subsidiaries as set forth on Schedule 3.5, (ii) ------------ Permitted Investments, (iii) advances and loans among the Borrowers, and (iv) investments existing on the Closing Date and listed on Schedule 6.10. ------------- SECTION 6.11 Disposition of Assets. Sell or otherwise dispose of any --------------------- assets (including, without limitation, the capital stock of any Subsidiary) except for (i) sales of inventory, fixtures and equipment in the ordinary course of business and (ii) sales of surplus equipment no longer used in the telecommunications businesses of the Borrowers, and (iii) sales of assets (other than assets described in clauses (i) or (ii) above) for cash and for fair value in an aggregate amount not to exceed $15,000,000 in any fiscal year of the Borrowers; provided that in the case of sales of assets pursuant to clauses (i), (ii) or (iii) above, each Borrower shall, within two (2) Business Days of the date of receipt by such Borrower or any of its Subsidiaries of the Net Proceeds from such sale, prepay the Loans in the amount and order of priority set forth in Section 2.13(b). SECTION 6.12 Nature of Business. Modify or alter in any material manner ------------------ the nature and type of its business as conducted at or prior to the Filing Date or the manner in which such business is conducted (except as required by the Bankruptcy Code), it being understood that asset sales permitted by Section 6.11 shall not constitute such a material modification or alteration. SECTION 6.13 Transactions among Borrowers. Except to the extent existing ---------------------------- on the date the Cases were filed and disclosed on Schedule 6.13, permit, place or agree to permit or place any restrictions on the payment of dividends or other distributions among the Borrowers or the making of advances or any other cash payments among the Borrowers. SECTION 6.14 Right of Subrogation among Borrowers. Assert any right of ------------------------------------ subrogation against any other Borrower until all Borrowings and all Letters of Credit are paid in full and the Total Commitment is terminated. 48 SECTION 7. EVENTS OF DEFAULT SECTION 7.1 Events of Default. In the case of the happening of any of the ----------------- following events and the continuance thereof beyond the applicable period of grace if any (each, an "Event of Default"): ---------------- (a) any material representation or warranty made by any Borrower in this Agreement or in any Loan Document or in connection with this Agreement or the credit extensions hereunder or any material statement or representation made in any report, financial statement, certificate or other document furnished by any Borrower to the Lenders under or in connection with this Agreement, shall prove to have been false or misleading in any material respect when made or delivered; or (b) default shall be made in the payment of any (i) fees or interest on the Loans or reimbursement of expenses under any Loan Document when due, and such default shall continue unremedied for more than two (2) Business Days, or (ii) principal of the Loans or other amounts payable by the Borrowers hereunder (including, without limitation, reimbursement obligations or cash collateralization in respect of Letters of Credit), when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or by acceleration thereof or otherwise; or (c) default shall be made by any Borrower or any of its Subsidiaries in the due observance or performance of any of the negative covenants contained in Section 6 hereof; or (d) default shall be made by any Borrower or any of its Subsidiaries in the due observance or performance of any covenant, condition or agreement (other than the covenants contained in Section 6 hereof) to be observed or performed pursuant to the terms of this Agreement or any of the other Loan Documents and such default shall continue unremedied for more than ten (10) days; or (e) any of the Cases shall be dismissed or converted to a case under Chapter 7 of the Bankruptcy Code or any Borrower shall file a motion or other pleading seeking the dismissal of any of the Cases under Section 1112 of the Bankruptcy Code or otherwise; a trustee under Chapter 7 or Chapter 11 of the Bankruptcy Code, a responsible officer or an examiner with enlarged powers relating to the operation of the business (powers beyond those set forth in Section 1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the Bankruptcy Code shall be appointed in any of the Cases and the order appointing such trustee, responsible officer or examiner shall not be reversed or vacated within thirty (30) days after the entry thereof; or an application shall be filed by any Borrower for the approval of any other Superpriority Claim (other than the Carve-Out) in any of the Cases which is pari passu with or senior to ----------- the claims of the Agent and the Lenders against any Borrower hereunder, or there shall arise or be granted any such pari passu or senior Superpriority Claim; or ---------- (f) the Bankruptcy Court shall enter, over the objection of the Borrowers, an order or orders granting relief from the automatic stay applicable under Section 362 of the Bankruptcy Code to the holder or holders of any security interest to permit foreclosure (or the 49 granting of a deed in lieu of foreclosure or the like) on any assets of any of the Borrowers which have a value in excess of $1,000,000 in the aggregate; or (g) a Change of Control shall occur; or (h) the Borrowers shall fail to deliver a certified Borrowing Base Certificate when due and such default shall continue unremedied for more than three (3) Business Days; or (i) any provision of any Loan Document shall, for any reason, cease to be valid and binding on any of the Borrowers, or any of the Borrowers shall so assert in any pleading filed in any court; or (j) an order of the Bankruptcy Court shall be entered reversing, amending, supplementing, staying for a period in excess of ten (10) days, vacating or otherwise modifying the Final Order; or (k) any judgment or order as to a post-petition liability or debt for the payment of money in excess of $1,000,000 shall be rendered against any of the Borrowers or any of their Subsidiaries and the enforcement thereof shall not have been stayed; or (l) any non-monetary judgment or order with respect to a post- petition event shall be rendered against any Borrower or any of its Subsidiaries which does or would reasonably be expected to (i) cause a material adverse change in the financial condition, business, prospects, operations or assets of the Borrowers and their Subsidiaries taken as a whole on a consolidated basis, (ii) have a material adverse effect on the ability of any of the Borrowers to perform their respective obligations under any Loan Document, or (iii) have a material adverse effect on the rights and remedies of the Agent or any Lender under any Loan Document, and there shall be any period of ten (10) consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (m) except as permitted by the Final Order, the Borrowers shall make any Pre-Petition Payment other than Pre-Petition Payments authorized by the Bankruptcy Court in respect of: (i) accrued payroll and related expenses and employee benefits as of the Filing Date, (ii) the satisfaction and termination of the Existing Agreement; or (iii) mechanics liens and certain other pre- petition claims against the Borrowers in a total amount not in excess of $10,500,000 (excluding refunds or credits to customers issued in the ordinary course of business); or (n) any Termination Event described in clauses (iii) or (iv) of the definition of such term shall have occurred and shall continue unremedied for more than ten (10) days and the sum (determined as of the date of occurrence of such Termination Event) of the Insufficiency of the Plan in respect of which such Termination Event shall have occurred and be continuing and the Insufficiency of any and all other Plans with respect to which such a Termination Event (described in such clauses (iii) or (iv)) shall have occurred and then exist is equal to or greater than $5,000,000; or (o) (i) any Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such 50 Multiemployer Plan, (ii) such Borrower or such ERISA Affiliate does not have reasonable grounds to contest such Withdrawal Liability and is not in fact contesting such Withdrawal Liability in a timely and appropriate manner, and (iii) the amount of such Withdrawal Liability specified in such notice, when aggregated with all other amounts required to be paid to Multiemployer Plans in connection with Withdrawal Liabilities (determined as of the date of such notification), exceeds $500,000 allocable to post-petition obligations or requires payments exceeding $100,000 per annum in excess of the annual payments made with respect to such Multiemployer Plans by such Borrower or such ERISA Affiliate for the plan year immediately preceding the plan year in which such notification is received; or (p) any Borrower or any ERISA Affiliate thereof shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of such Borrower and its ERISA Affiliates to all Multiemployer Plans that are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years that include the date hereof by an amount exceeding $500,000; or (q) any Borrower or any ERISA Affiliate shall have committed a failure described in Section 302(f)(1) of ERISA (other than the failure to make any contribution accrued and unpaid as of the Filing Date) and the amount determined under Section 302(f)(3) of ERISA is equal to or greater than $1,000,000; or (r) it shall be determined (whether by the Bankruptcy Court or by any other judicial or administrative forum) that any Borrower is liable for the payment of claims arising out of any failure to comply (or to have complied) with applicable environmental laws or regulations the payment of which will have a material adverse effect on the financial condition, business, properties, operations or assets of the Borrowers, taken as a whole, and the enforcement thereof shall not have been stayed; then, and in every such event and at any time thereafter during the continuance of such event, and without further order of or application to the Bankruptcy Court, the Agent may, and at the request of the Required Lenders, shall, take one or more of the following actions without further order of or application to the Court, provided that with respect to item (iv) below and the enforcement of -------- liens or other remedies with respect to collateral referred to in item (v) below, the Agent shall provide the Borrowers (with a copy to counsel for the Official Creditors' Committee appointed in the Cases and to the United States Trustee for the District of Delaware) with five (5) business days' prior written notice: (i) terminate forthwith the Total Commitment; (ii) declare the Loans then outstanding to be forthwith due and payable, whereupon the principal of the Loans together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrowers accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrowers, anything contained herein or in any other Loan Document to the contrary notwithstanding; (iii) require the Borrowers upon demand to forthwith deposit in the Letter of Credit Account cash in an amount which, together with any amounts then held in the Letter of Credit Account, is equal to the sum of 105% of the then Letter of Credit Outstandings (and to the extent the Borrowers shall fail to furnish such funds as demanded by the 51 Agent, the Agent shall be authorized to debit the accounts of the Borrowers maintained with the Agent in such amount five (5) Business Days after the giving of the notice referred to above); (iv) set-off amounts in the Letter of Credit Account or any other accounts maintained with the Agent and apply such amounts to the obligations of the Borrowers hereunder and in the other Loan Documents; and (v) exercise any and all remedies under the Loan Documents and under applicable law available to the Agent and the Lenders. SECTION 8. THE AGENT SECTION 8.1 Administration by Agent. The general administration of the ----------------------- Loan Documents shall be performed by the Agent. Each Lender hereby irrevocably authorizes the Agent, at its discretion, to take or refrain from taking such actions as agent on its behalf and to exercise or refrain from exercising such powers under the Loan Documents as are delegated by the terms hereof or thereof, as appropriate, together with all powers reasonably incidental thereto (including the release of Collateral in connection with any transaction that is expressly permitted by the Loan Documents). The Agent shall have no duties or responsibilities except as set forth in this Agreement and the remaining Loan Documents. SECTION 8.2 Advances and Payments --------------------- (a) On the date of each Loan, the Agent shall be authorized (but not obligated) to advance, for the account of each of the Lenders, the amount of the Loan to be made by it in accordance with its Commitment hereunder. Should the Agent do so, each of the Lenders agrees forthwith to reimburse the Agent in immediately available funds for the amount so advanced on its behalf by the Agent, together with interest at the Federal Funds Effective Rate if not so reimbursed on the date due from and including such date but not including the date of reimbursement. (b) Any amounts received by the Agent in connection with this Agreement (other than amounts to which the Agent is entitled pursuant to Sections 2.19, 8.6, 9.5 and 9.6), the application of which is not otherwise provided for in this Agreement, shall be applied, first, in accordance with each Lender's Commitment Percentage to pay accrued but unpaid Commitment Fees or Letter of Credit Fees, and second, in accordance with each Lender's Commitment Percentage to pay accrued but unpaid interest and the principal balance outstanding and all unreimbursed Letter of Credit drawings. All amounts to be paid to a Lender by the Agent shall be credited to that Lender, after collection by the Agent, in immediately available funds either by wire transfer or deposit in that Lender's correspondent account with the Agent, as such Lender and the Agent shall from time to time agree. SECTION 8.3 Sharing of Setoffs. Each Lender agrees that if it shall, ------------------ through the exercise of a right of banker's lien, setoff or counterclaim against the Borrowers, including, but not limited to, a secured claim or other security or interest arising from, or in lieu of, such secured claim and received by such Lender under any applicable bankruptcy, insolvency or other similar law, or otherwise, obtain payment in respect of its Loans as a result of which the unpaid portion of its Loans is proportionately less than the unpaid portion of the Loans of any other Lender (a) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Lender a participation in the Loans of such other Lender, so that the aggregate 52 unpaid principal amount of each Lender's Loans and its participation in Loans of the other Lenders shall be in the same proportion to the aggregate unpaid principal amount of all Loans then outstanding as the principal amount of its Loans prior to the obtaining of such payment was to the principal amount of all Loans outstanding prior to the obtaining of such payment and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that the Lenders share such payment pro-rata, provided that if any such non-pro-rata payment is thereafter recovered or otherwise set aside such purchase of participations shall be rescinded (without interest). Each of the Borrowers expressly consents to the foregoing arrangements and agrees that any Lender holding (or deemed to be holding) a participation in a Loan may exercise any and all rights of banker's lien, setoff (in each case, subject to the same notice requirements as pertain to clause (iv) of the remedial provisions of Section 7.1) or counterclaim with respect to any and all moneys owing by the Borrowers to such Lender as fully as if such Lender held a Note and was the original obligee thereon, in the amount of such participation. SECTION 8.4 Agreement of Required Lenders. Upon any occasion requiring or ----------------------------- permitting an approval, consent, waiver, election or other action on the part of the Required Lenders, action shall be taken by the Agent for and on behalf or for the benefit of all Lenders upon the direction of the Required Lenders, and any such action shall be binding on all Lenders. No amendment, modification, consent, or waiver shall be effective except in accordance with the provisions of Section 9.10. SECTION 8.5 Liability of Agent. ------------------ (a) The Agent, when acting on behalf of the Lenders, may execute any of its respective duties under this Agreement by or through any of its respective officers, agents, and employees, and neither the Agent nor its directors, officers, agents, employees or Affiliates shall be liable to the Lenders or any of them for any action taken or omitted to be taken in good faith, or be responsible to the Lenders or to any of them for the consequences of any oversight or error of judgment, or for any loss, unless the same shall happen through its gross negligence or willful misconduct. The Agent and its respective directors, officers, agents, employees and Affiliates shall in no event be liable to the Lenders or to any of them for any action taken or omitted to be taken by them pursuant to instructions received by them from the Required Lenders or in reliance upon the advice of counsel selected by it. Without limiting the foregoing, neither the Agent, nor any of its respective directors, officers, employees, agents or Affiliates shall be responsible to any Lender for the due execution, validity, genuineness, effectiveness, sufficiency, or enforceability of, or for any statement, warranty, or representation in, this Agreement, any Loan Document or any related agreement, document or order, or shall be required to ascertain or to make any inquiry concerning the performance or observance by the Borrowers of any of the terms, conditions, covenants, or agreements of this Agreement or any of the Loan Documents. (b) Neither the Agent nor any of its respective directors, officers, employees, agents or Affiliates shall have any responsibility to the Borrowers on account of the failure or delay in performance or breach by any Lender or by the Borrowers of any of their obligations under this Agreement or any of the Loan Documents or in connection herewith or therewith. (c) The Agent, in its capacity as Agent hereunder, shall be entitled to rely on any communication, instrument, or document reasonably believed by such person to be genuine 53 or correct and to have been signed or sent by a person or persons believed by such person to be the proper person or persons, and such person shall be entitled to rely on advice of legal counsel, independent public accountants, and other professional advisers and experts selected by such person. SECTION 8.6 Reimbursement and Indemnification. Each Lender agrees (i) to --------------------------------- reimburse (x) the Agent for such Lender's Commitment Percentage of any expenses and fees incurred for the benefit of the Lenders under this Agreement and any of the Loan Documents, including, without limitation, counsel fees and compensation of agents and employees paid for services rendered on behalf of the Lenders, and any other expense incurred in connection with the operations or enforcement thereof not reimbursed by the Borrowers and (y) the Agent for such Lender's Commitment Percentage of any expenses of the Agent incurred for the benefit of the Lenders that the Borrowers have agreed to reimburse pursuant to Section 9.5 and has failed to so reimburse and (ii) to indemnify and hold harmless the Agent and any of its directors, officers, employees, agents or Affiliates, on demand, in the amount of its proportionate share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against it or any of them in any way relating to or arising out of this Agreement or any of the Loan Documents or any action taken or omitted by it or any of them under this Agreement or any of the Loan Documents to the extent not reimbursed by the Borrowers (except such as shall result from their respective gross negligence or willful misconduct). SECTION 8.7 Rights of Agent. It is understood and agreed that Chase shall --------------- have the same rights and powers hereunder (including the right to give such instructions) as the other Lenders and may exercise such rights and powers, as well as its rights and powers under other agreements and instruments to which it is or may be party, and engage in other transactions with any Borrower, as though it were not the Agent of the Lenders under this Agreement. SECTION 8.8 Independent Lenders. Each Lender acknowledges that it has ------------------- decided to enter into this Agreement and to make the Loans hereunder based on its own analysis of the transactions contemplated hereby and of the creditworthiness of the Borrowers and agrees that the Agent shall bear no responsibility therefor. SECTION 8.9 Notice of Transfer. The Agent may deem and treat a Lender ------------------ party to this Agreement as the owner of such Lender's portion of the Loans for all purposes, unless and until a written notice of the assignment or transfer thereof executed by such Lender shall have been received by the Agent. SECTION 8.10 Successor Agent. The Agent may resign at any time by giving --------------- written notice thereof to the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Agent, which shall be reasonably satisfactory to the Borrowers. If no successor Agent shall have been so appointed by the Required Lenders and shall have accepted such appointment, within thirty (30) days after the retiring Agent's giving of notice of resignation, the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of a least 54 $100,000,000, which shall be reasonably satisfactory to the Borrowers. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. SECTION 9. MISCELLANEOUS SECTION 9.1 Notices. Notices and other communications provided for herein ------- shall be in writing (including telegraphic, telex, facsimile or cable communication) and shall be mailed, telegraphed, telexed, transmitted, cabled or delivered to any Borrower at 161 Inverness Drive West, Englewood, Colorado 80112, Attn.: Randall Curran, Telecopier No. 303-414-5502, with a copy to Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 W. Wacker Drive, Suite 2100, Chicago, IL 60606, Attn.: David S. Kurtz, Esq., Telecopier No. (312) 407- 0411, and to a Lender or the Agent to it at its address set forth on Annex A, or such other address as such party may from time to time designate by giving written notice to the other parties hereunder. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the fifth Business Day after the date when sent by registered or certified mail, postage prepaid, return receipt requested, if by mail; or when delivered to the telegraph company, charges prepaid, if by telegram; or when receipt is acknowledged, if by any telegraphic communications or facsimile equipment of the sender; in each case addressed to such party as provided in this Section 9.1 or in accordance with the latest unrevoked written direction from such party; provided, however, -------- ------- that in the case of notices to the Agent notices pursuant to the preceding sentence with respect to change of address and pursuant to Section 2 shall be effective only when received by the Agent. SECTION 9.2 Survival of Agreement, Representations and Warranties, etc. ---------------------------------------------------------- All warranties, representations and covenants made by any Borrower herein or in any certificate or other instrument delivered by it or on its behalf in connection with this Agreement shall be considered to have been relied upon by the Lenders and shall survive the making of the Loans herein contemplated regardless of any investigation made by any Lender or on its behalf and shall continue in full force and effect so long as any amount due or to become due hereunder is outstanding and unpaid and so long as the Commitments have not been terminated. All statements in any such certificate or other instrument shall constitute representations and warranties by the Borrowers hereunder with respect to the Borrowers. SECTION 9.3 Successors and Assigns. ---------------------- (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Agent and the Lenders and their respective successors and assigns. None of the Borrowers may assign or transfer any of their rights or obligations hereunder without the prior written consent of all of the Lenders. Each Lender may sell participations to any Person in all or part of any Loan, or all or part of its Commitment, in which event, without limiting the foregoing, the provisions of Section 2.15 shall inure to the benefit of each purchaser of a 55 participation (provided that such participant shall look solely to the seller of such participation for such benefits and the Borrowers' liability, if any, under Sections 2.15 and 2.18 shall not be increased as a result of the sale of any such participation) and the pro rata treatment of payments, as described in Section 2.17, shall be determined as if such Lender had not sold such participation. In the event any Lender shall sell any participation, such Lender shall retain the sole right and responsibility to enforce the obligations of each of the Borrowers relating to the Loans, including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement (provided that such Lender may grant its participant the right to consent to such Lender's execution of amendments, modifications or waivers which (i) reduce any Fees payable hereunder to the Lenders, (ii) reduce the amount of any scheduled principal payment on any Loan or reduce the principal amount of any Loan or the rate of interest payable hereunder or (iii) extend the maturity of the Borrowers' obligations hereunder). The sale of any such participation shall not alter the rights and obligations of the Lender selling such participation hereunder with respect to the Borrowers. (b) Each Lender may assign to one or more Lenders or Eligible Assignees all or a portion of its interests, rights and obligations under this Agreement (including, without limitation, all or a portion of its Commitment and the same portion of the related Loans at the time owing to it), provided, however, that (i) other than in the case of an assignment to a Person at least 50% owned by the assignor Lender, or by a common parent of both, or to another Lender, the Agent and the Fronting Bank must give their respective prior written consent to such assignment, which consent will not be unreasonably withheld, (ii) the aggregate amount of the Commitment and/or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Agent) shall, unless otherwise agreed to in writing by the Borrowers and the Agent, in no event be less than $1,000,000 or the remaining portion of such Lender's Commitment and/or Loans, if less and (iii) the parties to each such assignment shall execute and deliver to the Agent, for its acceptance and recording in the Register (as defined below), an Assignment and Acceptance with blanks appropriately completed, together with a processing and recordation fee of $3,500 (for which the Borrowers shall have no liability). Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be within ten (10) Business Days after the execution thereof (unless otherwise agreed to in writing by the Agent), (A) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder and (B) the Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto). (c) By executing and delivering an Assignment and Acceptance, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, such Lender assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any of the other Loan Documents or the execution, legality, validity, 56 enforceability, genuineness, sufficiency or value of this Agreement or any of the other Loan Documents; (ii) such Lender assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the performance or observance by the Borrowers of any of its obligations under this Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto; (iii) such assignee confirms that it has received a copy of this Agreement and the other Loan Documents, together with copies of the financial statements referred to in Section 3.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (iv) such assignee will, independently and without reliance upon the Agent, such Lender assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) such assignee appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms thereto, together with such powers as are reasonably incidental hereof; and (vi) such assignee agrees that it will perform in accordance with their terms all obligations that by the terms of this Agreement are required to be performed by it as a Lender. (d) The Agent shall maintain at its office a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amount of the Loans owing to, each Lender from time to time (the "Register"). The entries in -------- the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Agent and the Lenders shall treat each Person the name of which is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Lender and the assignee thereunder together with the fee payable in respect thereto, the Agent shall, if such Assignment and Acceptance has been completed with blanks appropriately filled and consented to by the Agent and the Fronting Bank (to the extent such consent is required hereunder), (i) accept such Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt written notice thereof to the Borrowers (together with a copy thereof). No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. (f) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 9.3, disclose to the assignee or participant or proposed assignee or participant, any information relating to the Borrowers furnished to such Lender by or on behalf of any of the Borrowers; provided that prior to any such disclosure, each such assignee or participant or proposed assignee or participant shall agree in writing to be bound by the provisions of Section 9.4. (g) Each of the Borrowers hereby agrees to actively assist and cooperate with the Agent in the Agent's efforts to sell participations herein (as described in Section 9.3(a)) and 57 assign to one or more Lenders or Eligible Assignees a portion of its interests, rights and obligations under this Agreement (as set forth in Section 9.3(b)). SECTION 9.4 Confidentiality. Each Lender agrees to keep any information --------------- delivered or made available by any of the Borrowers to it confidential from anyone other than persons employed or retained by such Lender who are or are expected to become engaged in evaluating, approving, structuring or administering the Loans; provided that nothing herein shall prevent any Lender from disclosing such information (i) to any of its Affiliates or to any other Lender, provided such Affiliate agrees to keep such information confidential to the same extent required by the Lenders hereunder, (ii) upon the order of any court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority, (iv) which has been publicly disclosed other than as a result of a disclosure by the Agent or any Lender which is not permitted by this Agreement, (v) in connection with any litigation to which the Agent, any Lender, or their respective Affiliates may be a party to the extent reasonably required, (vi) to the extent reasonably required in connection with the exercise of any remedy hereunder, (vii) to such Lender's legal counsel and independent auditors, and (viii) to any actual or proposed participant or assignee of all or part of its rights hereunder subject to the proviso in Section 9.3(f). Each Lender shall use reasonable efforts to notify the Borrowers of any required disclosure under clause (ii) of this Section. SECTION 9.5 Expenses. Whether or not the transactions hereby contemplated -------- shall be consummated, the Borrowers agree to pay all expenses incurred by the Agent and Chase Securities Inc. (including, without limitation, the reasonable fees and disbursements of Bryan Cave LLP, special counsel for the Agent, any other counsel that the Agent shall retain and any internal or third-party appraisers, consultants and auditors advising the Agent and Chase Securities Inc. and their counsel) in connection with the preparation, execution, delivery and administration of this Agreement and the other Loan Documents, the making of the Loans and the issuance of the Letters of Credit, the perfection of the Liens contemplated hereby, the syndication of the transactions contemplated hereby, the costs, fees and expenses of the Agent and Chase Securities Inc. in connection with monthly and other periodic field audits, monitoring of assets (including reasonable and customary internal collateral monitoring fees) and publicity expenses, and, following the occurrence of an Event of Default, all expenses incurred by the Lenders and the Agent in the enforcement or protection of the rights of any one or more of the Lenders or the Agent in connection with this Agreement or the other Loan Documents, including but not limited to the fees and disbursements of any counsel for the Lenders or the Agent. Such payments by the Borrowers shall be made upon delivery of a statement setting forth such costs and expenses. Whether or not the transactions hereby contemplated shall be consummated, the Borrowers agree to reimburse the Agent and Chase Securities Inc. for the expenses set forth in the Commitment Letter and the reimbursement provisions thereof are hereby incorporated herein by reference. The obligations of the Borrowers under this Section shall survive the termination of this Agreement and/or the payment of the Loans. SECTION 9.6 Indemnity. Each of the Borrowers agrees to indemnify and hold --------- harmless the Agent, Chase Securities Inc. and the Lenders and their directors, officers, employees, agents and Affiliates (each an "Indemnified Party") from ----------------- and against any and all expenses, losses, claims, damages and liabilities incurred by such Indemnified Party arising out of claims made by 58 any Person in any way relating to the transactions contemplated hereby, but excluding therefrom all expenses, losses, claims, damages, and liabilities to the extent that they are determined by the final judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party. The obligations of the Borrowers under this Section shall survive the termination of this Agreement and/or the payment of the Loans. SECTION 9.7 Choice of Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS ------------- SHALL IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND THE BANKRUPTCY CODE. SECTION 9.8 No Waiver. No failure on the part of the Agent or any of the --------- Lenders to exercise, and no delay in exercising, any right, power or remedy hereunder or any of the other Loan Documents shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law. SECTION 9.9 Extension of Maturity. Should any payment of principal of or --------------------- interest or any other amount due hereunder become due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day and, in the case of principal, interest shall be payable thereon at the rate herein specified during such extension. SECTION 9.10 Amendments, etc. --------------- (a) No modification, amendment or waiver of any provision of this Agreement or the Security and Pledge Agreement, and no consent to any departure by the Borrowers therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given; provided, however, that no such modification or amendment shall without the written consent of the Lender affected thereby (x) increase the Commitment of a Lender (it being understood that a waiver of an Event of Default shall not constitute an increase in the Commitment of a Lender), or (y) reduce the principal amount of any Loan or the rate of interest payable thereon, or extend any date for the payment of interest hereunder or reduce any Fees payable hereunder or extend the final maturity of the Borrowers' obligations hereunder (except as contemplated by Section 2.2(d), as to which no consent shall be required); and, provided, further, that no such modification or amendment shall without the written consent of (A) all of the Lenders (i) amend or modify any provision of this Agreement which provides for the unanimous consent or approval of the Lenders, (ii) amend this Section 9.10 or the definition of Required Lenders or (iii) amend or modify the Superpriority Claim status of the Lenders contemplated by Section 2.23 or (B) the Super-Majority Lenders (i) release any material portion of the Collateral from the Liens created pursuant to the Security and Pledge Agreement or (ii) alter the eligibility standards used in determining the Borrowing Base in a manner which would increase the amount of the Borrowing Base. No such amendment or modification may adversely affect the rights and obligations of the Agent or any Fronting Bank hereunder or any Lender in the capacity referred to in Section 6.3(v) without its prior written consent. No notice to or 59 demand on any Borrower shall entitle any Borrower to any other or further notice or demand in the same, similar or other circumstances. Each assignee under Section 9.3(b) shall be bound by any amendment, modification, waiver, or consent authorized as provided herein, and any consent by a Lender shall bind any Person subsequently acquiring an interest on the Loans held by such Lender. No amendment to this Agreement shall be effective against any Borrower unless signed by such Borrower. (b) Notwithstanding anything to the contrary contained in Section 9.10(a), in the event that the Borrowers request that this Agreement be modified or amended in a manner which would require the unanimous consent of all of the Lenders (or the consent described in clause (B) of the first sentence of Section 9.10(a)) and such modification or amendment is agreed to by the Super-majority Lenders (as hereinafter defined), then with the consent of the Borrowers and the Super-majority Lenders, the Borrowers and the Super-majority Lenders shall be permitted to amend the Agreement without the consent of the Lender or Lenders which did not agree to the modification or amendment requested by the Borrowers (such Lender or Lenders, collectively the "Minority Lenders") to provide for (w) ---------------- the termination of the Commitment of each of the Minority Lenders, (x) the addition to this Agreement of one or more other financial institutions (each of which shall be an Eligible Assignee), or an increase in the Commitment of one or more of the Super-majority Lenders, so that the Total Commitment after giving effect to such amendment shall be in the same amount as the Total Commitment immediately before giving effect to such amendment, (y) if any Loans are outstanding at the time of such amendment, the making of such additional Loans by such new financial institutions or Super-majority Lender or Lenders, as the case may be, as may be necessary to repay in full the outstanding Loans of the Minority Lenders immediately before giving effect to such amendment and (z) such other modifications to this Agreement as may be appropriate. As used herein, the term "Super-majority Lenders" shall mean, at any time, Lenders holding Loans ---------------------- representing at least 66-2/3% of the aggregate principal amount of the Loans outstanding, or if no Loans are outstanding, Lenders having Commitments representing at least 66-2/3% of the Total Commitment. SECTION 9.11 Severability. Any provision of this Agreement which is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 9.12 Headings. Section headings used herein are for convenience -------- only and are not to affect the construction of or be taken into consideration in interpreting this Agreement. SECTION 9.13 Execution in Counterparts. This Agreement may be executed in ------------------------- any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument. SECTION 9.14 Prior Agreements. This Agreement represents the entire ---------------- agreement of the parties with regard to the subject matter hereof and the terms of any letters and other documentation entered into between a Borrower and any Lender or the Agent prior to the execution of this Agreement which relate to Loans to be made hereunder shall be replaced by the 60 terms of this Agreement (except as otherwise expressly provided herein with respect to the Commitment Letter and the fee letter referred to therein, including without limitation the Borrower's agreement to actively assist the Agent in the syndication of the transactions contemplated hereby referred to in Section 9.3(g) and including also the provisions of Section 2.19 and except for the commitment of Chase Securities Inc. to use commercially reasonable efforts to effect the syndication of the transactions contemplated hereby). SECTION 9.15 Further Assurances. Whenever and so often as reasonably ------------------ requested by the Agent, the Borrowers will promptly execute and deliver or cause to be executed and delivered all such other and further instruments, documents or assurances, and promptly do or cause to be done all such other and further things as may be necessary and reasonably required in order to further and more fully vest in the Agent all rights, interests, powers, benefits, privileges and advantages conferred or intended to be conferred by this Agreement and the other Loan Documents. SECTION 9.16 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY -------------------- WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. SECTION 9.17 Foreign Subsidiaries Notwithstanding any provision of any -------------------- Loan Document to the contrary, (i) no more than 65% of the capital stock in or of any Subsidiary of any Borrower, which Subsidiary is incorporated under the laws of a jurisdiction outside the United States and which is a "controlled foreign corporation" within the meaning of Section 957(a) of the Code (each, a "Foreign Subsidiary"), shall be pledged or similarly hypothecated to guaranty or ------------------ support any Obligations of any Borrower, (ii) no Foreign Subsidiary shall guaranty or support any Obligation of any Borrower, and (iii) no security or similar interest shall be granted in the assets of any Foreign Subsidiary, which security or similar interest guarantees or supports any Obligation of any Borrower. The parties agree that any pledge, guaranty or security or similar interest made or granted in contravention of this Section 9.17 shall be void ab -- initio. The Borrowers may not (x) make any additional Investments in their - ------ Foreign Subsidiaries or (y) transfer any assets or the proceeds of any Loans to any jurisdiction outside of the United States of America. [The remainder of this page is intentionally left blank.] 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and the year first written. BORROWERS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President DOWNNORTH, INC. By: /s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President THE CHASE MANHATTAN BANK, Individually and as Agent By: /s/ Norma C. Corio ------------------ Name: Norma C. Corio Title: Managing Director Annex A to the Revolving Credit Agreement COMMITMENT AMOUNTS Dated as of December 4, 2000 COMMITMENT COMMITMENT BANK AMOUNT PERCENTAGE The Chase Manhattan Bank $200,000,000 100.0000% Loan and Agency Services One Chase Manhattan Plaza 8th Floor New York, NY 10081 Attn: Donna Montgomery Tel: (212) 552-7477 Fax: (212) 552-5700 Total $200,000,000 100.0000% - ----------------------------------------------------------------------------- Exhibit A to the Revolving Credit Agreement FORM OF FINAL ORDER UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE ______________________________________X In re: : Chapter 11 ICG COMMUNICATIONS, INC., et al., : Case No. 00-4238 -- --- : (Jointly Administered) Debtors. ______________________________________X FINAL ORDER AUTHORIZING DEBTORS TO OBTAIN POST-PETITION FINANCING PURSUANT TO 11 U.S.C. (S)(S) 364(c)(1), 364(c)(2) and 364(c)(3) AND TO REPAY CERTAIN PRE-PETITION SECURED INDEBTEDNESS ----------------------------------------------- Upon the Motion For Order Authorizing Post-Petition Financing Pursuant ------------------------------------------------------------- To 11 U.S.C. (S)(S) 364(c) And 105 (the "Motion") of ICG Communications, Inc. - ---------------------------------- ------ and certain of its direct and indirect subsidiaries identified on Schedule 1 hereto, each as a debtor and debtor in possession (hereinafter referred to collectively as the "Debtors"): ------- (i) seeking this Court's authorization, pursuant to Sections 364(c)(1), 364(c)(2), 364(c)(3) and 105 of the United States Bankruptcy Code, 11 U.S.C. (S)(S)101, et seq. (the "Code"), and Rules 2002, 4001 and -- --- ---- 9014 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), ---------------- for the Debtors to obtain post-petition financing as described more fully below and in the Documents (as defined below) (the "Financing") up to the --------- aggregate principal amount of $350,000,000 from The Chase Manhattan --------- Bank ("Chase" or "Agent"), 270 Park ----- ----- Park Avenue, New York, New York 10017, with Chase acting as Agent for itself and a syndicate of banks, financial institutions and other institutional lenders to be arranged by Chase (together with Chase, the ------- "Lenders"), (x) with priority over any and all administrative expenses of the kind specified in any sections of the Code, including, without limitation, or arising or ordered under Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 507(b), 546(c), 726 (to the extent permitted by law) and 1112 of the Code (other than the Carve-Out (as defined below)) pursuant to Section 364(c)(1) of the Code, (y) to be secured pursuant to Section 364(c)(2) of the Code by a valid and perfected first priority security interest in and lien upon all pre-petition and post-petition property, wherever located, of the Debtors, including, without limitation, all cash and cash balances of the Debtors wherever located, not subject to valid and perfected liens in existence at the time of the commencement of the Cases or to valid liens in existence at the time of such commencement that are perfected subsequent to such commencement as permitted by Section 546(b) of the Code (the "Unencumbered Collateral"), subject only to the ----------------------- Carve-Out, provided that following the Termination Date amounts in the -------- Letter of Credit Account shall not be subject to the Carve-Out, and (z) to be secured pursuant to Section 364(c)(3) of the Code by a valid and perfected junior lien on all pre-petition and post-petition property, wherever located, of the Debtors, including, without limitation, all cash and cash balances of the Debtors wherever located, property of the Debtors, including, without limitation, all cash and cash balances of the Debtors wherever located, that is subject to valid and perfected liens in existence at the time of the commencement of the Cases or to valid liens in existence at the time of such commencement that are perfected subsequent to such commencement as permitted by Section 546(b) of the Code, including liens securing the Indebtedness (as defined in the Credit Agreement) under the Existing Agreement (as defined in the Credit Agreement)1/ (all of such property referred to in this clause (z) being hereinafter referred to as the "Encumbered Collateral"), junior to such valid and perfected Liens and --------------------- subject only to the Carve-Out, provided that upon repayment in full of -------- all Indebtedness under the Existing Agreement, the obligations of the Borrowers under the Credit Agreement and under the Documents and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement shall automatically be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a valid and perfected first priority senior security interest and lien (subject to Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement) upon all pre-petition and post-petition property, wherever located, of the Borrowers that then secures the Indebtedness under the Existing Agreement, including, without limitation, all cash and cash balances of the Borrowers wherever located (subject only to the Carve-Out); and (ii) seeking this Court's authorization to repay, in full in accordance _____________________ 1/ Existing Agreement is defined in the Credit Agreement to mean: "that certain Credit Agreement dated as of August 12, 1999 among ICG Equipment, Inc. and ICG NetAhead, Inc., as borrowers, ICG Services, Inc., as parent, the several lenders from time to time party thereto, Morgan Stanley Senior Funding, Inc, as sole book-runner and lead arranger, Royal Bank of Canada, as administrative agent and collateral agent, and Bank of America, N.A. and Barclays Bank PLC, as co-documentation agents, and shall include the "Loan Documents" (as defined therein) (each as heretofore amended, amended and restated or otherwise modified)." with the Credit Agreement and the terms of this Order, the Indebtedness arising under the Existing Agreement, and, due notice of the Motion having been given by the Debtors pursuant to Bankruptcy Rule 4001(c), and upon the entire record made at the Final Hearing and after due deliberation and consideration and good and sufficient cause appearing therefor; IT IS FOUND, DETERMINED, ORDERED AND ADJUDGED, that: 1. This Court has core jurisdiction over these proceedings and the parties and property affected hereby pursuant to 28 U.S.C. (S)(S)157(b) and 1334. Consideration of the Motion constitutes a core proceeding as defined in 28 U.S.C. (S)157(b)(2). 2. The Debtors have a need to obtain financing in order to permit, among other things, the orderly continuation of the operation of its businesses, to maintain business relationships with vendors and suppliers, to make certain strategic capital expenditures, to repay all Indebtedness under the Existing Agreement and to satisfy other working capital needs. The ability of the Debtors to obtain sufficient working capital and liquidity through the incurrence of new Indebtedness for borrowed money and other financial accommodations is vital to the Debtors. The preservation and maintenance of the going concern values of the Debtors is integral to a successful Chapter 11 proceeding of the Debtors pursuant to the provisions of Chapter 11 of the Code. The Debtors are unable to obtain for these necessary purposes adequate unsecured credit allowable under Section 503(b)(1) of the Code as an administrative expense. A facility in the amount provided by the Financing is unavailable to the Borrower without the Debtors granting to the Agent and the Lenders (x) pursuant to Section 364(c)(1) of the Code, allowed superpriority claims, with respect to all Indebtedness and obligations of the Debtors - -------------------------------------------------------------------------------- under the Credit Agreement (and with respect to all Indebtedness and obligations in respect of overdrafts and related liabilities referred to in Section 6.3(v) of the Credit Agreement), having priority over any and all administrative expenses of the kind specified in any sections of the Code, including, without limitation, or arising or ordered under Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 507(b), 546(c), 726 (to the extent permitted by law) and 1112 of the Code (other than the Carve-Out), (y) pursuant to Section 364(c)(2) of the Code, security for such Indebtedness and obligations by the granting of a valid and perfected first priority senior security interest in and lien upon all Unencumbered Collateral (subject only to the Carve-Out), provided that following -------- the Termination Date, amounts in the Letter of Credit Account shall not be subject to the Carve-Out; and (z) pursuant to Section 364(c)(3) of the Code, security for such Indebtedness and obligations by the granting of a valid and perfected junior security interest in and lien upon Encumbered Collateral (subject only to the Carve-Out), provided that upon repayment in full of all -------- Indebtedness under the Existing Agreement, the obligations of the Borrowers under the Credit Agreement and under the Documents and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement shall automatically and additionally be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a valid and perfected first priority senior security interest and lien (subject to Liens permitted by clauses (i) and (ii) of Section 6.1 of the Credit Agreement) upon all pre-petition and post-petition property, wherever located, of the Borrowers that then secures the Indebtedness under the Existing Agreement, including, without limitation, all cash and cash balances of the Borrowers wherever located (subject only to the Carve-Out). 3. The terms of the Financing are fair and reasonable, reflect the Debtors' exercise of prudent business judgment consistent with their fiduciary duty and are supported by reasonably equivalent value and fair consideration. The Financing has been negotiated in good faith and at arm's-length between the Debtors and the Agent and any credit extended, letters of credit issued for the account of and loans made to the Debtors by the Lenders pursuant to, and any credit extended in respect of overdrafts referred to in, the Revolving Credit Agreement dated as of December 1, 2000, among the Debtors, the Lenders and the Agent (the "Credit Agreement"), ---------------- the Credit Agreement, shall be deemed to have been extended by the Lenders in "good faith," as that term is used in Section 364(e) of the Code. 4. The Documents are hereby approved and the Debtors are immediately authorized and empowered to borrow or to obtain standby or import documentary letters of credit (up to a maximum sublimit of $10,000,000 for such standby letters of credit) pursuant to and in accordance with the Credit Agreement up to an aggregate of $350,000,000, which shall be used for the purposes set forth in the Credit Agreement. In addition, the Debtors are immediately authorized to the extent permitted in the Credit Agreement to incur overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house fund transfers provided to or for the benefit of the Debtors by Chase or any of its affiliates. Notwithstanding anything herein to the contrary, no Loans, Letters of Credit, or related cash or any portion of the Carve-Out amount provided for herein may be used to object to or contest in any manner, or raise any defenses to, the validity, priority or enforceability of the Indebtedness owing to the Agent or Lenders, or the claims or rights in favor of the Agent or Lenders securing such Indebtedness, or to assert any claims or causes of action against the Agent or Lenders in their capacity as Lenders or Agents under the Financing. 5. The Debtors are expressly authorized, empowered and directed to execute and deliver to the Lenders, among other documents, the Credit Agreement and the Security and Pledge Agreement (as defined in the Credit Agreement) to which the Debtors are parties (collectively, and together with the letter agreement referred to in paragraph 13(iii) hereof, the "Documents"). The Debtors are hereby authorized, --------- obligated and directed to perform and do all acts that may be required in connection with the Documents. Upon execution and delivery of the Documents, the Documents shall constitute valid and binding obligations of the Debtors that are parties thereto, enforceable against each Debtor that is a party thereto in accordance with their terms. 6. As security for all of the Debtors' obligations and Indebtedness arising under the Financing and the Documents (and in respect of the overdrafts and related liabilities entered into with the Lenders referred to above), the Agent and the Lenders are granted, pursuant to Section 364(c)(1) of the Code, an allowed superpriority claim having priority over any and all administrative expenses of the kind specified in Sections 503(b), 105, 326, 328, 330, 331, 506(c), 507(a), 507(b), 546(c), 726 (to the extent permitted by law) and 1112 of the Code, subject only to (x) in the event of the occurrence of an Event of Default (as defined in the Credit Agreement) or an event that would constitute an Event of Default with the giving of notice or lapse of time or both, the payment of allowed and unpaid professional fees and disbursements incurred by the Debtors and any statutory committee (each, a "Committee") appointed in the --------- Debtors' Chapter 11 cases (the "Cases") in an amount not in excess of $3,000,000 ----- (plus all professional fees and disbursements incurred prior to the occurrence of an Event of Default to the extent allowed by the Bankruptcy Court) and (y) the payment of fees pursuant to 28 U.S.C. (S)1930 and to the Clerk of the Court (collectively, the "Carve-Out"). No claim (other than claims or liens granted --------- prior to the date hereof) having a priority superior or pari passu with that ---- ----- granted by this Order to the Agent and the Lenders shall arise or be granted while any portion of the Financing (or refinancing thereof by the Lenders during the pendency of these cases) or the commitment thereunder remains outstanding. 7. So long as no Event of Default or an event which with the giving of notice or lapse of time or both would constitute an Event of Default shall have occurred and be continuing, the Debtors shall be permitted to pay compensation and reimbursement of expenses allowed and payable under Sections 330 and 331 of the Code, as the same may be due and payable. Any such compensation and expenses previously paid, or accrued but unpaid, prior to the occurrence of such Event of Default may also be paid and shall not be applied against the Carve- Out. Except to the extent of the Carve-Out, no expenses of the administration of the Cases or any future proceeding or case which may result therefrom, including liquidation in bankruptcy or other proceedings under the Code, shall be charged against the Agent, the Lenders or the Collateral, pursuant to Section 506(c) of the Code or otherwise, without the prior written consent of the Agent, and no such consent shall be implied from any other action, inaction, or acquiescence by the Agent or the Lenders. 8. As security for all of the Debtors' obligations and Indebtedness arising under the Financing and the Documents (and in respect of overdrafts and related liabilities arising from cash management services provided by Chase or any of its affiliates referred to above), the Agent, on behalf of the Lenders, is hereby granted (effective upon the date of this Order and without the necessity of the execution by the Debtors of mortgages, security agreements or otherwise), pursuant to Section 364(c)(2) of the Code, a valid and perfected first priority senior security interest in and lien upon all Unencumbered Collateral (subject only to the Carve-Out), provided that following the -------- Termination Date, amounts in the Letter of Credit Account shall not be subject to the Carve-Out. The security interests and liens granted to the Agent on behalf of the Lenders hereunder shall not (i) be subject to any lien or security interest which is avoided and preserved for the benefit of the Debtors' estates under Section 551 of the Code, (ii) be subordinated to or made pari passu with any ---- ---- other lien or security interest under Section 364(d) of the Code, or otherwise, or (iii) include Debtors' avoidance powers under Sections 544-549 of the Code. 9. As security for all of the Debtors' obligations and Indebtedness arising under the Financing and the Documents (and in respect of overdrafts and related liabilities arising from cash management services provided by Chase or any of its affiliates referred to above), the Agent, on behalf of the Lenders, is hereby granted (effective upon the date of this Order and without the necessity of the execution by the Debtors of mortgages, security agreements or otherwise), pursuant to Section 364(c)(3) of the Code, a valid and perfected junior security interest in and lien upon all Encumbered Collateral (subject only to the Carve-Out), provided that upon repayment in full of all Indebtedness -------- under the Existing Agreement pursuant to Paragraph 11 hereof, the obligations of the Borrowers under the Credit Agreement and under the Documents and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement shall automatically and additionally be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a valid and perfected first priority senior security interest and lien (subject to Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement) upon all pre-petition and post-petition property, wherever located, of the Borrowers that then secures the Existing Agreement, including, without limitation, all cash and cash balances of the Borrowers wherever located (subject only to the Carve-Out). The security interests and liens granted to the Agent on behalf of the Lenders hereunder, including the resulting first priority arising upon payment of the Indebtedness under the Existing Agreement pursuant to Paragraph 11 below shall not be (i) subject to any lien or security interest which is avoided and preserved for the benefit of the Debtors' estates under Section 551 of the Code or (ii) subordinated to or made pari passu with any lien or security interest ---- ----- under Section 364(d) of the Code, or otherwise. 10. The Agent and the Lenders shall not be required to file or to record financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or take any other action in order to validate and perfect the security interests and liens granted to them pursuant to this Order. If the Agent, on behalf of the Lenders, shall, in its sole discretion, choose to file such financing statements, mortgages, notices of lien or similar instruments or otherwise confirm perfection of such security interests and liens, the Debtors shall execute such documents as requested by the Agent, and all such documents shall be deemed to have been filed or recorded at the time and on the date of entry of this Order. 11. Each of the Debtors is authorized and empowered to use proceeds of the Financing in accordance with the terms of the Credit Agreement. The Borrowers are hereby authorized in accordance with the Credit Agreement to pay in full (and not in part) simultaneously with the making of the first Loan or the issuance of the first Letter of Credit (as defined in the Credit Agreement) all of the then Indebtedness under the Existing Agreement. No Letter of Credit shall be issued to the Debtors prior to the payment in full (and not in part) of the Indebtedness under the Existing Agreement if after giving effect to such issuance the aggregate outstanding Letters of Credit would exceed $2,000,000. 12. Nothing in this Order shall prejudice the right of any committee or party in interest in these proceedings to seek to (i) disallow the claims of the Existing Lenders, (ii) avoid any security or collateral interests claimed by the Existing Lenders in the assets of the Debtors, (iii) otherwise challenge the validity, priority or extent of the liens and/or claims of the Existing Lenders, or (iv) disgorge all or any part of the payment by the Debtors to the Existing Lenders pursuant to Paragraph 11 above to the extent that said payment (or portion thereof) was in excess of the final amount of the allowed secured claim of the Existing Lenders, as determined (if an objection is filed) by final order of this Court. In the event that the Existing Lenders are required to disgorge any such amount in excess of their allowed secured claim, (i) the Debtors shall immediately cause said amount to be paid to the Agent for application against the then outstanding Indebtedness under the Financing; and (ii) the Commitment shall be reduced in an equal amount. Accordingly, in the event that the Existing Lenders are required to disgorge all or any part of said payment by the Debtors, the resulting unsecured claims of the Existing Lenders shall in all respects be subject to the rights and liens of the Agent and the Lenders under this Order and the Credit Agreement. Any committee or party in interest shall have ninety days from the date hereof within which to file an objection or commence an action with respect to the claims or liens of the Existing Lenders. Thereafter, any and all challenges by any committee or party in interest to the validity, sufficiency, extent or perfection of the Indebtedness or liens of the Existing Lenders shall be forever barred. Until such time as the Indebtedness under the Existing Agreement is paid in full, the Debtors may provide the lenders under the Existing Agreement with such adequate protection of their interests under the Existing Agreement as the Court may authorize pursuant to separate order of the Court. Upon payment in full pursuant to Paragraph 11 above of all of the Indebtedness under the Existing Agreement, the obligations of the Borrowers under the Credit Agreement and under the Documents and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement shall automatically and in addition to the other liens and claims authorized by this Order be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a valid and perfected first priority senior security interest and lien (subject to Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement) upon all pre-petition and post-petition property of the Borrowers, including, without limitation, all cash and cash balance of the Borrowers wherever located, that then secures the Existing Agreement (subject only to the Carve-Out). 13. Each of the Debtors is authorized and directed to do and perform all acts, to make, execute and deliver all instruments and documents (including, without limitation, the execution of security agreements, mortgages and financing statements), and to pay fees, which may be reasonably required or necessary for the Debtors' performance under the Financing, including, without limitation: (i) the execution of the Documents, (ii) the execution of one or more amendments to the Credit Agreement for, among other things, the purpose of adding additional banks, financial institutions or other institutional lenders as Lenders and reallocating the commitments for the Financing among the Lenders, and modifying the affirmative and negative covenants set forth in the Credit Agreement, in each case in such form as the Debtors, the Agent and the Lenders may agree, and (iii) the non-refundable payment to Chase or the Lenders, as the case may be, of the Fees referred to in the Credit Agreement (and in the separate letter agreement dated November 13, 2000, between the Borrowers and Chase referred to in the Credit Agreement) and such Letter of Credit Fees, Commitment Fees and reasonable costs and expenses as may be due from time to time (without duplication) including, without limitation, reasonable attorneys' fees and disbursements as provided in the Documents, all as such terms are defined in the Documents. To the extent that, prior to the entry of this Order, the Debtors did or performed any acts, made, executed or delivered any instruments or documents or paid any fees, reasonably required or necessary for the Debtors' performance under the Financing, the same are hereby ratified. 14. The Debtors, the Agent and the Lenders may amend, modify, supplement or waive any provision of the Documents if such amendment, modification, supplement or waiver is permitted under the terms of the Documents and is not material (in the good faith judgment of the Debtors and the Agent), without the need to apply to, or receive further approval from, the Court, provided, -------- however, that the Debtors shall give notice to any Committee and the Office of the United States Trustee of any non-material amendments, waivers, supplements or modifications. 15. Subject only to the provisions of the Credit Agreement, the automatic stay provisions of Section 362 of the Code are vacated and modified to the extent necessary so as to permit the Agent and the Lenders to exercise, upon the occurrence of an Event of Default and upon five (5) Business Days' (as that term is defined in the Credit Agreement) written notice to the Debtors, the Office of the United States Trustee and counsel to any Committee, all rights and remedies provided for in the Documents (including, without limitation, the right to setoff monies of the Debtors in accounts maintained with the Agent or any Lender). 16. The Documents and the provisions of this Order shall be binding upon the Agent, the Lenders and the Debtors and their respective successors and assigns (including any Chapter 7 or Chapter 11 trustee hereinafter appointed or elected for the estate of any of the Debtors) and inure to the benefit of the Agent, the Lenders and the Debtors and (except with respect to any trustee hereinafter appointed or elected for the estate of any of the Debtors) their respective successors and assigns. 17. Upon (i) final satisfaction and repayment in full of all obligations and Indebtedness to the Agent and the Lenders under the Credit Agreement, and (ii) termination of the Commitment, then each of the Debtors shall thereafter have such rights of subrogation as between and among themselves based upon each respective Debtor's actual usage of or benefit from the proceeds of the Financing (subject to final determination of such amounts by this Court). 18. Unless all obligations and Indebtedness owing to the Agent and the Lenders under the Credit Agreement shall theretofore have been indefeasibly paid in full (and, with respect to outstanding Letters of Credit issued pursuant to the Credit Agreement, the Debtors shall be in compliance with the provisions of Section 2.3(b) the Credit Agreement), the Debtors shall not seek, and it shall constitute an Event of Default if any of the Debtors seek, or if there is entered, an order dismissing or converting any of the Cases, or a plan (or confirmation of such plan) that does not provide for the indefeasible payment in full in cash of the Indebtedness (including cash collateralization of all Letters of Credit or the deposit of standby Letters of Credit with the Agent as provided in the Credit Agreement) on the effective date of such plan. If an order dismissing or converting any of the Cases under Section 1112 of the Code or otherwise is at any time entered, such order shall provide (in accordance with Sections 105 and 349(b) of the Code) that (x) the superpriority claims, liens and security interests granted to the Agent and the Lenders pursuant to this Order shall continue in full force and effect and shall maintain their priorities as provided in this Order until all obligations in respect thereof shall have been paid and satisfied in full (and that such superpriority claims, liens and security interests, shall, notwithstanding such dismissal, remain binding on all parties in interest) and (y) this Court shall retain exclusive jurisdiction, notwithstanding such dismissal, for the purposes of enforcing the claims, liens and security interests referred to in (x) above. 19. If any or all of the provisions of this Order are hereafter reversed, modified, vacated or stayed, such reversal, stay, modification or vacation shall not affect (x) the validity of any obligation, Indebtedness or liability incurred by the Debtors to the Lenders prior to written notice to the Agent of the effective date of such reversal, stay, modification or vacation, or (y) the validity and enforceability of any lien or priority authorized or created hereby or pursuant to the Credit Agreement with respect to any such obligations, Indebtedness or liability. Notwithstanding any such reversal, stay, modification or vacation, any Indebtedness, obligation or liability incurred by the Debtors to the Lenders prior to written notice to the Agent of the effective date of such reversal, stay, modification or vacation shall be governed in all respects by the original provisions of this Order, and the Lenders shall be entitled to all the rights, remedies, privileges and benefits, granted herein and/or pursuant to the Credit Agreement with respect to such Indebtedness, obligation or liability. The obligations of the Debtors under this Order and the Financing shall not be discharged by the entry of an order confirming a plan of reorganization in any of the Cases and, pursuant to Section 1141(d)(4) of the Code, the Debtors have waived such discharge. 20. The notice given by the Debtors of the Motion and of the Final Hearing constitutes due and sufficient notice of the Motion and of the Final Hearing. Dated: Wilmington, Delaware December ____, 2000 ------------------------------- UNITED STATES BANKRUPTCY JUDGE SCHEDULE 1 TO FINAL ORDER Subsidiaries - ------------ Bay Area Teleport, Inc. Communications Buying Group, Inc. DownNorth, Inc. ICG Access Services - Southeast, Inc. ICG Canadian Acquisition, Inc. ICG ChoiceCom, L.P. ICG ChoiceCom Management, LLC ICG DataChoice Network Services, LLC ICG Enhanced Services, Inc. ICG Equipment, Inc. ICG Funding LLC ICG Holdings (Canada) Co. ICG Holdings, Inc. ICG Mountain View, Inc. ICG NetAhead, Inc. ICG Ohio LINX, Inc. ICG Services, Inc. ICG Telecom Group, Inc. ICG Telecom Group of Virginia, Inc. ICG Telecom of San Diego, L.P. ICG Tevis, Inc. NikoNet, LLC PTI Harbor Bay, Inc. Trans American Cable, Inc. Western Plains Finance, LLC Exhibit B to the Revolving Credit Agreement FORM OF SECURITY AND PLEDGE AGREEMENT SECURITY AND PLEDGE AGREEMENT (the "Agreement"), dated as of December ___, --------- 2000, by and among ICG COMMUNICATIONS, INC., a Delaware corporation, and each of its direct or indirect subsidiaries party to the Credit Agreement (as hereinafter defined) (the "Grantors"), each of which Grantors is a debtor and -------- debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, and THE CHASE MANHATTAN BANK, a New York banking corporation as agent (in such capacity, the "Agent") for the lenders (the "Lenders") party to the Credit ----- ------- Agreement. WITNESSETH: ---------- WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Agent, the Lenders and the Grantors are entering into a Revolving Credit Agreement dated as of the date hereof (as amended, modified or supplemented from time to time, the "Credit Agreement"); and ---------------- WHEREAS, unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined; and WHEREAS, it is a condition precedent to the making of Loans and the issuance of Letters of Credit that the Grantors shall have granted a security interest, pledge and lien on (x) all cash maintained in the Letter of Credit Account pursuant to Section 364(c)(2) of the Bankruptcy Code and (y) certain of the Grantors' assets and properties and the proceeds thereof pursuant to Sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code; and WHEREAS, upon entry of the Final Order, the grant of such security interest, pledge and lien will have been authorized pursuant to Sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code ; and WHEREAS, to supplement the Final Order without in any way diminishing or limiting the effect of the Final Order or the security interest, pledge and lien granted thereunder, the parties hereto desire to more fully set forth their respective rights in connection with such security interest, pledge and lien; and WHEREAS, upon entry of the Final Order, this Agreement will have been approved by the Bankruptcy Court; NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Loans and issue Letters of Credit, the Grantors hereby agree with the Agent as follows: SECTION 1. Grant of Security and Pledge. Subject to entry of the Final ---------------------------- Order, each of the Grantors hereby transfers, grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over to the Agent for its benefit and the ratable benefit of the Lenders, and hereby grants to the Agent for its benefit and the ratable benefit of the Lenders a perfected pledge and security interest in, all of the Grantors' right, title and interest in and to the following (the "Collateral"), which pledge and security interest shall be (x) ---------- junior to valid and perfected Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement, provided that upon repayment of all -------- Indebtedness under the Existing Agreement, the Obligations of the Borrowers hereunder and under the Loan Documents and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement shall automatically be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a perfected first priority Lien (subject to valid and perfected Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement) on all property of the Borrowers that then secures the Existing Agreement, and (y) subject to the Carve-Out: (a) all "accounts" as defined in the Uniform Commercial Code as in effect from time to time in the State of New York, or when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction (the "UCC"), including, without limitation, all present --- and future accounts, accounts receivable and other rights of each of the Grantors to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance (collectively, the "Accounts"); -------- (b) (i) all "inventory" as defined in the UCC, and (ii) all goods and merchandise now owned or hereafter acquired by each of the Grantors wherever located, whether in the possession of a Grantor or of a bailee or other person for sale, storage, transit, processing, use or otherwise consisting of whole goods, components, supplies, materials, or consigned, returned or repossessed goods) which are held for sale or lease or to be furnished (or have been furnished) under any contract of service or which are raw materials, work-in- process, finished goods or materials used or consumed in such Grantor's business or processed by or on behalf of any Grantor (regardless of whether characterized as inventory under the UCC) (collectively, the "Inventory"); --------- (c) (i) all "equipment" as defined in the UCC, and (ii) all machinery, all manufacturing, distribution, selling, data processing and office equipment, all furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling, molds, dies, vehicles, vessels, aircraft and all other goods of every type and description (other than Inventory), in each instance whether now owned or hereafter acquired by each of the Grantors and wherever located (collectively, the "Equipment"); --------- (d) all works of art now owned or hereafter acquired by each of the Grantors, including, without limitation, paintings, sketches, drawings, prints, sculptures, crafts, tapestries, porcelain, carvings, artifacts, renderings and designs; (e) all "general intangibles" as defined in the UCC, including, without limitation, all rights, interests, choses in action, causes of action, claims and all other intangible property of each of the Grantors of every kind and nature (other than Accounts, Trademarks, Patents and Copyrights), in each instance whether now owned or hereafter acquired by such Grantor, including, without limitation, all general intangibles; all corporate and other business records; all loans, royalties, and other obligations receivable; all inventions, designs, trade secrets, computer programs, software, printouts and other computer materials, goodwill, registrations, copyrights, licenses, franchises, customer lists, credit files, correspondence, and advertising materials; all customer and supplier contracts, firm sale orders, rights under license and franchise agreements (including all license agreements with any other Person in connection with any of the Patents and Trademarks or such other Person's names or marks, whether such Grantor is a licensor or licensee under any such license agreement), and other contracts and contract rights (including, without limitation, all Material Contracts); all interests in partnerships and joint ventures; all tax refunds and tax refund claims; all right, title and interest under leases, subleases, licenses and concessions and other agreements to the extent assignable relating to real or personal property; all payments due or made to each of the Grantors in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any property by any person or governmental authority; all deposit accounts (general or special) with any bank or other financial institution; all credits with and other claims against carriers and shippers; all rights to indemnification; all reversionary interests in pension and profit sharing plans and reversionary, beneficial and residual interest in trusts; all proceeds of insurance of which each of the Grantors is beneficiary; and all letters of credit, guaranties, liens, security interest and other security held by or granted to each of the Grantors; and all other intangible property, whether or not similar to the foregoing (collectively, the "General Intangibles"); ------------------- (f) all chattel paper (as that term is defined in Article 9 of the UCC, including, without limitation, electronic chattel paper, as that term is defined in Revised Article 9), all instruments (as that term is defined in Article 9 of the UCC), all notes and debt instruments and all payments thereunder and instruments and other property from time to time delivered in respect thereof or in exchange therefor, and all bills of lading, warehouse receipts and other documents of title and documents, in each instance whether now owned or hereafter acquired by each of the Grantors; (g) all property or interests in property now or hereafter acquired by each of the Grantors which may be owned or hereafter may come into the possession, custody or control of the Agent or any agent or affiliate of the Agent in any way or for any purpose (whether for safekeeping, deposit, custody, pledge, transmission, collection or otherwise), and all rights and interests of each of the Grantors, now existing or hereafter arising and however and wherever arising, in respect of any and all (i) notes, drafts, letters of credits, stocks, bonds, and debt and equity securities, whether or not certificated, and warrants, options, puts and calls and other rights to acquire or otherwise relating to the same; (ii) money (including all cash and cash equivalents held in the Letter of Credit Account (as defined and referred to in the Credit Agreement)); (iii) proceeds of loans, including, without limitation, Loans made under the Credit Agreement; and (iv) insurance proceeds and books and records relating to any of the property covered by this Agreement; together, in each instance, with all accessions and additions thereto, substitutions therefor, and replacements, proceeds and products thereof; (h) all of each Grantor's now owned or existing and filed and hereafter acquired or arising and filed trademarks, service marks, trademark or service mark registrations, trade names, trademark or service mark applications, trade styles, prints and labels on which said trademarks, trade names, trade styles and service marks have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof (except for "intent to use" applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and including, without limitation, each mark, registration, and application listed on Schedule 3 attached hereto and made a part hereof (as the same may be amended pursuant hereto from time to time), and (i) renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payment for past or future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, (iv) all rights corresponding thereto throughout the world, and (v) together in each case with the good will of each Grantor's business connected with the use of each such trademark, service mark, trade name and trade dress (all of the foregoing being herein referred to as the "Trademarks"); ---------- (i) all of each Grantor's now owned or existing and filed and hereafter acquired or arising and filed patents and patent applications of the United States and any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by each Grantor, and including without limitation the inventions and improvements described and claimed therein, and those patents and patent applications listed on Schedule 4 attached hereto and made a part hereof, and (a) all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, (d) all rights, title and interests corresponding thereto throughout the world (all of the foregoing patents and applications, and (e) the goodwill of Assignor's business connected with and symbolized by the foregoing, together with the items described in clauses (a)-(d), are sometimes hereinafter individually and/or collectively referred to as the "Patents"); ------- (j) all of each Grantor's now owned, registered and unregistered, and hereafter acquired or arising, registered and unregistered, copyrights and copyright applications of the United States, or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Copyright Office, the Library of Congress or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof, including those listed on Schedule 5 attached hereto and made a part hereof (as the same may be amended pursuant hereto from time to time), and (i) the renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including damages and payments for past or future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, and (iv) all rights, title, and interests corresponding thereto throughout the world (all of the foregoing being herein referred to as the "Copyrights"); ---------- (k) all books, records, ledger cards and other property at any time evidencing or relating to the Accounts, Equipment, General Intangibles, Trademarks, Patents or Copyrights; (l) all shares of capital stock owned by any Grantor, including, without limitation, all shares of capital stock listed on Schedule 6 hereto (as such schedule may be amended or supplemented from time to time) of the issuers listed thereon (individually, an "Issuer", and collectively, the "Issuers") and ------ ------- all shares of capital stock of any Issuer obtained in the future by such Grantor and the certificates, if any, representing or evidencing such shares and any interest of such Grantor on the books and records of such Issuer or on the books and records of any securities intermediary pertaining to such shares, and, subject to Section 9 below, all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, and all rights and privileges of any Grantor with respect to such shares (the "Pledged Shares"); -------------- (m) all interests in any general partnership, limited partnership, limited liability partnership or other partnership held by any Grantor, including, without limitation, all partnership interests listed in Schedule 7 hereto (as such schedule may be amended or supplemented from time to time) of the partnerships listed thereon (individually, a "Partnership", and ----------- collectively, the "Partnerships") and all partnership interests in any ------------ Partnership obtained in the future by such Grantor and the certificates, if any, representing or evidencing such interests and any interest of such Grantor on the books and records of such Partnership or on the books and records of any securities intermediary pertaining to such interest, and, subject to Section 9 below, all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and all rights and privileges of any Grantor with respect to such interests (the "Pledged Partnership Interests"); ----------------------------- (n) all interests in any limited liability company or unlimited liability company held by any Grantor, including, without limitation, all limited liability company and unlimited liability company interests listed in Schedule 8 hereto (as such schedule may be amended or supplemented from time to time) of the limited liability companies and the unlimited liability company listed thereon (individually, a "Company", and collectively, the "Companies") ------- --------- and all interests in any Company obtained in the future by such Grantor and the certificates, if any, representing or evidencing such interests and any interest of such Grantor on the books and records of such Company or on the books and records of any securities intermediary pertaining to such interest, and, subject to Section 9 below, all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and all rights and privileges of any Grantor with respect to such interests (the "Pledged Company --------------- Interests") (the Pledged Shares, the Pledged Partnership Interests and the - --------- Pledged Company Interests being collectively called the "Pledged Collateral"); ------------------ (o) all health-care-insurance receivables (the "Health-Care-Insurance --------------------- Receivables)", as such term is defined in the 1999 Official Text of Article 9 of - ----------- the Uniform Commercial Code with conforming amendments to Articles 1, 2, 2a, 4, 5, 6, 7 and 8 ("Revised Article 9"); ----------------- (p) all letter of credit rights, as such term is defined in Revised Article 9 (the "Letter of Credit Rights") ----------------------- (q) all other personal property of each of the Grantors, whether tangible or intangible, and whether now owned or hereafter acquired; and (r) all proceeds and products of any of the foregoing, in any form, including, without limitation, any claims against third parties for loss or damage to or destruction of any or all of the foregoing and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral and (ii) cash. Notwithstanding anything contained herein to the contrary, the total amount of shares of capital stock or other ownership interests of any Person pledged pursuant to this Agreement that is not incorporated or organized in the United States shall in no event exceed sixty-five percent (65%) of the total outstanding shares of capital stock or such other ownership interests thereof. For avoidance of doubt, it is expressly understood and agreed that, to the extent the UCC is revised subsequent to the date hereof such that the definition of any of the foregoing terms included in the description of Collateral is changed, the parties hereto desire that any property which is included in such changed definitions which would not otherwise be included in the foregoing grant on the date hereof be included in such grant immediately upon the effective date of such revision. Notwithstanding the immediately preceding sentence, the foregoing grant is intended to apply immediately on the date hereof to all Collateral to the fullest extent permitted by applicable law regardless of whether any particular item of Collateral is currently subject to the UCC. SECTION 2. Security for Obligations. This Agreement and the Collateral ------------------------ secure the payment of all obligations of each of the Grantors, now or hereafter existing, under the Credit Agreement and the other Loan Documents (and any other documents in respect of such Obligations), and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement, whether for principal, interest, fees, expenses or otherwise, and all obligations of each of the Grantors now or hereafter existing under or in respect of this Agreement (all such obligations of the Grantors being herein called the "Obligations"). ----------- SECTION 3. Delivery of Pledged Collateral; Other Actions. Upon written --------------------------------------------- request by the Agent (and without further order of the Bankruptcy Court), all certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by the Agent pursuant hereto and shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Agent. Upon the occurrence and during the continuance of any Event of Default, the Agent shall have the right (for the ratable benefit of the Lenders) to give (to the extent required) the five (5) Business Day notice referred to in the final proviso of Section 7.1 of the Credit Agreement (the "Default Notice") and, at any time after the expiration of -------------- five (5) Business Days from the date of the Default Notice (the "Default Notice -------------- Period") in its discretion and without further notice to the Grantors, to - ------ transfer to or to register in the name of the Agent or any of its nominees any or all of the Pledged Collateral. SECTION 4. Representations and Warranties. Each Grantor, jointly and ------------------------------ severally, represents and warrants as follows: (a) As of the Filing Date, all of the Inventory and/or Equipment (other than motor vehicles and other immaterial amounts of Inventory and Equipment not exceeding, in the aggregate, $10,000,000 in value) is located at the places specified in Schedule 1 hereto. As of the Filing Date, the jurisdictions of formation, organization or incorporation, as the case may be, the chief places of business and chief executive offices of each of the Grantors and the offices where each Grantor keeps its records concerning any Accounts and any Health-Care-Insurance Receivables and all originals of all chattel paper which evidence any Account are located at the places specified in Schedule 2 hereto. As of the Filing Date, all trade names under which each of the Grantors have sold and will sell Inventory are listed on Schedule 3 hereto. (b) Each of the Grantors owns the Collateral free and clear of any lien, security interest, charge or encumbrance except for the security interest created by this Agreement and except as otherwise permitted under Section 6.1 of the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed (x) in favor of the Agent relating to this Agreement and (y) in favor of any holder of a Lien permitted under Section 6.1 of the Credit Agreement. (c) As of the Filing Date, no Grantor owns any material Trademarks, Patents or Copyrights or has any material Trademarks, Patents or Copyrights registered in, or the subject of pending applications in, the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, other than those described in Schedules 3, 4 and 5 hereto. As of the Filing Date, the registrations for the Trademarks, Patents and Copyrights disclosed on such Schedules 3, 4 and 5 hereto are subsisting and have not been adjudged invalid or unenforceable, in whole or in part, and each Patent, Trademark and Copyright is valid and enforceable. None of the material Trademarks, Patents or Copyrights has been abandoned or dedicated. (d) Each Grantor, as the case may be, is the sole and exclusive owner of the entire right, title and interest in and to each of its Trademarks, Patents and Copyrights, free and clear of any liens, charges and encumbrances except for Liens permitted pursuant to Section 6.1 of the Credit Agreement. (e) As of the Filing Date, no Grantor owns or holds any Pledged Collateral other than that described in Schedules 6, 7 and 8. (f) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. (g) As of the Filing Date, each Grantor, as the case may be, is the record and beneficial owner of the Pledged Collateral described in Schedules 6, 7 and 8 free and clear of any Lien, security interest, option or other charge or encumbrance, except as permitted under Section 6.1 of the Credit Agreement. (h) As of the Filing Date, except as disclosed on Schedule 6, the Pledged Shares constitute all of the issued and outstanding shares of stock of each of the Issuers which is a Borrower or a Subsidiary of a Borrower and no such Issuer is under any contractual obligation to issue any additional shares of stock or any other securities, rights or indebtedness. (i) As of the Filing Date, except as disclosed on Schedule 7, the Pledged Partnership Interests constitute all of the issued and outstanding interests in each of the Partnerships and no Partnership is under any contractual obligation to issue any additional interests or any other rights or indebtedness. (j) As of the Filing Date, except as disclosed on Schedule 8, the Pledged Company Interests constitute all of the issued and outstanding interests in each of the Companies and no Company is under any contractual obligation to issue any additional interests or any other rights or indebtedness. (k) Upon the entry by the Bankruptcy Court of the Final Order, (i) each Grantor will be duly authorized to execute and deliver this Agreement to the Agent, and (ii) this Agreement will constitute the legal, valid and binding obligation of the Grantors, enforceable against the Grantors in accordance with its terms. (l) As of the Filing Date, all material letters of credit to which any Grantor has rights are listed on Schedule 9 (as amended or supplemented from time to time) hereto, and the Grantors have obtained the consent of each issuer of any material letter of credit to the assignment of the proceeds of the letter of credit to the Agent. SECTION 5. Further Assurances. ------------------ (a) Each of the Grantors agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce any of its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, and without further order of the Bankruptcy Court, each of the Grantors will execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as the Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby. (b) Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof is sufficient as a financing statement where permitted by law. (c) Each Grantor will furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail. (d) Each Grantor hereby covenants and agrees that with respect to any material letter of credit hereafter arising it shall obtain the consent of the issuer thereof to the assignment of the proceeds of the letter of credit to the Agent. SECTION 6. As to Equipment and Inventory. Each Grantor shall: ----------------------------- (a) Keep the Equipment and Inventory (other than Inventory sold in the ordinary course of business, motor vehicles and other immaterial amounts of Inventory and Equipment not exceeding, in the aggregate, $10,000,000 in value) at the places specified therefor in Schedule 1 hereto or, upon 30 days' prior written notice to the Agent, at other places in jurisdictions where all action required by Section 5 hereof shall have been taken to assure the continuation of the perfection of the security interest of the Agent (for its benefit and the ratable benefit of the Lenders) with respect to the Equipment and Inventory. (b) Subject to provisions of the Credit Agreement, maintain or cause to be maintained in good repair, working order and condition, excepting ordinary wear and tear and damage due to casualty, all of the Equipment, and make or cause to be made all appropriate repairs, renewals and replacements thereof, to the extent not obsolete and consistent with past practice of such Grantor, as quickly as practicable after the occurrence of any loss or damage thereto which are necessary or reasonably desirable to such end, except where the failure to do any of the foregoing would not result in a material adverse effect on the assets, properties or condition (financial or otherwise) of the Grantors, taken as a whole. (c) Until satisfaction in full of the Obligations, at any time when an Event of Default has occurred and is continuing: (i) each Grantor will perform any and all reasonable actions requested by the Agent to enforce the Agent's security interest in the Inventory and all of the Agent's rights hereunder, such as leasing warehouses to the Agent or its designee, placing and maintaining signs, appointing custodians, transferring Inventory to warehouses, and delivering to the Agent warehouse receipts and documents of title in the Agent's name; (ii) if any Inventory is in the possession or control of any of the Grantors' agents, contractors or processors or any other third party, each such Grantor will notify the Agent thereof and will notify such agents, contractors or processors or third party of the Agent's security interest therein and, upon request, instruct them to hold all such Inventory for the Agent and such Grantor's account, as their interests may appear, and subject to the Agent's instructions; (iii) the Agent shall have the right to hold all Inventory subject to the security interest granted hereunder; and (iv) the Agent shall have the right to give the Default Notice and, at any time after the expiration of the Default Notice Period, to take possession of the Inventory or any part thereof and to maintain such possession on such Grantor's premises or to remove any or all of the Inventory to such other place or places as the Agent desires in its sole discretion. If the Agent exercises its right to take possession of the Inventory, such Grantor, upon the Agent's demand, will assemble the Inventory and make it available to the Agent at such Grantor's premises at which it is located. SECTION 7. As to Accounts. -------------- (a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Accounts, and the offices where it keeps all originals of all chattel paper which evidence Accounts, at the location therefor specified in Section 4(a) hereof or, upon 30 days' prior written notice to the Agent, at such other locations in a jurisdiction where all actions required by Section 5 hereof shall have been taken with respect to the Accounts. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of the Agent, at any time during normal business hours, to inspect and make abstracts from such records and chattel paper in accordance with Section 5.6 of the Credit Agreement. (b) Except as otherwise provided in this subsection (b), each Grantor shall continue to collect in accordance with its customary practice, at its own expense, all amounts due or to become due to such Grantor under the Accounts and, prior to the occurrence and continuance of an Event of Default, such Grantor shall have the right to adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon, all in accordance with its customary practices. In connection with such collections, the Grantors may, upon the occurrence and during the continuation of an Event of Default, take (and at the direction of the Agent shall take) such action as the Grantors or the Agent may reasonably deem necessary or advisable to enforce collection of the Accounts; provided, that upon written notice by the Agent to any Grantor, -------- following the occurrence and during the continuation of an Event of Default and after the expiration of the Default Notice Period, of its intention so to do, the Agent shall have the right to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to the Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Accounts, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice referred to in the proviso to the preceding sentence, ------- (i) all amounts and proceeds (including instruments) received by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Agent (for the ratable benefit of the Lenders) hereunder, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and either (A) released to the Grantors if such Event of Default shall have been cured or waived or (B) if such Event of Default shall be continuing, applied as provided by Section 16 hereof, and (ii) the Grantors shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. SECTION 8. As to Trademarks, Patents and Copyrights. ---------------------------------------- (a) (i) Each Grantor shall, either itself or through licensees, continue to use the Trademarks as each is currently used in the Grantor's business in order to maintain the Trademarks in full force free from any claim of abandonment for nonuse, and (ii) each such Grantor will not (and will not permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated, unless, in the cases of clauses (i) and (ii), such failure to maintain or use a Trademark is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operation or properties of the Grantors taken as a whole. (b) Unless and until an Event of Default shall have occurred, the Agent hereby grants to the Grantors the exclusive and nontransferable right and license to make, have made, use and sell the inventions disclosed and claimed in the Patents for the Grantors' own benefit and account and for none other. Each Grantor agrees that it will not sell or assign its interest in, or grant any sublicense under, the license granted to the Grantors under this subsection (b) without the prior written consent of the Agent. From and after the occurrence of any Default or Event of Default, the Grantors' license with respect to the Patents as set forth in this subsection (b) shall terminate, and the Agent shall have, in addition to all other rights and remedies given it by this Agreement, those allowed by law. (c) Each Grantor hereby agrees that the license granted to the Agent with respect to each of the Patents shall be without any liability for royalties or other related charges from the Agent to the Grantors. The assignment granted to the Agent herein with respect to each of the Patents shall terminate on the earlier of (i) the expiration of such Patent, and (ii) the payment in full of all of the Obligations and the termination of the Commitments. (d) No Grantor will do any act, or omit to do any act, whereby the Patents or Copyrights may become abandoned or dedicated and each such Grantor shall notify the Agent immediately if it knows of any reason or has reason to know that the application or registration of any of the Patents or Copyrights may become abandoned or dedicated, unless such abandonment or dedication is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operations or properties of the Grantors taken as a whole. (e) No Grantor will, either itself or through any agent, employee, licensee or designee, (i) file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof or (ii) file any assignment of any Patent or Trademark, which such Grantor may acquire from a third party, with the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof, unless such Grantor shall, within 30 days after the date of ------ such filing, notify the Agent thereof, and, upon request of the Agent, execute and deliver any and all assignments, agreements, instruments, documents and papers as the Agent may request to evidence the Agent's interest in such Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby, and such Grantor hereby constitutes the Agent its attorney-in-fact to execute and file all such writings for the foregoing purposes, all lawful acts of such attorney being hereby ratified and confirmed; such power being coupled with an interest is irrevocable until the Obligations are paid in full. (f) Each Grantor will take all necessary steps in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office, the Library of Congress or any similar office or agency in any other country or any political subdivision thereof, in order to maintain in all material respects each registered Trademark, Patent and Copyright, and to pursue each application for registration of any Trademark, Patent and Copyright not listed on Schedules 3, 4 or 5 hereto, including, without limitation, filing of renewals, payment of maintenance fees, filing of affidavits of use, filing of affidavits of incontestability and opposition, and participation in opposition, interference and cancellation proceedings, unless failure to take such steps is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operation or properties of the Grantors, taken as a whole. (g) Each Grantor will, without further order of the Bankruptcy Court, perform all acts and execute and deliver all further instruments and documents, including, without limitation, assignments for security in form suitable for filing with the United States Patent and Trademark Office, and the United States Copyright Office, respectively, reasonably requested by the Agent at any time to evidence, perfect, maintain, record and enforce the Agent's interest in all Trademarks, Patents and Copyrights or otherwise in furtherance of the provisions of this Agreement, and each Grantor hereby authorizes the Agent to execute and file one or more accurate financing statements (and similar documents) or copies thereof or of this Agreement with respect to Patents, Trademarks and Copyrights signed only by the Agent. (h) Each Grantor will, upon acquiring knowledge of any use by any person of any term or design likely to cause confusion with any Trademark, promptly notify the Agent of such use, and if requested by the Agent, shall join with the Agent, at such Grantor's expense, in such action as the Agent, in its reasonable discretion, may deem advisable for the protection of the Agent's interest in and to the Trademarks. (i) Each Grantor agrees that, should it obtain rights to any Patent, Trademark or Copyright which is not now identified on Schedules 3, 4 or 5, or become entitled to the benefit of any reissue, division, continuation, renewal, extension, or continuation-in-part of any Trademark, Patent or Copyright, (i) such Grantor shall give prompt written notice thereof to the Agent, (ii) the provisions of Section 1 of this Agreement shall automatically apply to any such Trademark, Patent or Copyright, and (iii) any such Trademark, Patent or Copyright shall automatically become part of the Collateral. (j) If any Grantor becomes aware that any Trademark, Patent or Copyright is infringed or misappropriated by a third party, such Grantor shall promptly notify the Agent and shall, if reasonably requested by the Agent, promptly sue for infringement or misappropriation and for recovery of all damages caused by such infringement or misappropriation, or, with the prior written consent of the Agent, shall take such other actions as the Agent shall reasonably deem appropriate under the circumstances to protect such Trademark, Patent or Copyright. (k) Each Grantor shall continue to use reasonable and proper statutory notice in connection with its use of each registered Patent, Trademark and Copyright. (l) This Agreement is executed by collateral purposes only and upon payment in full of the Obligations and termination of the Commitments, the Agent shall, at the Grantors' expense, execute and deliver to the Grantors all deeds, assignments and other instruments as may be necessary or proper to re-vest in the Grantors full title to the Trademarks, Patents and Copyrights, subject to any disposition thereof which may have been made by the Agent pursuant hereto or pursuant to the Credit Agreement. SECTION 9. As to the Pledged Collateral; Voting Rights; Dividends; Etc. ------------------------------------------------------------ (a) So long as no Event of Default shall have occurred and be continuing: (i) the Grantors (as applicable) shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; (ii) notwithstanding the provisions of Section 1 hereof, such Grantors shall be entitled to receive and retain any and all dividends, interest or distributions paid in respect of the Pledged Collateral; provided, that any and all -------- (A) dividends, interest or distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, and (B) dividends, interest or distributions paid or payable in cash in respect of any Pledged Collateral (other than the Pledged Collateral consisting of Pledged Shares, Pledged Partnership Interests or Pledged Company Interests of Subsidiaries of the Borrowers) in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus; and (C) cash paid, payable or otherwise distributed in respect of, or in redemption of, or in exchange for, any Pledged Collateral (other than the Pledged Collateral consisting of Pledged Shares, Pledged Partnership Interests or Pledged Company Interests of Subsidiaries of the Borrowers); shall be, and shall be forthwith delivered to the Agent, to hold as Pledged Collateral and shall, if received by any of the Grantors, be received in trust for the benefit of the Agent, be segregated from the other property or funds of such Grantor, and be forthwith delivered to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement); and (iii) the Agent shall execute and deliver (or cause to be executed and delivered) to the Grantors (as applicable) all such proxies and other instruments as the Grantors (as applicable) may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends which it is authorized to receive and retain pursuant to paragraph (ii) above; (b) Upon the occurrence and during the continuance of an Event of Default: (i) upon written notice from the Agent to the Grantors (as applicable) to such effect, all rights of such Grantors (as applicable) to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 9(a)(i) and to receive the dividends which it would otherwise be authorized to receive and retain pursuant to Section 9(a)(ii) shall cease, and all such rights shall thereupon become vested in the Agent, who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral any such dividends; and (ii) all dividends which are received by such Grantors contrary to the provisions of paragraph (i) of this Section 9(b) shall be received in trust for the benefit of the Agent, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). SECTION 10. As to Material Contracts. ------------------------ (a) Each Grantor agrees that the Agent may at any time notify, or require any Grantor to so notify, the counterparty on any Material Contract of the security interest of the Agent therein. In addition, after the occurrence and during the continuance of an Event of Default, the Agent may upon written notice to the applicable Grantor, notify, or require any Grantor to notify, the counterparty to make all payments under the Material Contracts directly to the Agent. (b) Each Grantor shall perform in all material respects all of its obligations with respect to the Material Contracts, except where the failure to do so would not result in a material adverse effect on the condition (financial or otherwise), operation or properties of the Grantors, taken as a whole. (c) Each Grantor shall promptly and diligently exercise each material right it may have under any Material Contract, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor may deem necessary or advisable in its good faith business judgment. SECTION 11. Insurance. Upon the occurrence and during the continuance --------- of any Event of Default, all insurance payments in respect of Inventory and Equipment shall be held, applied and paid to the Agent as specified in Section 16 hereof. SECTION 12. Transfers to Others; Liens; Additional Shares and Interests. ----------------------------------------------------------- (a) Each Grantor shall not sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except for dispositions otherwise permitted by the Credit Agreement or other Loan Documents. (b) Each Grantor shall not create or suffer to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral to secure any obligation of any person or entity, except for the security interest created by this Agreement and the Final Order, or except as otherwise permitted under Section 6.1 of the Credit Agreement. (c) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Issuers that are wholly-owned Subsidiaries not to issue any stock or other securities in addition to or substitution for the Pledged Shares issued by such Issuer, except to the respective Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional shares of stock or other securities of each Issuer. (d) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Partnerships that are wholly-owned Subsidiaries not to issue any interests in addition to or substitution for the Pledged Partnership Interests issued by such Issuer, except to the respective Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional interests of each Partnership. (e) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Companies that are wholly-owned Subsidiaries not to issue any interests in addition to or substitution for the Pledged Company Interests issued by such Company, except to the respective Grantor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional interests of each Company. SECTION 13. Agent Appointed Attorney-in-Fact. Each Grantor hereby -------------------------------- irrevocably appoints the Agent such Grantor's attorney-in-fact (which appointment shall be irrevocable and deemed coupled with an interest), with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Agent's discretion, upon and during the occurrence and continuation of an Event of Default at any time after the Agent has given the Default Notice and the Default Notice Period has expired, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (i) to obtain and adjust insurance required to be paid to the Agent pursuant to Section 11 hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (iii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) or (ii) above, (iv) to receive, endorse and collect all instruments made payable to the Grantors representing any dividend or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, and (v) to file any claims or take any action or institute any proceedings which the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent with respect to any of the Collateral. SECTION 14. Agent May Perform. If any Grantor fails to perform any ----------------- agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Grantors under Section 17(b) hereof. SECTION 15. The Agent's Duties. The powers conferred on the Agent ------------------ hereunder are solely to protect its interest and the interests of the Lenders in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral, including, without limitation, ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Agent has or is deemed to have knowledge of such matters. SECTION 16. Remedies. If any Event of Default shall have occurred and -------- be continuing at any time after the Agent has given the Default Notice and the Default Notice Period has expired, and subject to the provisions of Section 7 of the Credit Agreement: (a) The Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, and without application to or order of the Bankruptcy Court, all the rights and remedies of a secured party on default under the UCC and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place to be designated by the Agent which is reasonably convenient to both parties and (ii) without notice except as specified in the following sentence, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of such sale shall be required by law, at least ten days' notice to the Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) The Agent may instruct the Grantors not to make any further use of the Patents, Copyrights or Trademarks or any mark similar thereto for any purpose to the extent that such use would be inconsistent with the exercise by the Agent of any other remedies under this Section. (c) The Agent may license, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any of the Trademarks, Patents or Copyrights throughout the world for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine. (d) The Agent may (without assuming any obligations or liability thereunder), at any time, enforce (and shall have the exclusive right to enforce) against any licensee or sublicensee all rights and remedies of the Grantors in, to and under any one or more license agreements with respect to the Collateral, and take or refrain from taking any action under any thereof, and each of the Grantors hereby releases the Agent from, and agrees to hold the Agent free and harmless from and against any claims arising out of, any action taken or omitted to be taken with respect to any such license agreement. (e) In the event of any such license, assignment, sale or other disposition of the Collateral, or any of it, each Grantor shall supply its know- how and expertise relating to the manufacture and sale of the products bearing or in connection with the Trademarks, Patents or Copyrights, and its customer lists and other records relating to the Trademarks, Patents or Copyrights and to the distribution of said products, to the Agent or its designee. (f) In order to implement the assignment, sale or other disposal of any of the Trademarks, Patents or Copyrights, the Agent may, at any time, pursuant to the authority granted in Section 13 hereof, execute and deliver on behalf of the Grantors, one or more instruments of assignment of the Trademarks, Patents or Copyrights (or any application of registration thereof), in form suitable for filing, recording or registration in any country. (g) All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as collateral for, and then or at any time thereafter applied (after payment of any amounts payable to the Agent pursuant to Section 17 hereof) in whole or in part against, all or any part of the Obligations in such order as the Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all the Obligations shall be paid over to the Grantors or to whomsoever may be lawfully entitled to receive such surplus. (h) If at any time when the Agent shall determine to exercise its right to sell all or any part of the Pledged Collateral pursuant to this Section 16, such Pledged Collateral or the part thereof to be sold shall not be effectively registered under the Securities Act of 1933, as amended, and as from time to time in effect, and the rules and regulations thereunder (the "Securities Act"), the Agent is hereby expressly authorized to sell such Pledged -------------- Collateral or such part thereof by private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Agent, in compliance with applicable securities laws, (a) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Collateral or such part thereof shall have been filed under such Securities Act, (b) may approach and negotiate with a restricted number of potential purchasers to effect such sale and (c) may restrict such sale to purchasers as to their number, nature of business and investment intention including without limitation to purchasers each of whom will represent and agree to the satisfaction of the Agent that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Collateral, or part thereof, it being understood that the Agent may cause or require each Grantor, and each Grantor hereby agrees upon the written request of the Agent, to cause (i) a legend or legends to be placed on the certificates to be delivered to such purchasers to the effect that the Pledged Collateral represented thereby have not been registered under the Securities Act and setting forth or referring to restrictions on the transferability of such securities; and (ii) the issuance of stop transfer instructions to such Issuer's transfer agent, if any, with respect to the Pledged Collateral, or, if such Issuer transfers its own securities, a notation in the appropriate records of such Issuer. In the event of any such sale, each Grantor does hereby consent and agree that the Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price which the Agent may deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were public and deferred until after registration as aforesaid. SECTION 17. Indemnity and Expenses. ---------------------- (a) Each Grantor, jointly and severally, agrees to indemnify the Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses or liabilities directly arising from the Agent's own gross negligence, willful misconduct or bad faith. (b) The Grantors will upon demand pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder or (iv) the failure by any of the Grantors to perform or observe any of the provisions hereof. (c) The Grantors assume all responsibility and liability arising from the use of the Trademarks, Patents and Copyrights, and the Grantors hereby, jointly and severally, indemnify and hold the Agent harmless from and against any claim, suit, loss, damage or expense (including reasonable attorneys' fees) arising out of any alleged defect in any product manufactured, promoted or sold by any of the Grantors in connection with any Trademark or out of the manufacture, promotion, labeling, sale or advertisement of any such product by any of the Grantors except as the same may have resulted from the gross negligence, willful misconduct or bad faith of the Agent. (d) Each of the Grantors agree that the Agent does not assume, and shall have no responsibility for, the payment of any sums due or to become due under any agreement or contract included in the Collateral or the performance of any obligations to be performed under or with respect to any such agreement or contract by any of the Grantors, and except as the same may have resulted from the gross negligence or willful misconduct of the Agent, each of the Grantors hereby jointly and severally agree to indemnify and hold the Agent harmless with respect to any and all claims by any person relating thereto. SECTION 18. Security Interest Absolute. All rights of the Agent and -------------------------- security interests hereunder, and all obligations of each of the Grantors hereunder, shall be absolute and unconditional, irrespective of any circumstance which might constitute a defense available to, or a discharge of, any guarantor or other obligor in respect of the Obligations. SECTION 19. Amendments; Etc. No amendment or waiver of any provision of --------------- this Agreement, nor any consent to any departure by any of the Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 20. Addresses for Notices. All notices and other communications --------------------- provided for hereunder shall be in writing and shall be given in accordance with the applicable provisions of the Credit Agreement. SECTION 21. Continuing Security Interest. This Agreement shall create a ---------------------------- continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of the Obligations, (ii) be binding upon each of the Grantors, their successors and assigns and (iii) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Agent and each of the Lenders and their respective successors, transferees and assigns. Upon the payment in full of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors subject to any existing liens, security interests or encumbrances on such Collateral. Upon any such termination, the Agent will, at the Grantor's expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination. SECTION 22. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York and by Federal law (including, without limitation, the Bankruptcy Code) to the extent the same has pre-empted the law of the State of New York or such other jurisdiction. SECTION 23. Headings. Section headings in this Agreement are included -------- herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. IN WITNESS WHEREOF, each of the Grantors and the Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. GRANTORS: ICG COMMUNICATIONS, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG TEVIS, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG SERVICES, INC. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG NETAHEAD, INC. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: _________________________ Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: _________________________ Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: _________________________ Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: _________________________ Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: _________________________ Name: Bernard L. Zuroff Title: Vice President DOWNNORTH, INC. By: _________________________ Name: Bernard L. Zuroff Title: Vice President AGENT: THE CHASE MANHATTAN BANK By: _________________________ Name: Norma C. Corio Title: Managing Director SCHEDULE 1 Locations of Equipment and Inventory SCHEDULE 2 Locations of Chief Executive Office, Chief Place of Business and Locations Where Records Concerning Accounts are Kept SCHEDULE 3 Trademarks SCHEDULE 4 Patents SCHEDULE 5 Copyrights SCHEDULE 6 Pledged Shares Grantor Issuer Class No. Of Shares ------- ------ ----- ------------- SCHEDULE 7 Pledged Partnership Interests Grantor Partnership Percentage of Partnership Interests Held ------ ----------- ---------------------------------------- SCHEDULE 8 Pledged Company Interests Grantor Company Percentage of Interests Held ------- ------- ---------------------------- SCHEDULE 9 Material Letters of Credit Exhibit C to the Revolving Credit Agreement FORM OF OPINION OF COUNSEL December ___, 2000 To Each Addressee Listed on Schedule I hereto Re: ICG Communications, Inc. ------------------------ Ladies and Gentlemen: We have acted as special counsel to (i) ICG Communications, Inc., a Delaware corporation and a debtor and debtor-in-possession (the "Company") in a ------- pending case under Chapter 11 of the United States Bankruptcy Code, 11 U.S.C. (S)(S) 101-1330 (the "Bankruptcy Code"), and (ii) each of the entities listed on --------------- Schedule II, each of which is a direct or indirect subsidiary of the Company - ----------- (each, individually, a "Borrower" and collectively, with the Company, the -------- "Borrowers") and each of which is a debtor and debtor-in-possession in a pending --------- case (each, individually a "Case" and collectively, with the Chapter 11 case of ---- the Company, the "Cases"), in connection with the preparation, execution and ----- delivery of the Revolving Credit Agreement, dated as of November __, 2000 (the "Credit Agreement"), among the Borrowers, The Chase Manhattan Bank, a New York ---------------- banking corporation ("Chase"), each of the other financial institutions party ----- thereto (together with Chase, the "Lenders") and Chase, as agent (in such ------- capacity, the "Agent") for the Lenders. This opinion is being delivered ----- pursuant to Section 4.2(f) of the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. December __, 2000 Page 2 In our examination we have assumed the genuineness of all signatures including indorsements, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion which we did not independently establish or verify, we have relied upon representations of the Borrowers and of public officials, including the facts and conclusions set forth in the Officer's Certificate described in item 4 below. In rendering the opinions set forth herein, we have examined and relied on originals or copies of the following: (1) the Credit Agreement; (2) the Security and Pledge Agreement, dated as of November ___, 2000, by and among the Borrowers, as grantors, and the Agent (the "Security Agreement"); ------------------ (3) the Order, dated December __, 2000 (the "Final Order"), a ----------- copy of which is annexed hereto as Exhibit A; --------- (4) the Certificate of the Borrowers dated the date hereof, a copy of which is annexed hereto as Exhibit B (the "Officer's --------- --------- Certificate"); and ----------- (5) such other documents as we have deemed necessary or appropriate as a basis for the opinions set forth below. We express no opinion as to the laws of any jurisdiction other than (i) the Applicable Laws of the State of New York and (ii) the Applicable Laws of the United States of America. We have relied with your consent as to matters of the laws of the State of New York on the opinion of Skadden, Arps, Slate, Meagher & Flom LLP dated the date hereof and addressed to us. The documents listed at items 1 and 2 above shall hereinafter be referred to collectively as the "Loan Documents". The following terms shall -------------- have the following meanings when used herein: (i) "Applicable Laws" shall mean those laws, rules and regulations --------------- which, in our experience, are normally applicable to transactions of the type contemplated by the Loan Documents (including the Bankruptcy Code) without our having made any special investigation as to the applicability of any specific law, rule or regulation and which are not the subject of a specific opinion herein referring to a particular law or laws; and (ii) "Governmental Approval" shall mean any consent, approval, --------------------- license, authorization or validation of, or filing, recording or registration with, any governmental authority pursuant to (x) the Applicable Laws of the State of New York or (y) the Applicable Laws of the United States of America. Based upon the foregoing and subject to the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that: 1. Each of the Loan Documents constitutes the valid and binding obligation of each Borrower party thereto enforceable against such Borrower in accordance with its terms under the laws of the State of New York. Our opinion in this paragraph is subject to the following qualifications: (a) enforcement of the Loan Documents is subject to the Bankruptcy Court's general powers (including its powers as a court of equity), to applicable New York state bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in equity or at law); (b) certain of the remedial provisions with respect to the Collateral (as defined in the Security Agreement) including waivers with respect to the exercise of remedies against the Collateral contained in the Loan Documents may be unenforceable in whole or in part, but the inclusion of such provisions does not affect the validity of any such agreement, taken as a whole; (c) enforcement of the Loan Documents as each relates to the grant of a security interest in the Collateral may be subject to the terms of instruments, leases, contracts or other agreements between each Borrower party thereto and the other parties to such agreements, the rights of such other parties and any claims or defenses of such other parties against such Borrowers arising under or outside such instruments, leases or contracts or other agreements; (d) we express no opinion as to the creation, perfection or priority of any lien on or security interest in the Collateral purported to be created by any Loan Document; (e) we express no opinion regarding any provision of any Loan Document to the extent that it authorizes or permits any purchaser of a participation interest to set off or apply any deposit, property or indebtedness with respect to any participation interest; (f) we express no opinion as to the enforceability of any rights to contribution or indemnification provided for in the Loan Documents which are violative of the public policy underlying any law, rule or regulation (including any federal or state securities law, rule or regulation); and (g) the enforceability of the Loan Documents may be limited to the extent any term or provision of the Loan Documents conflicts or is found to conflict with any term or provision of the Final Order. 2. The execution and delivery by each Borrower of each Loan Document to which it is a party and the performance by each such Borrower of its obligations thereunder do not violate any provision of any Applicable Law of the State of New York or any Applicable Law of the United States of America. 3. Other than the entry by the Bankruptcy Court of the Final Order, no Governmental Approval, which has not been obtained or taken and is not in full force and effect, is required under any Applicable Law of the State of New York or the United States of America to authorize, or is required in connection with, the execution, delivery or performance of any Loan Documents. 4. The Final Order was entered on the docket of the Clerk of the Bankruptcy Court for the Cases of the Borrowers (the "Docket") on December __, ------ 2000 (the "Effective Time"). Based solely upon our review of the Docket as it -------------- existed as of __ a.m. on December __, 2000, (x) we believe that the Final Order is in full force and effect and (y) no order amending, staying, vacating or rescinding the Final Order has been entered by the Bankruptcy Court. In connection with the foregoing, please note that there may be a delay between the time when papers are filed with the Bankruptcy Court and the time when such papers entered into the Docket. To our knowledge, as of the Effective Time, no order amending, staying, vacating or rescinding the Final Order has been entered by the Bankruptcy Court. QUALIFICATIONS AND ASSUMPTIONS ------------------------------ A. In rendering the foregoing opinions as they relate to or are affected by the Final Order, we have the following qualifications and assumptions relating to the Final Order: (a) we have assumed that each interested party, to the extent entitled thereto, has received or will receive due, sufficient and adequate notice of the Final Order and the Bankruptcy Court's hearing on the Final Order; (b) you have not asked for, and we express no opinion herein, on the substantive effect of the Final Order or the provisions thereof; (c) we have assumed that the evidence in the record at the hearing was adequate to support the relief requested in the Motion (as defined in the Final Order) and the entry of the Final Order; and (d) in rendering our opinions in paragraphs 1, 2 and 3, we have relied on the terms of the Final Order as in effect at the Effective Time and reflected on the Docket at such time, and we express no opinion as to whether the Final Order may be subject to subsequent alteration or revocation by the Bankruptcy Court or another court of competent jurisdiction or effects of any such alteration or revocation on the transactions contemplated by the Loan Documents. B. In rendering the foregoing opinions, we also have assumed, with your consent, that: (b) each Borrower has been duly incorporated or formed, as applicable, and is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable; (c) each Borrower has the requisite power and authority, corporate or otherwise, to execute, deliver and perform all of its obligations under each of the Loan Documents to which it is a party, and the execution and delivery of such Loan Documents and the consummation by each Borrower of the transactions contemplated thereby have been duly authorized by all requisite action, corporate or otherwise, on the part of such Borrower; (d) each of the Loan Documents has been duly executed and delivered by each Borrower that is a party thereto; (e) the execution and delivery by each Borrower of the Loan Documents to which it is a party and the performance of its obligations thereunder do not and will not conflict with, contravene, violate or constitute a default under (i) the articles or certificate of incorporation or the by-laws (or the equivalent organizational and governing documents) of such Borrower, (ii) any law, rule, or regulation to which any Borrower is subject including, without limitation, the Investment Company Act of 1940, as amended, and the Public Utilities Holding Company Act of 1935, as amended (other than Applicable Laws, as to which we express our opinion in paragraph 2 herein), (iii) any judicial or administrative order or decree of any governmental authority or (iv) any consent, approval, license, authorization or validation of, or filing, recording or registration with any governmental authority (other than Governmental Approvals as to which we express our opinion in paragraph 3 herein); and (f) no authorization, consent or other approval of, notice to or filing with any court, governmental authority or regulatory body (other than Governmental Approvals as to which we express our opinion in paragraph 3 herein) is required to authorize or is required in connection with the execution, delivery or performance by each Borrower of any Loan Document to which it is a party or the transactions contemplated thereby. We understand that you are separately receiving an opinion with respect to certain of the foregoing assumptions from Robert S. Albery, Esq., Assis- tant General Counsel to the Company, and we are advised that such opinion contains qualifications. Our opinions herein stated are based on the assumptions specified above and we express no opinion as to the effect on the opinions herein stated of the qualifications contained in such other opinion. C. Finally, our opinions are also subject to the following assumptions and qualifications: (b) each Loan Document constitutes the legal, valid and binding obligation of each party to such Loan Document (other than the Borrowers) enforceable against such party (other than the Borrowers) in accordance with its terms; (c) we express no opinion as to the effect on the opinions expressed herein of (i) the compliance or non-compliance of any Agent, Lender or other party (other than the Borrowers to the extent set forth herein) to the Loan Documents with any state, federal or other laws or regulations applicable to them or (ii) the legal or regulatory status or the nature of the business of the Agent, any Lender or other such party; (d) each Lender and the Agent has acted in good faith in the execution, delivery and performance of the Loan Documents and the transactions contemplated thereby; (e) in rendering our opinions expressed herein, we express no opinion as to the applicability or effect of any fraudulent transfer or similar law on the Loan Documents or any transactions contemplated thereby; and (f) we call to your attention that the execution, delivery and performance by the Borrowers of the Loan Documents, the grant by the Borrowers pursuant thereto of security interests and other liens in respect of their assets, the issuance by each Borrower of the notes issued thereunder to which it is a party and the borrowing by the Borrowers of Borrowings thereunder may violate or constitute defaults under other agreements and instruments to which any Borrower or its property is subject, and, in giving our opinions herein, we are relying upon the effectiveness of the Final Order and the Bankruptcy Code. This opinion is being furnished only to the addressees named above in connection with the Loan Documents and is solely for their benefit and is not to be used, circulated, quoted, relied upon or otherwise referred to by any other Person or for any other purpose without our prior written consent, except that (i) an assignee of a Lender which becomes a party to (and a Lender under) the Credit Agreement pursuant to subsection 9.3(b) of the Credit Agreement may rely on this opinion as if it were addressed and delivered to such assignee on the date hereof; and (ii) you may deliver a copy of this opinion to (A) any permitted assignee, transferee or participant in respect of your interest under the Credit Agreement, or (B) any regulatory authority having jurisdiction over any Agent or Lender; provided that, except as set forth in the preceding clause -------- (i), no Person who receives a copy of this opinion pursuant to the preceding clause (ii) may use, quote, rely upon or otherwise refer to this opinion. Very truly yours, Schedule I to SASM&F (Illinois) Opinion ------------------------- Addressees of Opinion --------------------- Schedule II to SASM&F (Illinois) Opinion ------------------------- Subsidiaries ------------ Exhibit A to SASM&F (Illinois) Opinion ------------------------- Final Order ----------- Exhibit B to SASM&F (Illinois) Opinion ------------------------- Officer's Certificate --------------------- EXHIBIT C to the Revolving Credit Agreement (Continued) [Letterhead of ICG Communications, Inc.] December __, 2000 To Each Addressee Listed on Schedule I hereto Re: ICG Communications, Inc. Credit Facility ---------------------------------------- Ladies and Gentlemen: I am the Assistant General Counsel of ICG Communications, Inc. ("ICG"), a Delaware corporation, and each of its subsidiaries (each a "Borrower" --- -------- and collectively, the "Borrowers"), each a Debtor and Debtor-in-Possession in a --------- case (each, individually a "Case" and collectively, with the Chapter 11 case of ---- the Company, the "Cases"), pending under Chapter 11 of the Bankruptcy Code in ----- the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy ---------- Court"), and am familiar with the transactions contemplated by the Revolving - ----- Credit Agreement, dated as of December ___, 2000 (the "Credit Agreement"), among ---------------- the Borrowers, the Lenders party thereto and The Chase Manhattan Bank, as agent (the "Agent") for the Lenders. Capitalized terms used herein and not otherwise ----- defined have the meanings assigned thereto in the Credit Agreement. This opinion is being delivered pursuant to Section 4.2(f) of the Credit Agreement. December __, 2000 Page 2 In my examination, I have assumed the genuineness of all signatures, including indorsements, the legal capacity of natural persons, the authenticity of all documents submitted to me as originals, the conformity to original documents of all copies submitted to me as telefacsimile, certified or photostatic copies, and the authenticity of the originals of such copies. As to any facts material to this opinion, I have relied solely upon statements, representations and warranties of the Borrowers, the Lenders and the Agent, and their respective officers and representatives, and of public officials, and I have made no independent investigation or inquiry with respect to such factual matters. In rendering the opinions set forth herein, I have examined and relied on executed originals or copies of the following: (a) the Credit Agreement; (b) the Security and Pledge Agreement; (c) the Order, dated December __, 2000 (the "Final Order"), a copy of ----------- which is annexed hereto as Exhibit A; --------- (d) copies of the Articles of Incorporation, Certificates of Incorporation, Certificates of Formation, By-Laws, Operating Agreements, or equivalent organizational documents of the Opinion Parties; (e) copies of certain resolutions of the Board of Directors or other governing body of each of the Borrowers adopted on November 13, 2000; (f) certificates of good standing or certificates of existence, from the applicable Governmental Authority of each Borrower's jurisdiction of incorporation, organization or formation; and (g) such other documents as I have deemed necessary or appropriate as a basis for the opinions set forth below. With your permission, I have further assumed the due authorization, execution and delivery of the Loan Documents by all of the parties thereto other than December ___, 2000 Page 3 the Borrowers, and that all parties thereto other than the Borrowers have complied or will comply with all applicable laws and regulations in connection with the consummation of the transactions contemplated thereby. Based on the foregoing and subject to the qualifications and assumptions set forth herein, after giving effect to the Final Order, it is my opinion that: 1. Each Borrower (i) has been duly incorporated or formed, as applicable, (ii) is validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable, and (iii) has all requisite power and authority to own and operate its properties and to conduct its business as now being conducted. 2. Each Borrower has all requisite power and authority, corporate or otherwise, to execute and deliver the Loan Documents to which it is a party and to perform its obligations thereunder. The execution, delivery and performance by each Borrower of the Loan Documents to which it is a party and the consummation by each Borrower of the transactions contemplated by the Loan Documents have been duly authorized by all requisite action, corporate or otherwise, on the part of such Borrower. 3. Each of the Loan Documents has been duly and validly executed and delivered by each Borrower that is a party thereto. 4. The execution and delivery by each Borrower of the Loan Documents to which it is a party and the performance of the obligations thereunder do not and will not conflict with, contravene, violate or constitute a default under (a) the articles or certificate of incorporation or the by-laws (or the equivalent organizational and governing documents) of such Borrower, (b) any law, rule, or regulation to which any Borrower is subject including, without limitation, the Investment Company Act of 1940, as amended, and the Public Utilities Holding Company Act of 1935, as amended, (c) any judicial or administrative order or decree of any governmental authority, or (d) any consent, approval, license, authorization or validation of, or filing, recording or registration with any governmental authority. December ___, 2000 Page 4 The opinions stated herein are subject to the following assumptions and qualifications: (a) In rendering our opinions herein I have relied on the terms of the Final Order as in effect on December __, 2000 and reflected on the docket of the Clerk of the Bankruptcy Court for the Cases of the Borrowers at such time, and we express no opinion as to whether the Final Order may be subject to subsequent alteration or revocation by the Bankruptcy Court or another court of competent jurisdiction or effects of any such alteration or revocation on the transactions contemplated by the Loan Documents. (b) I call to your attention that the execution, delivery and performance by the Borrowers of the Loan Documents, the grant by the Borrowers pursuant thereto of security interests and other liens in respect of their assets, the issuance by each Borrower of the Notes to which it is a party and the borrowing by the Borrowers of Borrowings thereunder may violate or constitute defaults under other agreements and instruments to which any Borrower or its property is subject, and, in giving the opinions herein, I am relying upon the effectiveness of the Final Order and the Bankruptcy Code. I do not express any opinion as to matters governed by any law other than the corporation law of the States of Delaware and of Colorado. I express no opinion as to the effect on the matters covered by this letter of the federal laws of the United States, including without limitation federal bankruptcy law, or the laws of any other jurisdiction. This opinion is predicated solely upon laws and regulations in existence as of the present date and as they currently apply and to the facts as they currently exist. I assume no obligation to revise or supplement this opinion should the present facts change or the present laws be changed by legislative action, judicial decision or otherwise. This opinion is being furnished only to the addressees named above in connection with the Loan Documents and is solely for their benefit and is not to be used, circulated, quoted, relied upon or otherwise referred to by any other Person or for any other purpose without our prior written consent, except that (i) an assignee of December ___, 2000 Page 5 a Lender which becomes a party to (and a Lender under) the Credit Agreement pursuant to subsection 9.3(b) of the Credit Agreement may rely on this opinion as if it were addressed and delivered to such assignee on the date hereof; and (ii) you may deliver a copy of this opinion to (A) any permitted assignee, transferee or participant in respect of your interest under the Credit Agreement, or (B) any regulatory authority having jurisdiction over any Agent or Lender; provided that, except as set forth in the preceding clause (i), no -------- Person who receives a copy of this opinion pursuant to the preceding clause (ii) may use, quote, rely upon or otherwise refer to this opinion. Very truly yours, Schedule I ---------- Addressees of Opinion --------------------- Exhibit A --------- Final Order ----------- Exhibit D to the Revolving Credit Agreement FORM OF ASSIGNMENT AND ACCEPTANCE Dated: _____________, 200_ Reference is made to the Revolving Credit Agreement, dated as of December ___, 2000 (as restated, amended, modified, supplemented and in effect from time to time, the "Credit Agreement"), among ICG Communications, Inc. and each of its ---------------- Subsidiaries party thereto, each a debtor and debtor-in-possession under Chapter 11 of the Bankruptcy Code (collectively, the "Borrowers"), and The Chase --------- Manhattan Bank, as agent (in such capacity, the "Agent") for the lenders (the ----- "Lenders") party to the Credit Agreement. Capitalized terms used herein and not ------- otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. This Assignment and Acceptance between the Assignor (as set forth on Schedule I hereto and made a part hereof) and the Assignee (as set forth on Schedule I hereto and made a part hereof) is dated as of the Effective Date (as set forth on Schedule I hereto and made a part hereof). 1. The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date, an undivided interest (the "Assigned Interest") in and to all ----------------- the Assignor's rights and obligations under the Credit Agreement in a principal amount as set forth on Schedule I. 2. The Assignor (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any other of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other of the Loan Documents or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the performance or observance by the Borrowers of any of their respective obligations under the Credit Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto; and (iii) requests that the Agent evidence the Assigned Interest by recording the information contained on Schedule I in the Register which reflects the assignment being made hereby (and after giving effect to any other assignments which have become effective on the Effective Date). 3. The Assignee (i) represents and warrants that it is legally authorized to enter into this Assignment and Acceptance and that it is an Eligible Assignee; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.1 thereof, and such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; (vi) if the Assignee is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the Assignee's exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Credit Agreement or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty; and (vii) has supplied the information requested on the administrative questionnaire heretofore supplied by the Agent. 4. Following the execution of this Assignment and Acceptance, it will be delivered to the Agent, together with a processing and recordation fee of $3,500, for acceptance by it and recording by the Agent pursuant to Section 9.3 of the Credit Agreement, effective as of the Effective Date (which Effective Date shall, unless otherwise agreed to by the Agent, be within ten Business Days after the execution of this Assignment and Acceptance). 5. Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee, whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and Assignee shall make all appropriate adjustments in payments for periods prior to the Effective Date by the Agent or with respect to the making of this assignment directly between themselves. 6. From and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations under the Credit Agreement provided that Assignor hereby represents and warrants that the restrictions set forth in Section 9.3 of the Credit Agreement pertaining to the minimum amount of assignments have been satisfied. 7. This Assignment and Acceptance shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Acceptance to be executed by their respective duly authorized officers on Schedule I hereto. Schedule I to Assignment and Acceptance Respecting the Revolving Credit Agreement, dated as of December ___, 2000, among ICG Communications, Inc. and its Subsidiaries party thereto, the Lenders named therein, and The Chase Manhattan Bank, as Agent Legal Name of Assignor: Legal Name of Assignee: Effective Date of Assignment:
Principal Percentage Assigned (to at least 8 decimals) Amount shown as a percentage of aggregate Assigned principal amount of all Banks - -------- ----------------------------- $__________ ______% CONSENTED TO AND ACCEPTED: THE CHASE MANHATTAN BANK, ____________________________, as Agent as Assignor By___________________________ By___________________________ Name: Name: Title: Title: ____________________________, ___________________________, as Fronting Bank as Assignee By___________________________ By___________________________ Name: Name: Title: Title:
Schedule 3.5 to the Revolving Credit Agreement SUBSIDIARIES Schedule 3.6 to the Revolving Credit Agreement LIENS Schedule 3.12 to the Revolving Credit Agreement INTELLECTUAL PROPERTY Schedule 3.13 to the Revolving Credit Agreement MATERIAL CONTRACTS Schedule 5.2 to the Revolving Credit Agreement CERTAIN SUBSIDIARIES Schedule 6.3 to the Revolving Credit Agreement INTERCOMPANY INDEBTEDNESS Schedule 6.10 to the Revolving Credit Agreement EXISTING INVESTMENTS Schedule 6.13 to the Revolving Credit Agreement BORROWER TRANSACTION RESTRICTIONS EX-4.27 3 dex427.txt SECURITY AND PLEDGE AGREEMENT EXHIBIT 4.27 CONFORMED COPY SECURITY AND PLEDGE AGREEMENT SECURITY AND PLEDGE AGREEMENT (the "Agreement"), dated as of December --------- 4, 2000, by and among ICG COMMUNICATIONS, INC., a Delaware corporation, and each of its direct or indirect subsidiaries party to the Credit Agreement (as hereinafter defined) (the "Grantors"), each of which Grantors is a debtor and -------- debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy Code, and THE CHASE MANHATTAN BANK, a New York banking corporation as agent (in such capacity, the "Agent") for the lenders (the "Lenders") party to the Credit ----- ------- Agreement. WITNESSETH: ---------- WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Agent, the Lenders and the Grantors are entering into a Revolving Credit Agreement dated as of the date hereof (as amended, modified or supplemented from time to time, the "Credit Agreement"); and ---------------- WHEREAS, unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined; and WHEREAS, it is a condition precedent to the making of Loans and the issuance of Letters of Credit that the Grantors shall have granted a security interest, pledge and lien on (x) all cash maintained in the Letter of Credit Account pursuant to Section 364(c)(2) of the Bankruptcy Code and (y) certain of the Grantors' assets and properties and the proceeds thereof pursuant to Sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code; and WHEREAS, upon entry of the Final Order, the grant of such security interest, pledge and lien will have been authorized pursuant to Sections 364(c)(2) and 364(c)(3) of the Bankruptcy Code ; and WHEREAS, to supplement the Final Order without in any way diminishing or limiting the effect of the Final Order or the security interest, pledge and lien granted thereunder, the parties hereto desire to more fully set forth their respective rights in connection with such security interest, pledge and lien; and WHEREAS, upon entry of the Final Order, this Agreement will have been approved by the Bankruptcy Court; NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Loans and issue Letters of Credit, the Grantors hereby agree with the Agent as follows: SECTION 1. Grant of Security and Pledge. Subject to entry of the ---------------------------- Final Order, each of the Grantors hereby transfers, grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over to the Agent for its benefit and the ratable benefit of the Lenders, and hereby grants to the Agent for its benefit and the ratable benefit of the Lenders a perfected pledge and security interest in, all of the Grantors' right, title and interest in and to the following (the "Collateral"), which pledge and security interest ---------- shall be (x) junior to valid and perfected Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement, provided that upon -------- repayment of all Indebtedness under the Existing Agreement, the Obligations of the Borrowers hereunder and under the Loan Documents and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement shall automatically be secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a perfected first priority Lien (subject to valid and perfected Liens permitted pursuant to clauses (i) and (ii) of Section 6.1 of the Credit Agreement) on all property of the Borrowers that then secures the Existing Agreement, and (y) subject to the Carve-Out: (a) all "accounts" as defined in the Uniform Commercial Code as in effect from time to time in the State of New York, or when the context implies, the Uniform Commercial Code as in effect from time to time in any other applicable jurisdiction (the "UCC"), including, without limitation, all present --- and future accounts, accounts receivable and other rights of each of the Grantors to payment for goods sold or leased or for services rendered (except those evidenced by instruments or chattel paper), whether now existing or hereafter arising and wherever arising, and whether or not they have been earned by performance (collectively, the "Accounts"); -------- (b) (i) all "inventory" as defined in the UCC, and (ii) all goods and merchandise now owned or hereafter acquired by each of the Grantors wherever located, whether in the possession of a Grantor or of a bailee or other person for sale, storage, transit, processing, use or otherwise consisting of whole goods, components, supplies, materials, or consigned, returned or repossessed goods) which are held for sale or lease or to be furnished (or have been furnished) under any contract of service or which are raw materials, work-in- process, finished goods or materials used or consumed in such Grantor's business or processed by or on behalf of any Grantor (regardless of whether characterized as inventory under the UCC) (collectively, the "Inventory"); --------- (c) (i) all "equipment" as defined in the UCC, and (ii) all machinery, all manufacturing, distribution, selling, data processing and office equipment, all furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling, molds, dies, vehicles, vessels, aircraft and all other goods of every type and description (other than Inventory), in each instance whether now owned or hereafter acquired by each of the Grantors and wherever located (collectively, the "Equipment"); --------- (d) all works of art now owned or hereafter acquired by each of the Grantors, including, without limitation, paintings, sketches, drawings, prints, sculptures, crafts, tapestries, porcelain, carvings, artifacts, renderings and designs; (e) all "general intangibles" as defined in the UCC, including, without limitation, all rights, interests, choses in action, causes of action, claims and all other intangible property of each of the Grantors of every kind and nature (other than Accounts, Trademarks, Patents and Copyrights), in each instance whether now owned or hereafter acquired by such Grantor, including, without limitation, all general intangibles; all corporate and other business records; all loans, royalties, and other obligations receivable; all inventions, designs, trade 2 secrets, computer programs, software, printouts and other computer materials, goodwill, registrations, copyrights, licenses, franchises, customer lists, credit files, correspondence, and advertising materials; all customer and supplier contracts, firm sale orders, rights under license and franchise agreements (including all license agreements with any other Person in connection with any of the Patents and Trademarks or such other Person's names or marks, whether such Grantor is a licensor or licensee under any such license agreement), and other contracts and contract rights (including, without limitation, all Material Contracts); all interests in partnerships and joint ventures; all tax refunds and tax refund claims; all right, title and interest under leases, subleases, licenses and concessions and other agreements to the extent assignable relating to real or personal property; all payments due or made to each of the Grantors in connection with any requisition, confiscation, condemnation, seizure or forfeiture of any property by any person or governmental authority; all deposit accounts (general or special) with any bank or other financial institution; all credits with and other claims against carriers and shippers; all rights to indemnification; all reversionary interests in pension and profit sharing plans and reversionary, beneficial and residual interest in trusts; all proceeds of insurance of which each of the Grantors is beneficiary; and all letters of credit, guaranties, liens, security interest and other security held by or granted to each of the Grantors; and all other intangible property, whether or not similar to the foregoing (collectively, the "General Intangibles"); ------------------- (f) all chattel paper (as that term is defined in Article 9 of the UCC, including, without limitation, electronic chattel paper, as that term is defined in Revised Article 9), all instruments (as that term is defined in Article 9 of the UCC), all notes and debt instruments and all payments thereunder and instruments and other property from time to time delivered in respect thereof or in exchange therefor, and all bills of lading, warehouse receipts and other documents of title and documents, in each instance whether now owned or hereafter acquired by each of the Grantors; (g) all property or interests in property now or hereafter acquired by each of the Grantors which may be owned or hereafter may come into the possession, custody or control of the Agent or any agent or affiliate of the Agent in any way or for any purpose (whether for safekeeping, deposit, custody, pledge, transmission, collection or otherwise), and all rights and interests of each of the Grantors, now existing or hereafter arising and however and wherever arising, in respect of any and all (i) notes, drafts, letters of credits, stocks, bonds, and debt and equity securities, whether or not certificated, and warrants, options, puts and calls and other rights to acquire or otherwise relating to the same; (ii) money (including all cash and cash equivalents held in the Letter of Credit Account (as defined and referred to in the Credit Agreement)); (iii) proceeds of loans, including, without limitation, Loans made under the Credit Agreement; and (iv) insurance proceeds and books and records relating to any of the property covered by this Agreement; together, in each instance, with all accessions and additions thereto, substitutions therefor, and replacements, proceeds and products thereof; (h) all of each Grantor's now owned or existing and filed and hereafter acquired or arising and filed trademarks, service marks, trademark or service mark registrations, trade names, trademark or service mark applications, trade styles, prints and labels on which said trademarks, trade names, trade styles and service marks have appeared or appear, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, and all registrations and recordings thereof, including, without limitation, applications, registrations and 3 recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof (except for "intent to use" applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and including, without limitation, each mark, registration, and application listed on Schedule 3 attached hereto and made a part hereof (as the same may be amended pursuant hereto from time to time), and (i) renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, damages and payment for past or future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, (iv) all rights corresponding thereto throughout the world, and (v) together in each case with the good will of each Grantor's business connected with the use of each such trademark, service mark, trade name and trade dress (all of the foregoing being herein referred to as the "Trademarks"); ---------- (i) all of each Grantor's now owned or existing and filed and hereafter acquired or arising and filed patents and patent applications of the United States and any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by each Grantor, and including without limitation the inventions and improvements described and claimed therein, and those patents and patent applications listed on Schedule 4 attached hereto and made a part hereof, and (a) all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, (c) the right to sue for past, present and future infringements thereof, (d) all rights, title and interests corresponding thereto throughout the world (all of the foregoing patents and applications, and (e) the goodwill of Assignor's business connected with and symbolized by the foregoing, together with the items described in clauses (a)-(d), are sometimes hereinafter individually and/or collectively referred to as the "Patents"); ------- (j) all of each Grantor's now owned, registered and unregistered, and hereafter acquired or arising, registered and unregistered, copyrights and copyright applications of the United States, or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States Copyright Office, the Library of Congress or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision thereof, including those listed on Schedule 5 attached hereto and made a part hereof (as the same may be amended pursuant hereto from time to time), and (i) the renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including damages and payments for past or future infringements thereof, (iii) the right to sue for past, present and future infringements thereof, and (iv) all rights, title, and interests corresponding thereto throughout the world (all of the foregoing being herein referred to as the "Copyrights"); ---------- (k) all books, records, ledger cards and other property at any time evidencing or relating to the Accounts, Equipment, General Intangibles, Trademarks, Patents or Copyrights; 4 (l) all shares of capital stock owned by any Grantor, including, without limitation, all shares of capital stock listed on Schedule 6 hereto (as such schedule may be amended or supplemented from time to time) of the issuers listed thereon (individually, an "Issuer", and collectively, the "Issuers") and ------ ------- all shares of capital stock of any Issuer obtained in the future by such Grantor and the certificates, if any, representing or evidencing such shares and any interest of such Grantor on the books and records of such Issuer or on the books and records of any securities intermediary pertaining to such shares, and, subject to Section 9 below, all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such shares, and all rights and privileges of any Grantor with respect to such shares (the "Pledged Shares"); -------------- (m) all interests in any general partnership, limited partnership, limited liability partnership or other partnership held by any Grantor, including, without limitation, all partnership interests listed in Schedule 7 hereto (as such schedule may be amended or supplemented from time to time) of the partnerships listed thereon (individually, a "Partnership", and ----------- collectively, the "Partnerships") and all partnership interests in any ------------ Partnership obtained in the future by such Grantor and the certificates, if any, representing or evidencing such interests and any interest of such Grantor on the books and records of such Partnership or on the books and records of any securities intermediary pertaining to such interest, and, subject to Section 9 below, all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and all rights and privileges of any Grantor with respect to such interests (the "Pledged Partnership Interests"); ----------------------------- (n) all interests in any limited liability company or unlimited liability company held by any Grantor, including, without limitation, all limited liability company and unlimited liability company interests listed in Schedule 8 hereto (as such schedule may be amended or supplemented from time to time) of the limited liability companies and the unlimited liability company listed thereon (individually, a "Company", and collectively, the "Companies") ------- --------- and all interests in any Company obtained in the future by such Grantor and the certificates, if any, representing or evidencing such interests and any interest of such Grantor on the books and records of such Company or on the books and records of any securities intermediary pertaining to such interest, and, subject to Section 9 below, all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of such interests, and all rights and privileges of any Grantor with respect to such interests (the "Pledged Company Interests") (the Pledged ------------------------- Shares, the Pledged Partnership Interests and the Pledged Company Interests being collectively called the "Pledged Collateral"); ------------------ (o) all health-care-insurance receivables (the "Health-Care-Insurance --------------------- Receivables)", as such term is defined in the 1999 Official Text of Article 9 of - ----------- the Uniform Commercial Code with conforming amendments to Articles 1, 2, 2a, 4, 5, 6, 7 and 8 ("Revised Article 9"); ----------------- (p) all letter of credit rights, as such term is defined in Revised Article 9 (the "Letter of Credit Rights") ----------------------- 5 (q) all other personal property of each of the Grantors, whether tangible or intangible, and whether now owned or hereafter acquired; and (r) all proceeds and products of any of the foregoing, in any form, including, without limitation, any claims against third parties for loss or damage to or destruction of any or all of the foregoing and, to the extent not otherwise included, all (i) payments under insurance (whether or not the Agent is the loss payee thereof), or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing Collateral and (ii) cash. Notwithstanding anything contained herein to the contrary, the total amount of shares of capital stock or other ownership interests of any Person pledged pursuant to this Agreement that is not incorporated or organized in the United States shall in no event exceed sixty-five percent (65%) of the total outstanding shares of capital stock or such other ownership interests thereof. For avoidance of doubt, it is expressly understood and agreed that, to the extent the UCC is revised subsequent to the date hereof such that the definition of any of the foregoing terms included in the description of Collateral is changed, the parties hereto desire that any property which is included in such changed definitions which would not otherwise be included in the foregoing grant on the date hereof be included in such grant immediately upon the effective date of such revision. Notwithstanding the immediately preceding sentence, the foregoing grant is intended to apply immediately on the date hereof to all Collateral to the fullest extent permitted by applicable law regardless of whether any particular item of Collateral is currently subject to the UCC. SECTION 2. Security for Obligations. This Agreement and the ------------------------ Collateral secure the payment of all obligations of each of the Grantors, now or hereafter existing, under the Credit Agreement and the other Loan Documents (and any other documents in respect of such Obligations), and in respect of Indebtedness permitted by Section 6.3(v) of the Credit Agreement, whether for principal, interest, fees, expenses or otherwise, and all obligations of each of the Grantors now or hereafter existing under or in respect of this Agreement (all such obligations of the Grantors being herein called the "Obligations"). ----------- SECTION 3. Delivery of Pledged Collateral; Other Actions. Upon --------------------------------------------- written request by the Agent (and without further order of the Bankruptcy Court), all certificates or instruments representing or evidencing the Pledged Collateral shall be delivered to and held by the Agent pursuant hereto and shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Agent. Upon the occurrence and during the continuance of any Event of Default, the Agent shall have the right (for the ratable benefit of the Lenders) to give (to the extent required) the five (5) Business Day notice referred to in the final proviso of Section 7.1 of the Credit Agreement (the "Default Notice") and, at any time -------------- after the expiration of five (5) Business Days from the date of the Default Notice (the "Default Notice Period") in its discretion and without further --------------------- notice to the Grantors, to transfer to or to register in the name of the Agent or any of its nominees any or all of the Pledged Collateral. SECTION 4. Representations and Warranties. Each Grantor, jointly and ------------------------------ severally, represents and warrants as follows: 6 (a) As of the Filing Date, all of the Inventory and/or Equipment (other than motor vehicles and other immaterial amounts of Inventory and Equipment not exceeding, in the aggregate, $10,000,000 in value) is located at the places specified in Schedule 1 hereto. As of the Filing Date, the jurisdictions of formation, organization or incorporation, as the case may be, the chief places of business and chief executive offices of each of the Grantors and the offices where each Grantor keeps its records concerning any Accounts and any Health-Care-Insurance Receivables and all originals of all chattel paper which evidence any Account are located at the places specified in Schedule 2 hereto. As of the Filing Date, all trade names under which each of the Grantors have sold and will sell Inventory are listed on Schedule 3 hereto. (b) Each of the Grantors owns the Collateral free and clear of any lien, security interest, charge or encumbrance except for the security interest created by this Agreement and except as otherwise permitted under Section 6.1 of the Credit Agreement. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except such as may have been filed (x) in favor of the Agent relating to this Agreement and (y) in favor of any holder of a Lien permitted under Section 6.1 of the Credit Agreement. (c) As of the Filing Date, no Grantor owns any material Trademarks, Patents or Copyrights or has any material Trademarks, Patents or Copyrights registered in, or the subject of pending applications in, the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, other than those described in Schedules 3, 4 and 5 hereto. As of the Filing Date, the registrations for the Trademarks, Patents and Copyrights disclosed on such Schedules 3, 4 and 5 hereto are subsisting and have not been adjudged invalid or unenforceable, in whole or in part, and each Patent, Trademark and Copyright is valid and enforceable. None of the material Trademarks, Patents or Copyrights has been abandoned or dedicated. (d) Each Grantor, as the case may be, is the sole and exclusive owner of the entire right, title and interest in and to each of its Trademarks, Patents and Copyrights, free and clear of any liens, charges and encumbrances except for Liens permitted pursuant to Section 6.1 of the Credit Agreement. (e) As of the Filing Date, no Grantor owns or holds any Pledged Collateral other than that described in Schedules 6, 7 and 8. (f) The Pledged Shares have been duly authorized and validly issued and are fully paid and non-assessable. (g) As of the Filing Date, each Grantor, as the case may be, is the record and beneficial owner of the Pledged Collateral described in Schedules 6, 7 and 8 free and clear of any Lien, security interest, option or other charge or encumbrance, except as permitted under Section 6.1 of the Credit Agreement. (h) As of the Filing Date, except as disclosed on Schedule 6, the Pledged Shares constitute all of the issued and outstanding shares of stock of each of the Issuers which is a Borrower or a Subsidiary of a Borrower and no such Issuer is under any contractual obligation to issue any additional shares of stock or any other securities, rights or indebtedness. 7 (i) As of the Filing Date, except as disclosed on Schedule 7, the Pledged Partnership Interests constitute all of the issued and outstanding interests in each of the Partnerships and no Partnership is under any contractual obligation to issue any additional interests or any other rights or indebtedness. (j) As of the Filing Date, except as disclosed on Schedule 8, the Pledged Company Interests constitute all of the issued and outstanding interests in each of the Companies and no Company is under any contractual obligation to issue any additional interests or any other rights or indebtedness. (k) Upon the entry by the Bankruptcy Court of the Final Order, (i) each Grantor will be duly authorized to execute and deliver this Agreement to the Agent, and (ii) this Agreement will constitute the legal, valid and binding obligation of the Grantors, enforceable against the Grantors in accordance with its terms. (l) As of the Filing Date, all material letters of credit to which any Grantor has rights are listed on Schedule 9 (as amended or supplemented from time to time) hereto, and the Grantors have obtained the consent of each issuer of any material letter of credit to the assignment of the proceeds of the letter of credit to the Agent. SECTION 5. Further Assurances. ------------------ (a) Each of the Grantors agrees that from time to time, at its expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Agent may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Agent to exercise and enforce any of its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, and without further order of the Bankruptcy Court, each of the Grantors will execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary, or as the Agent may reasonably request, in order to perfect and preserve the security interests granted or purported to be granted hereby. (b) Each Grantor hereby authorizes the Agent to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of such Grantor where permitted by law. A carbon, photographic or other reproduction of this Agreement or any financing statement covering the Collateral or any part thereof is sufficient as a financing statement where permitted by law. (c) Each Grantor will furnish to the Agent from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Agent may reasonably request, all in reasonable detail. (d) Each Grantor hereby covenants and agrees that with respect to any material letter of credit hereafter arising it shall obtain the consent of the issuer thereof to the assignment of the proceeds of the letter of credit to the Agent. SECTION 6. As to Equipment and Inventory. Each Grantor shall: ----------------------------- 8 (a) Keep the Equipment and Inventory (other than Inventory sold in the ordinary course of business, motor vehicles and other immaterial amounts of Inventory and Equipment not exceeding, in the aggregate, $10,000,000 in value) at the places specified therefor in Schedule 1 hereto or, upon 30 days' prior written notice to the Agent, at other places in jurisdictions where all action required by Section 5 hereof shall have been taken to assure the continuation of the perfection of the security interest of the Agent (for its benefit and the ratable benefit of the Lenders) with respect to the Equipment and Inventory. (b) Subject to provisions of the Credit Agreement, maintain or cause to be maintained in good repair, working order and condition, excepting ordinary wear and tear and damage due to casualty, all of the Equipment, and make or cause to be made all appropriate repairs, renewals and replacements thereof, to the extent not obsolete and consistent with past practice of such Grantor, as quickly as practicable after the occurrence of any loss or damage thereto which are necessary or reasonably desirable to such end, except where the failure to do any of the foregoing would not result in a material adverse effect on the assets, properties or condition (financial or otherwise) of the Grantors, taken as a whole. (c) Until satisfaction in full of the Obligations, at any time when an Event of Default has occurred and is continuing: (i) each Grantor will perform any and all reasonable actions requested by the Agent to enforce the Agent's security interest in the Inventory and all of the Agent's rights hereunder, such as leasing warehouses to the Agent or its designee, placing and maintaining signs, appointing custodians, transferring Inventory to warehouses, and delivering to the Agent warehouse receipts and documents of title in the Agent's name; (ii) if any Inventory is in the possession or control of any of the Grantors' agents, contractors or processors or any other third party, each such Grantor will notify the Agent thereof and will notify such agents, contractors or processors or third party of the Agent's security interest therein and, upon request, instruct them to hold all such Inventory for the Agent and such Grantor's account, as their interests may appear, and subject to the Agent's instructions; (iii) the Agent shall have the right to hold all Inventory subject to the security interest granted hereunder; and (iv) the Agent shall have the right to give the Default Notice and, at any time after the expiration of the Default Notice Period, to take possession of the Inventory or any part thereof and to maintain such possession on such Grantor's premises or to remove any or all of the Inventory to such other place or places as the Agent desires in its sole discretion. If the Agent exercises its right to take possession of the Inventory, such Grantor, upon the Agent's demand, will assemble the Inventory and make it available to the Agent at such Grantor's premises at which it is located. SECTION 7. As to Accounts. -------------- (a) Each Grantor shall keep its chief place of business and chief executive office and the office where it keeps its records concerning the Accounts, and the offices where it keeps all originals of all chattel paper which evidence Accounts, at the location therefor specified in Section 4(a) hereof or, upon 30 days' prior written notice to the Agent, at such other locations in a jurisdiction where all actions required by Section 5 hereof shall have been taken with respect to the Accounts. Each Grantor will hold and preserve such records and chattel paper and will permit representatives of the Agent, at any time during normal business hours, to inspect and make abstracts from such records and chattel paper in accordance with Section 5.6 of the Credit Agreement. 9 (b) Except as otherwise provided in this subsection (b), each Grantor shall continue to collect in accordance with its customary practice, at its own expense, all amounts due or to become due to such Grantor under the Accounts and, prior to the occurrence and continuance of an Event of Default, such Grantor shall have the right to adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon, all in accordance with its customary practices. In connection with such collections, the Grantors may, upon the occurrence and during the continuation of an Event of Default, take (and at the direction of the Agent shall take) such action as the Grantors or the Agent may reasonably deem necessary or advisable to enforce collection of the Accounts; provided, that upon written notice by the Agent to any Grantor, -------- following the occurrence and during the continuation of an Event of Default and after the expiration of the Default Notice Period, of its intention so to do, the Agent shall have the right to notify the account debtors or obligors under any Accounts of the assignment of such Accounts to the Agent and to direct such account debtors or obligors to make payment of all amounts due or to become due to such Grantor thereunder directly to the Agent and, upon such notification and at the expense of such Grantor, to enforce collection of any such Accounts, and to adjust, settle or compromise the amount or payment thereof, in the same manner and to the same extent as such Grantor might have done. After receipt by such Grantor of the notice referred to in the proviso to the preceding sentence, ------- (i) all amounts and proceeds (including instruments) received by such Grantor in respect of the Accounts shall be received in trust for the benefit of the Agent (for the ratable benefit of the Lenders) hereunder, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent in the same form as so received (with any necessary endorsement) to be held as cash collateral and either (A) released to the Grantors if such Event of Default shall have been cured or waived or (B) if such Event of Default shall be continuing, applied as provided by Section 16 hereof, and (ii) the Grantors shall not adjust, settle or compromise the amount or payment of any Account, or release wholly or partly any account debtor or obligor thereof, or allow any credit or discount thereon. SECTION 8. As to Trademarks, Patents and Copyrights. ---------------------------------------- (a) (i) Each Grantor shall, either itself or through licensees, continue to use the Trademarks as each is currently used in the Grantor's business in order to maintain the Trademarks in full force free from any claim of abandonment for nonuse, and (ii) each such Grantor will not (and will not permit any licensee thereof to) do any act or knowingly omit to do any act whereby any Trademark may become invalidated, unless, in the cases of clauses (i) and (ii), such failure to maintain or use a Trademark is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operation or properties of the Grantors taken as a whole. (b) Unless and until an Event of Default shall have occurred, the Agent hereby grants to the Grantors the exclusive and nontransferable right and license to make, have made, use and sell the inventions disclosed and claimed in the Patents for the Grantors' own benefit and account and for none other. Each Grantor agrees that it will not sell or assign its interest in, or grant any sublicense under, the license granted to the Grantors under this subsection (b) without the prior written consent of the Agent. From and after the occurrence of any Default or Event of Default, the Grantors' license with respect to the Patents as set forth in this subsection (b) shall terminate, and the Agent shall have, in addition to all other rights and remedies given it by this 10 Agreement, those allowed by law. (c) Each Grantor hereby agrees that the license granted to the Agent with respect to each of the Patents shall be without any liability for royalties or other related charges from the Agent to the Grantors. The assignment granted to the Agent herein with respect to each of the Patents shall terminate on the earlier of (i) the expiration of such Patent, and (ii) the payment in full of all of the Obligations and the termination of the Commitments. (d) No Grantor will do any act, or omit to do any act, whereby the Patents or Copyrights may become abandoned or dedicated and each such Grantor shall notify the Agent immediately if it knows of any reason or has reason to know that the application or registration of any of the Patents or Copyrights may become abandoned or dedicated, unless such abandonment or dedication is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operations or properties of the Grantors taken as a whole. (e) No Grantor will, either itself or through any agent, employee, licensee or designee, (i) file an application for the registration of any Patent or Trademark with the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof or (ii) file any assignment of any Patent or Trademark, which such Grantor may acquire from a third party, with the United States Patent and Trademark Office or any similar office or agency in any other country or any political subdivision thereof, unless such Grantor shall, within 30 days after the date of ------ such filing, notify the Agent thereof, and, upon request of the Agent, execute and deliver any and all assignments, agreements, instruments, documents and papers as the Agent may request to evidence the Agent's interest in such Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby, and such Grantor hereby constitutes the Agent its attorney-in-fact to execute and file all such writings for the foregoing purposes, all lawful acts of such attorney being hereby ratified and confirmed; such power being coupled with an interest is irrevocable until the Obligations are paid in full. (f) Each Grantor will take all necessary steps in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office, the Library of Congress or any similar office or agency in any other country or any political subdivision thereof, in order to maintain in all material respects each registered Trademark, Patent and Copyright, and to pursue each application for registration of any Trademark, Patent and Copyright not listed on Schedules 3, 4 or 5 hereto, including, without limitation, filing of renewals, payment of maintenance fees, filing of affidavits of use, filing of affidavits of incontestability and opposition, and participation in opposition, interference and cancellation proceedings, unless failure to take such steps is not reasonably likely to have a material adverse effect on the condition (financial or otherwise), operation or properties of the Grantors, taken as a whole. (g) Each Grantor will, without further order of the Bankruptcy Court, perform all acts and execute and deliver all further instruments and documents, including, without limitation, assignments for security in form suitable for filing with the United States Patent and Trademark Office, and the United States Copyright Office, respectively, reasonably requested by the Agent at any time to evidence, perfect, maintain, record and enforce the Agent's interest in all Trademarks, Patents and Copyrights or otherwise in furtherance of the provisions of this 11 Agreement, and each Grantor hereby authorizes the Agent to execute and file one or more accurate financing statements (and similar documents) or copies thereof or of this Agreement with respect to Patents, Trademarks and Copyrights signed only by the Agent. (h) Each Grantor will, upon acquiring knowledge of any use by any person of any term or design likely to cause confusion with any Trademark, promptly notify the Agent of such use, and if requested by the Agent, shall join with the Agent, at such Grantor's expense, in such action as the Agent, in its reasonable discretion, may deem advisable for the protection of the Agent's interest in and to the Trademarks. (i) Each Grantor agrees that, should it obtain rights to any Patent, Trademark or Copyright which is not now identified on Schedules 3, 4 or 5, or become entitled to the benefit of any reissue, division, continuation, renewal, extension, or continuation-in-part of any Trademark, Patent or Copyright, (i) such Grantor shall give prompt written notice thereof to the Agent, (ii) the provisions of Section 1 of this Agreement shall automatically apply to any such Trademark, Patent or Copyright, and (iii) any such Trademark, Patent or Copyright shall automatically become part of the Collateral. (j) If any Grantor becomes aware that any Trademark, Patent or Copyright is infringed or misappropriated by a third party, such Grantor shall promptly notify the Agent and shall, if reasonably requested by the Agent, promptly sue for infringement or misappropriation and for recovery of all damages caused by such infringement or misappropriation, or, with the prior written consent of the Agent, shall take such other actions as the Agent shall reasonably deem appropriate under the circumstances to protect such Trademark, Patent or Copyright. (k) Each Grantor shall continue to use reasonable and proper statutory notice in connection with its use of each registered Patent, Trademark and Copyright. (l) This Agreement is executed by collateral purposes only and upon payment in full of the Obligations and termination of the Commitments, the Agent shall, at the Grantors' expense, execute and deliver to the Grantors all deeds, assignments and other instruments as may be necessary or proper to re-vest in the Grantors full title to the Trademarks, Patents and Copyrights, subject to any disposition thereof which may have been made by the Agent pursuant hereto or pursuant to the Credit Agreement. SECTION 9. As to the Pledged Collateral; Voting Rights; Dividends; Etc. ----------------------------------------------------------- (a) So long as no Event of Default shall have occurred and be continuing: (i) the Grantors (as applicable) shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Collateral or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; (ii) notwithstanding the provisions of Section 1 hereof, such Grantors shall be entitled to receive and retain any and all dividends, interest or distributions paid in respect of the Pledged Collateral; provided, that any and all -------- 12 (A) dividends, interest or distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable or otherwise distributed in respect of, or in exchange for, any Pledged Collateral, and (B) dividends, interest or distributions paid or payable in cash in respect of any Pledged Collateral (other than the Pledged Collateral consisting of Pledged Shares, Pledged Partnership Interests or Pledged Company Interests of Subsidiaries of the Borrowers) in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid-in-surplus; and (C) cash paid, payable or otherwise distributed in respect of, or in redemption of, or in exchange for, any Pledged Collateral (other than the Pledged Collateral consisting of Pledged Shares, Pledged Partnership Interests or Pledged Company Interests of Subsidiaries of the Borrowers); shall be, and shall be forthwith delivered to the Agent, to hold as Pledged Collateral and shall, if received by any of the Grantors, be received in trust for the benefit of the Agent, be segregated from the other property or funds of such Grantor, and be forthwith delivered to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement); and (iii) the Agent shall execute and deliver (or cause to be executed and delivered) to the Grantors (as applicable) all such proxies and other instruments as the Grantors (as applicable) may reasonably request for the purpose of enabling such Grantor to exercise the voting and other rights which it is entitled to exercise pursuant to paragraph (i) above and to receive the dividends which it is authorized to receive and retain pursuant to paragraph (ii) above; (b) Upon the occurrence and during the continuance of an Event of Default: (i) upon written notice from the Agent to the Grantors (as applicable) to such effect, all rights of such Grantors (as applicable) to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 9(a)(i) and to receive the dividends which it would otherwise be authorized to receive and retain pursuant to Section 9(a)(ii) shall cease, and all such rights shall thereupon become vested in the Agent, who shall thereupon have the sole right to exercise such voting and other consensual rights and to receive and hold as Pledged Collateral any such dividends; and (ii) all dividends which are received by such Grantors contrary to the provisions of paragraph (i) of this Section 9(b) shall be received in trust for the benefit of the Agent, shall be segregated from other funds of the Grantors and shall be forthwith paid over to the Agent as Pledged Collateral in the same form as so received (with any necessary endorsement). 13 SECTION 10. As to Material Contracts. ------------------------ (a) Each Grantor agrees that the Agent may at any time notify, or require any Grantor to so notify, the counterparty on any Material Contract of the security interest of the Agent therein. In addition, after the occurrence and during the continuance of an Event of Default, the Agent may upon written notice to the applicable Grantor, notify, or require any Grantor to notify, the counterparty to make all payments under the Material Contracts directly to the Agent. (b) Each Grantor shall perform in all material respects all of its obligations with respect to the Material Contracts, except where the failure to do so would not result in a material adverse effect on the condition (financial or otherwise), operation or properties of the Grantors, taken as a whole. (c) Each Grantor shall promptly and diligently exercise each material right it may have under any Material Contract, at its own expense, and in connection with such collections and exercise, such Grantor shall take such action as such Grantor may deem necessary or advisable in its good faith business judgment. SECTION 11. Insurance. Upon the occurrence and during the continuance of --------- any Event of Default, all insurance payments in respect of Inventory and Equipment shall be held, applied and paid to the Agent as specified in Section 16 hereof. SECTION 12. Transfers to Others; Liens; Additional Shares and Interests. ----------------------------------------------------------- (a) Each Grantor shall not sell, assign (by operation of law or otherwise) or otherwise dispose of any of the Collateral, except for dispositions otherwise permitted by the Credit Agreement or other Loan Documents. (b) Each Grantor shall not create or suffer to exist any lien, security interest or other charge or encumbrance upon or with respect to any of the Collateral to secure any obligation of any person or entity, except for the security interest created by this Agreement and the Final Order, or except as otherwise permitted under Section 6.1 of the Credit Agreement. (c) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Issuers that are wholly-owned Subsidiaries not to issue any stock or other securities in addition to or substitution for the Pledged Shares issued by such Issuer, except to the respective Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional shares of stock or other securities of each Issuer. (d) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Partnerships that are wholly-owned Subsidiaries not to issue any interests in addition to or substitution for the Pledged Partnership Interests issued by such Issuer, except to the respective Grantor, and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional interests of each Partnership. (e) Each of the Grantors (as applicable) agrees that it will (i) cause each of the Companies that are wholly-owned Subsidiaries not to issue any interests in addition to or 14 substitution for the Pledged Company Interests issued by such Company, except to the respective Grantor and (ii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all such additional interests of each Company. SECTION 13. Agent Appointed Attorney-in-Fact. Each Grantor hereby -------------------------------- irrevocably appoints the Agent such Grantor's attorney-in-fact (which appointment shall be irrevocable and deemed coupled with an interest), with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Agent's discretion, upon and during the occurrence and continuation of an Event of Default at any time after the Agent has given the Default Notice and the Default Notice Period has expired, to take any action and to execute any instrument which the Agent may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (i) to obtain and adjust insurance required to be paid to the Agent pursuant to Section 11 hereof, (ii) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (iii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) or (ii) above, (iv) to receive, endorse and collect all instruments made payable to the Grantors representing any dividend or other distribution in respect of the Pledged Collateral or any part thereof and to give full discharge for the same, and (v) to file any claims or take any action or institute any proceedings which the Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Agent with respect to any of the Collateral. SECTION 14. Agent May Perform. If any Grantor fails to perform any ----------------- agreement contained herein, the Agent may itself perform, or cause performance of, such agreement, and the expenses of the Agent incurred in connection therewith shall be payable by the Grantors under Section 17(b) hereof. SECTION 15. The Agent's Duties. The powers conferred on the Agent ------------------ hereunder are solely to protect its interest and the interests of the Lenders in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Agent shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral, including, without limitation, ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Agent has or is deemed to have knowledge of such matters. SECTION 16. Remedies. If any Event of Default shall have occurred and be -------- continuing 15 at any time after the Agent has given the Default Notice and the Default Notice Period has expired, and subject to the provisions of Section 7 of the Credit Agreement: (a) The Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, and without application to or order of the Bankruptcy Court, all the rights and remedies of a secured party on default under the UCC and also may (i) require each Grantor to, and each Grantor hereby agrees that it will at its expense and upon request of the Agent forthwith, assemble all or part of the Collateral as directed by the Agent and make it available to the Agent at a place to be designated by the Agent which is reasonably convenient to both parties and (ii) without notice except as specified in the following sentence, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Agent's offices or elsewhere, for cash, on credit or for future delivery, and at such price or prices and upon such other terms as the Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of such sale shall be required by law, at least ten days' notice to the Grantors of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) The Agent may instruct the Grantors not to make any further use of the Patents, Copyrights or Trademarks or any mark similar thereto for any purpose to the extent that such use would be inconsistent with the exercise by the Agent of any other remedies under this Section. (c) The Agent may license, whether general, special or otherwise, and whether on an exclusive or nonexclusive basis, any of the Trademarks, Patents or Copyrights throughout the world for such term or terms, on such conditions, and in such manner, as the Agent shall in its sole discretion determine. (d) The Agent may (without assuming any obligations or liability thereunder), at any time, enforce (and shall have the exclusive right to enforce) against any licensee or sublicensee all rights and remedies of the Grantors in, to and under any one or more license agreements with respect to the Collateral, and take or refrain from taking any action under any thereof, and each of the Grantors hereby releases the Agent from, and agrees to hold the Agent free and harmless from and against any claims arising out of, any action taken or omitted to be taken with respect to any such license agreement. (e) In the event of any such license, assignment, sale or other disposition of the Collateral, or any of it, each Grantor shall supply its know- how and expertise relating to the manufacture and sale of the products bearing or in connection with the Trademarks, Patents or Copyrights, and its customer lists and other records relating to the Trademarks, Patents or Copyrights and to the distribution of said products, to the Agent or its designee. (f) In order to implement the assignment, sale or other disposal of any of the Trademarks, Patents or Copyrights, the Agent may, at any time, pursuant to the authority granted 16 in Section 13 hereof, execute and deliver on behalf of the Grantors, one or more instruments of assignment of the Trademarks, Patents or Copyrights (or any application of registration thereof), in form suitable for filing, recording or registration in any country. (g) All cash proceeds received by the Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral may, in the discretion of the Agent, be held by the Agent as collateral for, and then or at any time thereafter applied (after payment of any amounts payable to the Agent pursuant to Section 17 hereof) in whole or in part against, all or any part of the Obligations in such order as the Agent shall elect. Any surplus of such cash or cash proceeds held by the Agent and remaining after payment in full of all the Obligations shall be paid over to the Grantors or to whomsoever may be lawfully entitled to receive such surplus. (h) If at any time when the Agent shall determine to exercise its right to sell all or any part of the Pledged Collateral pursuant to this Section 16, such Pledged Collateral or the part thereof to be sold shall not be effectively registered under the Securities Act of 1933, as amended, and as from time to time in effect, and the rules and regulations thereunder (the "Securities Act"), the Agent is hereby expressly authorized to sell such Pledged -------------- Collateral or such part thereof by private sale in such manner and under such circumstances as the Agent may deem necessary or advisable in order that such sale may legally be effected without such registration. Without limiting the generality of the foregoing, in any such event the Agent, in compliance with applicable securities laws, (a) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Collateral or such part thereof shall have been filed under such Securities Act, (b) may approach and negotiate with a restricted number of potential purchasers to effect such sale and (c) may restrict such sale to purchasers as to their number, nature of business and investment intention including without limitation to purchasers each of whom will represent and agree to the satisfaction of the Agent that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Collateral, or part thereof, it being understood that the Agent may cause or require each Grantor, and each Grantor hereby agrees upon the written request of the Agent, to cause (i) a legend or legends to be placed on the certificates to be delivered to such purchasers to the effect that the Pledged Collateral represented thereby have not been registered under the Securities Act and setting forth or referring to restrictions on the transferability of such securities; and (ii) the issuance of stop transfer instructions to such Issuer's transfer agent, if any, with respect to the Pledged Collateral, or, if such Issuer transfers its own securities, a notation in the appropriate records of such Issuer. In the event of any such sale, each Grantor does hereby consent and agree that the Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price which the Agent may deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were public and deferred until after registration as aforesaid. SECTION 17. Indemnity and Expenses. ---------------------- (a) Each Grantor, jointly and severally, agrees to indemnify the Agent from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except claims, losses 17 or liabilities directly arising from the Agent's own gross negligence, willful misconduct or bad faith. (b) The Grantors will upon demand pay to the Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Agent may incur in connection with (i) the administration of this Agreement, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of the Agent hereunder or (iv) the failure by any of the Grantors to perform or observe any of the provisions hereof. (c) The Grantors assume all responsibility and liability arising from the use of the Trademarks, Patents and Copyrights, and the Grantors hereby, jointly and severally, indemnify and hold the Agent harmless from and against any claim, suit, loss, damage or expense (including reasonable attorneys' fees) arising out of any alleged defect in any product manufactured, promoted or sold by any of the Grantors in connection with any Trademark or out of the manufacture, promotion, labeling, sale or advertisement of any such product by any of the Grantors except as the same may have resulted from the gross negligence, willful misconduct or bad faith of the Agent. (d) Each of the Grantors agree that the Agent does not assume, and shall have no responsibility for, the payment of any sums due or to become due under any agreement or contract included in the Collateral or the performance of any obligations to be performed under or with respect to any such agreement or contract by any of the Grantors, and except as the same may have resulted from the gross negligence or willful misconduct of the Agent, each of the Grantors hereby jointly and severally agree to indemnify and hold the Agent harmless with respect to any and all claims by any person relating thereto. SECTION 18. Security Interest Absolute. All rights of the Agent and -------------------------- security interests hereunder, and all obligations of each of the Grantors hereunder, shall be absolute and unconditional, irrespective of any circumstance which might constitute a defense available to, or a discharge of, any guarantor or other obligor in respect of the Obligations. SECTION 19. Amendments; Etc. No amendment or waiver of any provision --------------- of this Agreement, nor any consent to any departure by any of the Grantors herefrom, shall in any event be effective unless the same shall be in writing and signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. SECTION 20. Addresses for Notices. All notices and other communications --------------------- provided for hereunder shall be in writing and shall be given in accordance with the applicable provisions of the Credit Agreement. SECTION 21. Continuing Security Interest. This Agreement shall create a ---------------------------- continuing security interest in the Collateral and shall (i) remain in full force and effect until payment in full of the Obligations, (ii) be binding upon each of the Grantors, their successors and assigns and (iii) inure, together with the rights and remedies of the Agent hereunder, to the benefit of the Agent and each of the Lenders and their respective successors, transferees and assigns. Upon the 18 payment in full of the Obligations, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantors subject to any existing liens, security interests or encumbrances on such Collateral. Upon any such termination, the Agent will, at the Grantor's expense, execute and deliver to the Grantors such documents as the Grantors shall reasonably request to evidence such termination. SECTION 22. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York and by Federal law (including, without limitation, the Bankruptcy Code) to the extent the same has pre-empted the law of the State of New York or such other jurisdiction. SECTION 23. Headings. Section headings in this Agreement are included -------- herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. 19 IN WITNESS WHEREOF, each of the Grantors and the Agent have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first above written. GRANTORS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President DOWNNORTH, INC. By: /s/ Bernard L. Zuroff ---------------------- Name: Bernard L. Zuroff Title: Vice President AGENT: THE CHASE MANHATTAN BANK, By: /s/ Norma C. Corio ------------------- Name: Norma C. Corio Title: Managing Director SCHEDULE 1 Locations of Equipment and Inventory SCHEDULE 2 Locations of Chief Executive Office, Chief Place of Business and Locations Where Records Concerning Accounts are Kept SCHEDULE 3 Trademarks SCHEDULE 4 Patents SCHEDULE 5 Copyrights SCHEDULE 6 Pledged Shares Grantor Issuer Class No. Of Shares - ------- ------ ----- -------------- SCHEDULE 7 Pledged Partnership Interests Grantor Partnership Percentage of Partnership Interests Held - ------- ------------- ---------------------------------------- SCHEDULE 8 Pledged Company Interests Grantor Company Percentage of Interests Held - ------- ------- ---------------------------- SCHEDULE 9 Material Letters of Credit EX-4.28 4 dex428.txt FIRST AMENDMENT TO CREDIT AGREEMENT Exhibit 4.28 CONFORMED COPY FIRST AMENDMENT TO ------------------ CREDIT AGREEMENT ---------------- This FIRST AMENDMENT TO CREDIT AGREEMENT dated as of January 31, 2001 (the "First Amendment"), is entered into by and among ICG COMMUNICATIONS, INC., --------------- a Delaware corporation, and each of its direct and indirect subsidiaries party to the Agreement (as defined below) (each, individually, a "Borrower" and -------- collectively, the "Borrowers"), THE CHASE MANHATTAN BANK, a New York banking --------- corporation, and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement (as defined below) (the "Lenders"), and THE CHASE ------- MANHATTAN BANK, as agent (the "Agent"). ----- WITNESSETH: WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit Agreement dated as of December 4, 2000 (the "Agreement"), pursuant to which the Lenders have made available to the Borrowers --------- a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $350,000,000 and initially not to be less than $200,000,000; and WHEREAS, the Borrowers have requested that the Lenders make certain modifications to the Agreement; and WHEREAS, the Borrowers and the Lenders desire to amend and supplement the Agreement to reflect the modifications requested by the Borrowers; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not otherwise ----------- defined in this First Amendment are used as defined in the Agreement. Section 2. Amendments to Agreement. Subject to the conditions set ----------------------- forth in Section 3 hereof, the Agreement is hereby amended as follows: --------- 2.1 Section 7.1(m) of the Agreement is hereby amended by modifying clause "(iii)" to read as follows: "mechanics liens and certain other pre-petition claims against the Borrowers in a total amount not in excess of $17,000,000 (excluding refunds or credits to customers issued in the ordinary course of business)". Section 3. Effectiveness. The effectiveness of this First Amendment ------------- is subject to the satisfaction and occurrence of the following conditions precedent: 3.1 The Agent shall have received executed counterparts of this First Amendment which, when taken together, bear the signatures of the Borrowers and the Required Lenders. Section 4. Representations and Warranties. Each Borrower represents ------------------------------ and warrants to the Lenders that: 4.1 The representations and warranties of the Borrowers contained in Section 3 of the Agreement are correct in all material respects on and as of the date hereof as if such representations and warranties had been made on and as of the date hereof (except to the extent that any such representations and warranties specifically relate to an earlier date); and 4.2 After giving effect to the amendments contained herein, (i) each Borrower is in compliance with all the terms and provisions set forth in the Agreement, and (ii) no Event of Default has occurred and is continuing (other than as specifically waived herein) or would result from the execution, delivery and performance of this First Amendment. Section 5. Full Force and Effect. Except as specifically amended --------------------- hereby, all of the terms and conditions of the Agreement shall remain in full force and effect, and the same are hereby ratified and confirmed. No reference to this First Amendment need be made in any instrument or document at any time referring to the Agreement, a reference to the Agreement in any of such to be deemed to be reference to the Agreement as amended hereby. Section 6. Counterparts. This First Amendment may be executed in any ------------ number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. Section 7. Headings. The various headings of this First Amendment are -------- inserted for convenience only and shall not affect the meaning or interpretation of this First Amendment or any provisions hereof. [The remainder of this page is intentionally left blank.] 2 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed as of the day and the year first written. BORROWERS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President 3 ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President 4 NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff -------------------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President 5 ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President 6 ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President 7 DOWNNORTH, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President THE CHASE MANHATTAN BANK, Individually and as Agent By: /s/ Norma C. Corio ---------------------------- Name: Norma C. Corio Title: Managing Director 8 EX-4.29 5 dex429.txt WAIVER TO CREDIT AGREEMENT Exhibit 4.29 CONFORMED COPY -------------- WAIVER TO CREDIT AGREEMENT -------------------------- This WAIVER TO CREDIT AGREEMENT dated as of March 30, 2001 (the "Waiver"), is entered into by and among ICG COMMUNICATIONS, INC., a Delaware ------ corporation, and each of its direct and indirect subsidiaries party to the Agreement (as defined below) (each, individually, a "Borrower" and collectively, -------- the "Borrowers"), THE CHASE MANHATTAN BANK, a New York banking corporation, and --------- each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement (as defined below) (the "Lenders"), and THE CHASE MANHATTAN BANK, as agent (the ------- "Agent"). ----- WITNESSETH: WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit Agreement dated as of December 4, 2000, as amended by that certain First Amendment to Revolving Credit Agreement dated as of January 31, 2001 (as so amended, the "Agreement"), pursuant to which the Lenders have --------- made available to the Borrowers a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $350,000,000 and initially not to be less than $200,000,000; and WHEREAS, the Borrowers have requested the Agent and the Lenders to waive compliance with certain of the provisions of the Agreement; and WHEREAS, the Borrowers and the Lenders desire to waive compliance with certain of the provisions of the Agreement; and NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not otherwise ----------- defined in this Waiver are used as defined in the Agreement. Section 2. Waivers Under the Agreement. --------------------------- 2.1 On the condition that the Borrowers shall deliver such financial statements to the Agent and each of the Lenders on or prior to April 13, 2001, the Lenders hereby waive the provisions of Section 5.1(a) of the Agreement solely to the extent necessary to waive the failure of the Borrowers to deliver to the Agent and each of the Lenders within ninety (90) days after the end of fiscal year 2000 the Borrowers' consolidated and consolidating balance sheets and related statements of income, stockholders' equity and cash flows for fiscal year 2000. The Borrowers' failure to deliver such financial statements to the Agent and each of the Lenders on or prior to 1 April 13, 2001 shall constitute a default in Borrowers' performance of Section 5.1(a). The foregoing waiver is effective only in this specific instance, and the Borrowers hereby acknowledge their obligations under Section 5.1(a) of the Agreement and acknowledge that the foregoing waiver shall not in any way waive compliance with the provisions of Section 5.1(a) of the Agreement for fiscal year 2001 or thereafter. 2.2 The Lenders hereby waive the provisions of Sections 5.1(a), 5.1(b) and 5.6(a) of the Agreement solely to the extent necessary to waive: (a) the failure by the Borrowers and their Subsidiaries to maintain or cause to be maintained true and complete books and records in accordance with GAAP of the financial operations of the Borrowers and their Subsidiaries at all times prior to June 30, 2001; and (b) any default or Event of Default resulting from delivery by the Borrowers' current independent auditor of an opinion in respect of the Borrowers' and their Subsidiaries' financial statements for the fiscal year ended December 31, 2000 which is qualified or adverse as a result of such failure. The foregoing waiver relates solely to the failure by the Borrowers and their Subsidiaries to comply with the provisions of Financial Accounting Standards Board Statement No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of " ("FAS 121") as described in ------- the draft auditor's opinion previously delivered to the Agent, and shall not relate to any other non-compliance of such financial statements with the provisions of GAAP. The foregoing waiver is effective only in the specific instances referenced herein and the Borrowers hereby acknowledge their obligations under Sections 5.1(a), 5.1(b) and 5.6 and acknowledge that the foregoing waiver shall not in any way waive compliance with the provisions of such Sections for the purposes of delivery of financial statements prepared in accordance with GAAP for any and all accounting periods ending on or after June 30, 2001. The Borrowers hereby further acknowledge that the foregoing waiver of Borrowers' obligations under Section 5.6 of the Agreement relates solely to non-compliance with the provisions of FAS 121 and shall not in any way waive Borrowers' compliance with Section 5.6 at all times from and after June 30, 2001. Accordingly, the Borrowers hereby covenant and agree that the financial statements to be delivered by the Borrowers for the fiscal quarter ending June 30, 2001 pursuant to Section 5.1(b) of the Agreement, and all other financial statements thereafter delivered by the Borrowers pursuant to Sections 5.1(a) and 5.1(b) of the Agreement, shall be prepared in accordance with GAAP, including, without limitation, FAS 121, subject to normal year-end audit adjustments. Section 3. Effectiveness. The effectiveness of this Waiver is subject ------------- to the satisfaction and occurrence of the following conditions precedent: 3.1 The Agent shall have received executed counterparts of this Waiver which, when taken together, bear the signatures of the Borrowers and the Lenders. Section 4. Representations and Warranties. Each Borrower represents ------------------------------ and warrants to the Lenders that: 4.1 The representations and warranties of the Borrowers contained in Section 3 of the Agreement are true and correct in all material respects on and as of the date hereof as if such representations and warranties had been made on and as of the date hereof (except to the extent that any such representations and warranties specifically relate to an earlier date 2 and except that references to Schedule 3.13 of the Agreement shall mean ------------- Schedule 3.13 attached hereto as Exhibit A and except with respect to ------------- --------- Section 3.4 to the extent that such compliance with GAAP is specifically ----------- waived herein); and 4.2 After giving effect to the waivers contained herein, (i) each Borrower is in compliance with all the terms and provisions set forth in the Agreement, and (ii) no Event of Default has occurred and is continuing (other than as specifically waived herein) or would result from the execution, delivery and performance of this Waiver. Section 5. Full Force and Effect. Except as specifically waived --------------------- hereby, all of the terms and conditions of the Agreement shall remain in full force and effect, and the same are hereby ratified and confirmed. Section 6. Counterparts. This Waiver may be executed in any number of ------------ counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. Section 7. Headings. The various headings of this Waiver are inserted -------- for convenience only and shall not affect the meaning or interpretation of this Waiver or any provisions hereof. [The remainder of this page is intentionally left blank.] 3 IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed as of the day and the year first written. BORROWERS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff -------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President 4 ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Vice President 5 NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff ------------------------------------ Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President 6 ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff --------------------------------------- Name: Bernard L. Zuroff Title: Vice President 7 ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By:/s/ Bernard L. Zuroff --------------------- Name: Bernard L. Zuroff Title: Vice President 8 DOWNNORTH, INC. By: /s/ Bernard L. Zuroff ------------------------------------- Name: Bernard L. Zuroff Title: Vice President THE CHASE MANHATTAN BANK, Individually and as Agent By: /s/ Norma C. Corio ------------------------------------ Name: Norma C. Corio Title: Managing Director 9 EXHIBIT A --------- Schedule 3.13 ------------- 10 EX-4.30 6 dex430.txt AMENDMENT TO WAIVER TO CREDIT AGREEMENT EXHIBIT 4.30 CONFORMED COPY -------------- AMENDMENT TO ------------ WAIVER TO CREDIT AGREEMENT -------------------------- This AMENDMENT TO WAIVER TO CREDIT AGREEMENT is dated as of March 30, 2001 (the "Amendment"), is entered into by and among ICG COMMUNICATIONS, INC., a --------- Delaware corporation, and each of its direct and indirect subsidiaries party to the Agreement (as defined below) (each, individually, a "Borrower" and -------- collectively, the "Borrowers"), THE CHASE MANHATTAN BANK, a New York banking --------- corporation, and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement (as defined below) (the "Lenders"), and THE CHASE ------- MANHATTAN BANK, as agent (the "Agent"). ----- WITNESSETH: WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit Agreement dated as of December 4, 2000, as amended by that certain First Amendment to Revolving Credit Agreement dated as of January 31, 2001 (as so amended, the "Agreement"), pursuant to which the Lenders have --------- made available to the Borrowers a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $350,000,000 and initially not to be less than $200,000,000; and WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Waiver to Credit Agreement dated as of March 30, 2001 (the "Waiver") ------ pursuant to which the Lenders and the Agent waived Borrowers' compliance with certain of the provisions of the Agreement; and WHEREAS, the Borrowers have requested the Agent and the Lenders to supplement the Waiver in certain respects to waive compliance with certain related provisions of the Agreement; and NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not otherwise ----------- defined in this Amendment are used as defined in the Agreement. Section 2. Amendments to Waiver. -------------------- 2.1 Section 2.1 of the Waiver is hereby amended by deleting the references to "April 13, 2001" in both places where such date appears and substituting therefor the date "April 17, 2001". 2.2 The Waiver is hereby further amended by adding a new Section 2.3 thereto as follows: 2.3 The Lenders hereby waive the provisions of Section 5.1(c) of the Agreement solely to the extent necessary to waive the failure of the Borrowers' accountants to deliver to the Agent and each of the Lenders a negative assurance certificate accompanying the Borrowers' audited consolidated financial statements for fiscal year 2000 as required pursuant to clause (ii) of such Section 5.1(c). The foregoing waiver is effective only in the specific instance referenced herein and the Borrowers hereby acknowledge their obligations under Sections 5.1(c) and acknowledge that the foregoing waiver shall not in any way waive compliance with the provisions of Section 5.1(c) of the Agreement for fiscal year 2001 or thereafter. Section 3. Effectiveness. The effectiveness of this Amendment is ------------- subject to the satisfaction and occurrence of the following conditions precedent: 3.1 The Agent shall have received executed counterparts of this Amendment which, when taken together, bear the signatures of the Borrowers and the Lenders. Section 4. Full Force and Effect. Except as specifically amended --------------------- hereby, all of the terms and conditions of the Waiver and the Agreement shall remain in full force and effect, and the same are hereby ratified and confirmed. No reference to this Amendment need be made in any instrument or document at any time referred to the Waiver, a reference to the Waiver in any of such to be deemed to be a reference to the Waiver as amended hereby. Section 5. Counterparts. This Amendment may be executed in any ------------ number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. Section 6. Headings. The various headings of this Amendment are -------- inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof. [The remainder of this page is intentionally left blank.] 2 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first written. BORROWERS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President 3 ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President 4 NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President 5 ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President 6 ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President 7 DOWNNORTH, INC. By: /s/ Bernard L. Zuroff --------------------------- Name: Bernard L. Zuroff Title: Vice President THE CHASE MANHATTAN BANK, Individually and as Agent By: /s/ Norma C. Corio --------------------------- Name: Norma C. Corio Title: Managing Director 8 EX-4.31 7 dex431.txt SECOND AMENDMENT TO WAIVER TO CREDIT AGREEMENT Exhibit 4.31 CONFORMED COPY SECOND AMENDMENT TO ------------------- WAIVER TO CREDIT AGREEMENT -------------------------- This SECOND AMENDMENT TO WAIVER TO CREDIT AGREEMENT is dated as of March 30, 2001 (the "Amendment"), is entered into by and among ICG --------- COMMUNICATIONS, INC., a Delaware corporation, and each of its direct and indirect subsidiaries party to the Agreement (as defined below) (each, individually, a "Borrower" and collectively, the "Borrowers"), THE CHASE -------- --------- MANHATTAN BANK, a New York banking corporation, and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement (as defined below) (the "Lenders"), and THE CHASE MANHATTAN BANK, as agent (the "Agent"). ------- ----- WITNESSETH: WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit Agreement dated as of December 4, 2000, as amended by that certain First Amendment to Revolving Credit Agreement dated as of January 31, 2001 (as so amended, the "Agreement"), pursuant to which the Lenders have --------- made available to the Borrowers a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $350,000,000 and initially not to be less than $200,000,000; and WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Waiver to Credit Agreement dated as of March 30, 2001, as amended by that certain Amendment to Waiver to Credit Agreement dated as of March 30, 2001 (as so amended, the "Waiver") pursuant to which the Lenders and the Agent waived ------ Borrowers' compliance with certain of the provisions of the Agreement; and WHEREAS, the Borrowers have requested the Agent and the Lenders to supplement the Waiver in certain respects to waive compliance with certain related provisions of the Agreement; and NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not otherwise ----------- defined in this Amendment are used as defined in the Agreement. Section 2. Amendments to Waiver. -------------------- 2.1 Section 2.1 of the Waiver is hereby amended in its entirety to read as follows: 2.1 On the condition that the Borrowers shall deliver such audited financial statements to the Agent and each of the Lenders on or prior to June 30, 2001, the Lenders hereby waive the provisions of Sections 5.1(a) and 5.1(c) of the Agreement solely to the extent necessary to waive the failure of the Borrowers to deliver to the Agent and each of the Lenders within ninety (90) days after the end of fiscal year 2000 the Borrowers' consolidated and consolidating balance sheets and related statements of income, stockholders' equity and cash flows for fiscal year 2000, all as audited for the Borrowers and their Subsidiaries by their current independent auditor, and the failure of the Borrowers to deliver the financial certifications required to accompany such financial statements in accordance with Section 5.1(c). The Borrowers' failure to deliver such audited financial statements to the Agent and each of the Lenders, together with the opinion of such accountants, Financial Officer certifications and other certificates as required pursuant to Sections 5.1(a) and 5.1(c), on or prior to June 30, 2001 shall constitute a default in Borrowers' performance of Sections 5.1(a) and 5.1(c). The foregoing waiver is effective only in this specific instance, and the Borrowers hereby acknowledge their obligations under Sections 5.1(a) and 5.1(c) of the Agreement and acknowledge that the foregoing waiver shall not in any way waive compliance with the provisions of Sections 5.1(a) and 5.1(c) of the Agreement for fiscal year 2001 or thereafter. 2.2 Section 2.2 of the Waiver is hereby amended in its entirety to read as follows: 2.2 The Lenders hereby waive the provisions of Sections 5.1(a), 5.1(b) and 5.6(a) of the Agreement solely to the extent necessary to waive the failure by the Borrowers and their Subsidiaries to maintain or cause to be maintained true and complete books and records in accordance with GAAP of the financial operations of the Borrowers and their Subsidiaries at all times prior to June 30, 2001. The foregoing waiver relates solely to the failure by the Borrowers and their Subsidiaries to comply with the provisions of Financial Accounting Standards Board Statement No. 121, "Accounting for Impairment of Long- Lived Assets and for Long-Lived Assets To Be Disposed Of" ("FAS 121") ------- as described in the draft auditor's opinion previously delivered to the Agent, and shall not relate to any other non-compliance of such financial statements with the provisions of GAAP. The foregoing waiver is effective only in the specific instances referenced herein and the Borrowers hereby acknowledge their obligations under Sections 5.1(a), 5.1(b) and 5.6 and acknowledge that the foregoing waiver shall not in any way waive compliance with the provisions of such Sections for the purposes of delivery of financial statements prepared in accordance with GAAP for any and all accounting periods ending on or after June 30, 2001. The Borrowers hereby further acknowledge that the foregoing waiver of Borrowers' obligations under Section 5.6 of the Agreement relates solely to non-compliance with the provisions of FAS 121 and shall not in any way waive Borrowers' compliance with Section 5.6 at all times from and after June 30, 2001. Accordingly, the Borrowers hereby covenant and agree that the financial statements to be delivered by the Borrowers for the fiscal year ended December 2 31, 2000 pursuant to Section 5.1(a) of the Agreement and for the fiscal quarter ending June 30, 2001 pursuant to Section 5.1(b) of the Agreement, and all other financial statements thereafter delivered by the Borrowers pursuant to Sections 5.1(a) and 5.1(b) of the Agreement, shall be prepared in accordance with GAAP, including, without limitation, FAS 121, subject to normal year-end audit adjustments. 2.3 Section 2.3 of the Waiver is hereby amended in its entirety to read as follows: 2.3 To the extent, but solely to the extent, that Sections 6.3, 6.4, 6.9 or 6.11 otherwise preclude the Borrowers or their Subsidiaries from entering into such transaction, the Lenders hereby waive the provisions of Sections 6.9 or 6.11 of the Agreement solely to the extent necessary to permit ICG Holdings, Inc. to execute, deliver and perform an agreement providing for: (a) the application of a $10,000,000 security deposit made by ICG Holdings, Inc. under that certain Commercial Lease dated as of January 15, 1998 (the "TriNet ------ Lease") with TriNet Essential Facilities X, Inc. to cure various ----- defaults under such lease by ICG Holdings, Inc.; (b) a release of ICG Holdings, Inc. from any obligation to pay for the garage construction described therein, which garage is located at 161 Inverness Drive West, Englewood, Colorado; (c) completion of the garage construction described therein; and (d) extension of the lease term to twenty five (25) years. Extension of the term of the TriNet Lease to twenty five (25) years shall cause the TriNet Lease to constitute a Capitalized Lease under the Agreement and, accordingly, ICG Holdings, Inc.'s obligations under the TriNet Lease shall constitute Indebtedness which is not otherwise permitted under Section 6.3 of the Agreement. Lenders acknowledge that certain of the monies constituting the security deposit under the TriNet Lease shall be used to satisfy obligations secured by mechanics liens which encumber the referenced garage, but the foregoing waiver shall not otherwise permit ICG Holdings, Inc. or any other Borrower to make any payments in respect of such mechanics liens. Application of such security deposit as described above shall not constitute a Capital Expenditure by ICG Holdings, Inc. for the purposes of Section 6.4 of the Agreement. The Lenders have agreed to the foregoing waiver in part in reliance upon a representation by the Borrowers that the guaranteed maximum price to complete construction of the referenced garage is approximately $7,600,000, which cost includes satisfaction of all obligations currently secured by mechanics liens which encumber such property. Borrowers hereby acknowledge and agree that it shall constitute an Event of Default under the Agreement in the event that ICG Holdings, Inc. or any other Borrower or any of their respective Subsidiaries are obligated to pay $500,000 or more (in the aggreate) in construction costs in respect of the referenced garage other than through the application of the referenced $10,000,000 security deposit. 3 The foregoing waiver is effective only in this specific instance, and the Borrowers hereby acknowledge their obligations under Sections 6.3, 6.4, 6.9 and 6.11 of the Agreement, and the Borrowers hereby acknowledge that the foregoing waiver shall not in any way waive compliance with any other provisions of the Agreement. Section 3. Effectiveness. The effectiveness of this Amendment is ------------- subject to the satisfaction and occurrence of the following conditions precedent: 3.1 The Agent shall have received executed counterparts of this Amendment which, when taken together, bear the signatures of the Borrowers and the Lenders. Section 4. Full Force and Effect. Except as specifically amended --------------------- hereby, all of the terms and conditions of the Waiver and the Agreement shall remain in full force and effect, and the same are hereby ratified and confirmed. No reference to this Amendment need be made in any instrument or document at any time referring to the Waiver, a reference to the Waiver in any of such to be deemed to be a reference to the Waiver as amended hereby. Section 5. Counterparts. This Amendment may be executed in any ------------ number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. Section 6. Headings. The various headings of this Amendment are -------- inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any provisions hereof. [The remainder of this page is intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first written. BORROWERS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff ------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff ------------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff ------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff ------------------------ Name: Bernard L. Zuroff Title: Executive Vice President 5 ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President 6 NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------ Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President 7 ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff ------------------------ Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff ------------------------ Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff ------------------------ Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff ------------------------ Name: Bernard L. Zuroff Title: Vice President 8 ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff ---------------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ----------------------- Name: Bernard L. Zuroff Title: Vice President 9 DOWNNORTH, INC. By: /s/ Bernard L. Zuroff ------------------------------ Name: Bernard L. Zuroff Title: Vice President THE CHASE MANHATTAN BANK, Individually and as Agent By: /s/ Norma C. Corio ------------------------------ Name: Norma C. Corio Title: Managing Director 10 EX-4.32 8 dex432.txt SECOND AMENDMENT TO CREDIT AGREEMENT EXHIBIT 4.32 CONFORMED COPY SECOND AMENDMENT TO ------------------- CREDIT AGREEMENT ---------------- This SECOND AMENDMENT TO CREDIT AGREEMENT dated as of May 2, 2001 (the "Second Amendment"), is entered into by and among ICG COMMUNICATIONS, INC., a ---------------- Delaware corporation, and each of its direct and indirect subsidiaries party to the Agreement (as defined below) (each, individually, a "Borrower" and -------- collectively, the "Borrowers"), THE CHASE MANHATTAN BANK, a New York banking --------- corporation, and each of the other commercial banks, finance companies, insurance companies or other financial institutions or funds from time to time party to the Agreement (as defined below) (the "Lenders"), and THE CHASE ------- MANHATTAN BANK, as agent (the "Agent"). ----- WITNESSETH: WHEREAS, the Borrowers, the Lenders and the Agent are parties to that certain Revolving Credit Agreement dated as of December 4, 2000, as amended (the "Agreement"), pursuant to which the Lenders have made available to the Borrowers --------- a revolving credit and letter of credit facility in an aggregate principal amount not to exceed $350,000,000 and initially not to be less than $200,000,000; and WHEREAS, the Borrowers have requested that the Lenders make certain modifications to the Agreement; and WHEREAS, the Borrowers and the Lenders desire to amend and to supplement the Agreement to reflect the modifications requested by the Borrowers; WHEREAS, subject to the terms and conditions set forth in Section 9.3 ----------- of the Agreement, each Lender is entitled to assign to one or more Eligible Assignees all or a ratable portion of its interests, rights and obligations under the Agreement (including, without limitation, all or a portion of its Commitment and the same portion of the related Loans at the time owing to it) by executing and delivering an Assignment and Acceptance between such Lender and such Eligible Assignee substantially in the form of Exhibit D to the Agreement; --------- and WHEREAS, pursuant hereto, Chase, the sole Lender party to the Agreement immediately prior to the effective date of this Amendment (in such capacity, the "Original Lender") wishes to assign to each of the financial --------------- institutions (other than itself) that is named on the Commitment Schedule hereto (such financial institutions other than the Original Lender, collectively the "New Lenders"), and each of the New Lenders wishes to assume, a portion of the ----------- Original Lender's interests, rights and obligations under the Agreement so that, after giving effect to this Amendment, the respective Commitments of the Original Lender and the New Lenders will be as set forth in such Commitment Schedule; and WHEREAS, the Borrowers, the Original Lender, the New Lenders and the Agent have determined that the execution and delivery of this Amendment to, among other things, effectuate a reallocation of the Total Commitment among the Original Lender and the New Lenders will be more expeditious and administratively efficient than the execution and delivery of separate Assignment and Acceptances between the Original Lender and each of the New Lenders; and WHEREAS, upon the occurrence of the Effective Date (as hereinafter defined), each of the New Lenders shall become a party to the Agreement as a Lender and shall have the rights and obligations of a Lender thereunder, and the respective Commitments of the Original Lender and each New Lender under the Agreement shall be in the amount set forth opposite its name on the Commitment Schedule hereto, as such amount may be reduced from time to time pursuant to the Agreement; NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used and not otherwise ----------- defined in this Second Amendment are used as defined in the Agreement. Section 2. Amendments to Agreement. Subject to the conditions set ----------------------- forth in Section 6 hereof, the Agreement is hereby amended as follows: --------- 2.1 Section 1.1 of the Agreement is hereby amended by (A) adding the ----------- following additional defined terms in the proper alphabetic location: "Account Debtor" means, with respect to any Account, the obligor with -------------- respect to such Account. "Adjusted Eligible Accounts Receivable" shall mean the product of ------------------------------------- Eligible Accounts Receivable minus the Dilution Reserve. "Adjusted Fiber Optic Network" shall mean the Fiber Optic Network, ---------------------------- valued at the Replacement Cost Without Time-to-Market Value, at the beginning of the period less the disposal of or sale of assets during such period. The disposal of or sale of assets shall be accounted for and calculated, based on the most recent asset appraisal report, as follows: (a) the number of disposed of or sold Fiber Optic Network miles classified as either rural, suburban and urban, multiplied by (b) the quotient of the Replacement Cost Without Time-To-Market Value By Region divided by the total number of fiber optic miles by region. "Adjusted Fixed Assets Other Than Fiber Optic Network" shall mean the ---------------------------------------------------- Fixed Assets other than Fiber Optic Network, valued at the Orderly Liquidation Value in Exchange, at the beginning of the period less the disposal of or sale of assets during such period. The deduction for the disposal of or sale of assets in the foregoing equation shall be calculated for each type of assets disposed of as follows: (a) the original cost of the assets of such type disposed of, multiplied by (b) a fraction, the numerator of which shall be the Orderly Liquidation Value in 2 Exchange for such assets and the denominator of which shall be the external cost for assets in the applicable asset category, all as set forth in the most recent asset appraisal report on Borrowers' assets prepared by or on behalf of Agent. "Dilution Factors" shall mean, with respect to any period, the ---------------- aggregate amount of all gross credit memos, adjustments, allowances, bad debt write-offs and other non-cash credits which are recorded to reduce accounts receivable in a manner consistent with current and historical accounting practices of the Borrowers. "Dilution Ratio" shall mean, at any date, the amount (expressed as a -------------- percentage) equal to (a) the aggregate amount of the applicable Dilution Factors the six (6) most recently ended fiscal months divided ------- by (b) total gross sales for the six (6) most recently ended fiscal months. The Dilution Ratio calculated on the Borrowers' available Accounts data shall be applied to those Accounts on which the Dilution Ratio cannot be determined as a result of insufficient available information from the Borrowers' billing platforms. "Dilution Reserve" shall mean, at any date, the applicable Dilution ---------------- Ratio multiplied by the Eligible Accounts Receivable on such date. "Eligible Accounts Receivable" means, at the time of any determination ---------------------------- thereof, each Account that satisfies the following criteria at the time of creation and continues to meet the same at the time of such determination: such Account (i) has been invoiced to, and represents the bona fide amounts due to the Borrowers from, the purchaser of services, in each case originated in the ordinary course of business of the Borrowers and (ii) is not ineligible for inclusion in the calculation of the Borrowing Base pursuant to any of clauses (a) through (m) below or otherwise deemed by the Agent in good faith to be ineligible for inclusion in the calculation of the Borrowing Base as described below. Without limiting the foregoing, to qualify as Eligible Accounts Receivable, an Account shall indicate no person other than a Borrower as payee or remittance party. In determining the amount to be so included, the face amount of an Account shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, price adjustments, finance charges or other allowances (including any amount that the Borrowers, as applicable, may be obligated to rebate to a customer pursuant to the terms of any agreement or understanding (written or oral)), (ii) the aggregate amount of all limits and deductions provided for in this definition and elsewhere in this Agreement and (iii) the aggregate amount of all cash received in respect of such Account but not yet applied by the Borrowers to reduce the amount of such Account. Unless otherwise approved from time to time in writing by the Agent, no Account shall be an Eligible Account Receivable if, without duplication: (a) the relevant Borrower does not have sole lawful and absolute title to such Account; or 3 (b) (i) it is unpaid more than 90 days from the original date of invoice or 60 days from the original due date or (ii) it has been written off the books of the Borrowers or has been otherwise designated on such books as uncollectible; or (c) more than 50% in face amount of all Accounts of the same Account Debtor are ineligible pursuant to clause (b) above; or (d) the Account Debtor is insolvent or the subject of any bankruptcy case or insolvency proceeding of any kind; or (e) the Account is not payable in Dollars or the Account Debtor is either not incorporated under the laws of the United States of America, any state thereof or the District of Columbia or is located outside or has its principal place of business or substantially all of its assets outside the United States, except to the extent the Account is supported by an irrevocable letter of credit reasonably satisfactory to the Agent (as to form, substance and issuer) and assigned to and directly drawable by the Agent; or (f) the Account Debtor is the United States of America or any department, agency or instrumentality thereof, unless the relevant Borrower duly assigns its rights to payment of such Account to the Agent pursuant to the Assignment of Claims Act of 1940, as amended, which assignment and related documents and filings shall be in form, and substance reasonably satisfactory to the Agent; or (g) the Account is supported by a security deposit (to the extent received from the applicable Account Debtor), retainage or other similar advance made by or for the benefit of the applicable Account Debtor, in each case to the extent thereof; or (h) (i) it is not subject to a valid and perfected first priority Lien in favor of the Agent for the benefit of the Secured Parties, subject to no other Liens other than the Liens (if any) permitted by the Loan Documents or (ii) it does not otherwise conform in all material respects to the representations and warranties contained in the Loan Documents relating to Accounts; or (i) as to all or any part of such Account, a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason, or (j) such Account was invoiced (i) in advance of services provided, or (ii) twice, or (iii) the associated income has not been earned, or 4 (k) such Account arises from invoicing by the Borrowers related to, reciprocal compensation, as historically defined by the Borrowers, or (l) the Account Debtor (i) is a creditor of a Borrower, (ii) has or has asserted a right of set-off against a Borrower or (iii) has disputed its liability (whether by chargeback or otherwise) or made any claim with respect to the Account or any other Account of a Borrower which has not been resolved, in each case, without duplication, to the extent of the amount owed by such Borrower to the Account Debtor, the amount of such actual or asserted right of set-off, or the amount of such dispute or claim, as the case may be; or (m) the Account Debtor is an Affiliate of the Borrowers. Notwithstanding the foregoing, all Accounts of any single Account Debtor and its Affiliates which, in the aggregate exceed 25% of the total amount of all Eligible Accounts Receivable at the time of any determination shall be deemed not to be Eligible Accounts Receivable to the extent of such excess. In determining the aggregate amount of Accounts from the same Account Debtor that are unpaid more than 90 days from the date of invoice or more than 60 days from the due date pursuant to clause (b) above, there shall be excluded the amount of any net credit balances relating to Accounts with invoice dates more than 90 days prior to the date of determination or more than 60 days from the due date. "Fiber Optic Network" shall mean, all telecommunications cable owned ------------------- by the Borrowers; including fiber optic cable, whether aerial, buried, underground or highline. "Fixed Assets" shall mean, the assets defined as Fiber Optic Network ------------ and Fixed Assets Other Than Fiber Optic Network. Unless otherwise approved in writing by the Agent, no Fixed Assets shall be included in the calculation of the Borrowing Base if, without duplication: (a) such item is (i) held on consignment, or (ii) such item is owned by a Borrower and has been consigned out, or (iii) is in transit to or from, or held or stored by, third parties, or (b) the relevant Borrower does not have good or marketable title as sole owner of such item or such Borrower does not have the exclusive right to possession of or dominion over any such item or any third party shall have made a claim disputing any of the foregoing in respect of such item, or (c) such item is not subject to a valid and perfected, first priority security interest in favor of the Agent, or 5 (d) such item is subject to any Lien whatsoever (other than the security interest described in (c) above), or (e) such item is not in working condition, or is otherwise defective. "Fixed Assets Other Than Fiber Optic Network" shall mean all non-fiber ------------------------------------------- telecommunications machinery, equipment, switches and third party software owned by the Borrowers. Any determination of Fixed Assets Other Than Fiber Optic Network shall expressly exclude the Fiber Optic Network. "Lender Affiliate" means, (a) with respect to any Lender, (i) an ---------------- Affiliate of such Lender or (ii) any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in loans and similar extensions of credit, any other fund that invests in loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Orderly Liquidation Value In Exchange" or "OLVIE" means an asset ------------------------------------- ----- valuation approach, (as adhered to in the Appraisal of the Selected Machinery and Equipment of ICG Communications, Inc. report, dated January 2, 2001, prepared by Emerald Technology Valuations, LLC, an asset appraisal firm), that assumes an outright liquidation of the assets in which buyers will remove the assets from the facilities at their own expense. "Replacement Cost Without Time-to-Market Value" an asset valuation --------------------------------------------- approach, (as adhered to in the Asset Valuation of Fiber Optic Network of ICG Communications, Inc. report, dated January 24, 2001, prepared by the Strategis Consulting Group, Inc., an asset appraisal firm), that utilizes the current replacement cost of new equipment and assumes an outright liquidation of the assets in which the assets will remain in their present location and will continue to be optimally employed. "Replacement Cost Without Time-To-Market Value By Region" is ------------------------------------------------------- calculated, based upon the most recent asset appraisal report, by a) multiplying the estimated replacement cost per mile by region by the number of miles in that region, divided by the sum of the products of each region, multiplied by b) total Replacement Cost Without Time-To- Market Value. 6 and; (B) amending the definitions of the following terms in their entirety to read as follows: "Account" shall mean any right to payment for goods sold or leased or ------- for services rendered, regardless of how such right is evidenced, and whether or not it has been earned by performance. "Borrowing Base" at the time of any determination an amount equal to -------------- the sum, without duplication, of (a) 80% of Adjusted Eligible Accounts Receivable, plus (b) 70% of the Adjusted Fiber Optic Network, (c) 50% of the Adjusted Fixed Assets Other Than Fiber Optic Network, minus (d) the Carve-Out. The Borrowing Base at any time shall be determined by reference to the most recent Borrowing Base Certificate delivered to the Administrative Agent pursuant to Section 5.8. Subject to the provisions of Section 9.10(a) of this Agreement, standards of eligibility and reserves and advance rates of the Borrowing Base may be revised and adjusted from time to time by the Agent in its sole discretion, with any changes in such standards to be effective three (3) days after delivery of notice thereof to the Borrowers. "Borrowing Base Certificate" shall mean a certificate substantially in -------------------------- the form of Exhibit E hereto (with such changes therein as may be --------- required by the Agent to reflect the components of and reserves against the Borrowing Base as provided for hereunder from time to time), executed and certified as accurate and complete by a Financial Officer of ICG Communications, Inc., which shall include appropriate exhibits, schedules, supporting documentation, and additional reports as (i) outlined in Schedule 1 to Exhibit E, (ii) as reasonably ---------- --------- requested by the Agent, and (iii) as provided for in Section 5.8. "Maturity Date" shall mean May 14, 2002. ------------- 2.2 Section 2.2(a) of the Agreement is hereby amended by deleting at -------------- the end thereof the following: "and the amount of the Total Commitment and the Maturity Date may be adjusted pursuant to Section 2.2(d) below". 2.3 Section 2.2(d) of the Agreement is hereby deleted in its -------------- entirety. 2.4 Section 2.17 of the Agreement is hereby amended by adding in ------------ clause "(ii)" thereof immediately after the words "immediately available funds" the following: ", without defense, setoff or counterclaim and free of any restriction or condition,". 2.5 Section 6.4 of the Agreement is hereby amended by deleting clause ----------- "(a)" in the last paragraph thereof in its entirety and substituting therefor a new clause "(a)" as follows: up to $20,000,000 of the amount permitted to be expended in the quarter ending March 31, 2001 that is not expended during such quarter may be added to the 7 amount permitted to be expended in any subsequent quarter for other purposes that may include purchasing additional special access lines. 2.6 Section 6.5(a) of the Agreement is hereby amended by deleting the -------------- cumulative EBITDA loss amounts set forth therein and substituting therefor the following cumulative EBITDA loss amounts: Fiscal Month Ending EBITDA (millions) ------------------- ----------------- November 30, 2000 ($ 15.0) (commencing November 15, 2000) December 31, 2000 ($ 35.0) January 31, 2001 ($ 55.0) February 28, 2001 ($ 75.0) March 31, 2001 ($110.0) April 30, 2001 ($135.0) May 31, 2001 ($155.0) June 30, 2001 ($165.0) July 31, 2001 ($180.0) August 31, 2001 ($190.0) September 30, 2001 ($190.0) October 31, 2001 ($185.0) November 30, 2001 ($175.0) December 31, 2001 ($170.0) January 31, 2002 ($160.0) February 28, 2002 ($150.0) March 31, 2002 ($140.0) April 30, 2002 ($125.0) 2.7 Section 9.3(b) of the Agreement is hereby amended by adding in -------------- clause "(i)" thereof immediately after the words "in the case of any assignment to" the following: "any Lender Affiliate or to". 2.8 Section 9.10(a) of the Agreement is hereby amended by (A) --------------- deleting the following parenthetical phrase: "(except as contemplated by Section 2.2(d), as to which no consent shall be required)" and (B) deleting the second proviso of the first grammatical sentence thereof in its entirety and substituting therefor the following: and, provided, further, that no such modification or amendment shall without the written consent of (A) all of the Lenders (i) amend or modify any provision of this Agreement which provides for the unanimous consent or approval of the Lenders, (ii) amend this Section ------- 9.10 or the definition of Required Lenders, (iii) amend or modify the ---- Superpriority Claim status of the Lenders contemplated by Section 2.23, (iv) release any material portion of the Collateral from the Liens created pursuant to the Security and Pledge Agreement, or (v) increase the advance ratios used in calculation of the Borrowing Base or (B) the Super-Majority Lenders, alter 8 the eligibility standards used in determining the Borrowing Base in a manner which would increase the amount of the Borrowing Base other than as contemplated in the definition of Eligible Accounts Receivable with respect to clauses (a) through (m) thereof. 2.9 The Agreement is hereby amended by adding Exhibit E thereto in --------- the form attached hereto. 2.10 Annex A of the Agreement is hereby replaced in its entirety by Annex A attached hereto. ------- 2.11 The signature pages to the Agreement are hereby amended to list, in addition to the Original Lender, the New Lenders, as such new Lenders are listed on the signature pages to this Amendment. Section 3. Assignment and Acceptance. ------------------------- 3.1 By its execution and delivery hereof, the Original Lender hereby irrevocably sells and assigns to each of the New Lenders without recourse to the Original Lender, and each of the New Lenders hereby irrevocably purchases and assumes from the Original Lender without recourse to the Original Lender, as of the Effective Date, an undivided interest (the "Assigned Interest") in and to all the Original Lender's rights and ----------------- obligations under the Agreement in a principal amount as set forth opposite each such New Lender's name on Annex A. ------- 3.2 By its execution and delivery hereof, the Original Lender (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement or any other of the Loan Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement, any other of the Loan Documents or any other instrument or document furnished pursuant thereto, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrowers or the performance or observance by the Borrowers of any of their respective obligations under the Agreement, any of the other Loan Documents or any other instrument or document furnished pursuant thereto; and (iii) requests that the Agent evidence the Assigned Interest by recording the information contained on Annex A in the Register which reflects the assignment being made hereby ------- (and after giving effect to any other assignments which have become effective on the Effective Date). 3.3 By its execution and delivery hereof, each of the New Lenders, (i) represents and warrants that it is legally authorized to enter into this Amendment and that it is an Eligible Assignee; (ii) confirms that it has received a copy of the Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.1 hereof (as ----------- such Section has been amended or waived prior to the date hereof), and 9 such other documents and information as it has deemed appropriate to make its own credit analysis; (iii) agrees that it will, independently and without reliance upon the Agent, the Original Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement; (iv) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Agreement and the other Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (v) agrees that it will be bound by the provisions of the Agreement and will perform in accordance with its terms all the obligations which by the terms of the Agreement are required to be performed by it as a Lender; (vi) if the New Lender is organized under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the Internal Revenue Service of the United States certifying as to the New Lender's exemption from United States withholding taxes with respect to all payments to be made to the New Lender under the Agreement or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty; and (vii) has supplied the information requested on the administrative questionnaire heretofore supplied by the Agent. 3.4 By its execution and delivery hereof, each of the New Lenders (i) agrees that any interest, Commitment Fees and Letter of Credit Fees that accrued prior to the Effective Date shall not be payable to such New Lender and authorizes and directs the Agent to deduct such amounts from any interest, Commitment Fees or Letter of Credit Fees paid to it after the Effective Date and to pay such amounts to the Original Lender (it being understood that interest, Commitment Fees and Letter of Credit Fees respecting the Commitment of the Original Lender and each New Lender that accrue on or after the Effective Date shall be payable to each such Lender in accordance with its Commitment), (ii) agrees that if it receives any amount under the Agreement that is for the account of the Original Lender, it shall receive the same for the account of such Original Lender to the extent of the Original Lender's interest therein and shall promptly pay the same to such other party, (iii) acknowledges that if such New Lender has heretofore furnished to the Agent the forms prescribed by the Internal Revenue Service of the United States certifying as to such New Lender's exemption from United States withholding taxes with respect to any payments to be made to such New Lender under the Agreement (or such other documents as are necessary to indicate that all such payments are subject to such tax at a rate reduced by an applicable tax treaty). 3.5 From and after the Effective Date, each New Lender will pay to the Agent (for the account of the Original Lender) such amount as represents such New Lender's pro rata portion of the aggregate principal amount of the Loans that are outstanding on the Effective Date and such New Lender's pro rata portion of the aggregate amount of the then unreimbursed drafts, if any, that were theretofore drawn under Letters of Credit, and (ii) the Agent shall pay to each New Lender such fees as have been previously agreed to between the Agent and such New Lender. 10 3.6 From and after the Effective Date, (i) each of the New Lenders shall be a party to the Agreement and, to the extent provided in this Amendment, have the rights and obligations of a Lender thereunder, and (ii) the Original Lender shall, to the extent provided in this Amendment, relinquish its rights and be released from its obligations under the Agreement, provided that Assignor hereby represents and warrants that the restrictions set forth in Section 9.3 of the Agreement pertaining to the ----------- minimum amount of assignments have been satisfied. 3.7 The execution of this Amendment by the Borrowers, the Agent and the Fronting Bank is evidence of the consents required pursuant to Section ------- 9.3(e) of the Agreement. In addition, to the extent it is not satisfied by ------ virtue of execution and delivery hereof, the condition contained in clause (iii) of Section 9.3(e) is hereby waived. Pursuant to Section 2.7(e) of -------------- -------------- the Agreement, the Borrowers agree to execute and deliver a Note payable to the order of each New Lender to evidence the assignment and assumption provided for herein. 3.8 By executing and delivering this Amendment, each New Lender hereby becomes party to the Agreement as a Lender, with all of the rights, privileges, obligations and duties of a Lender thereunder. Without limiting the generality of the foregoing, each New Lender agrees to perform its duties and obligations under the Agreement in accordance with the terms thereof. Section 4. Reduction of Syndication Commitment. Each of the ----------------------------------- Borrowers hereby acknowledges and agrees that, notwithstanding any provisions to the contrary contained in that certain Commitment Letter issued by the Agent and Chase Securities, Inc. to ICG Communications, Inc., ICG Services, Inc. and ICG Holdings, Inc. dated November 13, 2000, the Agent's commitment to use commercially reasonable efforts to syndicate the Facility is hereby reduced from $350,000,000 to $200,000,000. Accordingly, the Total Commitment shall be $200,000,000, subject to reduction in accordance with the terms of Section 2.10 of the Agreement. Section 5. Termination of Initial Period. Each of the Borrowers, the ----------------------------- Lenders and the Agent hereby acknowledge and agree that the Initial Period shall terminate on the Effective Date (as defined below). Section 6. Effectiveness. The effectiveness of this Second Amendment ------------- is conditioned upon the Agent's receipt of executed counterparts of this Second Amendment which, when taken together, bear the signatures of the Borrowers, the Original Lender and each New Lender (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party). The "Effective Date" shall mean the first -------------- Business Day on which the foregoing condition is fully satisfied. Section 7. Representations and Warranties. Each Borrower represents ------------------------------ and warrants to the Lenders that: 11 7.1 After giving effect to the amendments contained herein and taking into account all prior written waivers and amendments in respect of the Agreement, the representations and warranties of the Borrowers contained in Section 3 of the Agreement are true and correct in all material respects --------- on and as of the date hereof as if such representations and warranties had been made on and as of the date hereof (except to the extent that any such representations and warranties specifically relate to an earlier date); and 7.2 After giving effect to the amendments contained herein and taking into account all prior written waivers and amendments in respect of the Agreement, (i) each Borrower is in compliance with all the terms and provisions set forth in the Agreement, and (ii) no Event of Default has occurred and is continuing (other than as specifically waived herein) or would result from the execution, delivery and performance of this Second Amendment. Section 8. Full Force and Effect. Except as specifically amended --------------------- hereby, all of the terms and conditions of the Agreement shall remain in full force and effect, and the same are hereby ratified and confirmed. No reference to this Second Amendment need be made in any instrument or document at any time referring to the Agreement, a reference to the Agreement in any of such to be deemed to be reference to the Agreement as amended hereby. Section 9. Counterparts. This Second Amendment may be executed in ------------ any number of counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same agreement. Section 10. Headings. The various headings of this Second Amendment -------- are inserted for convenience only and shall not affect the meaning or interpretation of this Second Amendment or any provisions hereof. [The remainder of this page is intentionally left blank.] 12 IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be duly executed as of the day and the year first written. BORROWERS: ICG COMMUNICATIONS, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TEVIS, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG FUNDING, LLC By: ICG Communications, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG SERVICES, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG MOUNTAIN VIEW, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President 13 ICG NETAHEAD, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG EQUIPMENT, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG CANADIAN ACQUISITION, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS (CANADA) CO. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG HOLDINGS, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Executive Vice President ICG TELECOM GROUP, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President 14 NIKONET, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG OHIO LINX, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ENHANCED SERVICES, INC. By: /s/ Bernard L. Zuroff -------------------------------- Name: Bernard L. Zuroff Title: Vice President COMMUNICATIONS BUYING GROUP, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG TELECOM GROUP OF VIRGINIA, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President 15 ICG DATACHOICE NETWORK SERVICES, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President PTI HARBOR BAY, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President BAY AREA TELEPORT, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG ACCESS SERVICES - SOUTHEAST, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President TRANS AMERICAN CABLE, INC. By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President 16 ICG TELECOM OF SAN DIEGO, L.P. By: ICG Telecom Group, Inc., its General Partner By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President WESTERN PLAINS FINANCE, L.L.C. By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM MANAGEMENT, LLC By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ------------------------------- Name: Bernard L. Zuroff Title: Vice President ICG CHOICECOM, L.P. By: ICG ChoiceCom Management, LLC its General Partner By: ICG Telecom Group, Inc., its Managing Member By: /s/ Bernard L. Zuroff ---------------------------- Name: Bernard L. Zuroff Title: Vice President 17 DOWNNORTH, INC. By: /s/ Bernard L. Zuroff -------------------------- Name: Bernard L. Zuroff Title: Vice President THE CHASE MANHATTAN BANK, Individually and as Agent By: /s/ Norma C. Corio -------------------------- Name: Norma C. Corio Title: Managing Director HELLER FINANCIAL, INC. By: /s/ Michele Kovatchis -------------------------- Name: Michele Kovatchis Title: Senior Vice President CIT GROUP / BUSINESS CREDIT INC. By: /s/ James A. Brennan, Jr. -------------------------- Name: James A. Brennan, Jr. Title: Vice President ABLECO FINANCE LLC By: /s/ Kevin Genda -------------------------- Name: Kevin Genda Title: Senior Vice President 18 FRANKLIN FLOATING RATE TRUST By: /s/ Chauncey Lufkin -------------------------- Name: Chauncey Lufkin Title: Vice President 19 EXHIBIT E FORM OF BORROWING BASE CERTIFICATE Exhibit E-1 Page 1 of 2 ICG Communications, Inc. Form of Weekly Borrowing Base Certificate * For the Week Ended _______________________ A. Available accounts receivable (from page 2 of 2) $ ** --------------- B. Available fixed assets (from page 2 of 2) $ --------------- C. Carve-out $ --------------- D. Borrowing Base (Total Availability) (lines A + B - C) $ --------------- E. Lower of: Borrowing Base (Total Availability) (line D) $ --------------- $ --------------- Revolving Credit Commitment $ 200,000,000 --------------- F. Outstanding Loans $ --------------- G. Letters of Credit Outstanding $ --------------- H. Aggregate outstanding credit (lines F + G) $ --------------- I. Excess Availability (line E minus line H) $ ===============
Officer's Certification: Pursuant to the Credit Agreement dated as of December 4, 2000, the undersigned certifies that the information provided in this certificate to JPMorgan, as Agent, is accurate and complete based on the accounting records of ICG Communications, Inc. _______________________________________________ _____________ Signature & Title Date * The Borrowing Base Certificate is to be accompanied by documentation outlined in Schedule 1 Exhibit E. ** Reporting regarding accounts receivable to commence July 1, 2001. Exhibit E-1 Page 2 of 2 ICG Communications, Inc. Form of Weekly Borrowing Base Certificate * For the Week Ended _______________________ Calculation of available accounts receivable **
Total ----- Gross A/R per end of week aging $ ------------------ Total ineligibles from prior month ------------------ Eligible A/R (before dilution) ------------------ Dilution % (a) 23% Dilution Reserve ------------------ Adjusted Eligible A/R ------------------ Advance rate 80% Available A/R $ ================== Calculation of available fixed assets Fiber Optic Network adjusted Replacement Cost Without Time-to-Market Value (b) $ ------------------ Less: Weekly asset disposals or sales ------------------ Adjusted Fiber Optic Network ------------------ Advance rate 70% Availability from Fiber Optic Network ------------------ Fixed Assets other than Fiber Optic Network adjusted Orderly liquidation value in exchange (c) ------------------ Less: Weekly asset disposals or sales ------------------ Adjusted Fixed Assets other than Fiber Optic Network ------------------ Advance rate 50% Availability from Fixed Assets other than Fiber Optic Network ------------------ Available Fixed Assets $ ==============================================================================================================
* The Borrowing Base Certificate is to be accompanied by documentation outlined in Schedule 1 to Exhibit E. ** Reporting regarding accounts receivable to commence July 1, 2001. Notes to Borrowing Base - ----------------------- (a) Dilution ratio for the Access, UDP, Quickbooks, CBG, and Nikonet billing platforms has been estimated by utilizing the dilution ratio calculated for CBP for the 6 months ended December 31, 2000. The dilution ratio shall be adjusted based on a rolling 12 month average on available data and applied to those billing platforms in which a dilution ratio could not be calculated. (b) As reported by the Strategis Consulting Group, Inc. appraisal report as of October 31, 2000, and adjusted to reflect the disposal of or the sale of assets. (c) As reported by the Emerald Technology Valuations, LLC appraisal report as of December 22, 2000, and adjusted to reflect the disposal of or the sale of assets Exhibit E-2 Page 1 of 3 ICG Communications, Inc. Form of Monthly Borrowing Base Certificate * For the Month Ended _______________________ A. Available accounts receivable (from page 2 of 2) $ ** --------------- B. Available fixed assets (from page 2 of 2) $ --------------- C. Carve-out $ --------------- D. Borrowing Base (Total Availability) (lines A + B - C) $ --------------- E. Lower of: Borrowing Base (Total Availability) (line D) $ --------------- $ --------------- Revolving Credit Commitment $ 200,000,000 --------------- F. Outstanding Loans $ --------------- G. Letters of Credit Outstanding $ --------------- H. Aggregate outstanding credit (lines F + G) $ --------------- I. Excess Availability (line E minus line H) $ ===============
Officer's Certification: Pursuant to the Credit Agreement dated as of December 4, 2000, the undersigned certifies that the information provided in this certificate to JPMorgan, as Agent, is accurate and complete based on the accounting records of ICG Communications, Inc. _______________________________________________ _____________ Signature & Title Date * The Borrowing Base Certificate is to be accompanied by documentation outlined in Schedule 1 Exhibit E. ** Reporting regarding accounts receivable to commence July 1, 2001. Exhibit E-2 Page 2 of 3 ICG Communications, Inc. Form of Monthly Borrowing Base Certificate * For the Month Ended _______________________ Calculation of available accounts receivable **
Total ----- Beginning of month accounts receivable $ -------------- + Gross billings -------------- + Other debit adjustments -------------- - Cash receipts applied -------------- - Discounts -------------- - Credit memos -------------- - Returns -------------- - Write-offs -------------- - Other credit adjustments -------------- Gross A/R per end of month aging -------------- Ineligibles: > 90 days old or 60 past due -------------- Unapplied cash -------------- Unearned income -------------- Duplicate billings -------------- Reciprocal compensation -------------- Contra -------------- Credit reclass -------------- Cross-age -------------- Government -------------- Intercompany -------------- Foreign -------------- Customer deposits -------------- Concentration Cap at 25% -------------- Due from Bankrupt or insolvent customer -------------- Disputes/chargebacks, set-offs, claims -------------- No first priority perfected security interest -------------- Other (per Credit Agreement) -------------- Estimated ineligibles (a) -------------- Total ineligibles -------------- Eligible A/R (before dilution) -------------- Dilution % (b) 23% Dilution Reserve -------------- Adjusted Eligible A/R -------------- Advance rate 80% Available A/R $ ==============
* The Borrowing Base Certificate is to be accompanied by documentation outlined in Schedule 1 to Exhibit E. ** Reporting regarding accounts receivable to commence July 1, 2001. Exhibit E-2 Page 3 of 3 ICG Communications, Inc. Form of Monthly Borrowing Base Certificate * For the Month Ended _______________________ Calculation of available fixed assets
1.1.1.1.1.1.1 Total -------------------- Fixed Assets ------------ Fiber Optic Network adjusted Replacement Cost Without Time-to-Market Value (c) $ ------------------ Less: Monthly Asset Sales ------------------ Adjusted Fiber Optic Network ------------------ Advance rate 70% Availability from Fiber Optic Network $ ------------------ Fixed assets other than Fiber Optic Network adjusted Orderly liquidation value in exchange (d) $ ------------------ Less: Monthly Asset Sales ------------------ Adjusted Fixed assets other than Fiber Optic Network ------------------ Advance rate 50% Availability from Fixed Assets other than Fiber Optic Network $ ------------------ Available Fixed Assets $ ==================
* The Borrowing Base Certificate is to be accompanied by documentation outlined in Schedule 1 to Exhibit E. Notes to Borrowing Base - ----------------------- (a) Certain ineligibles are estimated for the UDP, Quickbooks, CBG, and Nikonet billing platforms by utilizing the effective percentage of gross A/R of ineligibles calculated for the CBP and Access platforms. The estimate is calculated as follows; (i) divided by (ii); and then multiplied by gross A/R for the applicable billing platform. (i) equals the sum of the contra, credit-reclass, cross-age, government, intercompany, foreign, customer deposits, and concentration cap A/R ineligibles for CBP and Access, (ii) equals the sum of gross A/R for CBP and Access. (b) Dilution ratio for the Access, UDP, Quickbooks, CBG, and Nikonet billing platforms has been estimated by utilizing the dilution ratio calculated for CBP for the 6 months ended December 31, 2000. The dilution ratio shall be adjusted based on a rolling 12 month average on available data and applied to those billing platforms in which a dilution ratio could not be calculated. (c) As reported by the Strategis Consulting Group, Inc. appraisal report as of October 31, 2000, and adjusted to reflect the disposal of or the sale of assets. (d) As reported by the Emerald Technology Valuations, LLC appraisal report as of December 22, 2000, and adjusted to reflect the disposal of or the sale of assets. Schedule 1 to Exhibit E ICG Communications, Inc. Collateral Monitoring Reporting Requirements Documents to be Submitted to the Bank The following information is to be submitted on a combined basis and for each billing platform where applicable, of ICG Communications, Inc. for the applicable reporting period. Weekly - Borrowing Base Certificate in the form of Exhibit E-1. - ------ 1) Accounts Receivable - Total page of accounts receivable aging report by billing platform. * 2) Fixed Assets - Support for all sales of or disposals of fixed assets during the current reporting period, including product type, location, original cost, net sales proceeds, and sales agreement. Monthly - Borrowing Base Certificate in the form of Exhibit E-2. - ------- Accounts Receivable 1) Total page of accounts receivable aging report by billing platform. * 2) Address and terms of top 10 combined accounts receivable balances. 3) Reconciliation of A/R Subsystem to the general ledger and financial statements (i.e., "A/R Subsystem Reconciliation"). Gross A/R Subsystem must agree to the combined A/R aging by billing platform. 4) Supporting documentation (system generated extract report where applicable) for the A/R ineligibles as per the Credit Agreement, including unapplied cash, unearned income, duplicate billings, reciprocal compensation, contra, credit reclass, cross-age, government, intercompany, foreign, customer deposits, and concentration cap. 5) Supporting documentation for the monthly rollforward of accounts receivable by billing platform including: . Total page of invoice (sales register). . Total page of cash receipts journal. . Total page of credit and adjustments register (should include credit memos issued, write-offs, returns, discounts and other credit adjustments). If a credit and adjustments register is not available, credits and adjustments should be accumulated on a separate workpaper. Fixed Assets 1) Support for all sales of or disposals of fixed assets for the current reporting period, including product type, location, original cost, net sales proceeds, purchase/sales agreement. 2) Reconciliation of fixed assets subledger to the general ledger and financial statements. Other 1) Monthly financial statements. 2) Total page of trade accounts payable report. 3) Schedule of ten largest trade accounts payable balances, including payment terms and products supplied. 4) Reconciliation of trade accounts payable report to balance sheet. * Reporting regarding accounts receivable to commence July 1, 2001. Submit to: JPMorgan Collateral Agent Services Group Attention: Scott Troy, Assistant Treasurer 270 Park Avenue - 29/th/ Floor New York, NY 10017 scott.troy@chase.com Phone: (212) 270-4628 Fax: (212) 270-7449 Annex A to the Revolving Credit Agreement COMMITMENT AMOUNTS Dated as of May 2, 2001
BANK ---- COMMITMENT COMMITMENT AMOUNT PERCENTAGE ------ ---------- The Chase Manhattan Bank Loan and $ 68,571,429.00 34.28571450% Agency Services One Chase Manhattan Plaza 8th Floor New York, NY 10081 Attn: Donna Montgomery Tele. (212) 552-7477 Fax: (212) 552-5700 Heller Financial, Inc. $ 45,714,286.00 22.85714300% 500 West Monroe Street Chicago, IL 60661 Attn: Brian Benz Tele. (312) 441-6715 Fax: (312) 441-7367 CIT Group / Business Credit Inc. $ 45,714.286.00 22.85714300% 1211 Avenue of the Americas New York, NY 10036 Attn: Jim Brennan Tele. (212) 536-1280 Fax: (212) 536-1295 Ableco Finance LLC $ 20,000,000.00 10.00000000% 450 Park Avenue 28th Floor New York, NY 10022 Attn: Eric Miller Tele. (212) 891-1549 Fax: (212) 753-5305 Franklin Floating Rate Trust $ 20,000,000.00 10.00000000% c/o Franklin Templeton Group 777 Mariners Island Boulevard P.O. Box 7777 San Mateo, CA 94404 Attn: Mary Anne Chase Tele. (650) 525-7424
Fax: (650) 312-3346 Total $200,000,000.00 100% ________________________ ________________________ ________________________
EX-4.33 9 dex433.txt LOAN MODIFICATION AGREEMENT Exhibit 4.33 LOAN MODIFICATION AGREEMENT --------------------------- THIS LOAN MODIFICATION AGREEMENT (this "Loan Modification Agreement"), is made effective as of June 28, 2001, by and between TRINET REALTY CAPITAL, ---------------------- INC., a Maryland corporation ("Lender"), as lender, and TRINET REALTY INVESTORS - ---- ----------------------- V, INC., a Maryland corporation ("Borrower"), as borrower. - ------- RECITALS -------- A. Lender made a loan to ICG Services, Inc., a Delaware corporation ("ICG Services"), pursuant to the terms and conditions of that certain Loan Agreement, dated as of January 1, 1999, by and among Lender and ICG Services, the proceeds of which loan ICG Services used to purchase the Property. The Loan is evidenced, in part, by a Promissory Note dated as of January 1, 1999, in the stated principal amount of $33,076,754 (the "Purchase Money Note"). B. ICG Services subsequently sold the Property to ICG 161, L.P., a Delaware limited partnership ("ICG 161"), and ICG 161 acquired the Property, subject to the Deed of Trust and, in connection with such sale and acquisition, ICG 161 assumed ICG Services' obligations under the Loan Documents pursuant to the terms and conditions of that certain Amended and Restated Loan Agreement, dated as of May 1, 1999, by and between Lender and ICG 161 (the "Loan Agreement"). C. The general partner of ICG 161 is ICG Corporate Headquarters, L.L.C., a Colorado limited liability company ("ICG Partner"), which owns a ninety-nine percent (99%) interest; the other one percent (1%) interest is owned by Borrower, as a limited partner. The partnership agreement of Borrower contains an option in favor of Borrower or its designated affiliate to purchase the partnership interest of the ICG Partner, or to purchase the Property, upon certain conditions and in certain circumstances (the "Repurchase Option"). As of the date hereof, Borrower has exercised the Repurchase Option and is acquiring the Property. D. The Property is occupied by ICG Holdings, Inc., a Colorado corporation ("Tenant"), pursuant to the terms and conditions of that certain Lease, dated as of January 15, 1998, between Tenant, as tenant, and Borrower, as successor landlord to ICG 161, and TriNet Essential Facilities X, Inc., a Maryland corporation ("TEF-X"), as amended by a First Amendment to Lease dated as of January 1, 1999, by a Second Amendment to Lease dated as of May 1, 1999, by a Third Amendment to Lease dated as of May 1, 1999 and by a Fourth Amendment to Lease of even date herewith (collectively as amended, the "Lease"). E. ICG Services has entered into that certain Construction Contract, dated as of March 27, 2000, between ICG Services, as owner, and Bovis Lend Lease, Inc. ("Bovis"), as contractor, to construct a parking structure on the Property (the "Garage"). The construction of the Garage commenced in 2000 and is partially completed. -1- F. Borrower wishes to have funds available for completion of the Garage construction. G. Lender is willing to advance to Borrower funds up to a total of seven million eight hundred thousand dollars ($7,800,000), in addition to the funds already advanced pursuant to the Loan Agreement, on the terms and conditions set forth in this Loan Modification Agreement and in the other Loan Documents. AGREEMENT --------- In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. Capitalized terms used but not defined herein shall ----------- have the meanings given in the Amended and Restated Loan Agreement. Without limiting the generality of the foregoing, the term "Loan Documents," as used herein and as used in the Loan Documents, shall include, without limitation, this Loan Modification Agreement and the New Note (as defined in Section 3 below). 2. Additional Advances. Subject to all of the terms, conditions and ------------------- provisions of this Loan Modification Agreement and the other Loan Documents, Lender agrees to advance to Borrower additional funds up to an aggregate amount not to exceed $7,800,000.00 in accordance with the Project Budget (as defined below) to pay amounts due under a Novated Construction Agreement dated June 28, 2001 between Borrower and Bovis (the "Construction Contract"), to remove any mechanic's lien which may be filed against the Property, and to finance completion of the Garage construction. Such advances of additional funds (each an "Additional Advance") shall be made in accordance with the provisions of Section 4 below. 3. Interest Rate and Payment Terms. The Additional Advances shall ------------------------------- bear interest at the Interest Rate in effect under Section 3.1 of the Loan Agreement at the time of disbursement. The Additional Advances shall be evidenced by, and shall be payable as to interest and principal in accordance with the provisions of, a new Promissory Note in the form attached hereto as Exhibit A (the "New Note"). - --------- 4. Disbursement Procedures. ----------------------- a. Lender shall, subject to all of the other terms, conditions and provisions of this Loan Modification Agreement (including, without limitation, Section 8 below) and the other Loan Documents, disburse Additional Advances to Borrower, not more than twice every thirty (30) days, upon Borrower's written request to Lender, which shall be accompanied by the following: (i) A summary of the request by line item of the project budget approved in advance by Lender (the "Project Budget"); (ii) A detailed schedule of the total project costs incurred to date and the estimated remaining project costs; -2- (iii) Invoices for all work in place; (iv) Receipts for all prior payments received by the applicable contractor for work in place, together with lien waivers for all such work; and (v) Such other information reasonably requested by Lender. b. Payments to Borrower of Additional Advances shall be made only upon satisfaction of the following conditions: (i) The amount of such payment shall be used only to pay actual costs of completing the Garage construction in accordance with the Project Budget or amounts due to mechanic's lien claimants for liens filed prior to the date of this Loan Modification Agreement; and (ii) In no event shall Lender be obligated to advance an aggregate of more than the amount of $7,800,000.00 pursuant to this Loan Modification Agreement. 5. Maturity Date and Assumption. The Maturity Date of the Purchase Money ---------------------------- Note is hereby extended to January 31, 2023. Borrower assumes the obligations under the Purchase Money Note. 6. Release and Waiver. Lender hereby releases ICG Services, ICG Partner ------------------ and ICG 161 from any and all obligations, claims, liabilities, damages, demands, costs and expenses whatsoever, whether now existing or hereafter arising, arising under the Loan Agreement, as modified and any of the related Loan Documents, including the Purchase Money Note, and hereby releases ICG Services, ICG Partner and ICG 161 from any further performance or payment thereunder. ICG Services, ICG Partner and ICG 161 hereby release Lender from any and all obligations, claims, liabilities, damages, demands, costs and expenses whatsoever, whether now existing or hereafter arising, arising under the Loan Agreement, as modified or any of the Loan Documents. Lender waives any prior or existing defaults of Tenant under the Lease relating to the construction of the Garage, the failure to make payments to contractors resulting in mechanic's liens and the stoppage of work on the Garage for purposes of paragraph 2 of the Subordination, Non-Disturbance and Attornment Agreement among Tenant, Borrower and Lender dated as of May 1, 1999. Lender also waives any prior and existing defaults of Borrower under the Loan Documents relating to the matters described in the preceding sentence. The Continuing Guaranty dated as of May 1, 1999 executed by ICG Services and the Secured Environmental Indemnity dated as of May 1, 1999 executed by ICG 161 and ICG Services are hereby terminated. -3- 7. Representations and Warranties. As an inducement to Lender to make ------------------------------ Additional Advances to Borrower under this Loan Modification Agreement, Borrower represents and warrants to Lender that as of the date of this Loan Modification Agreement, and as of the date of each Additional Advance made hereunder, in addition to the representations and warranties made in Section 7 of the Amended and Restated Loan Agreement, each of the following representations and warranties is and shall be true and correct: a. Enforceability. This Loan Modification Agreement and all other Loan -------------- Documents to which Borrower is a party executed on or before the date of this Loan Modification Agreement by Borrower have been duly authorized, executed and delivered on behalf of Borrower and constitute the legal, valid and binding obligations of Borrower enforceable against it in accordance with their respective terms, subject to the effect of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or other similar laws affecting the rights of creditors generally. b. Garage Construction. The copy of the Construction Contract, and the ------------------- status of performance thereunder, attached as Exhibit B hereto is complete and --------- accurate. 8. Conditions. Lender's obligation to make any Additional Advances and ---------- to perform any other obligation of Lender contemplated in this Loan Modification Agreement to be performed on or after the date hereof is subject to the satisfaction of each of the following conditions: a. Representations. On and as of the date of each Additional Advance, --------------- the representations and warranties of Borrower contained in the Loan Documents shall be accurate and complete in all material respects. b. Construction Contract Security Interest. Borrower hereby irrevocably --------------------------------------- grants, transfers and assigns to Lender, as additional security for Borrower's obligations under this Loan Modification Agreement and the other Loan Documents, all of Borrower's right, title and interest in, to and under the Construction Contract and all construction materials, intellectual property and documents related to the Construction Contract and/or to the design and construction of the Garage. The security interest granted by Borrower to Lender in the immediately foregoing sentence shall be governed by the Uniform Commercial Code. c. Repurchase Option. The Property shall have been transferred to ----------------- Borrower or its designated affiliate pursuant to the Repurchase Option as modified by the Agreement Regarding Option and Exercise of Option ("Option Exercise"), of even date herewith and the conditions to closing contained in paragraph 6 of the Option Exercise shall have been satisfied or waived by the parties to the Option Exercise. d. Lease Amendment. The Lease shall have been amended, in a form --------------- satisfactory to Lender in its reasonable discretion, to: (i) delete the security deposit requirement; (ii) release Tenant from the obligation to complete and pay for the Garage construction (except as provided in (iv) below); (iii) provide that the Garage constitutes part of the leased premises and is part of Landlord's property, but that Tenant is responsible for all expenses associated with the -4- completed Garage (e.g. taxes, insurance, maintenance), and (iv) obligate Tenant to pay for costs of the Garage construction in excess of the $7,800,000. e. Termination of Subdivision Agreement. That certain Subdivision ------------------------------------ Agreement, dated as of May 1, 1999, by ICG 161, Tenant, Lender and TEF-X, shall have been terminated. f. Documents. Borrower shall have delivered or shall have caused to be --------- delivered to Lender each of the following, in form and substance satisfactory to Lender: (i) A duly executed original of this Loan Modification Agreement; (ii) An original New Note, duly executed by Borrower, in the form of Exhibit A hereto; --------- (iii) An original Memorandum of Loan Modification Agreement, duly executed and acknowledged by Borrower, in the form of Exhibit C hereto; --------- (iv) A duly executed original UCC-1 Financing Statement to be filed in the Office of the Secretary of State, State of Colorado; (v) Endorsements to the Title Policy dated as of the date of this Loan Modification Agreement, in the forms attached in Exhibit D hereto; --------- 9. Amendment to Note. The Purchase Money Note is hereby amended ----------------- consistent with the terms hereof and Lender agrees that the Purchase Money Note shall be amended and endorsed by Lender to reflect the releases by Lender set forth in paragraph 6 hereof and the extension of Maturity Date set forth in paragraph 5 hereof. The Deed of Trust shall secure repayment of both the Purchase Money Note and the New Note. 10. Assumption of Loan. Borrower hereby assumes the Loan and all duties ------------------ and obligations of borrower or obligor set forth in the Loan Documents. 11. Miscellaneous. Except as expressly amended by this Loan Modification ------------- Agreement, the Loan Agreement and the other Loan Documents shall remain in full force and effect, unmodified, in accordance with their respective terms. In the event of any conflict between the terms of this Loan Modification Agreement and the terms of the Loan Agreement and/or the terms of the other Loan Documents, the terms of this Loan Modification Agreement shall prevail. For convenience purposes, this Loan Modification Agreement may be executed in any number of counterparts, all of which, when taken together, shall constitute one and the same original agreement. IN WITNESS WHEREOF, the parties hereto have executed this Loan Modification Agreement as of the date first written above. -5- LENDER: TRINET REALTY CAPITAL, INC., a Maryland corporation By: /s/ Elizabeth B. Smith ---------------------------------------- Elizabeth B. Smith Senior Vice President BORROWER: TRINET REALTY INVESTORS V, INC., a Maryland corporation By: /s/ Elizabeth B. Smith ---------------------------------------- Elizabeth B. Smith Senior Vice President The following parties execute this Agreement solely for purpose of confirming the releases set forth in paragraph 6 of the Loan Modification Agreement. ICG 161, L.P., a Delaware limited partnership By ICG CORPORATE HEADQUARTERS, L.L.C., a Colorado limited liability company, its general partner By: ICG SERVICES, INC., a Delaware corporation, its manager By: /s/ Bernard L. Zuroff ------------------------------- Bernard L. Zuroff Executive Vice President -6- ICG CORPORATE HEADQUARTERS, L.L.C., a Colorado limited liability company By: ICG SERVICES, INC., a Delaware corporation By: /s/ Bernard L. Zuroff --------------------------- Bernard L. Zuroff Executive Vice President IGC SERVICES, INC., a Delaware corporation By: /s/ Bernard L. Zuroff ------------------------------ Bernard L. Zuroff Executive Vice President -7- EXHIBIT A --------- FORM OF PROMISSORY NOTE ----------------------- $7,800,00.00 As of June __, 2001 FOR VALUE RECEIVED, TRINET REALTY INVESTORS V, Inc., a Maryland corporation ------------------------------- ("Borrower"), promises to pay to the order of TRINET REALTY CAPITAL, INC., a -------- --------------------------- Maryland corporation ("Lender"), at One Embarcadero Center, 33/rd/ Floor, San ------ Francisco, CA 94111, Attention: Capital Markets, or at such other place as the holder of this Note may from time to time designate in writing, the principal sum of seven million eight hundred thousand dollars ($7,800,000.00), or so much thereof as shall have been advanced to Borrower pursuant to that certain Loan Modification Agreement of even date herewith (the "Loan Modification Agreement"), between Borrower and Lender which amends the Amended and Restated Loan Agreement dated as of May 1, 1999, by and between Lender and ICG 161, L.P., a Delaware limited partnership ("ICG 161") (collectively, the "Loan Agreement"), together with interest on the amount thereof from time to time outstanding, to be computed on each advance from the date of its disbursement until such principal sum shall be fully paid at a rate per annum of _____% payable as follows: Borrower shall pay the entire principal sum of this Note and all accrued interest thereon on January 31, 2023 (the "maturity date"). All sums payable under this Note shall be paid in immediately available funds, by wire transfer if requested by the holder of this Note, no later than 4 p.m. (Pacific Time) on the due date, in lawful money of the United States of America that is legal tender for public and private debts at the time of payment. If the date on which any payment of interest or principal is due occurs on a Saturday or Sunday or on a day on which banks in the State of California or the State of Colorado are closed, such payment shall be due and payable on the next business day on which such banks are open. All payments made on this Note shall be credited, first, to any charge, fee, cost, expense or amount (other than principal or interest on this Note) payable by Borrower under this Note or the other Loan Documents, second, to accrued interest on the principal sum, and, third, to the reduction of the principal sum, and interest shall thereupon cease on the principal so credited. Borrower shall have no right to prepay all or any part of the principal sum of this Note, or any interest thereon, except as expressly provided to the contrary in the Loan Agreement. If any installment under this Note is not paid when due, such installment shall bear interest at a rate of interest equal to the lesser of five hundred (500) basis points in excess of the prime or reference rate announced from time to time by Bank of America NT&SA or twelve percent (12%) per annum, from the due date until such installment is paid. In addition, if any installment is not paid within five (5) business days of the date due, then the Borrower shall be obligated to pay a late charge as provided in Section 4.1 of the Loan Agreement. As long as any Event of Default (as defined in the Loan Agreement) exists, and from and after maturity, whether -8- or not resulting from acceleration, the entire unpaid balance of the principal sum of this Note shall bear interest at the Default Rate (as defined in the Loan Agreement). Notwithstanding anything to the contrary in this Note, the total liability of Borrower for payments in the nature of interest shall not exceed the limits applicable to this Note, if any, imposed by the usury laws, if any, of the United States of America or the State of Colorado. If any payment in the nature of interest made by Borrower or received by the holder of this Note is determined to be in excess of any limit applicable to this Note imposed by such usury laws, then the amount of such excess shall constitute and be considered a payment of principal, not interest, and such amount shall be applied to reduce the principal sum so that the total liability of Borrower for payments in the nature of interest does not exceed the applicable limits, if any, imposed by such usury laws. This Note is the New Note referred to in the Loan Modification Agreement and is secured by a Deed of Trust, Assignment of Rents and Security Agreement (the "Deed of Trust"), dated as of January 1, 1999, from ICG Services, as trustor, to the Public Trustee of Arapahoe County, Colorado, as trustee, for the benefit of Lender, as beneficiary, encumbering certain real property (the "Real Property") in Arapahoe County, Colorado, and by other security. Reference is made to the Deed of Trust for a description of the nature and extent of the security afforded thereby, the rights of the holder of this Note in respect of such security, and the terms and conditions upon which this Note is secured. The holder of this Note is entitled to the benefits of the Loan Agreement, the Deed of Trust and all other instruments executed by Borrower in connection with the indebtedness evidenced by this Note, and the holder of this Note may enforce the agreements of Borrower contained therein and exercise the remedies provided therein or otherwise in respect thereof, all in accordance with the Loan Agreement, the Deed of Trust and such other instruments. If an Event of Default occurs, then, and in any such event, the holder of this Note shall have the right, at the election of the holder of this Note, to declare the entire unpaid balance of the principal sum, or so much thereof as shall have been advanced, and all accrued but unpaid interest thereon, together will all other amounts payable under this Note and the other Loan Documents, immediately due and payable and the same shall thereupon become immediately due and payable, without notice. Time is of the essence of this Note. Borrower promises to pay the holder of this Note all costs and expenses of collection of this Note and to pay all reasonable attorneys' fees and expenses incurred in such collection or in any suit or action to collect this Note or in any appeal thereof. Borrower waives diligence, demand, presentment for payment, protest, notice of protest, notice of dishonor and notice of nonpayment. Borrower consents to any extension of time for the payment of this Note. Any such extension may be made without notice to Borrower and shall not discharge the liability of Borrower or any party liable for the payment of this Note. Failure to accelerate the maturity of the indebtedness evidenced by this Note upon default by Borrower, or acceptance of any past due installment, or failure to demand strict performance by Borrower of the provisions of this Note shall not constitute a waiver of any provision of this Note by the holder of this Note. -9- There are no oral agreements between Lender and Borrower relating to this Note. If any provision of this Note is held to be invalid or unenforceable, it shall not affect the validity and enforceability of the other provisions of this Note. If more than one borrower executes this Note, all obligations of Borrower under this Note shall be the joint and several obligations of each such signatory. As used in this Note, the singular shall include the plural. This Note shall be governed by and construed in accordance with the laws of the State of Colorado. IN WITNESS WHEREOF, Borrower has executed this Note as of the date first hereinabove written. TRINET REALTY INVESTORS V, INC., a Maryland corporation By:_________________________________ Elizabeth B. Smith Senior Vice President -10- EXHIBIT B --------- COPY OF CONSTRUCTION CONTRACT AND STATUS OF PERFORMANCE ------------------------------------------------------- THEREUNDER ---------- -11- EXHIBIT C --------- FORM OF MEMORANDUM OF LOAN MODIFICATION AGREEMENT ------------------------------------------------- Recording requested by and when recorded return to: Michael A. Hill, Esq. Pillsbury Madison & Sutro LLP 50 Fremont Street San Francisco, CA 94105 ________________________________________________________________ MEMORANDUM OF LOAN MODIFICATION AGREEMENT AND --------------------------------------------- AMENDMENT TO DEED OF TRUST -------------------------- THIS MEMORANDUM OF LOAN MODIFICATION AGREEMENT effective as of June __, 2001 by and between TRINET REALTY CAPITAL, INC., a Maryland corporation --------------------------- ("Lender"), and TRINET REALTY INVESTORS V, INC., a Maryland corporation ------------------------------- ("Borrower"). RECITALS: A. Lender made a loan to ICG Services, Inc., a Delaware corporation ("ICG Services") pursuant to the terms and conditions of that certain Loan Agreement, dated as of January 1, 1999, by and among Lender and ICG Services, the proceeds of which loan ICG Services used to purchase certain real property located in Arapahoe County, Colorado (the "Real Property"). B. ICG Services' obligations under the Loan Agreement were secured by that certain Deed of Trust, Assignment of Rents and Security Agreement, made as of January 1, 1999, granted by ICG Services, as trustor, to the Public Trustee of Arapahoe County, Colorado, as trustee, for the benefit of Lender (the "Deed of Trust") recorded May 17, 1999 as Document #A9081721 in the Official Records of Arapahoe County, Colorado. The Deed of Trust encumbers the real property described on Exhibit 1 hereto. --------- C. ICG Services subsequently sold the Real Property to ICG 161, and ICG 161 acquired the Real Property, subject to the Deed of Trust and, in connection with such sale and acquisition, ICG 161 assumed ICG Services' obligations under the Loan Documents (as defined in the Loan Agreement) pursuant to the terms and conditions of that certain Amended and Restated Loan Agreement, dated as of May 1, 1999, by and between Lender and ICG 161 (the "Loan Agreement"). -12- D. As of the date hereof, Borrower is acquiring the Property and assuming the obligations secured by the Deed of Trust. E. Lender and Borrower have entered into that certain Loan Modification Agreement of even date herewith (the "Loan Modification Agreement"), which modifies the Loan Agreement, the Deed of Trust and the other Loan Documents as therein provided. F. Lender and Borrower desire to give notice of the Loan Modification Agreement and of all of the terms and provisions thereof. NOW, THEREFORE, in consideration of the covenants and conditions more fully set forth in the Loan Modification Agreement, and other good and valuable consideration, Lender and Borrower agree as follows: 1. Agreement. The Loan Agreement, the Deed of Trust and the other Loan --------- Documents are modified as provided in the Loan Modification Agreement. 2. Additional Advances. The Loan Modification Agreement and the New Note ------------------- (as defined in the Loan Modification Agreement) provide for additional advances in an amount of up to $7,800,000, which advances are secured by the Deed of Trust. The total principal balance secured by the Deed of Trust is hereby increased to up to $40,876,754.00. 3. Maturity Date. The maturity date of the principal balance secured by ------------- the Deed of Trust is extended to January 31, 2023. 4. Notice. The purpose of the Memorandum is to give notice of the Loan ------ Modification Agreement and of all the terms, conditions and provisions thereof, as the same may be amended from to time. 5. No Modification of Loan Modification Agreement. This instrument is ---------------------------------------------- not intended to and shall not be construed to modify any of the terms or provisions of the Loan Modification Agreement. -13- IN WITNESS WHEREOF, Lender and Borrower have executed and delivered this Memorandum as of the date first hereinabove written. LENDER: TRINET REALTY CAPITAL, INC., a Maryland corporation By:_______________________________________ Elizabeth B. Smith Senior Vice President BORROWER: TRINET REALTY INVESTORS V, INC., a Maryland corporation By:_________________________________ Elizabeth B. Smith Senior Vice President -14- STATE OF ___________________, ) ) ss. County of ____________________. ) On _________________________, 2001, before me, ___________________________, a Notary Public in and for the State of Colorado, personally appeared Elizabeth B. Smith, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged to me that he or she executed the within instrument in his or her authorized capacity and that, by his or her signature on the within instrument, the person or entity upon behalf of which he or she acted executed the within instrument. WITNESS my hand and official seal. ------- Signature _________________________ (Seal) -15- STATE OF __________________, ) ) ss. County of ____________________. ) On _________________________, 2001, before me, ___________________________, a Notary Public in and for the State of Colorado, personally appeared Elizabeth B. Smith, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged to me that he or she executed the within instrument in his or her authorized capacity and that, by his or her signature on the within instrument, the person or entity upon behalf of which he or she acted executed the within instrument. WITNESS my hand and official seal. ------- Signature _________________________ (Seal) -16- EX-10.70 10 dex1070.txt EMPLOYMENT AGREEMENT Exhibit 10.70 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Robert Athey ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee hereby ---------- agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties and ------ bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be Two-Hundred Thousand Dollars ($200,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of-pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ---- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the ------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Robert Athey -------------------------------------- Robert Athey, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ------------------------------ Name: Gayle Landis ------------------------------ Title: SVP People Services ------------------------------ 4 EX-10.71 11 dex1071.txt EMPLOYMENT AGREEMENT EXHIBIT 10.71 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Brian Cato ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties ------ and bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be One-Hundred Seventy Five Thousand Dollars ($175,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any 2 way interfere with the relationship between the Company and any employee or between an affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Brian Cato ----------------------------------------- Brian Cato, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ----------------------------------- Name: Gayle Landis ----------------------------------- Title: SVP People Services ----------------------------------- 4 EX-10.72 12 dex1072.txt EMPLOYMENT AGREEMENT EXHIBIT 10.72 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Darlinda Coe ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties ------ and bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be Two-Hundred Thirty Thousand Dollars ($230,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/Darlinda Coe ------------------------------------- Darlinda Coe, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ---------------------------------- Name: Gayle Landis -------------------------------- Title: SVP People Services ------------------------------- 4 EX-10.73 13 dex1073.txt EMPLOYMENT AGREEMENT EXHIBIT 10.73 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and John Colgan ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties ------ and bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be One-Hundred Ninety Thousand Dollars ($190,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ John Colgan 3/5/01 ------------------------------------ John Colgan, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ------------------------------- Name: Gayle Landis ------------------------------- Title: SVP People Services ------------------------------ 4 EX-10.74 14 dex1074.txt EMPLOYMENT AGREEMENT EXHIBIT 10.74 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Richard E. Fish, Jr. ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties and ------ bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be Two-Hundred Forty Thousand Dollars ($240,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Richard E. Fish, Jr. ---------------------------------------- Richard E. Fish, Jr. Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ----------------------------------- Name: Gayle Landis ---------------------------------- Title: SVP People Services ---------------------------------- 4 EX-10.75 15 dex1075.txt EMPLOYMENT AGREEMENT EXHIBIT 10.75 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Kimberly Gordon ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee hereby ---------- agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties and ------ bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be One-Hundred Eighty Thousand Dollars ($180,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 2 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular 3 provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Kimberly Gordon -------------------------------------- Kimberly Gordon, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ---------------------------------- Name: Gayle Landis ------------------------------- Title: SVP People Services ------------------------------- 4 EX-10.76 16 dex1076.txt EMPLOYMENT AGREEMENT EXHIBIT 10.76 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and David Hurtado ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties and ------ and bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be Two-Hundred Thirty Thousand Dollars ($230,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ David M. Hurtado ------------------------------------- David Hurtado, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis -------------------------------- Name: Gayle Landis ------------------------------- Title: SVP People Services ------------------------------ 4 EX-10.77 17 dex1077.txt EMPLOYMENT AGREEMENT Exhibit 10.77 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Michael D. Kallet ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties ------ and bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be Three Hundred Fifty Thousand Dollars ($350,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out- of-pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 1 4. Term. Notwithstanding anything herein to the contrary, Employee ----- is an at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments 2 commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 5.6 In recognition of your importance to the business, in addition to the payments outlined above, you will be entitled to an additional bonus equal to Five-Hundred Thousand Dollars ($500,000.00) if (a) the Company sells all or substantially all of its assets and you are actively employed by the Company on the date such transaction is substantially consummated (a "Sale Date"), or (b) you are actively employed by the Company on the date that a reorganization plan (a "Plan") is confirmed ( or if prior to either of such events, your employment is terminated by the Company for any reason other that for death, disability or Cause of there is a Constructive Dismissal). This bonus will be paid approximately 30 days after the confirmation of a Plan or a Sale Date, as applicable. If prior to confirmation of a Plan or a Sale Date your employment is terminated by the Company due to death, disability or Cause, if you resign for any reason other than a Constructive Dismissal, you will not be entitled to receive the bonus described in this paragraph. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, 3 discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 4 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Michael D. Kallet ---------------------------------- Michael D. Kallet, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis --------------------------- Name: Gayle Landis --------------------------- Title: SVP People Services --------------------------- 5 EX-10.78 18 dex1078.txt EMPLOYMENT AGREEMENT Exhibit 10.78 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Gayle Landis ("Employee"). RECITALS WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee hereby ---------- agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties and ------ bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be One-Hundred Forty Thousand Dollars ($140,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ----- at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/Gayle E. Landis ----------------------------------- Gayle Landis, Employee ICG COMMUNICATIONS, INC. By: /s/Bernard Zuroff ------------------------------ Name: Bernard Zuroff puy ------------------------------ Title EVP ------------------------------ 4 EX-10.79 19 dex1079.txt EMPLOYMENT AGREEMENT Exhibit 10.79 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Gary Lindgren ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties and ------ bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be Two-Hundred Thirty Thousand Dollars ($230,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee is an ---- at-will employee of the Company and may be terminated at any time with or Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any 2 way interfere with the relationship between the Company and any employee or between an affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the ------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Gary Lindgren ----------------------------------- Gary Lindgren, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis -------------------------- Name: Gayle Landis -------------------------- Title: SVP People Services -------------------------- 4 EX-10.80 20 dex1080.txt EMPLOYMENT AGREEMENT Exhibit 10.80 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 26/th/ day of February, 2001, by and between ICG Communications, Inc. ("Employer" or the "Company") and Bernard L. Zuroff ("Employee"). R E C I T A L S WHEREAS, the Company desires to employ Employee as provided herein; and WHEREAS, Employee desires to be employed by Employer as provided herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows: 1. Employment. The Company agrees to employ Employee and Employee ---------- hereby agrees to be employed on a full-time basis by the Company or by such of its subsidiary or affiliate corporations as determined by the Company in such position as is mutually agreed, for the period and upon the terms and conditions hereinafter set forth. 2. Duties. During his employment, Employee shall perform the duties ------ and bear the responsibilities commensurate with his position and shall serve the Employer faithfully and to the best of his ability. Employee shall devote 100% of his working time to carrying out his obligations hereunder. 3. Compensation and Benefits. ------------------------- 3.1 The Company shall pay Employee during the Term of this Agreement an annual base salary, payable bi-weekly. The annual base salary will initially be One -Hundred Ninety Thousand Dollars ($190,000.00). 3.2 In addition to salary payments as provided above, the Company will provide Employee with the benefits of such insurance plans, hospitalization plans, and other benefits as shall be generally provided to employees of the Company at his level and for which Employee may be eligible under the terms and conditions thereof, until this Agreement is terminated. 3.3 The Company will reimburse Employee for all reasonable out-of- pocket expenses incurred by Employee in connection with the business of the Company and the performance of his duties under this Agreement, upon presentation to the Company by Employee of an itemized accounting of such expenses with reasonable supporting data, until this Agreement is terminated. 3.4 If Employee becomes disabled, Employee will be entitled to all benefits provided under any disability plans of the Company. 4. Term. Notwithstanding anything herein to the contrary, Employee ----- is an at-will employee of the Company and may be terminated at any time with or without Cause, as defined below. The applicable provisions of Sections 6, 7, and 8 shall remain in full force and effect for the time periods specified in such Sections notwithstanding the termination of this Agreement. 1 5. Termination. ----------- 5.1 If Employee dies during the Term of this Agreement, this Agreement will terminate. The Company will pay the estate of Employee an amount equal to three (3) months salary. 5.2 For the purposes of this Agreement, a "Change in Control" of the Company shall mean and be deemed to have occurred if (a) there is a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (b) the Company shall sell or otherwise dispose of, in one transaction or a series of related transactions, assets aggregating more than 50% of the assets of the Company and its subsidiaries consolidated. 5.3 For the purposes of this Agreement, "Constructive Dismissal" shall mean the resignation of the Employee as a result of any of the following actions by the Company: (i) any reduction in the annual salary of Employee (unless for Cause); (ii) any requirement to relocate to another state or country; or (iii) any material reduction in the value of Employee's benefit plans and programs, as of the date hereof (unless for Cause). 5.4 For purposes of this Agreement, "Cause" shall be defined as (i) an Employee's willful and continued failure to substantially perform his duties hereunder (other than or a result of a disability) or (ii) gross negligence, intentional misconduct or the commission of a felony by the Employee. 5.5 If this Agreement is terminated by the Company for any reason other than the Employee's death, disability or for Cause, or there is a Constructive Dismissal, the Company will pay Employee a termination fee in lieu of any remaining salary hereunder or any severance benefit (other than pursuant to the Retention Plan approved by the United States Bankruptcy Court for the District of Delaware on December 19, 2000) equal to twelve month's salary at the rate then in effect (the "Termination Fee"). Fifty percent (50%) of the Termination Fee shall be made in a single lump sum within 15 business days after such termination. The remaining fifty percent (50%) of the Termination Fee shall be payable in twelve (12) equal monthly payments commencing 30 days after the date of termination, subject to mitigation on a dollar for dollar basis based upon salary paid from any new employment for the Employee at any time during such twelve (12) month period. Employee hereby agrees to immediately notify the Company of any new employment during such 12 month period. Notwithstanding anything to the contrary, if Employee becomes employed by the successor to the Company or substantially all of its assets as a result of a Change in Control, upon such Change in Control or immediately thereafter, with substantially similar duties and no reduction in base salary, and a Constructive Dismissal does not otherwise occur, the termination fee set forth herein shall not be payable. 6. Non-Interference. ---------------- 6.1 For a period of twelve (12) months after the termination of this Agreement, Employee shall not (i) directly or indirectly cause or attempt to cause any employee of the Company of its affiliates to leave the employ of the Company or any affiliate, (ii) in any way interfere with the relationship between the Company and any employee or between an 2 affiliate and any employee of the affiliate, or (iii) interfere or attempt to interfere with any transaction in which the Company or any of its affiliates was involved prior to termination. 6.2 Employee agrees that, because of the nature and sensitivity of the information to which he will be privy and because of the nature and scope of the Company's business, the restrictions contained in this Section 6 are fair and reasonable. 7. Confidential Information. ------------------------ 7.1 The relationship between the Company and Employee is one of confidence and trust. This relationship and the rights granted and duties imposed by this Section shall continue until a date ten (10) years from the date Employee's employment is terminated. 7.2 As used in this Agreement (i) "Confidential Information" means information disclosed to or acquired by Employee about the Company's plans, products, processes and services, including information relating to research, development, inventions, manufacturing, purchasing, accounting, engineering, marketing, merchandising, selling, pricing, tariffed or contractual terms, customer lists and prospect lists and other market information, with respect to any of the Company's business activities; and (ii) "Inventions" means any inventions, discoveries, concepts and ideas, whether patentable or not, including, without limitation, processes, methods, formulas, and techniques (as well as related improvements and knowledge) that are based on or related to Confidential Information, that pertain in any manner to the Company's technology, expertise or business and that are made or conceived by Employee, either solely or jointly with others, and while employed by the Company or within six (6) months thereafter, whether or not made or conceived during working hours or with the use of the Company's facilities, materials or personnel. 7.3 Employee agrees that he shall at no time (before or after termination) disclose any Confidential Information to any person, firm or corporation to any extent or for any reason or purpose or use any Confidential Information for any purpose other than the conduct of the Company's business. 7.4 Any Confidential Information that is directly or indirectly originated, developed or perfected to any degree by Employee during the term of his employment by the Company shall be and remain the sole property of the Company and shall be deemed trade secrets of the Company. 7.5 Upon termination of Employee's employment pursuant to any of the provisions herein, Employee or his legal representative shall deliver to the Company all originals and all duplicates and/or copies of all documents, records, notebooks, and similar repositories of or containing Confidential Information then in his possession, whether prepared by him or not. 7.6 Employee agrees that the covenants and agreements contained in this Section 7 are fair and reasonable and that no waiver or modification of this Section or any covenant or condition set forth herein shall be valid unless set forth in writing and duly executed by the parties hereto. 8. Injunctive Relief. Upon a material breach or threatened material breach by ----------------- Employee of any of the provisions of Sections 6 or 7 of this Agreement, the Company shall be entitled to an injunction restraining Employee from such breach. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies for such breach or threatened breach, including recovery of damages from Employee. 3 9. No Waiver. A waiver by the Company of a breach of any provision of --------- this Agreement by Employee shall not operate or be construed as a waiver of any subsequent or other breach by Employee. 10. Severability. It is the desire and intent of the parties that the ------------ provisions of this Agreement shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision or portion of this Agreement shall be adjudicated to be invalid or unenforceable, this Agreement shall be deemed amended to delete therefrom the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provision in the particular jurisdiction in which such adjudication is made. 11. Notices. All communications, requests, consents and other notices ------- provided for in this Agreement shall be in writing and shall be deemed given if delivered by hand or mailed by first class mail, postage prepaid, to the last known address of the recipient. 12. Governing Law. This Agreement shall be governed by and construed and ------------- enforced in accordance with the laws of the State of Colorado. The parties hereto irrevocably consent to the jurisdiction of the United States Bankruptcy Court for the District of Delaware with respect to any claims or actions arising hereunder or related hereto. 13. Amendments. No provision of this Agreement shall be altered, amended, ---------- revoked or waived except by an instrument in writing, signed by each party to this Agreement. 14. Binding Effect. Except as otherwise provided herein, this Agreement -------------- shall be binding upon and shall inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 15. Execution in Counterparts. This Agreement may be executed in any ------------------------- number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16. Entire Agreement and Waiver of Claims. This Agreement sets forth the -------------------------------------- entire agreement and understanding of the parties and supersedes all prior understandings, agreements or representations by or between the parties, whether written or oral, which relate in any way to the subject matter hereof. By accepting this agreement, Employee waives any claims arising under any prior employment agreements with the Company or the Company's corporate severance policy. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. /s/ Bernard L. Zuroff ----------------------------------------- Bernard L. Zuroff, Employee ICG COMMUNICATIONS, INC. By: /s/ Gayle Landis ---------------------------------- Name: Gayle Landis ---------------------------------- Title: SVP People Services ---------------------------------- 4 EX-10.81 21 dex1081.txt FOURTH AMENDMENT TO LEASE Exhibit 10.81 FOURTH AMENDMENT TO LEASE ------------------------- THIS FOURTH AMENDMENT TO LEASE (this "Amendment") is made effective as of June 28, 2001 (the "Effective Date") and is entered into between TRINET REALTY ------------- INVESTORS V, INC., a Maryland corporation ("Landlord"), and ICG HOLDINGS, INC., - ----------------------------------------- ------------------ a Colorado corporation ("Tenant"). RECITALS -------- A. TriNet Essential Facilities X, Inc., a Maryland corporation ("TEFX") and Tenant entered into a lease dated as of January 15, 1998, with respect to premises commonly known as 161 Inverness Drive West, Englewood, Colorado (the "Premises"), which lease was amended by the First Amendment to Lease between TEFX and Tenant dated as of January 1, 1999, by the Second Amendment to Lease between ICG 161, L.P., a Delaware limited partnership ("ICG 161") and Tenant dated as of May 1, 1999, and by the Third Amendment to Lease between ICG 161 and Tenant dated as of May 1, 1999 (as so amended, the "Existing Lease"). Capitalized terms not otherwise defined herein shall have the meanings set forth in the Existing Lease. As used herein, the term "Lease" shall mean the Existing Lease as amended hereby. B. TriNet Realty Capital, Inc., a Maryland corporation ("Lender") made a loan to ICG Services, Inc., a Delaware corporation ("ICG Services"), pursuant to the terms and conditions of that certain Loan Agreement, dated as of January 1, 1999, by and among Lender and ICG Services, the proceeds of which loan ICG Services used to purchase the Premises and which Loan is secured by a Deed of Trust encumbering the Premises (the "Deed of Trust"). C. ICG Services subsequently sold the Premises to ICG 161 and ICG 161 acquired the Premises, subject to the Deed of Trust and, in connection with such sale and acquisition, ICG 161 assumed ICG Services' obligations under the Loan Agreement, Deed of Trust and related loan documents pursuant to the terms and conditions of that certain Amended and Restated Loan Agreement, dated as of May 1, 1999, by and between Lender and ICG 161 (the "Loan Agreement"). D. The general partner of ICG 161 is ICG Corporate Headquarters, L.L.C., a Colorado limited liability company ("ICG Partner"), which owns a 99% interest; the other one percent is owned by Landlord, as a limited partner. The partnership agreement of ICG 161 contains an option in favor of Landlord, or its designated affiliate, to purchase the partnership interest of the ICG Partner, or to purchase of the Premises, upon certain conditions and in certain circumstances. E. Landlord has exercised its option pursuant to the partnership agreement of ICG 161 to acquire the Premises by deed. Accordingly, Landlord is the successor landlord under the Existing Lease. Landlord also has assumed the duties and obligations of the borrower under the Amended and Restated Loan Agreement, Deed of Trust and related loan documents pursuant to a Loan Modification Agreement between Landlord and Lender dated as of June 28, 2001 (the "Loan Modification Agreement"). F. TEFX, Tenant, Lender and Landlord (as successor to ICG 161) are parties to, and intend to terminate as of the date of this Amendment, that certain Subdivision Agreement, dated as of May 1, 1999, respecting the possible subdivision of the Premises. G. ICG Services has entered into that certain Construction Contract (the "Construction Contract"), dated as of March 27, 2000, between ICG Services, as owner, and Bovis Lend Lease, Inc. ("Bovis"), as contractor, to construct a parking structure on the Premises (the "Garage"). The construction of the Garage commenced in 2000 and is partially completed. ICG Services has defaulted under the Construction Contract by failing to pay invoices on time and failing to provide assurances of financial capacity as required under the Construction Contract. Therefore, Bovis has ceased work on the Garage. ICG Services and Tenant are financially incapable of completing the Garage. H. On November 14, 2000, Tenant filed a petition for reorganization relief under Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (Case No. 00-4238 (PJW) (the "Bankruptcy Proceedings"). I. Landlord has asked Lender for an additional advance of $7,800,000 under the Loan Agreement (the "Additional Advance") the proceeds of which are to be used to pay the cost of completing the Garage, including, without limitation, the payment of invoices which are outstanding for work done on the Garage prior to the Effective Date. Lender is willing to make such Additional Advance, subject to the terms and conditions of the Loan Modification Agreement. J. Tenant is willing to fund the amount, if any, by which the cost to complete the Garage exceeds the Additional Advance, subject to the terms and conditions contained in this Amendment. K. Landlord is willing to complete construction of the Garage, subject to the terms and conditions contained in this Amendment and the Loan Modification Agreement, including, without limitation, the requirement that the term of the Lease be extended. L. Tenant wishes to be released from liability for completion of the Garage construction. M. Tenant and Landlord wish to amend the Existing Lease as set forth in this Amendment. NOW, THEREFORE, in consideration of the covenants set forth herein, Landlord and Tenant hereby agree as follows: AGREEMENTS ---------- 1. Effective Date. This Amendment shall become effective as of the -------------- Effective Date. From and after the Effective Date, the term "Lease," as used in the Lease shall have the meaning set forth in this Amendment. -2- 2. Garage. Landlord hereby releases Tenant from any obligation to ------ complete or pay for construction of the Garage, except as provided in paragraph 7 below. Once construction of the Garage has been completed, the Garage shall thereafter be the property of Landlord and shall be deemed to be part of the Premises for all purposes under the Lease, including, without limitation, Tenant's obligation to pay Operating Expenses in accordance with Articles 4 and 5 of the Lease. Section 12.1(b)(ii) of the Existing Lease is hereby amended to permit use of the Garage and the surface parking areas of the Premises for parking. Section 6.1(b) of the Existing Lease is amended to permit parking uses in the Garage and surface parking areas of the Premises. Nothing contained herein shall prohibit a sublease of the Garage and surface parking areas of the Premises, or a portion thereof, by Tenant, subject to Landlord's consent rights contained in Section 12.1 of the Existing Lease, and Landlord agrees it will not withhold its consent to any proposed sublease based upon the fact that such use by the subtenant is not incidental to use of the Building. 3. Security Deposit and Indemnities. Sections 24.2 through 24.9 of the -------------------------------- Existing Lease, Paragraphs 4, 5 and 6 of the First Amendment to Lease and the entire Third Amendment to Lease are hereby deleted in their entirety. Landlord and Tenant acknowledge that no security deposit was paid pursuant to the Third Amendment to Lease, notwithstanding the terms of the Third Amendment to Lease. Tenant agrees Landlord has no obligation with respect to any security deposit previously paid under the Lease. 4. Subdivision of the Premises. Paragraph 2 of the Second Amendment to --------------------------- Lease is hereby deleted in its entirety and Article 26 of the Existing Lease is hereby reinstated. 5. Term of Lease. The term of the Lease, set forth in the Basic Lease ------------- Information and Section 2.1 of the Existing Lease, is hereby extended by a period of ten years. The new Expiration Date shall be January 31, 2023. Rent due under the Lease during the extended term shall be adjusted to reflect annual increases in accordance with Article 3 of the Existing Lease. The Exercise Period for the Expansion Option provided in Article 26 of the Existing Lease is hereby extended up to and including the twentieth (20/th/) anniversary of the Commencement Date; provided, that, so long as the Termination Right described in paragraph 10 before remains in effect, neither Tenant nor any successor tenant under the Lease shall have a right to exercise the Expansion Option. 6. Operating Expenses. Section 5.1 of the Existing Lease is hereby ------------------ amended to provide that, in addition to those costs identified in clauses (i) through (viii) of said Section, Operating Expenses shall not include overhead and employee costs of Landlord and Landlord's property management company in excess of 50% of the usual and customary salary and benefits for one property manager and one administrative assistant. 7. Completion of Garage Construction; Payment of Liens. --------------------------------------------------- (a) The anticipated Actual Costs to Complete Garage Construction are set forth on the line item project budget attached as Exhibit A hereto (the --------- "Project Budget"). The plans and specifications for the Garage are identified on Exhibit B attached hereto (the "Project Plans"). Reference is also made to the - --------- Novated Construction Agreement entered into by Landlord and Bovis dated as of June 28, 2001 (the "Replacement Construction Contract"), the Agreement -3- Between Owner and Architect entered into by Landlord and Fentress Bradburn Architects Ltd. dated as of June 28, 2001 (the "Architect's Agreement"), and the Agreement Between Owner and Consultant entered into by Landlord and Ground Engineering Consultants Inc. dated as of June 28, 2001 (the "Consultant's Agreement"). Landlord agrees to complete construction of the Garage in a good and workmanlike manner in accordance with the Project Plans using the Additional Advance. Landlord shall commence completion of the Garage promptly following the Effective Date and shall diligently proceed with such work, using commercially reasonable efforts to substantially complete the Garage on or before March 31, 2002, subject to Tenant's obligation to pay for and deposit with Landlord any Cost Overage as set forth below in subparagraph (b) (as qualified by subparagraph (c) below). (b) If at any time Landlord reasonably determines that the Actual Costs to Complete Garage Construction (as defined below) will exceed the amount of the Additional Advance, then Landlord shall notify Tenant in writing and Tenant shall deposit with Landlord the difference between the projected Actual Costs to Complete Garage Construction and the Additional Advance (the "Cost Overage"). Invoices for labor, materials or services provided in connection with completion of Garage construction shall be paid first from the Additional Advance and, once the Additional Advance has been fully disbursed, from funds deposited by Tenant. Any funds of Tenant deposited with Landlord not used to pay Actual Costs to Complete Garage Construction shall be refunded to Tenant promptly following completion of the Garage and the final determination of the Actual Costs to Complete Garage Construction. Landlord will process all draws in the same manner and with the same degree of care it applies to the processing of draws for other construction projects on properties owned by Landlord. Landlord shall provide Tenant's designated representative with copies of each construction draw, including invoices, the schedule of values and other supporting documentation promptly upon Landlord's receipt of the draw and prior to payment. (c) Tenant's obligation to fund the Cost Overage shall be subject to the following conditions precedent: (i) The Replacement Construction Contract, the Architect's Agreement and the Consultant's Agreement shall not be modified in any material respect, or replaced, nor shall a different general contractor, architectural firm or consulting firm be engaged, without Tenant's written consent which shall not be unreasonably withheld; (ii) Tenant's prior written approval, which shall not be unreasonably withheld, shall be obtained for any change order, change in service, change directive or other document modifying, the Replacement Construction Contract, the Architect's Agreement or the Consultant's Agreement, which either singly, or in the aggregate with other previous or future change orders, changes in service, change directives or modifications, could increase the Actual Costs to Complete Garage Construction to an amount in excess of the Additional Advance; (iii) Landlord shall use the Additional Advance solely to pay Actual Costs to Complete Garage Construction. -4- (d) "Actual Costs to Complete Garage Construction" shall mean the sum of: (i) any cost identified on the Project Budget except the $230,000 Overall Project Contingency identified therein; (ii) any cost increase in the Project Budget resulting from a written change order or change directive to the Replacement Construction Contract, or a written change of service to the Architect's Agreement or Consultant's Agreement, which is approved in writing by Landlord, Tenant and Lender; (iii) any amounts not reflected in the Project Budget which are properly due and payable under the Replacement Construction Contract, the Architect's Agreement or the Consultant's Agreement for reasons other than owner, contractor, architect or consultant default or delay occurring after the Effective Date; and (iv) any amounts expended from the $230,000 Overall Project Contingency shown on the Project Budget which are used to pay reimbursables or other design, engineering, consulting, and construction costs directly related to construction of the Garage. Actual Costs to Complete Garage Construction shall not include any amounts payable to consultants engaged by Lender except for the $230,000 iStar Financial Construction Management Fee set forth in the Project Budget. (e) Landlord hereby releases Tenant from the obligation to complete and pay for the Garage construction except for Tenant's obligation to fund the Cost Overage contained herein. (f) Landlord shall provide a designated representative of Tenant with complete copies of any change orders, change directives, changes in service, modifications or amendments to the Project Plans and the Replacement Construction Contract, the Architect's Agreement and the Consultant's Agreement, regardless of whether Tenant's consent to such documents is required under the terms of this Amendment. Landlord shall permit representatives of Tenant and ICG Services to attend construction meetings and will regularly consult with those representatives regarding the completion of the Garage construction. 8. Development Costs. Tenant hereby assumes the obligations of ----------------- "Developer" under the Development Agreement recorded June 8, 2000 under Reception No. B0068912, the Traffic Signal Escrow Agreement recorded June 8, 2000 under Reception No. B0068913, the Escrow Contract and Security Agreement recorded June 8, 2000 under Reception No. B0068914 and the Escrow Contract and Security Agreement recorded June 8, 2000 under Reception No. B0068915, all between ICG 161 and Arapahoe County or the Arapahoe County Board of County Commissioners (individually, a "Development Agreement", and collectively, the "Development Agreements"), and agrees to perform all responsibilities of Developer and pay any amounts due from Developer thereunder. Tenant hereby indemnifies and holds harmless Landlord from and against any and all claims, liabilities, losses, damages, demands, costs and expenses (including reasonable attorneys' fees) arising out of or in any way relating to the Development Agreements. Landlord agrees that all security posted by ICG 161 in connection with the Development Agreements constitutes the property of Tenant. 9. Warranty Items. Following substantial completion of the Garage -------------- construction, Tenant shall be entitled to participate in the final inspection between the Landlord and the contractor and to contribute to any punch list. Landlord will diligently exercise its remedies under the Replacement Construction Contract to seek repair or replacement of any defective work on the Garage. -5- 10. Non-ICG Purchase Termination Right and Assignment. Notwithstanding ------------------------------------------------- the provisions of Article 12 of the Existing Lease, Tenant shall have a right to assign the Lease without Landlord's consent at any time up to and including the first year anniversary of the Effective Date to any entity entirely unaffiliated with Tenant, ICG Services or ICG Partner (the "Non-ICG Purchaser") which acquires more than 50% of the assets or voting securities of (a) Tenant, (b) ICG Communications, Inc. or (c) any subsidiary of ICG Communications, Inc. which is a direct or indirect parent of Tenant; provided, that the Non-ICG Purchaser assumes the Lease. The Non-ICG Purchaser shall have a right to terminate the Lease (the "Termination Right") by giving written notice (the "Termination Notice") to Landlord of its exercise of such Termination Right at any time during the pendency of the Bankruptcy Proceedings. The Termination Notice must state the date the Non-ICG Purchaser's exercise of the Termination Right will become effective which shall be no earlier than 30 days after the date the Termination Notice is received by Landlord in accordance with Section 23.1 of the Existing Lease and no later than 90 days after the date the Termination Notice is received by Landlord (the "Termination Date"). To be effective, the Termination Notice must be accompanied by a payment of the Base Rent which would become due for the two year period immediately following the Termination Date. 11. Rejection of Lease. If the Lease has not been assigned to a Non-ICG ------------------ Purchaser and Tenant is liquidated, Tenant may reject the Lease at any time during the pendency of the Bankruptcy Proceedings and, in such event, Tenant shall stipulate to allowing Landlord an administrative claim for damages of the Landlord resulting therefrom equal to two years' Base Rent (calculated from the rejection date). If Tenant so rejects the Lease, Tenant shall provide Landlord with written notice of such rejection, setting forth the date that the Lease will terminate in accordance therewith, which termination date shall be no earlier than 30 days after the date the written notice of rejection is received by Landlord and no later than 90 days after the date of Landlord's receipt of the written notice. 12. Landlord's Address. Landlord hereby notifies Tenant that its address ------------------ for receiving requests, approvals, consents, notices and other communications under the Existing Lease has been changed to: TriNet Realty Investors V, Inc. c/o iStar Financial, Inc. 6565 North MacArthur Blvd., Suite 410 Irving, TX 75039 Attn: Ms. Elizabeth Smith With a copy to: Nina B. Matis, Esq. iStar Financial, Inc. 1114 Avenue of the Americas 27/th/ Floor New York, NY 10036 -6- 13. Release and Waiver. Landlord hereby releases Tenant and ICG Services ------------------ and ICG Holdings (Canada) Co. and their respective officers, directors, employees and agents from any and all liabilities, losses, damages, demands, costs and or expenses under the Lease and the Continuing Lease Guaranty, heretofore arising out of, or in any way relating to, the construction of the Garage, the stoppage of the work on the Garage, and the other lease defaults discussed in the recitals to this Amendment and waives all defaults under the Lease relating thereto, heretofore or presently existing. Such releases and waivers shall not extend to the undertakings of Tenant in this Amendment. 14. Confirmation of Lease; Complete Agreement. Except as amended hereby, ----------------------------------------- the Existing Lease is unmodified, and as amended hereby, the Lease remains in full force and effect. There are no oral agreements between Landlord and Tenant relating to the Lease, the Premises or this Amendment; and the Lease as amended by this Amendment supersedes and cancels any and all previous negotiations, arrangements, brochures, offers, agreements and understandings, oral or written, if any, between Landlord and Tenant with respect to the leasing of the Premises pursuant to the Lease. -7- IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date first above written. Landlord: Tenant: TRINET REALTY INVESTORS V, INC., a ICG HOLDINGS, INC., Maryland corporation a Colorado corporation By /s/ Elizabeth B. Smith By /s/ Bernard L. Zuroff ---------------------------- ---------------------------- Elizabeth B. Smith Bernard L. Zuroff Senior Vice President Executive Vice President The undersigned Guarantors of the Existing Lease hereby consent to the foregoing Amendment and confirm and agree that the Continuing Lease Guaranties remain in full force and effect. ICG COMMUNICATIONS, INC., a Delaware corporation By /s/ Bernard L. Zuroff ---------------------------- Bernard L. Zuroff Executive Vice President ICG HOLDINGS (CANADA), CO., a Nova Scotia unlimited liability company By /s/ Bernard L. Zuroff ---------------------------- Bernard L. Zuroff Executive Vice President -8- Lender is signing below to acknowledge its consent to the foregoing Amendment pursuant to paragraph 5(e) of the Subordination, Non-Disturbance and Attornment Agreement dated as of May 1, 1999 among Landlord, Tenant and Lender. TRINET REALTY CAPITAL, INC., a Maryland corporation By: /s/ Elizabeth B. Smith ----------------------------- Elizabeth B. Smith Senior Vice President -9- EXHIBIT A --------- Project Budget -------------- [Line item budget to include list of payments to mechanic's lien claimants] -10- EXHIBIT B --------- Project Plans And Specifications -------------------------------- -11- EX-10.82 22 dex1082.txt AGREEMENT REGARDING OPTION Exhibit 10.82 AGREEMENT REGARDING OPTION AND EXERCISE OF OPTION THIS AGREEMENT REGARDING OPTION AND EXERCISE OF OPTION (this "Option Exercise") is made effective as of the 28/th/ day of June, 2001, by TriNet Realty Investors V, Inc., a Maryland corporation ("iStar Partner") and ICG Corporate Headquarters, L.L.C., a Colorado limited liability company ("ICG Partner"). RECITALS: -------- A. ICG 161, L.P., a Delaware limited partnership (the "Partnership"), is comprised of iStar Partner, as the sole limited partner, owning a one percent partnership interest, and ICG Partner, as the sole general partner, owning a 99% partnership interest. B. The Partnership is the owner of the Property (as defined in the Partnership Agreement, as defined below). C. Article XI of the Agreement of Limited Partnership of ICG 161, L.P. dated as of May 1, 1999 (the "Partnership Agreement") grants to the iStar Partner the option to purchase the partnership interest of the ICG Partner, or to purchase the Property (the "Option"), on the terms and conditions set forth in said Article XI of the Partnership Agreement. D. The parties wish to modify the terms and conditions of said Article XI of the Partnership Agreement, as provided in this Option Exercise. E. The iStar Partner wish to exercise its option to acquire the Property by deed in accordance with the terms of said Article XI of the Partnership Agreement, as modified herein. NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Option Presently Exercisable. Notwithstanding Section 11.2 of said ---------------------------- Article XI, the parties agree that the Option is presently exercisable. The ICG Partner waives the requirement set forth in Section 11.1 of the Partnership Agreement for 30 days' prior written notice. 2. Payment of Option Price. The Option Price (as defined in the ----------------------- Partnership Agreement) is hereby reduced to $33,076,754 and shall be paid solely through assumption by iStar Partner of the Loan, as defined in the Partnership Agreement. 3. Exercise of Option. The iStar Partner hereby exercises the Option, ------------------ subject to the satisfaction of the conditions set forth in Section 7 of this Option Exercise. 1 4. Release of Partners. The iStar Partner hereby releases the ICG ------------------- Partner, the Partnership and Affiliates (as defined in the Partnership Agreement) of the ICG Partner and the Partnership, and their respective officers, directors, managers, members, employees and agents from any and all actions, causes of actions, damages, demands, claims and liabilities whatsoever, whether known or unknown, arising out of or in any way related to: (a) the Partnership Agreement and the ICG Partner's obligations thereunder; and (b) acts and omissions occurring prior to the date hereof relating to the design and construction of the partially completed parking garage located on the Property. The ICG Partner hereby releases the iStar Partner, the Partnership and Affiliates of the iStar Partner and the Partnership, and their respective officers, directors, managers, employees and agents, from any and all actions, causes of action, damages, demands, claims and liabilities whatsoever, whether known or unknown, arising out of or in any way related to: (a) the Partnership Agreement and the iStar Partner's obligations thereunder; and (b) acts and omissions occurring prior to the date hereof relating to the design and construction of the partially completed parking garage located on the Property. 5. Tax Returns. Effective immediately, the iStar Partner shall cause the ----------- Partnership to be wound up and dissolved, and the ICG Partner shall cooperate in connection therewith. The ICG Partner shall continue to be the Designated Tax Matters Partner throughout the dissolution period. 6. Conditions to Closing. The exercise of the Option, the reduction in --------------------- the Option Price described herein, the delivery of the deed to the Property by the Partnership to the iStar Partner and the releases of the partners and the Partnership contained herein, all are expressly contingent upon the execution and delivery of the documents identified on Exhibit A attached hereto, Land --------- Title Guaranty Company is unconditionally committed to cause Chicago Title Insurance Company to issue to the iStar Partner a title insurance policy in the form of Exhibit B attached hereto, and payment of the transaction costs --------- described in paragraph 7 below by the ICG Partner or its Affiliates. 7. Payment of Costs. Upon presentation by iStar Partner of invoices ---------------- therefor to the ICG Partner, the ICG Partner agrees to pay, or to cause its Affiliates to pay, up to $100,000 of the out-of-pocket transaction costs, including, but not limited to, recording fees, title insurance premiums, transfer taxes, escrow fees and reasonable attorneys' fees, incurred by the iStar Partner and its Affiliates in connection with (a) this Option Exercise, (b) the conveyance of the Property to the iStar Partner, (c) a fourth amendment to the lease of the Property entered into by the iStar Partner and ICG Holdings, Inc., a Colorado corporation, contemporaneously herewith, (d) a modification to the loan secured by the Property to provide for an additional advance of up to $7,800,000, entered into by iStar Partner and the lender contemporaneously herewith, and (e) any of the closing documents listed on Exhibit A hereto. IN WITNESS WHEREOF, the parties have executed this Option Exercise on the day and date set forth above. 2 "iStar Partner" TRINET REALTY INVESTORS V, INC., a Maryland corporation By: /s/ Elizabeth B. Smith ------------------------------- Elizabeth B. Smith Senior Vice President "ICG Partner" ICG CORPORATE HEADQUARTERS, L.L.C., a Colorado limited liability company By: ICG Services, Inc., a Delaware corporation, its manager By: /s/ Bernard L. Zuroff -------------------------- Bernard L. Zuroff Executive Vice President 3 EXHIBIT A Closing Document List 4 EXHIBIT B Pro Forma Title Policy 5 EX-10.83 23 dex1083.txt CONFIRMATION LETTER EXHIBIT 10.83 ICG COMMUNICATIONS, INC. 161 Inverness Drive West Englewood, Colorado 80112 January 10, 2001 William S. Beans, Jr. 4 Sandy Lake Road Cherry Hills Village, CO 80110 Dear Bill: This will confirm the terms of the agreement (the "Agreement") that has been reached between you and ICG Communications, Inc. (for itself and as debtor-in-possession) (the "Company") in connection with your resignation as an officer and full-time employee of the Company, and the Company's continued utilization of your services as a director of the Company and on a consulting basis. 1. You will resign from employment with the Company effective as of February 4, 2001 (the "Employment Resignation Date"). As of December 4, 2000 (the "Effective Date"), you have resigned all of your positions as an officer of the Company, and as an officer and a director of any of the Company's subsidiaries and affiliates, including but not limited to ICG Holdings, Inc. and ICG Services, Inc., and you agree to execute such documents and take such actions as may be reasonably necessary or desirable to evidence the foregoing. Between the Effective Date and February 4, 2001 (the "Transition Period"), in addition to continuing as a director of the Company, you will remain an employee of the Company and, at reasonable times and upon reasonable notice, will provide such assistance as is reasonably requested by the Company's Board of Directors and/or its Chief Executive Officer. During the Transition Period you will be paid the same base salary as you had been provided in the period immediately preceding the Effective Date. 2. In view of your knowledge of and experience with the Company and its business, and to further facilitate the management transition and the Company's financial restructuring, during the Payment Period (as defined below) you agree at reasonable times and upon reasonable notice to provide such consulting services to the Company and its affiliates regarding the business and affairs of the Company as may be reasonably requested by its Board of Directors and/or its Chief Executive Officer, it being understood that such consulting services shall not unreasonably interfere with your holding another full time executive position and that nothing in this Agreement shall preclude you from resigning, at any time subsequent to the Effective Date, from your position as a director of the Company. In addition, you agree to reasonably cooperate with the Company or any of its respective subsidiaries and affiliates, and any of their officers, directors, shareholders, or employees concerning requests for information about the business of the Company (or of its subsidiaries or affiliates) consistent with your other obligations and on reasonable notice. You further agree to reasonably cooperate with the Company or any of its respective subsidiaries or affiliates in connection with any action, proceeding, suit or investigation concerning the Company or arising out of or relating to your service as an executive of the Company. You shall be entitled to reimbursement, upon receipt by the Company of suitable documentation, for reasonable and necessary travel and other expenses which you may incur at the specific request of the Company and as approved by the Company in accordance with its policies and procedures established from time to time. 3. (a) Except as specifically set forth in this Agreement, and effective only if, and for so long as, all payments required by this Agreement are being, or have been, timely made in accordance with the terms of this Agreement, you knowingly and voluntarily release and forever discharge the Company and any of its respective subsidiaries and affiliates, at any level, together with all of their respective past and present directors, managers, officers, shareholders, partners, employees, agents, attorneys and servants, and each of their predecessors, successors and assigns (collectively, the "Company Releasees") from any and all claims, charges, complaints, promises, agreements, controversies, liens, demands, causes of action, obligations, damages and liabilities of any nature whatsoever, known or unknown, suspected or unsuspected, which against them you or your executors, administrators, successors or assigns ever had, now have, or may hereafter claim to have against the Company Releasees arising on or before the date this Agreement is executed by you, and whether or not previously asserted before any state or federal court or before any state or federal agency or governmental entity, arising out of any contract, agreement, arrangement, plan or understanding, whether oral or in writing, regarding salary, bonus, advances, loans, benefits or other compensation previously paid or provided, or to be paid or provided, to you by the Company or any of its subsidiaries or affiliates under any employment agreements, compensation plans, incentive plans, severance plans, option plans or benefit plans. Subject to the performance of your obligations hereunder, the Company, on behalf of itself and its respective subsidiaries and affiliates, at any level, and each of their respective predecessors, successors and assigns (the "Company Releasors"), knowingly and voluntarily release and forever discharge you and all of your partners, employees, agents, attorneys, servants, executors, administrators, successors and assigns (the "Employee Releasees") from any and all claims, charges, complaints, promises, agreements, controversies, liens, demands, causes of action, obligations, damages and liabilities of any nature whatsoever, known or unknown, suspected or unsuspected, which the Company Releasors ever had, now have, or may hereafter claim to have against the Employee 2 Releasees arising on or before the date this Agreement is executed by you, and whether or not previously asserted before any state or federal court or before any state or federal agency or governmental entity, arising out of any contract, agreement, arrangement, plan or understanding, whether oral or in writing, regarding salary, bonus, advances, loans, benefits or other compensation previously paid or provided, or to be paid or provided, to you by the Company or any of its subsidiaries or affiliates under any employment agreements, compensation plans, incentive plans, severance plans, option plans or benefit plans. (b) Notwithstanding the terms of, and without in any way expanding the scope of the limited releases set forth in the foregoing subparagraph 3(a), nothing in those limited releases or this Agreement shall be deemed in any way to release or discharge any of: (i) your existing rights to indemnification under the Certificate of Incorporation or By-laws of the Company or any affiliate, or any applicable law (including, without limitation, the laws of the jurisdiction in which the Company or any such affiliate is incorporated), and under the Employment Agreement (as defined below), and the Company shall, to the fullest extent permitted by law, indemnify you for all amounts (including, without limitation, judgments, fines, settlement payments, losses, damage, costs and expenses, including reasonable attorneys' fees) incurred or paid by you in connection with any action, proceeding, suit or investigation arising out of or relating to the performance of your duties as an employee, officer or director of, or consultant to, the Company or any of its subsidiaries or affiliates to the same extent (but to no greater extent) as though you had remained a full time employee of the Company; (ii) any claim to which you may be entitled under any previously or presently existing or future Directors' and Officers' insurance policy or professional liability insurance policy paid for by the Company; (iii) your right, in accordance with the Company's policies as applied to you before the Effective Date, to be reimbursed for business expenses incurred in the course of your employment with the Company prior to or subsequent to the Effective Date but not previously reimbursed; (iv) your rights to salary, benefits and perquisites payable to you (including, but not limited to, accrued and unpaid vacation days), with respect to any period prior to the Effective Date, which have not been previously paid up to the Effective Date; (v) any claim to which you may be entitled under any employee pension benefit plan (as defined in Section 3(2) of ERISA) that is qualified under Section 401 of the Internal Revenue Code; (vi) any claim to which you may be entitled under any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that is in the nature of medical, dental or vision services or other health plan with respect to health services received prior to the Effective Date; (vii) any rights to elect continuing coverage under a medical plan, either as a matter of law or as a matter of contract, including rights under Section 601 et seq. of ERISA and Section 4980B of the Internal Revenue Code ("COBRA"); and (viii) your rights under this Agreement. You represent that you have not commenced or joined in any claim, charge, action or proceeding whatsoever against any of the Company Releasees that would be released by the limited release set forth in this paragraph 3. The Company represents that the Company Releasees have not, individually 3 or collectively, commenced or joined in any claim, charge, action or proceeding whatsoever, against any of the Employee Releasees that would be released by the limited release set forth in this paragraph 3. 4. On the Effective Date, the Company shall pay you the amount previously agreed to be the amount (less all applicable federal, state and local withholding taxes) owed you for accrued and unpaid vacation days, and you shall not accrue any additional vacation days after the Effective Date. In consideration of your execution and compliance with the terms and conditions of this Agreement, including but not limited to paragraphs 1, 2 and 3 above, the Company agrees to pay you the amount of $528,895 to be paid in thirteen (13) bi- weekly installments (the "Payment Period"), less all applicable federal, state and local withholding taxes (if any are required), to be payable, commencing on February 5, 2001, in accordance with the Company's ordinary payroll practices. You acknowledge that, subject to Section 3(a) hereof, the amounts referred to in this paragraph 4 are in lieu of and in full satisfaction of any amounts that might otherwise be payable under any contract, plan, policy or practice, past or present, of the Company, or any of its respective subsidiaries and affiliates, including but not limited to your Contract of Employment dated December 22, 1999 and as amended on April 13, 2000 (the "Employment Agreement"). You further acknowledge that, except for the amounts to be paid for accrued and unpaid vacation days, the amounts referred to in this paragraph 4 shall not be included in the computation of benefits under any Company benefit plan. 5. You shall be entitled to receive from the Company, at the Company's expense, through the one year anniversary of the Effective Date, the same medical coverage, disability coverage and life insurance as are currently in effect for you and your dependents, subject, however, to reduction to the extent you obtain similar coverage from a subsequent employer. In the event that you do not qualify under the Company's medical coverage, disability coverage and life insurance plans, you may elect to receive continued coverage under the Company's medical plan pursuant to the provisions of COBRA. The Company will reimburse you for the cost of premiums for such coverage during the twelve (12) month period. Except for the foregoing and subject to Section 3(a) hereof, after the Effective Date you shall not be eligible to participate or continue to participate in any employee benefit plans or executive compensation arrangements of the Company or any of its respective subsidiaries and affiliates, but you shall be provided such benefits and perquisites as are provided generally to the Company's outside directors. 6. You agree that, except as required by law, you will not make or publish any statement which is, or may reasonably be considered to be, disparaging to the Company or its directors, officers or employees. The Company agrees that, except as required by law, it will not make or publish any statement which is, or may reasonably be considered to be, disparaging to you. 4 7. This Agreement, including the Company's offer of and your acceptance of this Agreement, is not intended to be, and shall not be construed as, an admission or concession by the Company or you, or by any Releasee under this Agreement, with respect to the existence or validity of any liability, claim or defense, except that the Company and you intend that this Agreement be fully enforceable in accordance with its terms. 8. You agree that at all times hereafter, you shall maintain the confidentiality of all information, in whatever form, concerning the Company and any of its subsidiaries and affiliates, at any level, relating to its or their businesses, customers, finances, strategic or other plans, marketing, employees, trade practices, trade secrets, know how or other matters that are not publicly known outside the Company, and shall not, directly or indirectly, make any disclosure thereof to anyone outside of the Company (or its attorneys, auditors, accountants or other retained professionals), or make any use thereof, on your own behalf or on behalf of any third party, unless specifically requested by or agreed to in writing by the Board of Directors or an executive officer of the Company; provided, however, that nothing herein shall prevent disclosure of such information where, in the reasonable opinion of the Company's or your counsel, such disclosure is required by law, or where such disclosure is required in response to any governmental request, or any subpoena, court or administrative order, or other compulsory process. 9. If you so elect in writing at the time of the execution of this Agreement, the Company will arrange to transfer the lease for the motor vehicle that the Company has previously provided for your use to you, whereupon you will make all further lease payments and assume the obligation of paying all other costs associated therewith. You shall be permitted to keep all computer equipment (including, but not limited to, a Palm Pilot and laptop) and communications equipment previously provided to you by the Company for use outside of the Company's offices (collectively, "At-Home IT Equipment"). 10. You agree that during the Payment Period you shall not knowingly solicit the employment or services of any person who you know is, at the time of such solicitation, employed by or a consultant to the Company. Nothing herein shall limit any duties you may have as a director of the Company with respect to the solicitation or hiring of individuals who are employed by or consultants to the Company. 11. It is the desire and intent of the parties that the provisions of this Agreement shall be enforced to the fullest extent permissible under the applicable law. In the event that any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remainder of this Agreement shall not in any way be affected or impaired thereby. Moreover, if any 5 one or more of the provisions contained in this Agreement is held to be excessively broad as to duration, scope, activity or subject, such provisions shall be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law. 12. This Agreement sets forth the entire agreement and understanding of the parties and supersedes all prior agreements, arrangements and understandings, written or oral, between the parties with respect to your employment with the Company and its affiliates or service as an officer or director of any thereof and the termination of such employment, and except to the extent explicitly set forth herein, relieves you of any obligations set forth in any such agreements, arrangements and understandings, including without limitation, any obligation not to compete against the Company. 13. The Company will promptly seek and use its best efforts to obtain, by not later than the first Omnibus hearing date available to the Company in January 2001, the approval of the United States Bankruptcy Court for the District of Delaware with regard to this Agreement (including, without limitation, approval to make, in full and at the times specified in this Agreement, all payments to you provided for in this Agreement). If the Company fails to obtain such approval by February 5, 2001, either the Company or you may elect to declare this Agreement terminated, whereupon this Agreement shall be rendered null and void, and you and the Company each shall be permitted to assert any and all claims which otherwise would have been released under the terms of this Agreement. 6 14. For the purposes of this Agreement, notices, demands, and all other communications provided for hereunder shall be in writing and shall be deemed to have been duly given when hand delivered or (unless otherwise specified) when mailed by United States certified mail, return receipt requested, postage prepaid, addressed as follows: To you at: William S. Beans, Jr. 4 Sandy Lake Road Cherry Hills Village, CO 80110 with a copy to the attention of: Edwin M. Baum, Esq. Solomon, Zauderer, Ellenhorn, Frischer & Sharp 45 Rockefeller Plaza New York, NY 10111 To the Company to the attention of: General Counsel ICG Communications, Inc. 161 Inverness Drive West Englewood, CO 80122 with a copy to the attention of: J. Gregory Milmoe, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 4 Times Square New York, NY 10036 or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 15. No provision of this Agreement may be modified or discharged unless such modification or discharge is authorized and agreed to in writing, signed by the Company and you. No waiver by either party of any breach by the other party of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of any other provision or condition at the time or at any prior or subsequent time. 16. This Agreement and all rights, duties and remedies hereunder shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without reference to its choice of law rules. This Agreement may be executed 7 in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. If the above sets forth our agreement as you understand it and consent to it, please so signify by executing the enclosed copy of this letter and return it to me at the address listed above. Very truly yours, /s/Randall E. Curran ----------------------- Randall E. Curran Chief Executive Officer Agreed to and Accepted: /s/ William S. Beans, Jr. Dated: 1-11-2001 8 EX-21.1 24 dex211.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21.1 Subsidiaries of the Registrant
State of Doing Business Name of Subsidiary Incorporation As - --------------------------------------------------------------------------------------------------------------------- Bay Area Teleport, Inc. Delaware -- Communications Buying Group, Inc. Ohio -- ICG DataChoice Network Services, L.L.C. Nevada -- DownNorth, Inc. (formerly known as UpSouth Corporation) Georgia -- ICG Access Services - Southeast, Inc. (formerly known as PrivaCom, Inc.) Delaware -- ICG Canadian Acquisition, Inc. Delaware -- ICG ChoiceCom, L.P. (formerly known as CSW/ICG ChoiceCom, L.P.) Delaware -- ICG ChoiceCom Management, LLC (formerly known as Southwest TeleChoice Management, LLC and CSW/ICG ChoiceCom Management, LLC) Delaware -- ICG Corporate Headquarters, L.L.C. Colorado -- ICG Enhanced Services, Inc. Colorado -- ICG Equipment, Inc. Colorado -- ICG Funding, LLC Delaware -- ICG Holdings, Inc. (formerly known as IntelCom Group (U.S.A.), Inc.) Colorado -- ICG Holdings (Canada) Co. Nova Scotia -- ICG Mountain View, Inc. Colorado -- ICG Ohio LINX, Inc. (formerly known as Ohio Local Interconnection Network Exchange Co.) Ohio -- ICG NetAhead, Inc. (formerly known as NETCOM On-Line Communication Services, Inc. and ICG PST, Inc.) Delaware -- ICG Services, Inc. Delaware -- ICG Telecom Canada, Inc. Federal Canadian -- ICG Telecom Group, Inc. (formerly known as ICG Access Services, Inc.) Colorado -- ICG Telecom Group of Virginia, Inc. Virginia -- ICG Telecom of San Diego, L.P.
State of Doing Business Name of Subsidiary Incorporation As - --------------------------------------------------------------------------------------------------------------------- (formerly known as Linkatel of California, L.P.) California -- ICG Tevis, Inc. Delaware -- NikoNet, LLC Georgia -- PTI Harbor Bay, Inc. Washington -- TransAmerican Cable, Inc. Kentucky MidAmerican Cable Western Plains Finance Nevada -- Zycom Corporation (formerly known as Camber Sports, Inc.) Alberta, Canada -- Zycom Corporation Texas --
EX-23.1 25 dex231.txt CONSENT OF KPMG LLP EXHIBIT 23.1 Consent of KPMG LLP The Board of Directors ICG Communications, Inc.: We consent to incorporation by reference in the registration statements No. 33-96660 on Form S-3 of IntelCom Group, Inc., No. 333-08729 on Form S-3 of ICG Holdings (Canada) Co., Nos. 333-18839, 333-38823 and 333-74167 on Form S-3 of ICG Communications, Inc., and Nos. 333-40495 and 333-40495-01 on Form S-3 of ICG Funding, LLC and Nos. 33-14127, 333-25957, 333-39737, 333-45213 and 333-56835 on Form S-8 of ICG Communications, Inc. of our reports dated June 28, 2001, relating to the consolidated balance sheets of ICG Communications, Inc. and subsidiaries (the Company) (a debtor-in-possession as of November 14, 2000) as of December 31, 1999 and 2000, and the related consolidated statements of operations, stockholders' deficit, and cash flows for each of the years in the three-year period ended December 31, 2000, and the related financial statement schedule, which reports appear in the December 31, 2000 Annual Report on Form 10-K of ICG Communications, Inc. Our report dated June 28, 2001 contains an explanatory paragraph that states that the Company has suffered recurring losses, has a significant net capital deficiency, and, on November 14, 2000, the Company and most of its subsidiaries filed voluntary petitions for protection under Chapter 11 of the United States Bankruptcy Code, all of which raise substantial doubt about their ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty. Additionally, the consolidated financial statements do not include any adjustments which may be required in the Chapter 11 reorganization. Our report refers to a change in the method of accounting for installation revenues. /s/ KPMG LLP Denver, Colorado July 16, 2001 -----END PRIVACY-ENHANCED MESSAGE-----