Exhibit 2.3
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
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: Chapter 11
In re: :
:
ICG COMMUNICATIONS, INC., et : Case No. 00-4238 (PJW)
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al., :
-- :
Debtors. : Jointly Administered
x
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DISCLOSURE STATEMENT WITH RESPECT TO
JOINT PLAN OF REORGANIZATION OF ICG COMMUNICATIONS, INC.
AND ITS AFFILIATED DEBTORS AND DEBTORS IN POSSESSION
----------------------------------------------------
David S. Kurtz
Timothy R. Pohl
Rena M. Samole
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606-1285
(312) 407-0700
- and -
Gregg M. Galardi (I.D. No. 2991)
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Counsel for Debtors and Debtors in Possession
Dated: December 19, 2001
DISCLAIMER
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATE MENT IS INCLUDED
HEREIN FOR PURPOSES OF SOLICITING ACCEPTANCES OF THE JOINT PLAN OF
REORGANIZATION (THE "PLAN") OF ICG COMMUNICA TIONS, INC. AND ITS AFFILIATED
DEBTORS AND DEBTORS IN POSSESSION AND MAY NOT BE RELIED UPON FOR ANY PURPOSE
OTHER THAN TO DETER MINE HOW TO VOTE ON THE PLAN. NO PERSON MAY GIVE ANY
INFORMA TION OR MAKE ANY REPRESENTATIONS, OTHER THAN THE INFORMATION AND
REPRESENTATIONS CONTAINED IN THIS DISCLOSURE STATEMENT, REGARDING THE PLAN OR
THE SOLICITATION OF ACCEPTANCES OF THE PLAN.
ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE
STATEMENT AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE
PLAN. PLAN SUMMARIES AND STATE MENTS MADE IN THIS DISCLOSURE STATEMENT ARE
QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN AND THE EXHIBITS AND
SCHEDULES ANNEXED TO THE PLAN AND THIS DISCLOSURE STATEMENT. THE STATE MENTS
CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY AS OF THE DATE HEREOF, AND
THERE CAN BE NO ASSURANCE THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT
AT ANY TIME AFTER THE DATE HEREOF.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCOR DANCE WITH
SECTION 1125 OF THE UNITED STATES BANKRUPTCY CODE AND RULE 3016 OF THE FEDERAL
RULES OF BANKRUPTCY PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR
STATE SECURITIES LAWS OR OTHER NON-BANKRUPTCY LAW. THIS DISCLOSURE STATEMENT
HAS BEEN NEITHER APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF
THE STATEMENTS CONTAINED HEREIN. PERSONS OR ENTITIES TRADING IN OR OTHERWISE
PURCHASING, SELLING OR TRANSFERRING SECURITIES OR CLAIMS OF ICG COMMUNICATIONS,
INC. OR ANY OF THE AFFILIATED DEBTORS AND DEBTORS-IN-POSSESSION IN THESE CASES
SHOULD EVALUATE THIS DISCLOSURE STATEMENT AND THE PLAN IN LIGHT OF THE PURPOSE
FOR WHICH THEY WERE PREPARED.
AS TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER ACTIONS OR
THREATENED ACTIONS, THIS DISCLOSURE STATEMENT SHALL NOT CONSTITUTE OR BE
CONSTRUED AS AN ADMISSION OF ANY FACT OR LIABILITY, STIPULATION OR WAIVER, BUT
RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS. THIS DISCLOSURE
STATEMENT
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SHALL NOT BE ADMISSIBLE IN ANY NON-BANKRUPTCY PROCEEDING NOR SHALL IT BE
CONSTRUED TO BE CONCLUSIVE ADVICE ON THE TAX, SECURI TIES OR OTHER LEGAL
EFFECTS OF THE PLAN AS TO HOLDERS OF CLAIMS AGAINST, OR EQUITY INTERESTS IN,
ICG COMMUNICATIONS, INC. OR ANY OF THE AFFILIATED DEBTORS AND DEBTORS-IN-
POSSESSION IN THESE CASES.
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THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED BY THE BANKRUPTCY
COURT AT THIS TIME. A HEARING TO CONSIDER THE ADEQUACY OF THIS DISCLOSURE
STATEMENT UNDER SECTION 1125 OF THE BANKRUPTCY CODE HAS BEEN SET BY THE
BANKRUPTCY COURT FOR FEBRUARY 1, 2002 AT 2:00 P.M. THE DEBTORS RESERVE THE
RIGHT TO MODIFY OR SUPPLEMENT THIS DISCLOSURE STATEMENT PRIOR TO AND UP TO THE
DATE OF SUCH HEARING.
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CERTAIN PROVISIONS OF THE PLAN AND THE DISCLOSURE STATEMENT ARE THE
SUBJECT OF CONTINUING NEGOTIATIONS AMONG THE DEBTORS AND VARIOUS PARTIES, AND
THUS MAY BE MODIFIED.
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OVERVIEW OF THE PLAN AND CHAPTER 11 CASES
The following introduction and summary is a general overview only,
which is qualified in its entirety by, and should be read in conjunction with,
the more detailed discussions, information and financial statements and notes
thereto appearing elsewhere in this Disclosure Statement and the Joint Plan of
Reorganization of ICG Communications, Inc. and its affiliated debtors and
debtors in possession (the "Plan"). All capitalized terms not defined in this
Disclosure Statement have the meanings ascribed to such terms in the Plan. A
copy of the Plan is annexed hereto as Appendix A.
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This Disclosure Statement contains, among other things, descriptions
and summaries of provisions of the Plan being proposed by the Debtors (as
defined herein) as filed with the Bankruptcy Court on December 19, 2001.
Certain provisions of the Plan, and thus the descriptions and summaries
contained herein, are the subject of continuing negotiations among the Debtors
and various parties, have not been finally agreed upon, and may be modified.
A. Business Overview
ICG Communications, Inc. ("ICG") and its direct and indirect
subsidiaries (together with ICG, the "Company"), are a facilities-based
nationwide communications provider that, based upon revenue and customer lines
in service, are one of the largest competitive communications companies in the
United States. Specifically, the Company is focused on providing data and voice
services to Internet service providers, telecommunication carriers and corporate
customers. In 2000, the Company had revenue of approximately $598.3 million.
The Debtors' operations are structured through two principal groups of
operating entities owned by the Debtors' ultimate parent corporation, ICG. The
first group of operating companies is owned directly or indirectly by ICG
Holdings, Inc. ("ICG Holdings"), including ICG Telecom Group, Inc. ("ICG
Telecom" and, together with ICG Holdings and ICG Telecom's subsidiaries, the
"Telecom Debtors"). The second group of operating companies is owned directly by
ICG Services, Inc. ("ICG Services"), including ICG Equipment, Inc. ("ICG
Equipment") and ICG NetAhead, Inc. ("ICG NetAhead" and, together with ICG
Services, ICG Equipment and ICG Mountain View, Inc., the "Services Debtors").
The Telecom Debtors own significant network assets and are the primary providers
of telecom services to the Debtors' customers. The Services Debtors also own
significant network assets, which are primarily leased to and utilized by the
Telecom Debtors in providing services to customers.
As discussed more fully below, the Company experienced a liquidity
crisis in the latter part of 2000, which ultimately led to the commencement, on
November 14, 2000 (the "Petition Date"), of the reorganization cases (the
"Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code for
ICG and certain of ICG's direct and indirect subsidiaries (collectively, the
"Debtors"). Prior to the Petition Date, the Debtors dramatically expanded
their network facilities, resulting in the incurrence of significant costs and
obligations, as well as certain operational difficulties associated with the
deployment of new technology. In the midst of this expansion, funding from the
capital markets for the telecommunications industry became constricted, which
prevented the Debtors from funding the
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completion of their ongoing network expansion. As a result, the Debtors' balance
sheet was significantly over-leveraged relative to their existing operations,
requiring a financial and operational restructuring that the Debtors concluded
could best be achieved through the Chapter 11 reorganization process.
B. Operational Restructuring During the Chapter 11 Cases and Exploration of
Strategic Alternatives
During the Chapter 11 Cases, the Company pursued two parallel paths in
an effort to maximize the value of the Company's businesses and assets for the
benefit of the Company's constituen cies. First, the Company, assisted by its
investment banker, Dresdner Kleinwort & Wasserstein, Inc. ("DrKW"), explored
opportunities for a sale of all or part of the Company, as well as for new
invest ments in the Company. Despite efforts in this regard, no third party
made any committed proposal for a purchase, investment, or other transaction
that the Debtors believed reflected the fair value of the Company's businesses.
Second, during the Chapter 11 Cases, the Company significantly
restructured its operations, refocused its business strategies, restructured
arrangements with key third parties in the industry, and eliminated expenses.
As a result of this operational restructuring, coupled with the restructuring of
Claims and Interests contemplated by the Plan, the Company believes that it will
be well positioned to compete successfully in its industry in the future.
C. General Structure of the Plan
The Plan is premised upon the strategic business plan for the Company
going forward prepared by ICG's management and financial advisors (the "Business
Plan"). The Business Plan is discussed in Section IV.I, and the accompanying
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pro forma financial projections through December 31, 2005 (the "Projections"),
are set forth in Appendix E. While the Company believes that the Business Plan
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and Projections are reasonable and appropriate, they include a number of
assumptions that may differ from actual results and are subject to a number of
risk factors. See Section VI and Appendix E.
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The Plan provides for ICG's balance sheet to be restructured by
converting (i) the obligations to the holders of Secured Lender Claims to new
secured debt of Reorganized ICG (the "New Secured Notes"), and (ii) General
Unsecured Claims, which include the Claims of the holders of the publicly held
unsecured debentures issued by various Debtors (the "Old Notes"), into newly
issued common equity securities of Reorganized ICG (the "New Common Shares"),
and Rights to purchase additional New Common Shares. There will be no recovery
for holders of existing preferred or common equity securities of the Company,
whose Interests will be cancelled.
As discussed in Section V.G., under the Plan, one-hundred percent
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(100%) of the New Common Shares to be distributed on the Effective Date (subject
to Dilution), will be distributed on a Pro Rata basis to holders of Allowed
Claims in Class 5 (General Unsecured Claims). As additional consideration,
holders of Allowed Claims in Class 5 on the Rights Offering Record Date will
receive Rights to purchase additional New Common Shares, on the terms and
conditions described in Section
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V.G. The Rights Offering Record Date is the Confirmation Date or the date set
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forth in the Confirmation Order. Holders of Claims in Class 5 that have not
become Allowed Claims by the Rights Offering Record Date will not receive any
Rights. The Rights will be tradeable for approximately thirty (30) days, and, if
fully subscribed, the Rights Offering will generate gross proceeds of $100
million for the Company. These proceeds will be used to augment existing working
capital, and in part to reduce obligations under the New Secured Notes to be
issued to holders of Secured Lender Claims under the Plan. As discussed in
Section V.G., however, the Rights Offering is not underwritten and, accordingly,
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there may or may not be any proceeds received by the Company from the Rights
Offering.
In addition, the Plan is premised on substantive consolidation of the
Debtors for procedural purposes only. This means that, for purposes of
distribution under the Plan, the assets and liabilities of each Debtor are
treated as assets and liabilities of a single entity. See Section V.B.
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D. Summary of Treatment of Claims and Interests Under the Plan
As contemplated by the Bankruptcy Code, Administrative Claims and
Priority Tax Claims are not classified under the Plan. Allowed Administrative
Claims are to be paid in full on the Effective Date, or, for ordinary course
Administrative Claims, when such claims become due. See Section V.C for a
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summary of the treatment proposed under the Plan for Administrative Claims and
Priority Tax Claims.
The estimated amount of non-ordinary course Administrative Claims to
be incurred during the Chapter 11 Cases (which are primarily comprised of
professional fees and which will be paid, in part, during the Chapter 11 Cases
pursuant to Bankruptcy Court orders), is estimated to be $16.1 million. The
estimated amount of Priority Tax Claims is $7.1 million.
The table below summarizes the classification and treatment of the
prepetition Claims and Interests under the Plan. For certain classes of Claims,
estimated percentage recoveries are also set forth below. Estimated percentage
recoveries have been calculated based upon a number of assumptions, including
the value ascribed to the New Securities to be issued under the Plan, for
purposes of the Plan, as discussed below and in Section IX.
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Based, in part, on information provided to it by the Company, DrKW has
evaluated the enterprise value of the Company. DrKW's valuation establishes the
value of the Company on a going concern basis as between $350 million and $500
million. This valuation of the Company results in a valuation of the New Common
Shares to be issued under the Plan, in the aggregate, between approxi mately
$136.5 million and $286.5 million, which is derived by subtracting from the
Company's enterprise value the projected funded debt on the pro forma balance
sheet for the Company on the Effective Date, as set forth in Appendix E. The
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valuation is based on numerous assumptions, including, among other things, an
assumption that the operating results projected for Reorganized ICG will be
achieved in all material respects, including revenue growth and improvements in
operating margins, earnings, and cash flow. The valuation assumptions also
consider, among other matters, (i) market valuation information concerning
certain publicly traded securities of certain other companies that are
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considered relevant, (ii) certain general economic and industry information
considered relevant to the business of Reorganized ICG, and (iii) such other
investigations and analysis deemed necessary or appropriate. The valuation
assumptions are not a prediction or reflection of post-Confirmation trading
prices of the New Common Shares or any other New Securities. Such securities
may trade at substantially higher or lower prices because of a number of
factors, including those discussed in Section VI. The trading prices of
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securities issued under a plan of reorganization are subject to many
unforeseeable circumstances and therefore cannot be predicted.
Although the Company believes that the terms of the Rights are
favorable and thus that they provide significant additional consideration to
holders of General Unsecured Claims, for purposes of estimating the percentage
recoveries set forth below, the Rights have not been considered. In addition,
for certain Classes of Claims, the actual amounts of Allowed Claims could
materially exceed or could be materially less than the estimated amounts shown
in the table that follows. The Debtors do not anticipate having reviewed and
fully analyzed all Proofs of Claim filed in these cases by the Confirmation
Date. Estimated Claim amounts for each Class set forth below are based upon the
Debtors' review of their books and records and of certain Proofs of Claim, and
include estimates of a number of Claims that are contingent, disputed, and/or
unliquidated. With respect to Class 5, if the aggregate amount of General
Unsecured Claims that are ultimately Allowed exceeds the Debtors' estimate, the
estimated percentage recovery set forth below for holders of Claims in Class 5
would be reduced. Accordingly, for these reasons, no representation can be or is
being made with respect to whether the estimated percentage recoveries shown in
the table below for Class 5 will actually be realized by the holders of Allowed
Claims in that Class.
Class Description Treatment Under Plan
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Class 1 - Other Priority Class 1 consists of all Claims entitled
Claims to priority pursuant to section 507(a)
of the Bankruptcy Code other than
Priority Tax Claims or Administrative
Claims.
Estimated Allowed Claims: Under the Plan, on or as soon as
Approximately $0.2 million reasonably practicable after, the latest
of (i) the Distribution Date, (ii) the
date such Class 1 Claim becomes an
Allowed Class 1 Claim, or (iii) the date
such Class 1 Claim becomes payable
pursuant to any agreement between a
Debtor and the holder of such Class 1
Claim, each holder of an Allowed Class 1
Claim will receive in full satisfac
tion, settlement, release and discharge
of and in exchange for such Allowed
Class 1 Claim (x) Cash equal to the
unpaid portion of such Allowed Class 1
Claim or (y) such other treatment as to
which a Debtor and such holder shall
have agreed upon in writing. Class 1
Claims are Unimpaired and therefore not
entitled to vote on the Plan. Estimated
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Class Description Treatment Under Plan
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Percentage Recovery: 100%.
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Class Description Treatment Under Plan
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Class 2 - Other Secured Class 2 consists of separate subclasses
Claims of claims that are secured by a lien
upon property in which the Estate has an
interest, to the extent of the value of
Estimated Allowed Claims: the Claim holders' interest in the
Approximately $4.9 million. Estate's interest in such property, as
determined pursuant tosection 506(a) of
the Bankruptcy Code, against the
Debtors, other than the Secured Lender
Claims included in Class 3 below ("Other
Secured Claims"). Each subclass is
deemed to be a separate class for all
purposes under the Bankruptcy Code.
On the Effective Date, the legal,
equitable and contractual rights of
holders of an Allowed Class 2 Claim
shall be Reinstated, subject to the
provisions of Article VIII of the Plan.
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The Debtors' failure to object to any
such Class 2 Claims in the Chapter 11
Cases shall be without prejudice to the
rights of ICG or the Reorganized Debtors
to contest or otherwise defend against
such Claim in the appropriate forum when
and if such Claim is sought to be
enforced by the Other Secured Claim
holders. Notwithstanding section 1141(c)
or any other provi sion of the
Bankruptcy Code, all prepetition liens
on property of any Debtor held by or on
behalf of the Other Secured Claim
holders with respect to such Claims
shall survive the Effective Date and
continue in accordance with the
contractual terms of the underlying
agreements with such Claim holders
until, as to each such Claim holder, the
Allowed Claims of such Other Secured
Claim holder are paid in full, subject
to the provisions of Article VIII of the
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Plan. Nothing in the Plan or elsewhere
shall preclude the Debtors or
Reorganized Debtors from challenging the
validity of any alleged lien on any
asset of a Debtor or the value of such
collateral. Class 2 Claims are
Unimpaired and therefore not entitled to
vote on the Plan. Estimated Percentage
Recovery: 100%.
Class 3 - Secured Lender Class 3 consists of all Secured Claims
Claims of the Prepetition Secured Lenders (as
defined herein) arising under or as a
result of the Pre-Petition Credit
Allowed Claims: Facility, which Claims will be deemed
$84.6 million. Allowed pursuant to the Plan in the
amount of approximately $84.6 million.
Under the Plan, on the Effective Date,
each holder of an Allowed Class 3 Claim,
in full satisfaction, settlement,
release,
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Class Description Treatment Under Plan
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and discharge of and in exchange for
such Allowed Class 3 Claim, will receive
on or as soon as practicable after the
Distribution Date, its Pro Rata share of
one-hundred percent (100%) of the New
Secured Notes. If Class 3 accepts the
Plan, the New Secured Notes shall have
the terms and conditions set forth on
Plan Exhibit F(1). If Class 3 does not
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accept the Plan, the New Secured Notes
shall have the terms and conditions set
forth on Plan Exhibit F(2) and the
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Debtors shall seek to confirm the Plan
pursuant to section 1129(b) of the
Bankruptcy Code with respect to Class 3.
Class 3 Claims are Impaired and entitled
to vote on the Plan. Estimated
Percentage Recovery: 100%.
Class 4 - Convenience Claims Class 4 consists of any claim that
otherwise would be an Allowed Class 5
Claim against the Debtors in an amount
Estimated Allowed Claims: (i) equal to or less than $500, or (ii)
Approximately $0.4 million. greater than $500 but which is reduced
to $500 by an irrevocable written
election of the holder of such Claim
made on a validly executed and timely
delivered ballot.
Under the Plan, on the Effective Date,
each holder of an Allowed Class 4 Claim
will receive cash equal to the amount of
such Allowed Claim (as reduced, if
applicable, pursuant to an election by
the holder thereof). Class 4 Claims are
Impaired and entitled to vote on the
Plan. Estimated Percentage Recovery:
100%.
Class 5 - General Class 5 consists of any Claim against
Unsecured Claims the Debtors that is not an
Administrative Claim, Priority Tax
Claim, Other Priority Claim, Other
Estimated Allowed Claims: Secured Claim, Subordinated Claim,
Approximately $2.4 billion. Secured Lender Claim, or Convenience
Claim.
Under the Plan, on the Effective Date,
each holder of an Allowed Class 5 Claim
will receive, in full satisfaction,
settlement, release and discharge of and
in exchange for such Allowed Class 5
Claim: (i) its Pro Rata share of 100% of
the New Common Shares issued and
outstanding as of the Effective Date
(subject to Dilution); plus (ii) for
each holder of an Allowed Class 5 Claim
as of the Rights Offering Record Date,
on the Rights Offering Commencement
Date, its Rights
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Class Description Treatment Under Plan
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Offering Pro Rata Share of the Rights
Offering Distribution Pool. Class 5
Claims are Impaired under the Plan and
entitled to vote on the Plan. Estimated
Percentage Recovery: 5.7%-11.9%.
Class 6 - ICG Interests and Class 6 consists of all ICG Interests
Subordinated Claims and all Subordinated Claims. Under the
Plan, the holders of such Claims or
Interests shall not receive or retain
any property on account of such Claim or
Interests. On the Effective Date, all of
the ICG Interests shall be deemed
cancelled and extinguished. Class 6
Interests and Subordinated Claims are
Impaired and will receive no
distribution under the Plan and are
therefore deemed to reject the Plan and
are not entitled to vote on the Plan.
Estimated Percentage Recovery: 0%.
THE DEBTORS BELIEVE THAT THE PLAN PROVIDES THE BEST RECOVERIES POSSIBLE FOR
HOLDERS OF CLAIMS AGAINST THE DEBTORS AND THUS STRONGLY RECOMMEND THAT YOU VOTE
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TO ACCEPT THE PLAN.
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TABLE OF CONTENTS
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I. INTRODUCTION..................................................................... 1
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES........................................ 2
A. Definitions............................................................. 2
B. Notice to Holders of Claims and Interests............................... 2
C. Solicitation Package.................................................... 3
D. Voting Procedures, Ballots and Voting Deadline.......................... 3
E. Confirmation Hearing and Deadline for Objections to Confirmation........ 4
III. HISTORY AND STRUCTURE OF THE DEBTORS........................................... 4
A. Overview of Business Operations......................................... 4
1. Description of the Company's Businesses............................ 4
2. History............................................................ 6
3. Prepetition Financial Results...................................... 7
B. Capital Structure of the Company........................................ 10
1. Prepetition Equity................................................. 10
2. Material Prepetition Debt Obligations.............................. 10
C. Corporate Structure of the Company...................................... 11
1. Current Corporate Structure........................................ 11
2. Board of Directors................................................. 11
3. Senior Officers.................................................... 13
D. Events Leading to Commencement of the Chapter 11 Cases.................. 14
IV. CHAPTER 11 CASES............................................................... 15
A. Continuation of Business; Stay of Litigation............................ 15
B. First Day Orders........................................................ 15
C. Debtor in Possession Financing.......................................... 16
1. The DIP Facility................................................... 16
2. Authorization to Use Cash Collateral............................... 17
3. Exit Financing..................................................... 17
D. Appointment of Creditors' Committee..................................... 17
E. Other Material Relief Obtained During the Chapter 11 Cases.............. 18
1. Employee Retention Program......................................... 18
2. Senior Employment Agreements; Chief Executive Officer Agreement.... 18
3. Extension of Time to Assume or Reject Unexpired Leases............. 19
4. Extension of Exclusive Periods..................................... 19
5. Settlement with Qwest Communications Corporation................... 19
6. Settlement and Assumption with Respect to Corporate Headquarters... 20
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7. De Minimis Asset Sale Procedure................................... 22
F. Settlements with Significant Creditors................................. 22
1. Lucent............................................................ 22
2. Cisco............................................................. 23
G. Summary of Claims Process and Bar Date................................. 23
1. Schedules and Statements of Financial Affairs..................... 23
2. Claims Bar Date and Proofs of Claim............................... 23
H. Summary of Material Litigation Matters................................. 24
1. Shareholder Suits................................................. 24
2. ICG Funding Preferred Shareholders Suit........................... 24
I. Development and Summary of The Business Plan........................... 25
1. Services to be Offered by Reorganized ICG......................... 25
2. Geographic Footprint.............................................. 27
3. Network and Facilities............................................ 28
V. SUMMARY OF THE PLAN OF REORGANIZATION......................................... 29
A. Overall Structure of the Plan.......................................... 29
B. Substantive Consolidation.............................................. 30
C. Classification and Treatment of Claims and Interests................... 32
1. Treatment of Unclassified Claims Under the Plan................... 33
2. Treatment of Classified Claims and Interests Under the Plan....... 34
3. Reservation of Rights Regarding Claims............................ 36
D. Distributions under the Plan........................................... 36
1. Distributions for Claims Allowed as of the Effective Date......... 37
2. Resolution and Treatment of Disputed, Contingent, and
Unliquidated Claims and Distributions with Respect Thereto........ 39
E. Dissolution of the Creditors' Committees............................... 40
1. Creditors' Committee.............................................. 40
2. Claims Resolution Committee....................................... 40
F. Post-Consummation Operations of the Debtors............................ 42
1. Continued Corporate Existence..................................... 42
2. Cancellation of Old Securities and Agreements..................... 42
3. Certificates of Incorporation and By-laws......................... 42
4. Restructuring Transactions........................................ 42
G. Summary of Securities to Be Issued in Connection with the Plan......... 43
1. New Common Shares................................................. 43
2. Rights Offering................................................... 43
3. New Secured Notes................................................. 46
4. Registration Rights Agreement..................................... 46
H. Summary of Releases under the Plan..................................... 47
1. Releases by Debtors............................................... 47
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2. Release by Holders of Claims and Interests......................... 47
3. Injunction Related to Releases..................................... 47
I. Compensation and Benefit Programs....................................... 48
J. Directors And Officers of Reorganized Debtors........................... 49
1. Appointment........................................................ 49
2. Terms.............................................................. 49
3. Vacancies.......................................................... 49
4. Treatment of Director and Officer Indemnification Obligations
Under the Plan..................................................... 49
K. Revesting of Assets..................................................... 50
L. Preservation of Rights of Action........................................ 50
M. Other Matters........................................................... 50
1. Treatment of Executory Contracts and Unexpired Leases.............. 50
2. Administrative Claims.............................................. 52
3. Professional Fee Claims............................................ 52
4. Withholding and Reporting Requirements............................. 53
5. Setoffs............................................................ 53
N. Confirmation and/or Consummation........................................ 53
1. Requirements for Confirmation of the Plan.......................... 53
2. Conditions to Confirmation and Consummation........................ 55
O. Effects of Confirmation................................................. 56
1. Binding Effect..................................................... 56
2. Discharge of the Debtors........................................... 56
3. Permanent Injunction............................................... 57
4. Exculpation and Limitation on Liability; Indemnity................. 57
P. Retention of Jurisdiction............................................... 58
VI. CERTAIN FACTORS TO BE CONSIDERED............................................... 60
A. General Considerations.................................................. 60
B. Certain Bankruptcy Considerations....................................... 60
C. Inherent Uncertainty of Financial Projections........................... 60
D. Lack of Established Market for the New Securities....................... 61
E. Restricted Resale of the New Securities................................. 61
F. Telecommunications Competition.......................................... 61
G. Government Regulation................................................... 62
H. Reliance on Key Personnel............................................... 62
VII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS............................ 62
A. Offer and Sale of New Securities, Pursuant to the Plan: Bankruptcy
Code Exemption from Registration Requirements........................... 63
B. Subsequent Transfers of New Securities.................................. 63
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1. Federal Securities Laws: Section 1145(c) of the Bankruptcy Code... 63
2. Subsequent Transfers of New Common Shares Under State
Securities Laws................................................... 64
VIII. INCOME TAX CONSEQUENCES OF THE PLAN.......................................... 64
A. Federal Income Tax Consequences to the Debtors......................... 65
1. Cancellation of Indebtedness Income............................... 65
2. Utilization of Net Operating Loss Carryovers...................... 66
3. Federal Alternative Minimum Tax................................... 67
B. Federal Income Tax Consequences to Claim Holders....................... 67
1. United States Federal Income Tax Consequences..................... 67
2. Non-United States Persons......................................... 69
3. Information Reporting and Backup Withholding...................... 69
C. Importance of Obtaining Professional Tax Assistance.................... 70
IX. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS....................... 70
A. Feasibility of the Plan................................................ 70
B. Acceptance of the Plan................................................. 72
C. Best Interests Test.................................................... 72
D. Liquidation Analysis................................................... 73
E. Valuation of the Reorganized Debtors................................... 73
F. Application of the "Best Interests" of Creditors Test to the
Liquidation Analysis and the Valuation................................. 74
G. Confirmation Without Acceptance of All Impaired Classes: The
"Cramdown" Alternative................................................. 75
X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN...................... 76
A. Alternative Plan(s) of Reorganization.................................. 76
B. Liquidation under Chapter 7 or Chapter 11.............................. 76
XI. THE SOLICITATION; VOTING PROCEDURE............................................. 77
A. Parties in Interest Entitled to Vote................................... 77
B. Classes Impaired under the Plan........................................ 77
C. Waivers of Defects, Irregularities, Etc................................ 77
D. Withdrawal of Ballots; Revocation...................................... 78
E. Further Information; Additional Copies................................. 78
15
TABLE OF APPENDICES
Appendix Name
-------- ----
Appendix A Joint Plan of Reorganization of ICG Communications,
Inc., et al.
Appendix B Organization Structure of Company
B-1 Existing Organization Structure of Debtors
B-2 Chart Depicting Anticipated Corporate Structure Changes
B-3 Organization Structure of Reorganized Debtors After the
Effective Date
Appendix C Election Form for Rights Offering
Appendix D Liquidation Analysis
Appendix E Pro Forma Financial Projections
16
I. INTRODUCTION
ICG Communications, Inc. ("ICG") and certain of its direct and
indirect subsidiaries that are also debtors and debtors-in-possession (the
"Subsidiary Debtors") in the above-referenced Chapter 11 Cases (collectively,
the "Debtors") submit this disclosure statement (the "Disclosure Statement")
pursuant to section 1125 of the Bankruptcy Code, for use in the solicitation of
votes on the Joint Plan of Reorganization of ICG Communications, Inc. et al.
(the "Plan") proposed by the Debtors and filed with the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") on December 19,
2001. A copy of the Plan is annexed as Appendix A to this Disclosure Statement.
----------
This Disclosure Statement sets forth certain information regarding the
Debtors' prepetition operating and financial history, the need to seek Chapter
11 protection, significant events that are expected to occur during the Chapter
11 Cases, and the anticipated organization, operations and financing of the
Debtors upon successful emergence from Chapter 11 (the "Reorganized Debtors").
This Disclosure Statement also describes terms and provisions of the Plan,
including certain alternatives to the Plan, certain effects of confirmation of
the Plan, certain risk factors associated with securities to be issued under the
Plan, and the manner in which distributions will be made under the Plan. In
addition, this Disclosure Statement discusses the confirmation process and the
voting procedures that holders of Claims entitled to vote under the Plan must
follow for their votes to be counted. Unless otherwise noted herein, all dollar
amounts provided in this Disclosure Statement and in the Plan are given in
United States Dollars.
FOR A DESCRIPTION OF THE PLAN AND VARIOUS RISKS AND OTHER FACTORS
PERTAINING TO THE PLAN AS IT RELATES TO HOLDERS OF CLASS 3, 4 AND 5 CLAIMS,
PLEASE SEE SECTION V OF THE DISCLOSURE STATEMENT, ENTITLED "SUMMARY OF THE PLAN
---------
OF REORGANIZATION," AND SECTION VI OF THE DISCLOSURE STATEMENT, ENTITLED "
----------
CERTAIN FACTORS TO BE CONSIDERED."
THIS DISCLOSURE STATEMENT CONTAINS SUMMARIES OF CERTAIN PROVISIONS OF
THE PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATING TO THE PLAN,
CERTAIN EVENTS EXPECTED TO OCCUR IN THE CHAPTER 11 CASES AND CERTAIN FINANCIAL
INFORMATION. ALTHOUGH THE DEBTORS BELIEVE THAT THE SUMMARIES OF THE PLAN AND
RELATED DOCUMENT SUMMARIES ARE FAIR AND ACCURATE, SUCH SUMMARIES ARE QUALIFIED
TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR
STATUTORY PROVISIONS. FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT
HAS BEEN PROVIDED BY THE DEBTORS' MANAGEMENT, EXCEPT WHERE OTHERWISE
SPECIFICALLY NOTED. THE DEBTORS DO NOT WARRANT OR REPRESENT THAT THE
INFORMATION CONTAINED HEREIN, INCLUDING THE FINANCIAL INFORMATION, IS WITHOUT
ANY MATERIAL INACCURACY OR OMISSION.
THE DEBTORS BELIEVE THAT THE PLAN WILL ENABLE THE DEBTORS TO
SUCCESSFULLY REORGANIZE AND ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT
ACCEPTANCE OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTORS AND THE HOLDERS
OF CLASS 3, 4 AND 5 CLAIMS. THE DEBTORS URGE HOLDERS OF CLASS 3, 4 AND 5 CLAIMS
TO VOTE TO ACCEPT THE PLAN.
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT
THE PLAN, SEE SECTION XI OF THE DISCLOSURE STATEMENT, ENTITLED "THE
----------
SOLICITATION; VOTING PROCEDURE."
II. PLAN VOTING INSTRUCTIONS AND PROCEDURES
A. Definitions
Except as otherwise defined herein, capitalized terms not otherwise
defined in this Disclosure Statement have the meanings ascribed to them in the
Plan.
B. Notice to Holders of Claims and Interests
This Disclosure Statement will be transmitted to holders of Claims
that are entitled under the Bankruptcy Code to vote on the Plan. See Section V
---------
for a discussion and listing of those holders of Claims that are entitled to
vote on the Plan and those holders of Claims and Interests that are not entitled
to vote on the Plan. The purpose of this Disclosure Statement is to provide
adequate information to enable such Claim holders to make a reasonably informed
decision with respect to the Plan prior to exercising their right to vote to
accept or reject the Plan.
The Debtors expect that the Bankruptcy Court will approve a Disclosure
Statement that will contain information of a kind and in sufficient and adequate
detail to enable such Claim holders to make an informed judgment with respect to
acceptance or rejection of the Plan. A BANKRUPTCY COURT'S APPROVAL OF THIS
DISCLOSURE STATEMENT (WHEN SUCH APPROVAL IS OBTAINED) DOES NOT CONSTITUTE EITHER
A GUARANTY OF THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN
NOR AN ENDORSEMENT OF THE PLAN BY THE BANKRUPTCY COURT.
ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS ARE ENCOURAGED TO READ THIS
DISCLOSURE STATEMENT AND ITS APPENDICES CAREFULLY AND IN THEIR ENTIRETY BEFORE
DECIDING TO VOTE EITHER TO ACCEPT OR TO REJECT THE PLAN. This Disclosure
Statement contains important information about the Plan, considerations
pertinent to acceptance or rejection of the Plan, and developments concerning
the Chapter 11 Cases.
THIS DISCLOSURE STATEMENT IS THE ONLY DOCUMENT TO BE USED IN
CONNECTION WITH THE SOLICITATION OF VOTES ON THE PLAN. No solicitation of votes
2
may be made except after distribution of this Disclosure Statement, and no
person has been authorized to distribute any information concerning the Debtors
other than the information contained herein.
CERTAIN OF THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
BY ITS NATURE FORWARD LOOKING AND CONTAINS ESTIMATES, ASSUMPTIONS AND
PROJECTIONS THAT MAY BE MATERIALLY DIFFERENT FROM ACTUAL, FUTURE RESULTS.
Except with respect to the projections set forth in Appendix E to be annexed
----------
hereto (the "Projections") and except as otherwise specifically and expressly
stated herein, this Disclosure Statement does not reflect any events that may
occur subsequent to the date hereof and that may have a material impact on the
information contained in this Disclosure Statement. The Debtors do not intend
to update the Projections; thus, the Projections will not reflect the impact of
any subsequent events not already accounted for in the assumptions underlying
the Projections. Further, the Debtors do not anticipate that any amendments or
supplements to this Disclosure Statement will be distributed to reflect such
occurrences. Accordingly, the delivery of this Disclosure Statement shall not
under any circumstance imply that the information herein is correct or complete
as of any time subsequent to the date hereof.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTING FIRM AND HAS NOT
BEEN PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
C. Solicitation Package
The Debtors expect that when the Debtors solicit votes for the Plan
pursuant to this Disclosure Statement, the Debtors will send copies of (1) the
Plan; (2) the notice of, among other things, the time for submitting Ballots to
accept or reject the Plan, the date, time and place of the hearing to consider
confirmation of the Plan and related matters, and the time for filing objections
to confirmation of the Plan (the "Confirmation Hearing Notice"); (3) if you are
the holder of Claim(s) entitled to vote on the Plan, one or more Ballots (and
return envelopes) to be used by you in voting to accept or to reject the Plan;
and (4) if you are the holder of Claim(s) entitled to participate in the Rights
Offering, a form of exercise notice.
D. Voting Procedures, Ballots and Voting Deadline
After carefully reviewing the Plan, this Disclosure Statement and the
detailed instructions accompanying your Ballot, you will be asked to indicate
your acceptance or rejection of the Plan by voting in favor of or against the
Plan on the enclosed Ballot. You will be required to complete and sign your
original Ballot (copies will not be accepted) and return it in the envelope
provided.
3
Each Ballot has been coded to reflect the Class of Claims it
represents. Accordingly, in voting to accept or reject the Plan, you must use
only the coded Ballot or Ballots sent to you with this Disclosure Statement.
IN ORDER FOR YOUR VOTE TO BE COUNTED, YOUR BALLOT MUST BE PROPERLY
COMPLETED AS SET FORTH ABOVE AND IN ACCORDANCE WITH THE VOTING INSTRUCTIONS ON
THE BALLOT AND RECEIVED NO LATER THAN _____, 2002, AT __ P.M. (EASTERN TIME)
--------
(THE "VOTING DEADLINE") BY LOGAN & COMPANY, INC. (THE "VOTING AGENT"). DO NOT
RETURN ANY STOCK CERTIFICATES OR DEBT INSTRUMENTS WITH YOUR BALLOT.
If you have any questions about (1) the procedure for voting your
Claim or Interest or with respect to the packet of materials that you have
received or (2) the amount of your Claim, or if you wish to obtain, at your own
expense, unless otherwise specifically required by Federal Rule of Bankruptcy
Procedure 3017(d), an additional copy of the Plan, this Disclosure Statement or
any appendices or exhibits to such documents, please contact:
Logan & Company, Inc.
546 Valley Road
Upper Montclair, NJ 07043
(973) 509-3190 (telephone)
(973) 509-3191 (facsimile)
FOR FURTHER INFORMATION AND INSTRUCTION ON VOTING TO ACCEPT OR REJECT
THE PLAN, SEE SECTION XI.
----------
E. Confirmation Hearing and Deadline for Objections to Confirmation
Pursuant to section 1128 of the Bankruptcy Code and Federal Rule of
Bankruptcy Procedure 3017(c), the Bankruptcy Court has scheduled a Confirmation
Hearing for April 3, 2002, at 2:00 p.m. (prevailing Eastern Time). The
Confirmation Hearing may be adjourned from time to time by the Bankruptcy Court
without further notice except for the announcement of the adjournment date made
at the Confirmation Hearing or at any subsequent adjourned Confirmation Hearing.
Objections to Confirmation of the Plan must be filed with the Bankruptcy Court
no later than March 22, 2002.
4
III HISTORY AND STRUCTURE OF THE DEBTORS
A. Overview of Business Operations
1. Description of the Company's Businesses
ICG is a facilities-based, nationwide communications provider focused
on providing data and voice services to Internet service providers ("ISPs"),
telecommunication carriers and corporate customers. The Company has
metropolitan fiber in 26 markets, fiber interconnection in five regional
markets, voice and data switches in 27 major metropolitan areas and a nationwide
IP data network. ICG is a competitive local exchange carrier ("CLEC") certified
in most of the United States, having interconnection agreements with every major
local exchange carrier. ICG's facilities support three distinct lines of
businesses: (i) Dial-Up Services, providing wholesale managed modem connection
to ISPs and other carriers; (ii) Point-to-Point Broadband, or special access
service, providing dedicated broadband connections to other carriers, as well as
SS7 and switched access services; and (iii) Corporate Services, providing voice
and data services to corporate customers with an emphasis on Dedicated Internet
Access ("DIA") services.
. Dial-Up Services: The Company provides PRI ports (one and two
way) and managed modem services ("IRAS") to many of the largest
national ISPs and other telecommunications carriers, as well as
to numerous regional ISPs and other communication service
companies. Most of these services are on-switch through the
Company's owned facilities. Included in the IRAS are domain name
services ("DNS") and radius authentication and proxy. As of the
third quarter 2001, the Company had approximately 650,000 dial-up
ports in service, which, before the related reciprocal
compensation, account for approximately one-third (1/3) of the
Company's total revenue. Associated reciprocal compensation
revenue accounts for approximately thirteen percent (13%) of the
Company's revenue.
. Point-to-Point Broadband Service: The Company provides
dedicated bandwidth to connect (i) long-haul carriers to local
markets, large corporations and other long-haul carrier
facilities and (ii) large corporations to their long-distance
carrier sites and other corporate locations. Special access
sales are focused in areas where ICG maintains local fiber and
buildings on-net or in close proximity. Point-to-Point Broadband
Service also includes switched access and SS7 services. Point-
to-Point service accounts for approximately one-third (1/3) of
the Company's total revenue.
. Corporate Services: The Company offers Internet access, data
and voice service to corporate customers. The Company's current
customer base is located primarily in California, Ohio, Texas,
Colorado and parts of the southeast. ICG is
5
expanding its DIA services to medium and large-sized businesses
in its 27 major markets. DIA service is a rapidly growing sector
because an increasing number of corporations are replacing higher
cost long haul point-to-point circuits with this less expensive
technology. ICG is well positioned to expand this service with
its metropolitan asset base, data network infrastructure, and
Internet experience. Corporate Services accounts for
approximately one-fifth (1/5) of revenue.
ICG supports its service offerings through an advanced nationwide
network comprised of 5,540 route miles of metropolitan and regional fiber
connected with switch sites and data points of presence. In addition, 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.
2. History
The Company's roots can be traced to the mid-1980s with a business
plan to develop satellite communications capabilities in Denver, Colorado. Then
known as Teleport Denver, Ltd. ("TDL"), the Company completed a 24-hour managed
facility that housed eight earth stations and could reach five continents in a
single satellite hop. With the emergence of the first competitive access
providers ("CAPs") in the mid- to late-1980s, TDL's management recognized a
business opportunity in providing long distance and private line services to
select business customers. Accordingly, in 1992, the Company began providing
telecommunications services using fiber-optic rings at a facility in south
Denver.
In an effort to expand its geographic presence, TDL (and its
successors ICG Holdings and ICG Telecom) made numerous acquisitions between 1991
and 1994, including the acquisitions of Conticomm, Inc., Fiber Optic
Technologies, Inc., PrivaCom, Ohio LINX, MidAmerica Cable, and Bay Area
Teleport, Inc. These acquisitions expanded the Company's network capabilities
in Colorado, California, Ohio, Arizona, and the southeastern United States. In
February 1994, the Company expanded its product line beyond transport to include
switched services. Throughout the next few years, the Company entered into a
number of fiber lease agreements with electric utility companies across the
country. These early agreements set the stage for the Company's utility
partnering strategy, which helped the Company expand its network, services and
distribution channels in key markets. In 1995, the Company also entered into a
strategic alliance with Southern New England Telephone that allowed the Company
to offer a nationwide SS7 network.
With the passage of the Federal Telecommunications Act of 1996 (the
"Telecommunications Act"), the Company was poised to enter the local telephone
market. Accordingly, in April 1996, the Company reincorporated under the name
ICG Communications, Inc., and implemented an aggressive local telecommunications
strategy that focused on regional network expansion in California, Colorado, the
Ohio Valley, and the Southeast. As part of this strategy, recruiting efforts
6
accelerated, and the Company had nearly 1,300 employees nationwide by the end of
1996. In continued efforts to prepare for entry into the local telephone
market, the Company signed a seven-year, $1 billion agreement in September 1996
with Lucent Technologies/Bell Labs to purchase telecommunications equipment,
including 5E switching systems and other technical services. In 1997, the
Company formally entered the local telephone market and began offering local,
long distance and calling card services primarily to small- and mid-sized
business customers. Shortly thereafter, the Company launched dial tone service
in every other regional ICG market and ended 1997 with more than 141,000 lines
provisioned.
During 1998, attempting to capitalize on the emerging Internet
industry, the Company's management completed a merger with Netcom On-Line
Communication Services, Inc. ("Netcom"), a leading provider of Internet
services. The merger allowed ICG to enter the Internet and data services
markets. In January 1999, the Company sold the U.S. customer base of its Netcom
subsidiary to MindSpring Enterprises, Inc. ("Mindspring"), but retained the
Netcom network backbone (which included 227 points of presence and served
approximately 700 cities). In addition, the Company entered into a second
agreement in which MindSpring agreed to utilize the data network and network
management capabilities of ICG. This strategic decision set the stage for the
Company's emergence as a provider of Internet access services. During 1999 and
2000, the Company signed multi-year agreements with a number of key ISPs to
provide access, transport and network management services.
The Company decided to sell its fiber optic and satellite services
divisions in 1999 as part of an overall business strategy to focus on its core
strengths: providing access and transport to ISPs, telecom services to
businesses nationwide and direct connectivity to interexchange carriers. During
the first six (6) months of 2000, the Company began to aggressively expand its
network. Such expansion included entering into markets as well as upgrading its
network. To assist in its expansion plans, in April 2000, the Company raised
$750 million in new equity capital from investors that included affiliates of
Liberty Media Corporation, Hicks, Muse, Tate & Furst Incorporated and Gleacher
Capital Partners. This investment, combined with other vendor financing, funded
the Company's capital program for 2000.
As discussed in more detail in Section III.D, the Company began to
-------------
experience significant cash flow problems by the third quarter of 2000. This
liquidity problem, combined with certain service issues related to the rapid
network expansion, caused the Company to reevaluate its planned network
expansion. Accordingly, the Company suspended many of its network expansion
plans and abandoned certain lines of business.
3. Prepetition Financial Results
Set forth below is selected financial data for ICG, including its
direct and indirect Subsidiaries, on a consolidated basis for the nine months
ended September 30, 2000 and for the year ended December 31, 1999. The
unaudited financial data for the nine months ended September 30, 2000 is
consistent with the amounts shown in ICG's Form 10-Q filed with the SEC for the
quarterly period ended September 30, 2000, except as noted in ICG's Form 10-Q
filed with the SEC for the year ended
7
December 31, 2000 for Revenue and Net Losses. Revenue is less and Net Loss
greater than reported in the Form 10-Q for the nine months ended September 30,
2000 by approximately $.04 million due to the retroactive application of SAB
101, Revenue Recognition in Financial Statements. The financial data for the
year ended December 31, 1999 was audited for inclusion in ICG's Form 10-K filed
with the SEC.
8
Consolidated Statements of Operations
Year ended December 31, 1999 and Nine Months ended September 30, 2000
(Unaudited)
Nine months
Year ended ended
December 31, September 30,
1999 2000
---- ----
(in thousands)
Revenue $ 479,226 $ 477,369
Operating costs and expenses:
Operating costs 238,927 304,202
Selling, general and administrative expenses 239,756 188,947
Depreciation and amortization 174,239 236,514
Loss on disposal of asset 31,815 2,566
Other, net 387 1,692
--------- ---------
Total operating costs and expenses 685,124 733,921
--------- ---------
Operating loss (205,898) (256,552)
Other income (expense):
Interest expense (212,420) (195,406)
Interest income 16,300 20,437
Other expense, net (2,522) (349)
--------- ---------
Total other expense, net (198,642) (175,318)
Loss from continuing operations before accretion
and preferred dividends (404,540) (431,870)
Accretion and preferred dividends on preferred
securities of subsidiaries, net of minority
interest in share of losses (61,897) (51,428)
Income tax expense (25) (10)
--------- ---------
Loss from continuing operations (466,462) (483,308)
Net income from discontinued operations 36,789 736
--------- ---------
Net loss before extraordinary gain and cumulative
effect of change in accounting principle (429,673) (482,572)
Extraordinary gain on sales of operations of
NETCOM, net of income taxes 195,511
--------- ---------
Net loss $(234,162) (482,572)
========= =========
9
Consolidated Balance Sheets
As of December 31, 1999 and September 30, 2000 (Unaudited)
December 31, September 30,
1999 2000
------------ -------------
(in thousands)
Assets
- ------
Current assets:
Cash and cash equivalents $ 103,288 $ 216,714
Short-term investments available for sale 22,219 17,536
Receivables, net 168,731 193,640
Prepaid expenses, deposits and inventory 9,189 19,839
------------ -------------
Total current assets 303,427 447,729
Property and equipment, net 1,527,879 2,193,450
Restricted cash 12,537 7,721
Investments 28,939 15,652
Other assets, net of accumulated amortization:
Goodwill 95,187 73,099
Deferred financing costs 35,884 32,252
Other, net 16,768 20,024
------------ -------------
Total other assets 147,839 125,375
------------ -------------
Total Assets $2,020,621 $ 2,789,927
============ =============
Liabilities and Stockholders' Deficit
- -------------------------------------
Current liabilities:
Accounts payable $ 112,291 $ 108,465
Payable pursuant to IRU agreement 135,322 53,826
Accrued liabilities 85,709 206,611
Deferred revenue 25,175 172,843
Other current liabilities 14,890 56,755
------------ -------------
Total current liabilities 373,387 598,500
Capital lease obligations, less current portion 63,348 139,377
Long-term debt, net of discount, less current portion 1,905,901 2,068,672
Other long-term liabilities 2,526 3,247
------------ -------------
Total liabilities 2,345,162 2,809,796
Redeemable preferred stock 519,323 1,222,896
Stockholders' deficit (843,864) (1,242,765)
------------ -------------
10
Total Liabilities and Stockholders' Deficit $ 2,020,621 $ 2,789,927
============ =============
B. Capital Structure of the Company
1. Prepetition Equity
From March 25, 1997 to November 18, 2000, ICG's stock (the "Old
Common Shares") was traded on the Nasdaq National Market (the "NASDAQ") under
the ticker symbol "ICGX," and it was previously listed on the American Stock
Exchange ("AMEX") under the ticker symbol "ICG." On November 18, 2000, shortly
after the Petition Date, the NASDAQ halted trading of the Old Common Shares and
initiated delisting procedures. As of June 20, 2001, the Old Common Shares
continue to be traded on the Over-the-Counter ("OTC") market. At that time, the
Company had approximately 52,045,443 shares outstanding. The Company neither
declared nor paid dividends on the Old Common Shares.
Prior to the Petition Date, the Company also issued the following
preferred securities (the "Old Preferred Shares"): (i) ICG Communications, Inc.
8% Series A-1, A-2, and A-3 Convertible Preferred Securities due 2015; (ii) ICG
Funding, LLC Exchangeable Preferred Securities Mandatorily Redeemable 2009;
(iii) ICG Communications, Inc. 6 3/4% Preferred Stock Mandatorily Redeemable
2009; (iv) ICG Holdings, Inc. 14% Preferred Stock Mandatorily Redeemable 2008;
and (v) ICG Holdings, Inc. 14 1/4% Preferred Stock Mandatorily Redeemable 2007.
Under the Plan, the holders of Interests on account of the Old Common
Shares and Old Preferred Shares will be classified in Class 6. Under the Plan,
holders of Interests in Class 6 will not receive or retain any property under
the Plan on account of such Interests. On the business day on which all
conditions to consummation of the Plan have been satisfied or waived, as set
forth in the Plan (the "Effective Date"), all of the Old Common Shares and Old
Preferred Shares will be deemed cancelled and extinguished.
2. Material Prepetition Debt Obligations
As of the Petition Date, ICG Equipment and ICG NetAhead were parties
to a Credit Agreement dated as of August 12, 1999 (as amended from time to time,
the "Pre-petition Credit Agreement") with the lenders signatory thereto (the
"Prepetition Secured Lenders") and Royal Bank of Canada as administrative agent
and collateral agent. The obligations under the Prepetition Credit Agreement
(the "Prepetition Credit Agreement Obligations") are guaranteed by ICG Services.
The Prepetition Credit Agreement Obligations total approximately $85 million,
and are secured by substantially all the assets of ICG Equipment and ICG
NetAhead. The Telecom Debtors are not party to any prepetition secured bank
financing facility.
The Debtors' other principal liabilities as of the Petition Date were
comprised of, among other things: (a) the 9 7/8% senior discount notes issued by
ICG Services with an accreted value as of November 1, 2000 of approximately
$318,428,137; (b) the 10% senior discount notes issued by ICG Services with an
accreted value as of November 1, 2000 of approximately $391,924,050; (c) the 11
5/8% senior discount notes issued by ICG Holdings with an accreted value as of
November 1, 2000 of
11
approximately $150,718,480; (d) the 12 1/2% senior discount notes issued by ICG
Holdings with an accreted value as of November 1, 2000 of approximately
$517,925,851; and (e) the 13 1/2% senior discount notes issued by ICG Holdings
with an accreted value as of November 1, 2000 of approximately $584,300,000. The
Debtors' prepetition liabilities also include approximately $195 million of
capital lease obligations and significant trade debt obligations.
C. Corporate Structure of the Company
1. Current Corporate Structure
ICG is incorporated in Delaware, and is the publicly-traded parent
company of ICG Funding, LLC ("ICG Funding"), a special purpose Delaware limited
liability company, ICG Holdings, ICG Services and their respective subsidiaries.
See Appendices B(1)-(3) for charts depicting the Company's current
-------------------
corporate structure, and the anticipated corporate structure of the Reorganized
Debtors after the Effective Date.
2. Board of Directors
The following persons comprised the Board of Directors (the "Board")
of ICG as of December 1, 2001:
Name Title
---- -----
William J. Laggett Vice Chairman of the Board
John U. Moorhead, II Board Member
Leontis Teryazos Board Member
Walter Threadgill Board Member
William S. Beans, Jr. Board Member
J. Shelby Bryan Board Member
William J. Laggett, formerly Chairman of the Board, was named Vice
Chairman of the Board in June 1999. Prior to serving on the Company's Board,
Mr. Laggett was President of Centel Cellular Company from 1988 until 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. Mr. Laggett also is
a member of the Company's Special Committee of the Board of Directors (the
"Special Committee").
John U. Moorhead, II was named a Director in June 1998. From 1991 to
April 2001, Mr. Moorhead also served as a managing director of VM Equity
Partners, a firm he co-founded in 1991.
12
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, which provides specialty materials and services to the microelectronic
and semiconductor industries. Mr. Moorhead also is a member of the Special
Committee.
Leontis Teryazos was named a Director in June 1995. Since 1993, Mr.
Teryazos has served as President of Letmic Management Inc., a financial advisory
firm that specializes in working with telecommunications and media companies.
Mr. Teryazos has also headed Letmic Management Reg'd., a real estate development
and management company, since 1985. In addition, Mr. Teryazos is a member of
the Special Committee.
Walter Threadgill was named a Director in December 1997. In addition,
he is the Managing General Partner of Atlantic Coastal Ventures, L.P.
Previously, Mr. Threadgill was the President and Chief Executive Officer of
Multimedia Broadcast Investment Corporation. He also held positions as
Divisional Vice President of Fiduciary Trust Company in New York and 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. In addition, Mr. Threadgill is a member
of the Special Committee.
William S. Beans, Jr., formerly President, Chief Operating Officer,
Executive Vice President and President of Network Services, was named a Director
in April 2000. Prior to joining the Company, Mr. Beans held several positions
with Teleport Communications Group, Inc., a division of AT&T Local Services. He
was National Vice President of Operations from November 1997 until June 1999,
Vice President of Customer Care from October 1995 to November 1997 and Vice
President of Network Development from September 1993 to October 1995.
J. Shelby Bryan, formerly Chairman of the Board, Chief Executive
Officer, and President, was named a Director in May 1995. Mr. Bryan has more
than 20 years of experience in the telecommunications industry. Prior to
joining the Company, Mr. Bryan 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.
All members of the Board, other than Messrs. Beans and Bryan, are
members of the Special Committee. The Special Committee has been responsible
for oversight of management and these Chapter 11 Cases for the Debtors. Messrs.
Bryan and Beans left the Company's employ in August 2000 and February 2001,
respectively, and Mr. Beans entered into a severance agreement with the Company
that was approved by the Bankruptcy Court in January, 2001.
13
3. Senior Officers
The following is a list, as of December 1, 2001, of the names of the
executive officers and the positions with ICG held by each officer.
Name Title
---- -----
Randall E. Curran Chief Executive Officer
Richard E. Fish, Jr. Executive Vice President
and Chief Financial
Officer
Bernard L. Zuroff Executive Vice President,
General Counsel, and
Secretary
Michael D. Kallet Executive Vice President,
Operations
John V. Colgan Senior Vice President,
Finance, and Controller
Randall E. Curran was named Chief Executive Officer in September 2000.
Prior to his position at the Company, Mr. Curran most recently served as
Chairman, President and Chief Executive Officer of Thermadyne Holdings
Corporation. Mr. Curran also served as vice president of Finance for Clarke
Industries, a division of Cooper Industries. Mr. Curran received a Bachelor of
Arts in Economics from DePauw University and a Master of Business Administration
from Loyola University Chicago.
Richard E. Fish, Jr., formerly a Senior Vice President of Finance, was
named Executive Vice President and Chief Financial Officer in November 2000.
Prior to joining the Company, Mr. Fish held various operational and business
development positions with AT&T. Before joining AT&T, Mr. Fish was with Arthur
Andersen, LLP in their Financial Consulting & Audit Division. Mr. Fish received
a Bachelor of Science in Business Administration from the University of Nebraska
and is a Certified Public Accountant.
Bernard L. Zuroff, formerly Assistant General Counsel, was named
Executive Vice President, General Counsel and Secretary in November 2000. Prior
to joining the Company, Mr. Zuroff was a senior attorney with the Resolution
Trust Corporation and an associate business attorney with Gorsuch Kirgis, L.L.C.
Michael D. Kallet, formerly Executive Vice President of Data
Networking Services and Products and Technology, was named Executive Vice
President of Operations in December 1999. In his current position, Mr. Kallet
is responsible for the operations of ICG's network and services, and works
closely with ICG's chief executive officer to oversee day-to-day operations.
Mr. Kallet also oversees the Company's product strategy. Prior to joining the
Company, Mr. Kallet held positions at Walker Interactive, Software Publishing
Corporation (Harvard Graphics) and IBM.
14
John V. Colgan, formerly Vice President of Shared Services and Leasing
Operations, Vice President of Financial Planning and Analysis and Vice President
of Finance for ICG Telecom, was named Senior Vice President of Finance and
Controller in January 1999. In this position, Mr. Colgan is responsible for,
among things, SEC reporting, insurance and risk management. Prior to joining the
Company, Mr. Colgan spent ten (10) years in various executive positions in the
logistics and transportation industry, including five (5) years with Burlington
Northern, Inc. and approximately ten (10) at Arthur Andersen, LLP. In addition,
Mr. Colgan currently serves on the Board of Directors of the local chapter of
Financial Executives International.
D. Events Leading to Commencement of the Chapter 11 Cases
During the latter part of 2000, a series of regulatory, operational
and financial events culminated to materially reduce the Company's expected
revenue and cash flow generation. The regulatory events related to reciprocal
compensation revenue. Specifically, the Company had difficulties collecting
reciprocal compensation from other telecommunications companies. In order to
accelerate collection, ICG renegotiated rate provisions contained in long-term
agreements with incumbent local exchange carriers ("ILECs"). The areas covered
by such ILECs encompassed nearly 75% of the Company's service territories
subject to reciprocal compensation. The negotiated rates were significantly
lower than those provided in previous agreements; however, the renegotiated
contracts contain a three-year guarantee of future revenue. In addition, a
decision from the Colorado Public Utility Commission in August 2000 denied the
Company compensation for inbound traffic, which further reduced expected
reciprocal compensation revenue.
Operational events related primarily to network performance and
customer service issues associated with the Company's IRAS product. During
2000, ICG experienced high demand for its IRAS service. In an effort to meet
such demand, the Company deployed non-field tested software. This resulted in
system errors, latency and failed dial-up connections, thereby reducing overall
network performance to below-minimum levels. The reduced levels violated
performance provisions of certain IRAS service agreements. Further, limitations
of certain monitoring systems prevented the Company from detecting and
correcting the network performance problems.
In August 2000, two large IRAS customers notified ICG that it was in
breach of contract as a result of the reduced service and network performance
levels. The Company subsequently issued credits to certain customers and
reduced line commitments for the installation of IRAS service, further reducing
revenue. Finally, to meet the increased demand from IRAS customers, the Company
utilized resold lines as a temporary solution until the Company's own facilities
were completed. The resold lines, which made up a significant percentage of
total lines in service, were not cost effective and did not generate reciprocal
compensation revenue.
The combination of lower IRAS and reciprocal compensation revenues and
higher costs substantially lowered expected financial results. Consequently,
the Company was technically in violation of certain of the covenants in the
Pre-Petition Credit Agreement. In addition, during this period, the Company
required additional funding to complete its planned network build-out. The
timing of these events corresponded with a significant tightening of the capital
markets within the telecommunications industry. Accordingly, the Company faced
a liquidity crisis and required a
15
restructuring of operations and the Company's balance sheet, which the Company
believed could best be accomplished in Chapter 11.
IV. CHAPTER 11 CASES
A. Continuation of Business; Stay of Litigation
On November 14, 2000, the Debtors filed petitions for relief under
Chapter 11 of the Bankruptcy Code. Since the Petition Date, the Debtors have
continued to operate as debtors-in-possession subject to the supervision of the
Bankruptcy Court and in accordance with the Bankruptcy Code. The Debtors are
authorized to operate their business in the ordinary course of business, with
transactions out of the ordinary course of business requiring Bankruptcy Court
approval.
An immediate effect of the filing of the Debtors' bankruptcy petitions
is the imposition of the automatic stay under the Bankruptcy Code which, with
limited exceptions, enjoins the commencement or continuation of all collection
efforts by creditors, the enforcement of liens against property of the Debtors
and the continuation of litigation against the Debtors. This relief provides
the Debtors with the "breathing room" necessary to assess and reorganize their
business. The automatic stay remains in effect, unless modified by the
Bankruptcy Court, until consummation of a plan of reorganization.
B. First Day Orders
On the first day of these Chapter 11 cases, the Debtors filed several
motions seeking certain relief by virtue of so-called "first day orders." First
day orders are intended to facilitate the transition between a debtor's
prepetition and postpetition business operations by approving certain regular
business practices that may not be specifically authorized under the Bankruptcy
Code or as to which the Bankruptcy Code requires prior approval by the
Bankruptcy Court. The first day orders obtained in these cases are typical for
large Chapter 11 cases.
The first day orders in the Chapter 11 Cases authorized, among other
things:
a. the retention of the following professionals to serve on behalf
of the Debtors: (i) Skadden, Arps, Slate, Meagher & Flom
(Illinois) and its affiliated law practice as bankruptcy counsel;
(ii) Zolfo Cooper, LLC ("Zolfo Cooper") as bankruptcy consultants
and special financial advisors; (iii) DrKW as investment banker;
and (iv) Logan & Company, Inc. as solicitation and noticing agent
(the "Claims Agent");
b. the continued retention of professionals regularly employed by
the Debtors in the ordinary course of business;
c. the maintenance of the Debtors' bank accounts and operation of
their cash management systems substantially as such systems
existed prior to the Petition Date;
16
d. payment of employees' accrued prepetition wages, royalties and
employee benefit claims;
e. payment of prepetition shipping, warehouse, distributor or
regulatory charges and related possessory and mechanics' liens;
f. continued utility services during the pendency of the Chapter 11
Cases;
g. payment of certain prepetition tax claims;
h. confirmation that the Debtors' undisputed obligations arising
from postpetition delivery of goods will have administrative
expense priority status, administrative expense treatment for
certain holders of valid reclamation claims, and authority to pay
certain expenses in the ordinary course of business;
i. joint administration of each of the Debtors' bankruptcy cases;
and
j. the maintenance of certain prepetition customer programs and
practices.
C. Debtor in Possession Financing
1. The DIP Facility
To ensure that it would have sufficient liquidity to conduct its
businesses during the Chapter 11 Cases, the Company believed, at the time the
Chapter 11 Cases were commenced, that it was in the best interests of the
Company and its creditors to obtain a commitment for Debtor-in-Possession
financing. Such financing would ensure continued access to sufficient working
capital during the pendency of the Chapter 11 Cases and instill confidence in
its customers, critical vendors and employees that the Company would continue as
a going concern.
Accordingly, at the outset of these cases, the Debtors sought and
obtained interim authority to enter into a DIP facility (the "DIP Facility")
with The Chase Manhattan Bank as administrative agent (the "Agent") and a
syndicate of financial institutions (collectively, the "DIP Lenders") arranged
by the Agent. Final authority to enter into the DIP Facility was granted by the
Bankruptcy Court on December 19, 2000. The DIP Facility provided for secured
postpetition financing from the DIP Lenders in an aggregate principal amount not
to exceed $350 million, which was later reduced by amendment to $200 million.
The DIP Facility had a term of eighteen months.
Under the terms of the DIP Facility, to secure the repayment of the
borrowing and all other obligations arising under the DIP Facility, the Debtors
granted the DIP Lenders first priority liens on substantially all of their
assets junior to the liens of the existing Prepetition Secured Lenders, and
other valid liens existing on the Petition Date. Obligations under the DIP
Facility were also granted "superpriority" claim status under section 364(c)(1)
of the Bankruptcy Code, meaning they have priority over all other administrative
expenses. The liens and claims granted to the DIP Lenders are junior to the fees
and expenses of the Office of the United States Trustee under 28 U.S.C. (S) 1930
and the Clerk of the
17
Bankruptcy Court, as well as to a $3 million carve-out for the fees and
disbursements of the professionals of the Debtors and the Creditors' Committee
incurred after an event of default under the DIP Facility. The DIP Facility also
contained covenants, representations and warranties, events of default, and
other terms and conditions typical of credit facilities of a similar nature. The
DIP Facility required that, if any borrowings thereunder were made, initial
borrowings had to be sufficient to, and utilized to, pay all obligations to the
Prepetition Secured Lenders in full.
Because the results of operations during the Chapter 11 Cases
materially exceeded projections made at the outset of the Chapter 11 Cases, the
Debtors did not need to utilize funds available under the DIP Facility and, as
set forth in below, have cash on hand as of November 30, 2001 of approximately
$150.6 million. Thus, to reduce financing costs by avoiding future fees of the
DIP Facility, the Debtors terminated the DIP Facility on November 7, 2001.
2. Authorization to Use Cash Collateral
The cash that ICG Equipment and ICG NetAhead had on hand as of the
Petition Date, and substantially all cash received by such Debtors during the
Chapter 11 Cases, constitutes "Cash Collateral" of the Prepetition Secured
Lenders. Cash collateral is defined in section 363 of the Bankruptcy Code and
includes, but is not limited to, "cash, negotiable instruments, documents of
title, securities, deposit accounts, . . . other cash equivalents . . . and . .
. proceeds, products, offspring, rents or profits of property subject to a
security interest . . . ." 11 U.S.C. (S) 363(a). Under the Bankruptcy Code,
the Debtors are prohibited from using, selling, or leasing Cash Collateral
unless either the appropriate creditor(s) consent or the Bankruptcy Court, after
notice and a hearing, authorizes such action. Accordingly, the Debtors obtained
authority to use the Cash Collateral to pay current operating expenses,
including payroll to ensure the maintenance of the Debtors' telecommunications
network and to ensure uninterrupted customer service, which is essential to the
Debtors' continued viability (the "Cash Collateral Order"). Importantly,
pursuant to the Cash Collateral Order, the Debtors use of Cash Collateral is
restricted by the terms of a budget agreed upon by the Debtors and the Pre-
Petition Secured Lenders.
3. Exit Financing
As of November 30, 2001, the Services Debtors had approximately $87.5
million in cash on hand, and the Telecom Debtors had approximately $63.1 million
in cash on hand. The Debtors anticipate that as of April 1, 2002, the Services
Debtors will continue to have approximately $100 million in cash on hand, and
the Telecom Debtors will have approximately $15 million in cash on hand. The
reduction in cash on hand with respect to the Telecom Debtors is due to normal
operating cash requirements. If the Plan is consummated, there will be no
balance sheet distinctions between the Services Debtors and the Telecom Debtors,
and, accordingly, there will be no need to segregate the cash of the Telecom and
Service Debtors, respectively. Given this amount of cash, and based upon the
Business Plan and Projections, the Debtors do not believe that obtaining new
financing is necessary in order to consummate the Plan, or to render the Plan
feasible within the meaning of Section 1129 of the Bankruptcy Code. See
---
Sections I. As discussed in Section V.G below, as additional consideration to
- ---------- -----------
holders of Claims in Class 5, the Plan does include the Rights Offering, which
may raise additional cash for operations. However, the Rights Offering is not
being underwritten. Thus, while the Rights Offering
18
may provide an additional source of cash to Reorganized ICG, there can be no
assurances that the Rights Offering will provide any additional funding to
Reorganized ICG.
D. Appointment of Creditors' Committee
On November 29, 2000, the United States Trustee for the District of
Delaware appointed, pursuant to section 1102(a) of the Bankruptcy Code, certain
entities to the Official Committee of Unsecured Creditors of the Debtors (the
"Creditors' Committee"). Members of the Creditors' Committee have included:
Aetna, Inc.; Banc One Investment; Cerberus Partners; Conseco Capital Management,
Inc.; W.R. Huff Asset Management Co.; Lucent Technologies; and Qwest
Communications Corporation. In or about July 2001, Qwest Communications
Corporation resigned from the Creditors' Committee.
E. Other Material Relief Obtained During the Chapter 11 Cases
In addition to the first day relief sought in these Chapter 11 Cases,
the Debtors have sought authority with respect to a multitude of matters
designed to assist in the administration of the Chapter 11 Cases, to maximize
the value of the Debtors' estates, and to provide the foundation for the
Debtors' emergence from Chapter 11. Set forth below is a brief summary of
certain of the principal motions the Debtors have filed during the pendency of
the Chapter 11 Cases.
1. Employee Retention Program
On December 19, 2000, the Bankruptcy Court approved a program designed
to retain key executives and employees. The first component is the retention
program, which included a retention bonus providing an annual bonus to certain
employees ranging from 6% to 150% of compensation depending upon their position
within ICG. The second component is a severance policy, which provides that the
Company will make severance payments based on length of service to certain
employees who do not have employment contracts.
2. Senior Employment Agreements; Chief Executive Officer Agreement
On January 31, 2001, the Bankruptcy Court authorized the Debtors to
assume and/or enter into employment contracts with twelve key members of the
Debtors' senior management. The contracts provide for a severance benefit equal
to one-year's base salary if terminated other than for cause. One of the twelve
executives, Mr. Michael Kallet, who is critical to the maintenance of the
Debtors' telecommunications network, see Section , will also receive a $500,000
--------
bonus upon confirmation of the Plan if he is still employed by the Debtors on
the date the Plan is confirmed, or the date a sale of all or substantially all
of the Company's assets is consummated.
In addition, on June 21, 2001, the Bankruptcy Court authorized the
Debtors to enter into a new employment agreement with their Chief Executive
Officer, Mr. Randall Curran (the "Curran Agreement"). The principal terms of
the Curran Agreement are as follows:
(i) Term. The term of the Curran Agreement continues until Mr.
Curran's termination, provided, however that at the end of each calendar month,
the employment term shall be extended through the end of the immediately
following calendar month unless notice of non-renewal is
19
given by the Company to Mr. Curran not less than fifteen (15) days prior to the
end of any such calendar month.
(ii) Compensation. An annual base salary of $900,000 (the "Base
Salary"), which may be increased in accordance with normal business practices
and may not be reduced. If the Company achieves $31 million EBITDA for fiscal
2001, then Mr. Curran shall receive a $100,000 bonus (the "2001 Bonus
Threshold"). Mr. Curran shall receive $100,000 for each $1 million in excess of
the 2001 Bonus Threshold (together with the 2001 Bonus Threshold, the
"Performance Bonus"), and, in no event, shall the Performance Bonus exceed
$900,000. Ten days after either (x) consummation of a confirmed plan of
reorganization or (y) consummation of a sale of substantially all of the assets
of the Debtors, prior to December 31, 2001, Mr. Curran shall receive a
reorganization bonus equal to $900,000 (the "Reorganization Bonus"). If
conditions (x) or (y) are met following December 31, 2001, a portion of the
Reorganization Bonus may become payable, provided that the amount of the
Reorganization Bonus shall be reduced by $100,000 for each whole one-month
period immediately following December 31, 2001. Finally, if conditions (x) or
(y) are met following December 21, 2001, and the reason such condition was not
met prior to such date is lack of resolution of intercreditor issues or the
Creditors' Committee's refusal to support an Acceptable Plan (as defined in the
Curran Agreement), then the Reorganization Bonus shall be $900,000.
(iii) Expenses and Other Benefits. Mr. Curran shall receive (i)
employee benefits as are generally provided to senior executives of the Debtors,
(ii) reimbursement for all reasonable out-of-pocket expenses incurred in
connection with the performance of his duties as CEO, including reasonable costs
associated with permanently relocating to the Denver metropolitan area, and
(iii) vacation time, paid holidays, and personal days in accordance with the
Debtors' policy then in effect.
(iv) Termination. If the Agreement is terminated by Mr. Curran for
"good reason," or if the Debtors terminate Mr. Curran's employment for any
reason other than Mr. Curran's death, disability, or for cause, the Company
shall pay Mr. Curran a lump sum termination benefit in an amount equal to
fifteen months' Base Salary at the rate then in effect.
3. Extension of Time to Assume or Reject Unexpired Leases
Given the size and complexity of these Chapter 11 Cases, the Debtors
were unable to complete their analysis of all nonresidential real property
leases during the time limitation prescribed by section 365(d)(4) of the
Bankruptcy Code. On January 31, 2001, the Bankruptcy Court extended the time by
which the Debtors must assume or reject leases of nonresidential property for
six months, through and including July 12, 2001. On June 21, 2001, the
Bankruptcy Court extended that period an additional six months, through and
including January 10, 2002. The Debtors have requested a further extension
through the date of Confirmation of this Plan.
4. Extension of Exclusive Periods
Pursuant to orders of the Bankruptcy Code dated February 27, 2001,
August 2, 2001, and December 6, the Bankruptcy Court extended the Debtors'
exclusive period to propose a plan of reorganization (the "Plan Proposal
Period") and to solicit acceptances of such Plan (the "Solicitation
20
Period"). On February 20, the Bankruptcy Court extended the plan proposal period
through August 11, 2001, and the solicitation period through October 10, 2001.
On August 2, 2001, the Bankruptcy Court further extended the Plan Proposal
Period through December 10, 2001, and the Solicitation Period through February
8, 2002. Finally, on December 6, 2001, the Bankruptcy Court further extended the
Plan Proposal Period through March 8, 2002, and the Solicitation Period through
May 7, 2002.
5. Settlement with Qwest Communications Corporation
Prior to the Petition Date, Qwest and the Debtors developed a number
of important and mutually valuable business relationships, governed by a
plethora of contracts (collectively, the "Qwest Prepetition Agreements"). The
Qwest Prepetition Agreements include contracts pertaining both to the Debtors'
ISP business and their operations as a CLEC. During the pendency of the Chapter
11 Cases, both the Debtors and Qwest asserted various breaches of, and claims
under, the Qwest Prepetition Agreements. Following lengthy negotiations, the
parties agreed to enter into a settlement resolving all of the claims and issues
between the parties (the "Qwest Settlement Agreement") in order to continue a
cooperative, mutually beneficial relationship and to avoid potentially costly
litigation. The Qwest Settlement Agreement was approved by the Bankruptcy Court
on or about June 21, 2001.
Under the Qwest Settlement Agreement, the Debtors agreed to assume
certain executory contracts, as amended, to mutually benefit both parties. For
example, the Debtors agreed to assume an agreement regarding the use of certain
optical fiber capacity after it was modified (i) to reduce the number of fiber
circuits granted by ICG, and (ii) to require Qwest's payment of certain
completion costs for the unfinished circuits. Additionally, the Debtors and
Qwest amended and restated two existing agreements under which ICG sells
Internet services to Qwest. Under the Qwest Settlement Agreement, the Debtors
also assumed an agreement, as amended, under which Qwest leases certain fiber
optic capacity from ICG on a "take or pay" basis.
In addition to assuming certain executory contracts, the Qwest
Settlement Agreement resolved issues related to prepetition setoffs. After a
careful review of its books and negotiations between the parties, the Debtors
agreed that Qwest had valid setoff rights with respect to certain of the Qwest
Prepetition Agreements. As a result of such negotiations, Qwest agreed to waive
certain claims, and the Debtors agreed to transfer title of certain assets to
Qwest. In addition, as a part of the global settlement, Qwest paid $10 million
to the Debtors for amounts owed during the prepetition period and as additional
consideration for the global settlement.
The Debtors, their estates and their creditors received significant
benefits from the Qwest Settlement Agreement including: (a) eliminating
unsecured claims exceeding $230 million; (b) receiving $10 million in cash; (c)
modifying its service contract with Qwest to eliminate the risk that current
revenue levels could materially decrease; and (d) increasing monthly revenue
received by the Debtors from Qwest by over $1.4 million per month for 36 months
and over $1 million for the following 24 months. More importantly, the Qwest
Settlement Agreement permits the Debtors to continue to have a highly beneficial
and valuable working relationship going forward with one of their largest
customers, which also happens to be a significant and highly influential company
in the telecommunications industry.
6. Settlement and Assumption with Respect to Corporate Headquarters
21
In January 1998, the Debtors established their corporate headquarters
at 161 Inverness Drive West, Englewood, Colorado (the "Headquarters Property").
The Headquarters Property includes the Debtors' main office complex, as well as
a Network Operations Center for monitoring their network. Originally, Debtor ICG
Holdings was the tenant with respect to the Headquarters Property, and the
lessor was a non-affiliated party, TriNet Essential Facilities X, Inc.
("TriNet"). Under such lease (the "Headquarters Lease"), which would have
expired by its own terms on January 31, 2013, ICG Holdings provided TriNet with
a $10 million security deposit (the "Security Deposit").
Starting in January 1999, a series of transactions were consummated
pursuant to which (a) the Headquarters Property was sold by TriNet to Debtor ICG
Services for approximately $44 million, and (b) ICG Services then sold the
Headquarters Property to ICG 161, L.P. (the "Partnership"). The Partnership is
a single-purpose limited partnership formed specifically to own the property and
be the lessor under the Headquarters Lease. Pursuant to the partnership
agreement (the "Partnership Agreement"), 99% of the Partnership is owned by ICG
Corporate Headquarters, L.L.C. (the "ICG Partner"), and 1% is owned by TriNet
Realty Investments V., Inc., which is an affiliate of TriNet (the "iStar
Partner"). The ICG Partner is a wholly-owned subsidiary of ICG Services, and
neither the Partnership nor the ICG Partner is a debtor in these Chapter 11
Cases.
To finance the purchase of the Headquarters Property, ICG Services
obtained a loan for approximately $33 million from another TriNet affiliate,
TriNet Realty Capital, Inc. (the "Lender"), secured by a deed of trust (the
"Deed of Trust") on the Headquarters Property (collectively, the "Loan"). TriNet
utilized the $10 million Security Deposit established by ICG Holdings under the
Headquarters Lease to pay the balance of the purchase price. ICG Services
reimbursed such deposit to ICG Holdings. When ICG Services then sold the
property to the Partnership, the Partnership assumed the Loan, ICG Services
became the guarantor with respect thereto, and the Partnership became the
landlord under the Headquarters Lease. The parties agreed that the Security
Deposit did not have to be reinstated at that time. In sum, ICG Holdings paid
rent under the Headquarters Lease to the Partnership, which in turn made the
mortgage payment under the Loan.
Pursuant to the Partnership Agreement, the iStar Partner had an option
to purchase (the "Purchase Option") the ICG Partner's interest in the
Partnership and/or purchase the Headquarters Property for approximately $43
million (the "Option Price") upon certain conditions and in certain
circumstances (i.e., certain defaults). If the iStar Partner exercised the
----
Purchase Option, it could satisfy a portion of the Option Price by assumption of
the Loan (approximately $33 million). The remaining $10 million of the option
price, nominally payable to the ICG Partner (ICG Services' wholly-owned
subsidiary), in fact had to be used to reinstate the $10 million Security
Deposit under the Headquarters Lease. Under the terms of the Headquarters
Lease, the Security Deposit would not be returned until January 2013.
In the Spring of 2000, ICG Services entered into a construction
contract (the "Construction Contract") with Bovis Lend Lease ("Bovis") for
construction of a parking garage (the "Garage") on the Headquarters Property.
Thereafter, ICG Services failed to pay certain of Bovis' invoices. As a result,
Bovis and its subcontractors filed significant mechanics' liens, totaling over
$2.5 million, against the Headquarters Property. In the Autumn of 2000, Bovis
shut down the project site, even though construction with respect to the Garage
was not complete. Shortly thereafter, Bovis, along with several of its
subcontractors, began pursuing lien foreclosure actions against the Headquarters
22
Property. These violations arguably constituted triggering events with respect
to the iStar Partner's Purchase Option because the existence of mechanics' liens
on the Headquarters Property were events of default under the Headquarters Lease
and Partnership Agreement.
To resolve the numerous problems associated with the construction of
the Garage and to restructure the ownership interest in the property, on June
21, 2001 the Debtors obtained Bankruptcy Court approval of a settlement
agreement with the iStar Partner relating to the Headquarters Property. Under
the settlement agreement: (a) the Lender exercised its option to purchase the
Headquarters Property and agreed to fund completion of the Garage up to $7.8
million (including arrearages and mechanics' liens); (b) the Debtors and the ICG
Partner received a full release from any and all obligations they may have as
guarantor under the Loan; (c) the Debtors were released from any obligation to
cure existing and/or past defaults under the Headquarters Lease, the Partnership
Agreement or the Loan; and (d) the Headquarters Lease was amended in several
significant ways, including deletion of the security deposit requirement,
extension of the term by ten years, and elimination of the iStar Partner's
obligation to pay the $10 million in cash. In conjunction with the settlement
agreement, the Bankruptcy Court authorized the Debtors to assume the
Headquarters Lease, as amended in accordance with the terms described above.
7. De Minimis Asset Sale Procedure
Under Section 363 of the Bankruptcy Code, asset sales outside of the
Debtors' ordinary course of business require a separate notice and hearing. On
January 31, 2001, the Bankruptcy Court authorized the Debtors to sell assets
outside of the ordinary course of business without a separate notice and hearing
for each such sale if the sale price for a specified asset or group of related
assets is $3 million or less (the "De Minimis Asset Sale Order"). In lieu of a
separate notice and hearing, the Bankruptcy Court authorized the following
procedure for each such sale: (i) five (5) business days notice of each such
proposed sale to the U.S. Trustee, counsel for the Creditors' Committee, counsel
to the DIP Agent under the DIP Facility, counsel to the agent under the Pre-
Petition Credit Facility Agreements, and the holder of any lien, claim or
encumbrance relating to the proposed property to be sold; (ii) such notice
parties have five (5) business days to object to the proposed transaction; (iii)
if any such party objects to the proposed transaction within five (5) days, and
the Debtors and the objecting party cannot resolve the objection utilizing good
faith efforts, then the Debtors cannot consummate such sale absent Bankruptcy
Court approval; and (iv) if no such parties object within the specified time
period, then the Debtors are authorized to consummate the proposed sale.
In accordance with the terms of the Bankruptcy Court's De Minimis
Asset Sale Order, the Debtors consummated four De Minimis Asset Sales.
Specifically, they sold certain office furniture for $480,000, shares in Cienna
Systems, Inc. for approximately $2 million, certain microwave assets and license
agreements for approximately $1 million, and certain fiber optic cable in
exchange for a conduit system.
F. Settlements with Significant Creditors
1. Lucent
23
Lucent Technologies, Inc. (together with its subsidiaries and
affiliates, "Lucent") was the Company's primary supplier of switching equipment
(the "Lucent Equipment"), which routes voice and data connections in 27 major
metropolitan areas throughout the country. The Lucent Equipment, as well as the
contractual right to use software necessary to operate such equipment licenses
from Lucent (the "Software Rights"), are critical to the Company's ongoing
operations. The purchase of the Lucent Equipment and the Software Rights are
contained in a master agreement ("the Lucent Contract").
As of the Petition Date, the Company owed Lucent approximately $82
million (the "Lucent Prepetition Claim") in connection with the agreement to
purchase the Lucent Equipment and utilize the Software Rights. Lucent has
contended that it has ownership rights with respect to certain of the Lucent
Equipment possessed by the Company and, in addition, that in order to be able to
continue to utilize any of the Software Rights, the Company must assume all
obligations to Lucent under the Lucent Contract, and thus pay the full amount of
the Lucent Prepetition Claim. The Company contests these assertions.
To avoid the expense, uncertainty, and delay associated with
litigation over these issues, the Debtors negotiated a settlement with Lucent.
As described in Schedule 5.13 of the Plan, under the settlement agreement, on
-------------
the Effective Date, the Debtors will make a cash payment to Lucent, issue Lucent
an unsecured promissory note, and return to Lucent certain Lucent Equipment that
the Company no longer utilizes. In addition, Lucent will retain a General
Unsecured Claim in the amount of $___ million. The Company will retain clear
title to all Lucent Equipment it is utilizing and will be expressly authorized
to continue to utilize the Software Rights.
2. Cisco
Cisco Systems, Inc. and Cisco Capital (collectively, "Cisco") are
critical vendors to the Company. Prior to the Petition Date, Cisco was a key
provider of computer hardware and software necessary for the operation of the
Company's data network. Specifically, certain equipment was purchased from
Cisco Systems, Inc., and, beginning in January 2000, such equipment was acquired
under a master lease agreement with Cisco Capital.
Certain of this equipment is crucial to the operations of the
Company's network. In addition, Cisco's continued software and equipment
support will enable the Company to continue providing Internet service to
customers. Accordingly, the Debtors have begun negotiations with Cisco with
respect to a settlement of their prepetition claims, which will include a
provision regarding Ciscos's ongoing software and equipment support.
On the Effective Date of the Plan, the Debtors and Cisco will enter
into a settlement agreement providing for, among other things, the full
satisfaction of all claims and disputes between the parties arising out of
agreements, acts or events in existence or occurring prior to the Effective
Date, as described in Schedule 5.14 of the Plan.
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24
G. Summary of Claims Process and Bar Date
1. Schedules and Statements of Financial Affairs
On January 8, 2001, the Debtors filed Schedules of Assets and
Liabilities and Statements of Financial Affairs (collectively, the "Schedules
and Statements") with the Bankruptcy Court. Among other things, the Schedules
and Statements set forth the Claims of known creditors against each the Debtors
as of the Petition Date, based upon the Debtors' books and records. Separate
Schedules and Statements were filed for each of the 26 Debtors.
2. Claims Bar Date and Proofs of Claim
On February 9, 2001, the Debtors filed a motion with the Bankruptcy
Court to establish the general deadline for filing proofs of claim against the
Debtors by those creditors required to do so (the "Bar Date"). On February 27,
2001 the Bankruptcy Court established the Bar Date as April 30, 2001. The
Bankruptcy Court's order establishing the Bar Date (the "Bar Date Order")
requires that the Debtors' Claims Agent provide notice of the Bar Date by
mailing: (i) a notice of Bar Date; (ii) a proof of claim form; and (iii) a
notice of either unliquidated, contingent and/or disputed claim or liquidated,
non-contingent and undisputed claim upon the requisite persons or entities.
Proofs of claim aggregating over 2,500 in number and in excess of
$16.1 billion have been filed against the Debtors. A significant amount of the
proofs of claim filed are either duplicative, are based upon guarantees, or are
based upon intercompany relationships. In addition, numerous Claims were
asserted by various alleged creditors in unliquidated amounts. The Debtors
believe that numerous other claims that have been asserted or threatened to be
asserted are without merit and intend to object to all such Claims. There can
be no assurance that the Debtors will be successful in contesting any of such
Claims. Although the Debtors' completion of their review of all Claims filed is
anticipated to be completed after the Confirmation Date, based upon the review
of Claims and reconciliation of Proofs of Claim conducted to date, the Debtors
believe that General Unsecured Claims are likely to become Allowed Claims in the
approximate aggregate amount of $2.4 billion. However, the Debtors do not
anticipate having reviewed and fully analyzed all Proofs of Claim filed in these
cases by the Confirmation Date. Accordingly, the actual amount of General
Unsecured Claims (Class 5 Claims) that ultimately become Allowed Claims could
materially exceed $2.4 billion, and, if so, estimated percentage recoveries for
holders of Claims in Class 5 could be materially less than as estimated in this
Disclosure Statement.
H. Summary of Material Litigation Matters
During the Chapter 11 Cases to date, the Debtors commenced or were
involved in a number of lawsuits. A summary of the significant actions is set
forth below. In addition, the Company is a party to certain other litigation
that has arisen in the ordinary course of business. The Debtors do not believe
that the ultimate resolution of these matters will have a material adverse
effect on the Company's financial condition, results of operations or cash flow.
1. Shareholder Suits
25
The Company was served with fourteen lawsuits filed by various
shareholders in the United States 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 a lead plaintiffs' counsel will be chosen by the Court.
The Company has tendered these claims to its insurers.
At this time, the claims against the Company have been stayed pursuant
to the Company's filing for bankruptcy. The claims against the individual
defendants are proceeding and these defendants have retained separate legal
counsel to prepare a defense. Under section 510(b) of the Bankruptcy Code, all
such Claims against the Company are mandatorily subordinated and thus are
classified in Class 6. Holders of Claims and Interests in Class 6 will not
receive any recovery under the Plan.
2. ICG Funding Preferred Shareholders Suit
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 against the Company and ICG
Funding. The shareholders in this adversary action sought to recover
approximately $2.3 million from an escrow account established prior to the
Petition Date to fund certain dividend payments to holders of the Funding
Exchangeable Preferred Securities. Because ICG Funding filed for bankruptcy
protection, it 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 ICG
Funding obtained Bankruptcy Court approval of a settlement agreement with the
ICG Funding shareholders. Under the terms of the settlement, the shareholders
received approximately two-thirds (2/3) of the funds in the escrow account and
the Company received the remaining one-third (1/3) of the escrowed funds,
subject to certain contingencies and holdbacks related to shareholders that did
not participate in the settlement.
I. Development and Summary of The Business Plan
In the fall of 2000, ICG's management team identified the main areas
of operations and procedures that required change before the Company could
effect a turn-around to profitability. Six major areas of improvement were
identified, and objectives and teams were established to resolve the issues.
These objectives have either been met or are successfully being implemented as
of the third quarter 2001. Concurrently in the fall of 2000, the Company began
developing its long-term business plan, reconsidering all products, market
opportunities, geographic focus, cost structure and strengths, as well as the
Company's existing asset base, capacity and capital constraints. As a result of
these efforts, ICG has consistently achieved profitability before interest,
taxes, depreciation, and amortization since March 2001.
The Company's long-term plan is focused on three primary areas of
business: (1) Dial-Up Service; (2) Point-to-Point Broadband; and (3) Corporate
Services. The Company believes
26
these areas are the best fit for its current strengths and network architecture,
as well as providing the opportunity for substantial long-term growth
opportunity.
1. Services to be Offered by Reorganized ICG
a. Dial-Up Access
ICG plans to maintain and increase its position as a leading provider
of wholesale Dial-Up Internet access service to ISPs and other customers. Most
of these services are on switch through the Company's owned facilities and
utilize the Company's network infrastructure including fiber backbone and data
Points of Presence ("POPs"). The Company can easily expand these services with
its unutilized switch port, managed modem and IP backbone capacity. The Company
currently has significant market share and expects to benefit from the
consolidation of the ISP industry as national ISPs seek the scale, geographic
scope and network reliability of larger providers such as ICG. ICG is currently
a vendor for most of the nation's largest ISPs. As of the third quarter 2001,
the Company had approximately 650,000 Dial-Up ports in service with capacity for
approximately 500,000 additional ports.
ICG offers primary rate interface ("PRI") ports (one-and two-way) and
managed modem services ("IRAS") to ISPs, carriers and other communications
service companies such as telemarketing companies. PRI service typically
involves routing calls from ISP end-users (Internet subscribers dialing-in to
access the Internet) from the public switched telephone network to the ISP-owned
modem banks. Calls are routed from the public network to the ICG switch, where
it is sent to the ISP-owned managed modem equipment, typically collocated at the
ICG central office facility. If the ISP is not collocated, a Point-to-Point
Broadband connection is required between the ISP POP and the ICG central office.
PRI is priced per port per month typically under multi-year contracts. The
Company's costs are primarily for leased DS3 lines that connect the public
network to the ICG switch or for leased T1 lines between the ICG switch and ISP
POP. As part of its cost saving initiatives in late 2000, ICG stopped selling
PRIs requiring leased circuits and substantially reduced the number of leased
circuits within its network, lowering costs and increasing its operating margin
from Dial-Up. IRAS service is a more complete service offering that connects,
sends and routes customer data traffic using ICG's fiber backbone and peering
with multiple private and public sites. IRAS is also charged per port, per month
and typically is sold under multi-year contracts. The Company's associated costs
are mainly for the connection charges to the public network, leased PRI in
cities where ICG does not have a switch, and network backbone and backhaul costs
to transfer traffic to the ICG hub closest to the ISP POP.
The Dial-Up Access market has experienced competitive pricing pressure
and competition from higher speed Internet connection alternatives such as DSL
and cable access. ICG's Dial Up Access revenues however, are growing as ISP
industry consolidation has increased business for national network providers
such as ICG, and as the Company's reputation for reliable service has improved.
b. Point-to-Point Broadband
ICG includes three products in its Point-to-Point Broadband Service:
(i) dedicated bandwidth (traditionally referred to as special access); (ii)
switched access; and (iii) SS7 service.
27
Approximately eighty percent (80%) of revenue in this category is for dedicated
connections offered at DS-1 to OC-192 capacities (with availability depending
upon location) and sales are predominantly to other carriers. The Company
provides dedicated bandwidth to connect (x) carriers to local markets, large
corporations and other carrier facilities and (y) large corporations to their
long-distance carrier site and other locations. ICG plans to expand its
Point-to-Point dedicated services, focusing sales in areas where ICG has local
fiber and buildings close to or on-net. ICG is targeting carriers, ISPs and
large businesses.
Switched access service includes interstate and intrastate transport
and switching of calls between two carriers or a carrier and end-user. By using
ICG to switch (terminate or originate) a call, it reduces the long-distance
carriers local access cost, which is a major operating expense. The switched
access market is under pricing pressure from the ILECs, thereby reducing
margins. ICG continues to support its existing customer base, but is not pursing
switched access as a growth line of business. SS7 services are used to connect
long-distance companies (including wireless) companies to local networks using
SS7 signals between network elements to provide faster call set-up and more
efficient use of network resources. ICG is one of the few SS7 providers and
more than half of the Company's SS7 customers buy other services from ICG.
c. Corporate Services
The Company offers Internet access, data and voice services to
corporate customers. The Company's current customer base is primarily located in
California, Ohio, Texas, Colorado and parts of the southeast. ICG's traditional
service offerings as a competitive local exchange carrier are maintained under
Corporate Services, although ICG has redirected its focus to target growth in
data through DIA service to medium to large sized businesses, or those having
between 50 and 2,000 employees, in its 27 major markets. DIA industry
projections for T1 and T3 services reflect a compound growth rate of thirteen
percent (13%) over the next five (5) years as more and more businesses conduct
purchasing, sales and day-to-day operations using the Internet. ICG believes it
is well positioned to grow this service with its metropolitan asset base, data
network infrastructure, and Internet experience.
As part if its cost savings initiative in 2001, the Company sought to
transition its voice customers requiring resold lines to other carriers, thereby
reducing its customer base. The Company's business plan focuses on larger
customers requiring data services where voice services may be added in a cost-
efficient manner. During the fourth quarter of 2001, ICG reorganized its sales
force and added the capability to specifically expand DIA sales starting in
2002. This service provides dedicated bandwidth from a customer's premise
directly to the Internet at T1 and T3 speeds using ICG's more than seventy (70)
peering arrangements. ICG currently offers basic T1 and T3 DIA to corporate
customers and in 2002 plans to launch value added services such as virtual
private networking, T3 bursting and service level agreements.
2. Geographic Footprint
ICG halted an aggressive expansion program in the fourth quarter of
2000 and has defined its footprint to maximize profitability in the near term
while maintaining appropriate presence in markets where longer-term opportunity
is believed to exist. Existing port capacity in the identified switch markets
serves as the basis for future revenue opportunities, while DIA will be expanded
from eight cities in 2001 to other switch markets in 2002. ICG has switches in
the following markets:
28
State or Region City or County # of Switches
California Los Angeles 5
Oakland 1
Ontario 1
Orange County 3
Sacramento 2
San Diego 2
San Francisco 2
San Jose 2
Colorado
Denver 4
Colorado Springs 1
Ohio
Akron 1
Cincinnati 1
Cleveland 3
Columbus 2
Dayton 1
Texas
Austin 1
Corpus Christi 1
Dallas 1
Houston 1
San Antonio 1
Southeast/Northeast
Atlanta 1
Birmingham 1
Charlotte 1
Louisville 1
Nashville 1
Chicago 1
New York 1
In the first-half of 2002, the Company plans to expand its switch
market to include: Seattle, Washington; Salt Lake City, Utah; Washington D.C.;
and Boston, Massachusetts.
3. Network and Facilities
a. Regional Network Assets
ICG's regional assets include 43 voice and data switches located in 27
metropolitan service areas plus approximately 5,540 miles of leased or owned
regional and metropolitan fiber comprising 165,850 local fiber strand miles.
The regional network assets support all three primary lines of business.
29
The majority of the Company's metropolitan fiber is built in
Synchronous Optical Network ("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 to
provide fiber redundancy to ensure uninterrupted service. ICG currently connects
approximately 6,700 buildings to its network through on-net (i.e. connected to
the ICG network via ICG-owned fiber) and hybrid (connected to the ICG fiber
network via third party fiber) applications, of which approximately 900
buildings are connected on-net. In addition, the network is designed to access
long distance carriers as well as end-user telecommunications traffic in a cost
efficient manner that lends itself to providing competitive Point-to-Pont
Broadband services to other carriers.
ICG has considerable assets in 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. In addition, the Company has some switch equipment that it may
not complete. The Company is reviewing options to sell these assets.
b. Nationwide Network Architecture
As described in Section III.A, ICG's nationwide fiber optic data
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backbone has OC-48 long-haul capacity currently operating at OC-3/OC-12 and
connecting nine (9) major metropolitan areas. The fiber backbone is connected to
data POPs and 26 ATM switches with high performance routers. The Company has
peering arrangements at seven public peering sites: MAE East (Washington, D.C.),
MAE West (Santa Clara, California), MAE West ATM, MAE Dallas ATM, PacBell (San
Jose, California), Sprint NAP (Newark, New Jersey), and Ameritech (Chicago,
Illinois). The Company also has peering arrangements with approximately seventy
(70) private companies. The Company owns and leases dedicated lines throughout
the United States, and is currently in the process of consolidating numerous
dedicated lines and 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 which connects: San Jose, Los Angeles, Denver,
Dallas, Atlanta, Washington, D.C., Newark, and Chicago. The Company plans to
upgrade routes from Denver and San Jose to Seattle. 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.
4. The Projections
As discussed in more detail in Section IX and Appendix E, the Company
---------- ----------
has prepared pro forma financial projections through December 31, 2005 for the
Company on a consolidated basis. The Projections are based on numerous
assumptions, as discussed in Section IX and Appendix E.
---------- ----------
V. SUMMARY OF THE PLAN OF REORGANIZATION
THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE, CLASSIFICATION,
TREATMENT AND IMPLEMENTATION OF THE PLAN AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PLAN, WHICH ACCOMPANIES THIS DISCLOSURE STATEMENT, AND TO THE
EXHIBITS ATTACHED THERETO.
30
THE PLAN ITSELF AND THE DOCUMENTS REFERRED TO THEREIN WILL CONTROL THE
TREATMENT OF CREDITORS AND EQUITY SECURITY HOLDERS UNDER THE PLAN AND WILL, UPON
THE EFFECTIVE DATE, BE BINDING UPON HOLDERS OF CLAIMS AGAINST, OR INTERESTS IN,
THE DEBTORS, THE REORGANIZED DEBTORS AND OTHER PARTIES IN INTEREST.
A. Overall Structure of the Plan
Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under Chapter 11, a debtor is authorized to reorganize its
business for the benefit of its creditors and shareholders. Upon the filing of a
petition for relief under Chapter 11, section 362 of the Bankruptcy Code
provides for an automatic stay of substantially all acts and proceedings against
the debtor and its property, including all attempts to collect claims or enforce
liens that arose prior to the commencement of the Chapter 11 case.
The consummation of a plan of reorganization is the principal
objective of a Chapter 11 case. A plan of reorganization sets forth the means
for satisfying claims against and interests in a debtor. Confirmation of a plan
of reorganization by the Bankruptcy Court makes the plan binding upon the
debtor, any issuer of securities under the plan, any person or entity acquiring
property under the plan, and any creditor of or equity security holder in the
debtor, whether or not such creditor or equity security holder (i) is impaired
under or has accepted the plan or (ii) receives or retains any property under
the plan. Subject to certain limited exceptions and other than as provided in
the plan itself or the confirmation order, the confirmation order discharges the
debtor from any debt that arose prior to the date of all confirmation of the
plan and substitutes therefor the obligations specified under the confirmed
plan, and terminates all rights and interests of equity security holders.
The terms of the Debtors' Plan are based upon, among other things, the
Debtors' assessment of their ability to achieve the goals of their Business
Plan, make the distributions contemplated under the Plan and pay certain of
their continuing obligations in the ordinary course of the Reorganized Debtors'
businesses as approved by the Bankruptcy Court. Under the Plan, Claims against,
and Interests in, the Debtors are divided into Classes according to their
relative seniority and other criteria.
If the Plan is confirmed by the Bankruptcy Court and consummated, (i)
the Claims in certain Classes will be reinstated or modified and receive
distributions equal to the full amount of such Claims, (ii) the Claims of
certain other Classes will be modified and receive distributions constituting a
partial recovery on such Claims, and (iii) the Claims and Interests in certain
other Classes will receive no recovery on such Claims or Interests. On the
Effective Date and at certain times thereafter, the Reorganized Debtors will
distribute Cash, securities and other property in respect of certain Classes of
Claims as provided in the Plan. The Classes of Claims against and Interests in
the Debtors created under the Plan, the treatment of those Classes under the
Plan and the securities and other property to be distributed under the Plan are
described below.
31
B. Substantive Consolidation
The Plan is premised upon the substantive consolidation of the
Debtors only for purposes of the Plan; that is, for voting, confirmation and
distribution purposes. The Plan does not contemplate the merger of any Debtor
entity or the transfer or commingling of any asset of any Debtor. Substantive
consolidation under the Plan will not effect a transfer or commingling of any
assets of any Debtors, and all assets (whether tangible or intangible) will
continue to be owned by the respective Debtors.
Specifically, under the Plan, on the Effective Date, (a) all assets
and liabilities of the Debtors shall be deemed merged or treated as though they
were merged into and with the assets and liabilities of ICG.; (b) no
distributions shall made under the Plan on account of Intercompany Claims among
the Debtors; (c) no distributions shall be made under the Plan on account of
Subsidiary Interests; and (d) all guarantees of the Debtors of the obligations
of any other Debtor shall be deemed eliminated so that any claim against any
Debtor and any guarantee thereof executed by any other Debtor and any joint or
several liability of any of the Debtors shall be deemed to be one obligation of
the consolidated Debtors. Such substantive consolidation (other than for
purposes related to the Plan) shall not affect (i) the legal and corporate
structures of Reorganized ICG, subject to the right of the Debtors or
Reorganized ICG to effect Restructuring Transactions as provided in Article V of
---------
the Plan; (ii) Intercompany Claims, (iii) Subsidiary Interests, and (iv) pre and
post Commencement Date guarantees that are required to be maintained (x) in
connection with executory contracts or unexpired leases that have been or will
be assumed, or (y) pursuant to the Plan.
Generally, substantive consolidation of the estates of multiple
debtors in a bankruptcy case effectively combines the assets and liabilities of
the multiple debtors for certain purposes under a plan. The effect of
consolidation is the pooling of the assets of, and claims against, the
consolidated debtors; satisfying liabilities from a common fund; and combining
the creditors of the debtors for purposes of voting on reorganization plans.
There is no statutory authority specifically authorizing substantive
consolidation. The authority of a Bankruptcy Court to order substantive
consolidation is derived from its general equitable powers under section 105(a)
of the Bankruptcy Code, which provides that the court may issue orders necessary
to carry out the provisions of the Bankruptcy Code. Nor are there statutorily
prescribed standards for substantive consolidation. Instead, judicially
developed standards control whether substantive consolidation should be granted
in any given case.
The propriety of substantive consolidation must be evaluated on a
case-by-case basis. The extensive list of elements and factors frequently cited
and relied upon by courts in determining the propriety of substantive
consolidation may be viewed as variants on two critical factors, namely, (i)
whether creditors dealt with the entities as a single economic unit and did not
rely on their separate identity in extending credit or (ii) whether the affairs
of the debtors are so entangled that consolidation will benefit all creditors.
Some courts have viewed these elements and factors as examples of information
that may be useful to courts charged with deciding whether there is substantial
identity between the entities to be consolidated and whether consolidation is
necessary to avoid some harm or to realize some benefit.
Among the specific factors or elements looked to by courts are the
following:
32
. the degree of difficulty in segregating and ascertaining the
individual assets and liabilities of the entities to be
consolidated;
. the presence or absence of consolidated financial statements
among the entities to be consolidated;
. the commingling of assets and business functions among the
entities to be consolidated;
. the unity of interests and ownership among the various entities;
. the existence of parent and intercorporate guarantees on loans to
the various entities;
. the transfer of assets to and from the various entities without
formal observance of corporate formalities; and
. the effect on the percentage recovery of a claim if substantive
consolidation is allowed compared to administrative
consolidation.
The Debtors believe that the facts and circumstances surrounding the
historical business operations of ICG and the Subsidiary Debtors support
substantive consolidation in these Chapter 11 Cases for the limited purposes of
voting, confirmation and distributions. Many trade creditors view the Company
as a single economic unit. ICG and its Subsidiary Debtors generally have common
officers and directors, and have shared key employees and outside professionals,
including, but not limited to, employees of ICG who perform human resources,
legal, and risk management services for the benefit of all the Debtors and
accounting firms, law firms and consultants who rendered services to all of the
Debtors. In addition, the Debtors' network operations are highly intertwined
and dependent upon each other. Most importantly, the Debtors and their advisors
have analyzed the myriad of issues that would have to be resolved relating to
Intercompany Claims were the Plan not be premised upon substantive
consolidation. The Debtors have concluded that resolving all such issues would
be a monumental task, would be extremely time consuming, and would have highly
uncertain results. Moreover, the Debtors do not believe that recoveries to
most creditors are significantly impacted under substantive consolidation.
Accordingly, the Debtors believe that substantive consolidation for the limited
purposes of voting, confirmation and distributions is warranted in light of the
criteria established by the courts in ruling on the propriety of substantive
consolidation in other cases.
C. Classification and Treatment of Claims and Interests
Section 1122 of the Bankruptcy Code provides that a plan of
reorganization must classify the claims and interests of a debtor's creditors
and equity interest holders. In accordance with section 1122, the Plan divides
Claims and Interests into Classes and sets forth the treatment for each Class
(other than Administrative Claims and Priority Tax Claims which, pursuant to
section 1123(a)(1), do not need to be classified). The Debtors also are
required, under section 1122 of the Bankruptcy Code, to classify Claims against
and Interests in the Debtors into Classes that contain Claims and Interests that
are substantially similar to the other Claims and Interests in such Class.
33
The Debtors believe that the Plan has classified all Claims and
Interests in compliance with the provisions of section 1122 and applicable case
law, but it is possible that a holder of a Claim or Interest may challenge the
Debtors' classification of Claims and Interests and that the Bankruptcy Court
may find that a different classification is required for the Plan to be
confirmed. In that event, the Debtors intend, to the extent permitted by the
Bankruptcy Code, the Plan and the Bankruptcy Court, to make such reasonable
modifications of the classifications under the Plan to permit confirmation and
to use the Plan acceptances received in this Solicitation for purposes of
obtaining the approval of the reconstituted Class or Classes of which each
accepting holder ultimately is deemed to be a member. Any such reclassification
could adversely affect the Class in which such holder initially was a member, or
any other Class under the Plan, by changing the composition of such Class and
the vote required of that Class for approval of the Plan.
The amount of any Impaired Claim that ultimately is allowed by the
Bankruptcy Court may vary from any estimated allowed amount of such Claim and
accordingly the total Claims ultimately allowed by the Bankruptcy Court with
respect to each Impaired Class of Claims may also vary from any estimates
contained herein with respect to the aggregate Claims in any Impaired Class.
Thus, the value of the property that ultimately will be received by a particular
holder of an Allowed Claim under the Plan may be adversely or favorably affected
by the aggregate amount of Claims ultimately allowed in the applicable Class.
The classification of Claims and Interests and the nature of
distributions to members of each Class are summarized below. The Debtors
believe that the consideration, if any, provided under the Plan to holders of
Claims and Interests reflects an appropriate resolution of their Claims and
Interests, taking into account the differing nature and priority (including
applicable contractual and statutory subordination) of such Claims and Interests
and the fair value of the Debtors' assets. In view of the deemed rejection by
Class 6, however, as set forth below, the Debtors will seek confirmation of the
Plan pursuant to the "cramdown" provisions of the Bankruptcy Code.
Specifically, section 1129(b) of the Bankruptcy Code permits confirmation of a
Chapter 11 plan in certain circumstances even if the plan has not been accepted
by all impaired classes of claims and interests. See Section IX.G. Although
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the Debtors believe that the Plan can be confirmed under section 1129(b), there
can be no assurance that the Bankruptcy Court will find that the requirements to
do so have been satisfied.
1. Treatment of Unclassified Claims Under the Plan
a. Administrative Claims
The Plan provides that Administrative Claims will be paid in full.
Administrative Claims consist of the actual and necessary costs and expenses of
the Chapter 11 Cases that are allowed under sections 503(b) and 507(a)(1) of the
Bankruptcy Code. They include, among other things, the cost of operating the
Debtors' businesses following the Petition Date (e.g., the post-petition
salaries and other benefits for the Debtors' employees which the Debtors have
obtained an order allowing them to pay in the ordinary course of business, post-
petition rent, amounts owed to vendors providing goods and services to the
Debtors during the Chapter 11 Cases, tax obligations incurred after the Petition
Date, certain statutory fees and charges assessed under 28 U.S.C. (S) 1930) and
the actual, reasonable fees and expenses of the professionals retained by the
Debtors and the Creditors' Committee. All payments to professionals in
connection with the Chapter 11 Cases for compensation and reimbursement of
expenses
34
and all payments to reimburse expenses of members of the Creditors' Committee
will be made in accordance with the procedures established by the Bankruptcy
Code and the Bankruptcy Rules and will be subject to approval of the Bankruptcy
Court based on a reasonableness standard.
Except as otherwise provided in and subject to the requirements of the
Plan, the Plan provides that on or as soon as reasonably practicable after the
latest of (i) the Distribution Date, (ii) the date an Administrative Claim
becomes an Allowed Administrative Claim, or (iii) the date an Administrative
Claim becomes payable pursuant to any agreement between a Debtor and the holder
of such Administrative Claim, each holder of an Allowed Administrative Claim
will receive in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Administrative Claim (x) Cash equal to the unpaid
portion of such Allowed Administrative Claim or (y) such other treatment as to
which the applicable Debtor and such holder shall have agreed upon in writing;
provided, however, that Allowed Administrative Claims with respect to
liabilities incurred by a Debtor in the ordinary course of business during the
Chapter 11 Cases will be paid in the ordinary course of business in accordance
with the terms and conditions of any agreements relating thereto.
Holders of Administrative Claims based on liabilities incurred by the
Debtors in the ordinary course of their businesses will not be required to file
or serve any request for payment of such Claims, as these liabilities will be
assumed by the applicable Reorganized Debtor and paid, performed or settled when
due in accordance with the terms and conditions of the particular agreements
governing such obligations.
b. Priority Tax Claims
Priority Tax Claims are Unsecured Claims asserted by federal and state
governmental authorities for taxes specified in section 507(a)(8) of the
Bankruptcy Code, such as certain income taxes, property taxes, excise taxes, and
employment and withholding taxes. These Unsecured Claims are given a statutory
priority in right of payment.
Under the Plan, except to the extent that a holder of an Allowed
Priority Tax Claim has been paid by the Debtors prior to the Distribution Date
or has agreed in writing to a different treatment, each holder of an Allowed
Priority Tax Claim will be paid, at the sole discretion of the Debtors, (i)
equal Cash payments made on the last Business Day of every three-month period
following the Effective Date, over a period not exceeding six years after the
assessment of the tax on which such Claim is based, totaling the principal
amount of such Claim plus simple interest on any outstanding balance from the
Effective Date calculated at the interest rate available on ninety (90) day
United States Treasuries on the Effective Date, or (ii) such other treatment as
to which a Debtor and such holder shall have agreed upon in writing.
2. Treatment of Classified Claims and Interests Under the Plan
a. Unimpaired Classes of Claims
(i) Class 1 - Other Priority Claims
35
Class 1 consists of all Claims entitled to priority pursuant to
section 507(a) of the Bankruptcy Code other than Priority Tax Claims or
Administrative Claims.
Under the Plan, on, or as soon as reasonably practicable after, the
latest of (i) the Distribution Date, (ii) the date such Class 1 Claim becomes an
Allowed Class 1 Claim, or (iii) the date such Class 1 Claim becomes payable
pursuant to any agreement between a Debtor and the holder of such Class 1 Claim,
each holder of an Allowed Class 1 Claim will receive in full satisfaction,
settlement, release and discharge of and in exchange for such Allowed Class 1
Claim (x) Cash equal to the unpaid portion of such Allowed Class 1 Claim or (y)
such other treatment as to which a Debtor and such holder shall have agreed upon
in writing. Class 1 Claims are Unimpaired and therefore not entitled to vote on
the Plan.
(ii) Class 2 - Other Secured Claims
Class 2 consists of separate subclasses of claims that are secured by
a Lien upon property in which the Estate has an interest, to the extent of the
value of the Claim holders' interest in the Estate's interest in such property,
as determined pursuant to section 506(a) of the Bankruptcy Code against the
Debtors other than the Secured Lender Claims included in Class 3 below ("Other
Secured Claims"). Each subclass is deemed to be a separate Class for all
purposes under the Bankruptcy Code.
On the Effective Date, the legal, equitable and contractual rights of
holders of an Allowed Class 2 Claim shall be Reinstated, subject to the
provisions of Article VIII of the Plan. The Debtors' failure to object to any
------------
such Class 2 Claims in the Chapter 11 Cases shall be without prejudice to the
rights of ICG or the Reorganized Debtors to contest or otherwise defend against
such Claim in the appropriate forum when and if such Claim is sought to be
enforced by the Other Secured Claim holder. Notwithstanding section 1141(c) or
any other provision of the Bankruptcy Code, all pre-petition liens on property
of any Debtor held by or on behalf of the Other Secured Claim holders with
respect to such Claims shall survive the Effective Date and continue in
accordance with the contractual terms of the underlying agreements with such
Claim holders until, as to each such Claim holder, the Allowed Claims of such
Other Secured Claim holder are paid in full, subject to the provisions of
Article VIII of the Plan. Nothing in the Plan or elsewhere shall preclude the
- ------------
Debtors or Reorganized Debtors from challenging the validity of any alleged lien
on any asset of a Debtor or the value of such collateral. Class 2 Claims are
Unimpaired and therefore are not entitled to vote on the Plan.
b. Impaired Claims and Interests
(i) Class 3 - Secured Lender Claims
Class 3 consists of all Secured Claims of Prepetition Secured Lenders
arising under or as a result of the Pre-Petition Credit Facility Agreements,
which Claims will be deemed Allowed pursuant to the Plan in the amount of $84.6
million.
On the Effective Date, each holder of an Allowed Class 3 Claim, in
full satisfaction, settlement, release, and discharge of and in exchange for
such Allowed Class 3 Claim, will receive on or as soon as practicable after the
Distribution Date, its Pro Rata share of one-hundred percent (100%) of the New
Secured Notes. If Class 3 accepts the Plan, the New Secured Notes shall have
the terms and
36
conditions set forth in Plan Exhibit F(1). If Class 3 does not accept the Plan,
------------
the New Secured Notes shall have the terms and conditions set forth on Plan
Exhibit F(2). If Class 3 votes against the Plan, the Debtors shall seek
- ------------
confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code with
respect to Class 3. Class 3 Claims are Impaired and entitled to vote on the
Plan.
(ii) Class 4 - Convenience Claims
Class 4 consists of any Claim that otherwise would be an Allowed Class
5 Claim against the Debtors in an amount (i) equal to or less than $500, or (ii)
greater than $500 but which is reduced to $500 by an irrevocable written
election of the holder of such Claim made on a validly executed and timely
delivered Ballot.
On the Effective Date, each holder of an Allowed Class 4 Claim will
receive cash equal to the amount of such Allowed Claim (as reduced, if
applicable, pursuant to an election by the holder thereof). Class 4 Claims are
Impaired and entitled to vote on the Plan.
(iii) Class 5 - General Unsecured Claims
Claims in Class 5 are those Claims against the Debtors that are not
Administrative Claims, Priority Tax Claims, Other Priority Claims, Other Secured
Claims, Secured Lender Claims, Convenience Claims, or Subordinated Claims.
On the Effective Date, each holder of an Allowed Class 5 Claim shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 5 Claim: (i) its Pro Rate share of 100% of the
New Common Shares issued and outstanding as of the Effective Date (subject to
Dilution); plus (ii) for each holder of an Allowed Class 5 Claim as of the
Rights Offering Record Date, on the Rights Offering Commencement Date, its
Rights Offering Pro Rata Share of the Rights Offering Distribution Pool. See
---
Exhibit E to the Plan and Section V.G. Class 5 Claims are Impaired and entitled
- --------- -----------
to vote on the Plan.
(iv) Class 6 - ICG Interests and Subordinated Claims
Class 6 consists of all ICG Interests and any Claim subordinated
pursuant to sections 510(b) or (c) of the Bankruptcy Code. Under the Plan, any
Claim arising out of the rescission of a purchase or sale of any Old Security,
any Claim for damages arising from the purchase or sale of an Old Security, or
any Claim for reimbursement, contribution or indemnification on account of any
such Claim, shall be automatically subordinated pursuant to Section 510(b) of
the Bankruptcy Code. Under the Plan, the holders of ICG Interests and
Subordinated Claims shall not receive or retain any property under the Plan on
account of such Interests or Claims. On the Effective Date, all of the ICG
Interests shall be deemed cancelled and extinguished. Class 6 Claims and
Interests are Impaired and are presumed to receive no distribution under the
Plan and are therefore deemed to reject the Plan and are not entitled to vote on
the Plan.
37
3. Reservation of Rights Regarding Claims
Except as otherwise explicitly provided in the Plan, nothing shall
affect the Debtors' or Reorganized Debtors' rights and defenses, both legal and
equitable, with respect to any Claims, including, but not limited to, all rights
with respect to legal and equitable defenses to alleged rights of setoff or
recoupment.
D. Distributions under the Plan
Except as set forth in the succeeding sentence, the Disbursing Agent
shall make all distributions required under this Plan. Distributions provided
for in the Plan on account of Allowed Class 3, 4, and 5 Claims shall be made by
the Disbursing Agent.
If the Disbursing Agent is an independent third party designated by
the Reorganized Debtors to serve in such capacity, such Disbursing Agent shall
receive, without further Bankruptcy Court approval, reasonable compensation for
distribution services rendered pursuant to the Plan and reimbursement of
reasonable out-of-pocket expenses incurred in connection with such services from
the Reorganized Debtors on terms acceptable to the Reorganized Debtors. No
Disbursing Agent shall be required to give any bond or surety or other security
for the performance of its duties unless otherwise ordered by the Bankruptcy
Court.
Cash payments made pursuant to the Plan will be in U.S. funds by means
agreed to by the payor and the payee, including by check or wire transfer, or,
in the absence of an agreement, such commercially reasonable manner as the payor
shall determine in its sole discretion.
Except as otherwise provided in the Plan, any ancillary documents
entered into in connection therewith, or the Confirmation Order, the Debtors
shall have the right to prepay, without penalty, all or any portion of an
Allowed Claim at any time; provided, however, that any such prepayment shall not
violate, or otherwise prejudice, the relative priorities among the classes of
Claims. On the Effective Date, Reorganized ICG shall issue or distribute in
accordance with the provisions of the Plan all of the New Common Shares, Rights,
and New Secured Notes.
1. Distributions for Claims Allowed as of the Effective Date
a. Distribution Date
Except as otherwise provided herein or as ordered by the Bankruptcy
Court, distributions to be made on account of Claims that are Allowed Claims as
of the Effective Date shall be made as soon as practicable after the Effective
Date. Distributions on account of Claims that first become Allowed Claims after
the Effective Date shall be made pursuant to Article VIII of the Plan.
------------
Notwithstanding the date on which any distribution of securities is actually
made to a holder of a Claim or Interest that is an Allowed Claim or Allowed
Interest on the Effective Date, as of the date of the distribution such holder
shall be deemed to have the rights of a holder of such securities distributed as
of the Effective Date.
38
b. Record Date for Distributions to Holders of Secured Lender Claims
and Old Notes
Under the Plan, the Distribution Record Date is the Confirmation Date,
unless determined to be otherwise in the Confirmation Order. At the close of
business on the Distribution Record Date, the transfer records for the Secured
Lender Claims and Old Note Holder Claims shall be closed, and there shall be no
further changes in the record holders of Secured Lender Claims or Old Notes.
None of Reorganized ICG, the Disbursing Agent, nor the Administrative Agent for
the Prepetition Secured Lenders shall have any obligation to recognize any
transfer of such Secured Lender Claims or Old Note holder claims occurring after
the Distribution Record Date and shall be entitled instead to recognize and deal
for all purposes hereunder with only those record holders as of the close of
business on the Distribution Record Date.
c. Calculation of Distribution Amounts of New Common Shares
No fractional shares of New Common Shares shall be issued or
distributed under the Plan. Each Person entitled to receive New Common Shares
will receive the total number of whole shares of New Common Shares to which such
Person is entitled. Whenever any distribution to a particular Person would
otherwise call for distribution of a fraction of a share of New Common Shares
the actual distribution of shares of such stock shall be rounded to the next
higher or lower whole number as follows: (a) fractions one-half ( 1/2) or
greater shall be rounded to the next higher whole number, and (b) fractions of
less than one-half ( 1/2) shall be rounded to the next lower whole number. No
consideration shall be provided in lieu of fractional shares that are rounded
down.
d. Delivery of Distributions
Distributions to holders of Allowed Claims shall be made by the
Disbursing Agent (a) at the addresses set forth on the Proofs of Claim filed by
such holders (or at the last known addresses of such holders if no Proof of
Claim is filed or if the Debtors have been notified of a change of address), (b)
at the addresses set forth in any written notices of address changes delivered
to the Disbursing Agent after the date of any related Proof of Claim, (c) at the
addresses reflected in the Schedules if no Proof of Claim has been filed and the
Disbursing Agent has not received a written notice of a change of address, or
(d) at the addresses set forth in a properly completed letter of transmittal
accompanying securities properly remitted to the Debtors. If any holder's
distribution is returned as undeliverable, no further distributions to such
holder shall be made unless and until the Disbursing Agent is notified of such
holder's then current address, at which time all missed distributions shall be
made to such holder without interest. Amounts in respect of undeliverable
distributions made by the Disbursing Agent, shall be returned to the Reorganized
Debtors until such distributions are claimed. All claims for undeliverable
distributions made by the Disbursing Agent must be made on or before the first
(1/st/) anniversary of the Effective Date, after which date all unclaimed
property shall revert to the Reorganized Debtors free of any restrictions
thereon and the claim of any holder or successor to such holder with respect to
such property shall be discharged and forever barred, notwithstanding any
federal or state escheat laws to the contrary. Nothing contained in the Plan
shall require the Debtors, Reorganized Debtors, or any Disbursing Agent to
attempt to locate any holder of an Allowed Claim.
39
e. Old Notes
Except as provided in Article VIII of the Plan in connection with
------------
lost, stolen, mutilated or destroyed Old Notes, each holder of an Allowed Claim
evidenced by an Old Note shall tender such Old Note to the Disbursing Agent in
accordance with written instructions to be provided in a letter of transmittal
to such holders by the Disbursing Agent as promptly as practicable following the
Effective Date. Such letter of transmittal shall specify that delivery of such
notes or Old Notes will be effected, and risk of loss and title thereto will
pass, only upon the proper delivery of such notes or Old Notes with the letter
of transmittal in accordance with such instructions. Such letter of transmittal
shall also include, among other provisions, customary provisions with respect to
the authority of the holder of the applicable note or Old Notes to act and the
authenticity of any signatures required on the letter of transmittal. All
surrendered notes and Old Notes shall be marked as cancelled and delivered by
the Disbursing Agent to Reorganized ICG.
f. Lost, Stolen, Mutilated or Destroyed Old Notes
In addition to any requirements under the applicable certificate or
articles of incorporation or bylaws of the applicable Debtor, any holder of a
Claim evidenced by an Old Note that has been lost, stolen, mutilated or
destroyed shall, in lieu of surrendering the Old Note, deliver to the Disbursing
Agent (i) evidence satisfactory to the Disbursing Agent of the loss, theft,
mutilation or destruction; and (ii) such indemnity as may be required by the
Disbursing Agent to hold the Disbursing Agent harmless from any damages,
liabilities or costs incurred in treating such individual as a holder of an Old
Note. Upon compliance with Article VIII of the Plan by a holder of a Claim
------------
evidenced by an Old Note, such holder shall, for all purposes under the Plan, be
deemed to have surrendered its Old Note, as applicable.
g. Failure to Surrender Cancelled Old Notes
Any holder of an Old Note that fails to surrender or be deemed to have
surrendered such Old Note before the second (2/nd/) anniversary of the Effective
Date shall have its claim for a distribution on account of such Old Note
discharged and shall be forever barred from asserting any such claim against any
Reorganized Debtor or their respective property.
2. Resolution and Treatment of Disputed, Contingent, and Unliquidated
Claims and Distributions with Respect Thereto
a. Prosecution of Objections
All objections to Claims must be filed and served on the holders of
such Claims by the Claims Objection Deadline. If an objection has not been
filed to a Proof of Claim or a scheduled Claim by the Claims Objection Deadline,
the Claim to which the Proof of Claim or scheduled Claim relates will be treated
as an Allowed Claim if such Claim has not been allowed earlier.
b. Authority to Prosecute Objections
40
(i) After the Confirmation Date, only the Reorganized Debtors
will have the authority to file objections, settle, compromise, withdraw or
litigate to judgment objections to Claims, including Claims for reclamation
under section 546(c) of the Bankruptcy Code. Except as provided in Article XII
-----------
of the Plan, from and after the Effective Date, the Reorganized Debtors may
settle or compromise any Disputed Claim without approval of the Bankruptcy
Court.
(ii) On or before the last Business Day of each month or as
otherwise agreed in writing by the Creditors' Committee or the Claims Resolution
Committee, the Reorganized Debtors will provide counsel to the Claims Resolution
Committee with written notice of each Disputed Class 5 Claim that has been
settled or compromised in the prior month, other than such settlements or
compromises that fall within the parameters of settlement guidelines to be
agreed to by the Debtors and the Creditors' Committee or the Claims Resolution
Committee. Within ten (10) days after the receipt of such notice, the Claims
Resolution Committee will provide the Reorganized Debtors with written notice of
any such settlements or compromises with which it does not concur. If the
Reorganized Debtors and the Claims Resolution Committee cannot reach agreement
with respect to any such settlement or compromise, the Claims Resolution
Committee will be permitted to file and serve on the Reorganized Debtors an
objection to the reasonableness of such settlement or compromise by the last
Business Day of the month following the month in which the Claims Resolution
Committee received written notice of the settlement or compromise, with the
reasonableness of such settlement or compromise to be determined by the
Bankruptcy Court. If the Claims Resolution Committee does not provide a written
notice and file and serve an objection as specified in this section with respect
to any particular settlement or compromise, then such settlement or compromise
will be deemed resolved on the terms and subject to the conditions agreed to by
the Reorganized Debtors. The Reorganized Debtors and the Claims Resolution
Committee may modify the foregoing procedures by a writing executed by both.
c. Treatment of Disputed Claims
Under the Plan, no payments or distributions will be made on account
of a Disputed Claim or, if less than the entire claim is a Disputed Claim, the
portion of a Claim that is disputed, until such Claim becomes an Allowed Claim.
d. Disputed Claims Reserve
Prior to making any distributions of the New Common Shares to holders
of Allowed Class 5 Claims, the Disbursing Agent shall establish appropriate
reserves for Disputed Claims in Class 5, to withhold from any such distributions
100% of distributions to which holders of Disputed Claims in Class 5would be
entitled under the Plan as of such date if such Disputed Claims in Class 5 were
Allowed Claims in their Disputed Claim Amount. The Disbursing Agent shall also
establish appropriate reserves for Disputed Claims in other Classes, as it
determines necessary and appropriate.
e. Distributions on Account of Disputed Claims Once They Are Allowed
and Additional Distributions on Account of Previously Allowed
Claims
Under the Plan, on each Quarterly Distribution Date, the Reorganized
Debtors will make distributions (a) on account of any Disputed Claim or Disputed
Class 5 Claim that has become an Allowed Claim during the preceding calendar
quarter and (b) on account of previously Allowed Claims,
41
from the Disputed Claim reserves, of property that would have been distributed
to such Claim holders on the dates distributions previously were made to holders
of Allowed Claims had the Disputed Claims that have become Allowed Claims been
Allowed on such dates. Such distributions will be made pursuant to the
provisions of the Plan governing the applicable Class. Holders of such Claims
that are ultimately allowed will also be entitled to receive, on the basis of
the amount ultimately Allowed, the amount of any dividends or other
distributions received on account of the shares of New Common Shares and New
Notes between the Effective Date and the date such shares or notes are
distributed to such Claim holder.
E. Dissolution of the Creditors' Committees
1. Creditors' Committee
Under the Plan, on the Effective Date, the Creditors' Committee will
dissolve and its members will be released and discharged from all duties and
obligations arising from or related to the Chapter 11 Cases. The Professionals
retained by the Creditors' Committee and the members thereof will not be
entitled to compensation or reimbursement of expenses for any services rendered
after the Effective Date.
2. Claims Resolution Committee
On the Effective Date, the Claims Resolution Committee will be
established. The Claims Resolution Committee will consist of three (3) holders
of Class 5 Claims who sit on the Creditors' Committee as of the Effective Date
or other holders selected by the Creditors' Committee.
a. Function and Composition of Committee
The sole functions of the Claims Resolution Committee will be: (A) in
connection with applications for allowance of compensation and reimbursement of
expenses for Professionals filed before or after the Effective Date; (B) to
monitor the Reorganized Debtors' progress in (x) reconciling and resolving
Disputed Claims and Disputed Class 5 Claim and (y) making distributions on
account of such Claims once resolved; and (C) to review and assert objections to
the reasonableness of settlements and compromises of such Claims. The Claims
Resolution Committee will consist of three holders of Class 5 Claims who sit on
the Creditors' Committee as of the Effective Date or other holders selected by
the Creditors' Committee.
b. Committee Procedures
The Claims Resolution Committee will adopt by-laws that will control
its functions. These by-laws, unless modified by the Claims Resolution
Committee, will provide the following: (i) a majority of the Claims Resolution
Committee will constitute a quorum, (ii) one member of the Claims Resolution
Committee will be designated by the majority of its members as its chairperson,
(iii) meetings of the Claims Resolution Committee will be called by its
chairperson on such notice and in such manner as its chairperson may deem
advisable and (iv) the Claims Resolution Committee will function by decisions
made by a majority of its members in attendance at any meeting.
42
c. Employment of Professionals by the Committee and Reimbursement of
Committee Members
The Claims Resolution Committee will be authorized to retain and
employ counsel as reasonably necessary to accomplish its function. The role of
the Claims Resolution Committee's professionals will be strictly limited to
assisting the committee in its functions as set forth herein. The Reorganized
Debtors will pay the actual, necessary, reasonable and documented fees and
expenses of the professionals retained by the Claims Resolution Committee, as
well as the actual, necessary, reasonable and documented expenses incurred by
each committee member in the performance of its duties upon the monthly
submission of bills to the Reorganized Debtors and the members of the Claims
Resolution Committee. If no objection to payment is received within thirty (30)
days following delivery of the bill, the bill will be paid by the Reorganized
Debtors. Other than as specified in the preceding sentence, the members of the
Claims Resolution Committee will serve without compensation. If there is any
unresolved dispute between the Reorganized Debtors and the Claims Resolution
Committee, its professionals or a member thereof as to any fees or expenses,
such dispute will be submitted to the Bankruptcy Court for resolution. The
undisputed portion of each bill will be paid on the 31/st/ day after delivery.
d. Dissolution of the Committee
Subject to further order of the Bankruptcy Court, the Claims
Resolution Committee will dissolve on the date that an officer of the
Reorganized ICG files and serves on counsel to the Claims Resolution Committee
by overnight delivery service or facsimile transmission a certification that the
aggregate Face Amount of the remaining Disputed Claims in Class 5 is equal to or
less than $25 million, or on the date that any objection filed to such
certification is resolved by the Bankruptcy Court such that the aggregate Face
Amount of the remaining Disputed Claims in Class 5 is equal to or less than $25
million. The Claims Resolution Committee may file and serve on the Reorganized
Debtors an objection to the certification within ten (10) days of receipt
thereof, with the issue of the aggregate Face Amount of remaining Disputed
Claims to be determined by the Bankruptcy Court. The professionals retained by
the Claims Resolution Committee and the members of the committee will not be
entitled to compensation or reimbursement of expenses for any services rendered
after the date of dissolution of the committee. Notwithstanding the foregoing,
the Claims Resolution Committee will not dissolve until orders regarding final
requests for compensation by professionals become Final Orders and until the
Confirmation Order becomes a Final Order.
F. Post-Consummation Operations of the Debtors
1. Continued Corporate Existence
Following confirmation and consummation of the Plan, subject to the
Restructuring Transactions, the Reorganized Debtors will continue to exist as
separate corporate entities in accordance with the laws of their respective
states of incorporation and pursuant to their respective certificates or
articles of incorporation and bylaws in effect prior to the Effective Date,
except to the extent such certificates or articles of incorporation and bylaws
are amended under the Plan.
43
2. Cancellation of Old Securities and Agreements
On the Effective Date, except as otherwise provided for herein, (a)
the Old Securities and any other note, bond, indenture, or other instrument or
document evidencing or creating any indebtedness or obligation of a Debtor,
except such notes or other instruments evidencing indebtedness or obligations of
a Debtor that are Reinstated or amended and restated under the Plan, shall be
cancelled, and (b) the obligations of the Debtors under any agreements,
indentures or certificates of designations governing the Old Securities and any
other note, bond, indenture or other instrument or document evidencing or
creating any indebtedness or obligation of a Debtor, except such notes or other
instruments evidencing indebtedness or obligations of a Debtor that are
Reinstated or amended and restated under the Plan, as the case may be, shall be
discharged.
3. Certificates of Incorporation and By-laws
The certificate or articles of incorporation and by-laws of each
Debtor will be amended as necessary to satisfy the provisions of the Plan and
the Bankruptcy Code and will include, among other things, pursuant to section
1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-
voting equity securities, but only to the extent required by section 1123(a)(6)
of the Bankruptcy Code. The amended Certificates of Incorporation and By-laws
of Reorganized ICG shall be in substantially the form attached to the Plan as
Exhibits A and B, respectively.
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4. Restructuring Transactions
On or after the Effective Date, the applicable Reorganized Debtors may
enter into such transactions and may take such actions as may be necessary or
appropriate to effect a corporate restructuring of their respective businesses,
to otherwise simplify the overall corporate structure of the Reorganized
Debtors, or to reincorporate certain of the Subsidiary Debtors under the laws of
jurisdictions other than the laws of which the applicable Subsidiary Debtors are
presently incorporated. Such restructuring may include one or more mergers,
consolidations, restructures, dispositions, liquidations, or dissolutions, as
may be determined by the Debtors or Reorganized Debtors to be necessary or
appropriate (collectively, the "Restructuring Transactions"). The actions to
effect the Restructuring Transactions may include: (a) the execution and
delivery of appropriate agreements or other documents of merger, consolidation,
restructuring, disposition, liquidation, or dissolution containing terms that
are consistent with the terms of the Plan and that satisfy the applicable
requirements of applicable state law and such other terms to which the
applicable entities may agree; (b) the execution and delivery of appropriate
instruments of transfer, assignment, assumption, or delegation of any asset,
property, right, liability, duty, or obligation on terms consistent with the
terms of the Plan and having such other terms to which the applicable entities
may agree; (c) the filing of appropriate certificates or articles of merger,
consolidation, or dissolution pursuant to applicable state law; and (d) all
other actions that the applicable entities determine to be necessary or
appropriate, including making filings or recordings that may be required by
applicable state law in connection with such transactions. The Restructuring
Transactions may include one or more mergers, consolidations, restructures,
dispositions, liquidations, or dissolutions, as may be determined by the
Reorganized Debtors to be necessary or appropriate to result in substantially
all of the respective assets, properties, rights, liabilities, duties, and
obligations of certain of the Reorganized Debtors vesting in one or more
surviving, resulting, or acquiring corporations. In each case in which the
surviving, resulting, or acquiring
44
corporation in any such transaction is a successor to a Reorganized Debtor, such
surviving, resulting, or acquiring corporation will perform the obligations of
the applicable Reorganized Debtor pursuant to the Plan to pay or otherwise
satisfy the Allowed Claims against such Reorganized Debtor, except as provided
in any contract, instrument, or other agreement or document effecting a
disposition to such surviving, resulting, or acquiring corporation, which may
provide that another Reorganized Debtor will perform such obligations.
Under Article V of the Plan, as part of the Restructuring
---------
Transactions, on, prior to, or as soon as practicable after, the Effective Date,
Reorganized ICG shall take whatever steps are necessary and appropriate to wind-
up and terminate the following entities' corporate existence: ICG Tevis, Inc.
(Delaware); ICG Funding, LLC (Delaware); ICG Canadian Acquisition, Inc.
(Delaware); ICG Holdings (Canada) Co. (Nova Scotia Unlimited Liability Company);
ICG Services, Inc. (Delaware); ICG Enhanced Services, Inc. (Colorado);
Communications Buying Group, Inc. (Ohio); PTI Harbor Bay, Inc. (Washington); Bay
Area Teleport, Inc. (Delaware); ICG Access Services-Southeast-Inc. (Delaware);
Trans American Cable, Inc. (Kentucky); ICG Telecom of San Diego, L.P. (CA
Limited Partnership); Western Plains Finance, L.L.C. (NV Limited Liability
Company); ICG Telecom Canada, Inc. (Federal Canadian); Zycom Corporation
(Alberta, Canada); Zycom Corporation (Texas); Zycom Network Services, Inc.
(Texas); DownNorth, Inc. (Georgia); and ICG NetAhead, Inc. (Delaware). See
Appendices (B)(1)-(3) for charts depicting the organization structure of
- ----------
Reorganized ICG and its affiliates.
G. Summary of Securities to Be Issued in Connection with the Plan
1. New Common Shares
As of the Effective Date, Reorganized ICG shall issue for distribution
in accordance with the terms of the Plan, the New Common Shares to the holders
of Allowed Class 5 Claims. Ten (10) million shares shall be distributed to
holders of Claims in Class 5, subject to Dilution. The issuance of the New
Common Shares and the distribution thereof to holders of Allowed Class 5 Claims
shall be exempt from registration under applicable securities laws pursuant to
section 1145(a) of the Bankruptcy Code.
2. Rights Offering
As additional consideration for their Claims, the Plan provides for an
opportunity for holders of Allowed Class 5 Claims as of the Rights Offering
Record Date to receive Rights to purchase additional New Common Shares. The
Rights will be freely tradeable for thirty (30) days, and provide the holders
thereof with the opportunity to make a new investment in Reorganized ICG on
terms that the Company believes are favorable. Pursuant to the Rights Offering,
each holder of an Allowed Class 5 Claim on the Rights Offering Record Date shall
be provided with the opportunity to purchase a proportionate number of
additional shares of New Common Shares, on the terms and conditions set forth in
Exhibit E to the Plan. The Debtors believe that the issuance of the Rights, the
- ---------
distribution thereof to holders of Allowed Class 5 Claims as of the Rights
Offering Distribution Record Date, and the exercise of the Rights, will be
exempt from registration under applicable securities laws pursuant to section
1145(a) of the Bankruptcy Code.
45
The Rights Offering will provide for up to $100 million of gross
proceeds to be raised for the Company, if the Rights Offering is fully
subscribed. New Common Shares may be purchased under the Rights Offering based
upon a market-derived pricing mechanism to be established by the date of the
Disclosure Statement hearing, which will fix the number of shares of New Common
Shares that will be available for purchase and the subscription price (the
"Subscription Price").
a. Procedures for Exercise of Rights
The Rights Offering Commencement Date is the date on which ICG
commences the Rights Offering by mailing to holders of Allowed Class 5 Claims as
of the Rights Offering Record Date certificates representing the Rights and
instructions for the exercise thereof, which date shall be as soon as
practicable after the Effective Date of the Plan. The Rights Offering Record
Date for determining the holders of Allowed Class 5 Claim Holders entitled to
exercise the Rights is the Confirmation Date or the date set forth in the
Confirmation Order. The Rights Offering Expiration Date is thirty (30)
calendar days after the date on which all the conditions to the Effective Date
have occurred; after such date, unexercised Rights will be null and void. The
Reorganized Debtor will not be obligated to honor any purported exercise of
Rights received after the Rights Offering Expiration Date, regardless of when
the documents relating to such exercise were sent.
Each Right will entitle the holder of an Allowed Class 5 Claim to
purchase at the Subscription Price one (1) New Common Share (the "Subscription
Privilege"). Certificates representing the New Common Shares purchased pursuant
to the Subscription Privilege will be delivered to subscribers as soon as
practicable after the Rights Offering Expiration Date. The Rights, which are
transferable for thirty (30) days, subject to any applicable federal and state
law, may be exercised pursuant to an election form (the "Election Form"), which
will be in substantially the same form as Exhibit C to the Disclosure
----------
Statement.
Specifically, holders of Allowed Class 5 Claims as of the Rights
Offering Record Date may exercise their Rights by causing the Election Form to
be delivered to the Rights Offering agent (the "Rights Offering Agent")
specified in the Election Form at or prior to the Rights Offering Expiration
Date, having properly completed and executed the "Rights Offering Subscription"
section of the Election Form, together with payment in full of the Subscription
Price for each of the New Common Shares subscribed for pursuant to the
Subscription Privilege. Payment of the Subscription Price may be made in either
of the following ways: (i) by certified or cashier's check or postal,
telegraphic or express money order payable to Reorganized ICG, or (ii) by wire
transfer of funds to the account maintained by the Debtors for the purpose of
acceptance subscriptions. The Subscription Price will be deemed to have been
received by the Company only upon (a) receipt by the designated Rights Offering
Agent of any certified or cashier's check or of any postal, telegraphic or
express money order, or (b) receipt of collected funds in the Company's account.
Holders of Allowed Class 5 Claims are urged to make payment sufficiently in
advance of the Rights Offering Expiration Date to ensure that such payment is
received and clears by such time.
If the aggregate Subscription Price paid by an exercising Allowed
Class 5 Claim holder is insufficient to purchase the number of New Common Shares
that such claim holder indicates is being subscribed for, or if an exercising
Allowed Class 5 Claim holder does not specify the number of New Common Shares to
be purchased, then such party will be deemed to have exercised the Subscription
46
Privilege to purchase New Common Shares to the full extent of the payment
tendered, excluding any fractional shares. If the aggregate Subscription Price
paid by an exercising Allowed Class 5 Claim holder exceeds the amount necessary
to purchase the number of New Common Shares for which such party has indicated
an intention to subscribe, then such party will be deemed to have exercised the
Subscription Privilege (if not already fully exercised) to the full extent of
the number of shares that may be purchased based on the number of Rights held by
such party.
The instructions accompanying the Election Form should be read
carefully and followed in detail. ELECTION FORMS SHOULD BE SENT WITH PAYMENT TO
THE RIGHTS OFFERING AGENT. THE METHOD OF DELIVERY OF ELECTION FORMS AND PAYMENT
OF THE SUBSCRIPTION PRICE TO THE RIGHTS OFFERING AGENT WILL BE AT THE ELECTION
AND RISK OF THE HOLDER OF THE RIGHTS. IF SENT BY MAIL, RIGHTS HOLDERS ARE URGED
TO SEND ELECTION FORMS AND PAYMENTS BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, AND ARE URGED TO ALLOW A SUFFICIENT NUMBER OF DAYS TO
ENSURE DELIVERY TO THE RIGHTS OFFERING AGENT AND CLEARANCE OF PAYMENT PRIOR TO
THE RIGHTS OFFERING EXPIRATION DATE.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Disclosure Statement
or the Election Form should be directed to the Rights Offering Agent. Once the
holder of an Allowed Class 5 Claim has properly exercised the Subscription
Privilege, such exercise may not be revoked.
b. Proceeds
The potential gross proceeds potentially available to Reorganized ICG
from the Rights Offering are $100 million. Fifty percent (50%) of proceeds
received (subject to a cap of $7.5 million) will be utilized to reduce
obligations under the New Secured Notes, if Class 3 votes to accept the Plan.
However, the Rights Offering is not underwritten or guaranteed by any party.
Accordingly, the Company may not receive any proceeds from the Rights Offering
whatsoever. The Debtors believe that the Rights Offering provides holders of
Allowed Class 5 Claims the opportunity to participate in a new capital
investment on favorable terms. THIS DISCLOSURE STATEMENT, AND THE MATERIALS
ATTACHED HERETO OR SUBMITTED HEREWITH (OR THE STATEMENTS CONTAINED IN ANY OF THE
FOREGOING) DO NOT CONSTITUTE A RECOMMENDATION BY THE DEBTORS, OR ANY OF THEIR
RESPECTIVE REPRESENTATIVES, AGENTS, OR PROFESSIONALS, REGARDING WHETHER OR NOT A
RIGHTS HOLDER SHOULD EXERCISE THE RIGHTS. The decision to exercise or not
exercise the Rights is within the sole discretion of the holder of each of the
Rights and should be made on the basis of such holder's independent assessment
of the facts and circumstances. In that regard, each such holder is encouraged
to review carefully all of the materials included herewith and any other
materials deemed relevant by such holder and to consult with such holder's own
financial and legal advisors. However, if Rights are not exercised prior to the
Rights Offering Expiration Date, each holder of the Rights is advised that they
will receive no value from the Rights.
47
3. New Secured Notes
As of the Effective Date, Reorganized ICG shall issue for distribution
in accordance with the terms of the Plan to holders of Allowed Claims in Class 3
the New Secured Notes.
If Class 3 accepts the Plan, the New Secured Notes shall have the
following principal terms and conditions: (i) an aggregate principal amount of
approximately $85 million (with $20 million potentially in the form of an off
balance sheet receivable securitization program, if receivables quality and
structure permits such an instrument); (ii) at ICG's option, an interest rate of
prime plus three hundred (300) basis points or LIBOR plus four hundred (400)
basis points; (iii) a maturity date of five (5) years from the Effective Date;
(iv) as security, a first priority lien on substantially all unencumbered assets
of all of Reorganized ICG's entities, excluding working capital and cash on
hand, and a second priority lien on substantially all other secured assets; (v)
fifty percent (50%) of any net proceeds from the Rights Offering would reduce
the principal due up to $7.5 million; and (vi) on each anniversary of the
Effective Date, principal amortization of five percent (5%), five percent (5%),
ten percent (10%), and ten percent (10%), respectively. and See Exhibit F(1)
--- -------------
to the Plan.
If Class 3 does not accept the Plan, the New Secured Notes shall have
the following principal terms and conditions: (i) an aggregate principal amount
of approximately $85 million; (ii) at ICG's option, an interest rate of prime
plus one hundred (100) basis points or LIBOR plus two hundred and fifty (250);
(iii) a maturity date of five (5) years from the Effective Date; (iv) as
security, a first priority lien on substantially all unencumbered assets of all
of Reorganized ICG's entities, excluding working capital and cash on hand, and a
second priority lien on substantially all other secured assets; and (v) no
principal amortization for two (2) years, and, thereafter, principal
amortization of ten percent (10%) amortization on each anniversary of the
Effective Date of the Plan. See Exhibit F(2) to the Plan.
--- ------------
The issuance of the New Secured Notes and the distribution thereof to
holders of Allowed Claims in Class 3 shall be exempt from registration under
applicable securities laws pursuant to section 1145(a) of the Bankruptcy Code.
4. Registration Rights Agreement
Without limiting the effect of section 1145 of the Bankruptcy Code,
Reorganized ICG will enter into a Registration Rights Agreement with each
Allowed Class 5 Claim holder or holders (a) who by virtue of holding New Common
Shares to be distributed under the Plan and/or its relationship with Reorganized
ICG holds more than 10% of the Registrable Securities (as defined in the
Registration Rights Agreement) (by number of shares at the time issued and
outstanding), both on the date of effectiveness of the Plan and at the time of
the effectiveness of the Registration Statement, of Reorganized ICG (an
"Affiliated Stockholder"), and (b) who requests in writing that Reorganized ICG
execute such agreement. The Registration Rights Agreements shall contain
certain demand and piggyback registration rights for the benefit of the
signatories thereto. Subject to the terms and conditions of the Registration
Rights Agreement, Affiliated Stockholders holding at least 15% of the
Registrable Securities shall be entitled to request the registration of their
shares by the Company. Each Affiliated Stockholder shall receive one such
"demand" right; provided that, in the aggregate, the Affiliated Stockholders
shall be entitled to no more than two (2) demand registrations. Subject to the
terms and conditions of the Registration Rights Agreement, the Affiliated
Stockholders shall also have
48
the right to include their Registrable Securities in certain registrations by
the Company. The Registration Rights Agreement shall also contain customary
provisions regarding the registration rights, including, but not limited to,
registration procedures, transfer restrictions, withdrawal rights, holdback
agreements, registration expenses and indemnification. The Registration Rights
Agreement shall be in substantially the form attached to the Plan as Exhibit D.
---------
After the New Common Shares have been registered, Reorganized ICG will use best
efforts to have the New Common Shares listed for trading on a national
securities exchange.
H. Summary of Releases under the Plan
1. Releases by Debtors
Pursuant to the Plan, as of the Effective Date, the Debtors and
Reorganized Debtors will be deemed to forever release, waive and discharge all
claims, obligations, suits, judgments, damages, demands, debts, rights, causes
of action and liabilities whatsoever in connection with or related to the
Debtors and the Subsidiaries, the Chapter 11 Cases or the Plan (other than the
rights of the Debtors or Reorganized Debtors to enforce the Plan and the
contracts, instruments, releases, indentures, and other agreements or documents
delivered thereunder) whether liquidated or unliquidated, fixed or contingent,
matured or unmatured, known or unknown, foreseen or unforseen, then existing or
thereafter arising, in law, equity or otherwise that are based in whole or part
on any act, omission, transaction, event or other occurrence taking place on or
prior to the Effective Date in any way relating to the Debtors, the Reorganized
Debtors or their Subsidiaries, the Chapter 11 Cases or the Plan, and that may be
asserted by or on behalf of the Debtors or their Estates or the Reorganized
Debtors against (i) the Debtors' or Subsidiaries' present and former directors,
officers, employees, agents and professionals as of the Petition Date or
thereafter and (ii) the Creditors' Committee and its members.
2. Release by Holders of Claims and Interests
Under the Plan, as of the Effective Date, for good and valuable
consideration, the adequacy of which is hereby confirmed, each holder of a
Claim or Interest that affirmatively votes in favor of the Plan shall have
agreed to forever release, waive and discharge all claims, obligations, suits,
judgments, damages, demands, debts, rights, causes of action and liabilities
whatsoever in connection with or related to the Debtors and the Subsidiaries,
the Chapter 11 Case or the Plan (other than the rights of the Debtors or
Reorganized Debtors to enforce the Plan and the contracts, instruments,
releases, indentures, and other agreements or documents delivered thereunder)
whether liquidated or unliquidated, fixed or contingent, matured or unmatured,
known or unknown, foreseen or unforseen, then existing or thereafter arising, in
law, equity or otherwise that are based in whole or part on any act, omission,
transaction, event or other occurrence taking place on or prior to the Effective
Date in any way relating to the Debtors, the Reorganized Debtors or their
Subsidiaries, the Chapter 11 Case or the Plan, against (i) the Debtors and their
Subsidiaries, (ii) the Debtors' and their Subsidiaries' present and former
directors, officers, employees, agents and professionals as of the Petition Date
or thereafter and (iii) the Creditors' Committee and its members.
3. Injunction Related to Releases
49
As further provided in Article V of the Plan, the Confirmation Order
---------
will enjoin the prosecution, whether directly, derivatively or otherwise, of any
claim, obligation, suit, judgment, damage, demand, debt, right, cause of action,
liability or interest released, discharged or terminated pursuant to the Plan.
I. Compensation and Benefit Programs
Except and to the extent previously assumed or rejected by an order of
the Bankruptcy Court on or before the Confirmation Date, all employee
compensation and benefit programs of the Debtors, including programs subject to
sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or
after the Petition Date and not since terminated, shall be deemed to be, and
shall be treated as though they are, executory contracts that are assumed under
Article VII of the Plan except for (i) executory contracts or plans specifically
- -----------
rejected pursuant to the Plan (to the extent such rejection does not violate
sections 1114 and 1129(a)(13) of the Bankruptcy Code) and (ii) executory
contracts or plans as have previously been rejected, are the subject of a motion
to reject, or have been specifically waived by the beneficiaries of any plans or
contracts; provided, however, that the Debtors' obligations, if any, to pay all
"retiree benefits" (as defined in section 1114(a) of the Bankruptcy Code) shall
continue.
In addition, shortly after the Effective Date of the Plan, management
and the designated employees of Reorganized ICG and the other Reorganized
Debtors shall receive stock options which are more specifically described in the
Management Option Plan, in substantially the form attached to the Plan as
Exhibit C. The purpose of the Management Option Plan is to (1) attract and
- ---------
retain the services of participants whose judgment, interest and special efforts
will contribute to the success of, and enhance the value of, the Company; (2)
provide incentive compensation that is comparable to the Company's competitors;
and (3) align participants' personal interests to those of the Company's other
stockholders.
Specifically, the Management Option Plan authorizes the grant of stock
options related to an aggregate of approximately 1,760,000 New Common Shares,
which is approximately fifteen percent (15%) of the New Common Shares to be
issued and outstanding on the Effective Date. Approximately eighty-nine percent
(89%) of such stock options shall be granted ninety (90) days after the
Effective Date (the "Initial Grant Date") to individuals determined by the
Company (the "Initial Stock Options"), and as designated in the Management
Option Plan attached to the Plan as Exhibit C. Approximately eleven percent
---------
(11%) of such stock options shall be reserved for future awards by the Board of
Reorganized ICG.
The exercise price of the Initial Stock Options will be the lesser of
(i) the implied reorganization equity value midpoint set forth in this
Disclosure Statement divided by the number of New Common Shares outstanding on
the Effective Date, or (ii) the average of the closing price for the New Common
Shares on the principal securities exchange on which the New Common Shares are
traded for the five (5) business days preceding the Initial Grant Date.
All Initial Stock Options shall vest one-third (1/3) on the date that
is 275 days after the Initial Grant Date, and one-third (1/3) on each of the
next second and third anniversaries of the Effective Date. The Management
Option Plan will be administrated by a committee (the "Compensation Committee"),
appointed by Reorganized ICG's Board. The Compensation Committee will be
comprised of at least two (2) non-employee directors. The Compensation
Committee may grant to employees
50
incentive stock options, non-qualified stock options or a combination thereof.
Company employees eligible to participate in the Management Option Plan include
officers and employees of the Company, including employees who are members of
the Board.
J. Directors And Officers of Reorganized Debtors
1. Appointment
The existing senior officers of ICG shall serve initially in the same
capacities after the Effective Date for Reorganized ICG. The initial board of
directors of Reorganized ICG shall consist of seven (7) directors. Such board
of directors shall be divided into Class I and Class II, with Class I consisting
of four (4) directors, and Class II consisting of three (3) directors. The
Creditors' Committee shall be entitled to appoint all Class I directors, and the
Chief Executive Officer shall be entitled to appoint all Class II directors.
All of the selected directors shall be reasonably acceptable to the Chief
Executive Officer and the Creditors' Committee. The Chief Executive Officer
shall be Chairman of the board of directors. The Persons designating board
members shall file with the Bankruptcy Court and give to ICG written notice of
the identities of such members on a date that is not less than five (5) days
prior to the Confirmation Hearing; provided, however, that if and to the extent
that the Creditors' Committee fails to file and give such notice, ICG shall
designate the members of the board of directors of Reorganized ICG by announcing
their identities at the Confirmation Hearing.
2. Terms
Reorganized ICG board members shall serve for an initial two (2) year
term commencing on the Effective Date as determined be the Debtors.
3. Vacancies
Until the first annual meeting of shareholders of Reorganized ICG
after the Effective Date, any vacancy in the directorship originally (i)
selected by the Creditors' Committee shall be filled by a person designated by
such director as a replacement to serve out the remainder of the applicable
term; and (ii) selected by the Chief Executive Officer, shall be filled by a
person designated by the Chief Executive Officer to serve out the remainder of
the applicable term.
4. Treatment of Director and Officer Indemnification Obligations Under
the Plan
(a) Third-Party Indemnification. Indemnification Obligations owed to
any present or former professionals or advisors of the Debtors arising out of
acts that occurred prior to the Petition Date, including, without limitation,
accountants, auditors, financial consultants, underwriters, or attorneys, shall
be deemed to be, and shall be treated as though they are, executory contracts
that are rejected pursuant to section 365 of the Bankruptcy Code under this
Plan.
(b) Indemnification of Debtors' Directors, Officers and Employees.
Reorganized ICG shall provide standard and customary indemnification for all
officers and directors (as of the Petition Date and thereafter) for all actions
or events occurring after the Petition Date. Indemnification Obligations to
present and former officers and directors for actions or events occurring prior
to the
51
Petition Date shall be limited to director and officer liability insurance
coverage; provided however that all Indemnification Obligations to members of
-------- -------
the Special Committee, including for actions or events occurring prior to the
Petition Date, shall be deemed to be, and shall be treated as though they are,
executory contracts that are assumed pursuant to section 365 of the Bankruptcy
Code. In addition, Reorganized ICG shall indemnify present and former officers
and directors for all legal fees and expenses and shall advance all such fees
and expenses, as well as any insurance deductibles (if applicable), related to
any claims or lawsuits for any actions or events occurring prior to the Petition
Date. Reorganized ICG shall also reimburse the Special Committee and its
members for legal fees and expenses incurred in connection with the Chapter 11
Cases and the Plan.
K. Revesting of Assets
Pursuant to section 1141(b) of the Bankruptcy Code, all property of
each Debtor's Estate, together with any property of each Debtor that is not
property of its Estate and that is not specifically disposed of pursuant to the
Plan, shall revest in the applicable Reorganized Debtor on the Effective Date.
Thereafter, the Reorganized Debtors may operate their businesses and may use,
acquire and dispose of property free of any restrictions of the Bankruptcy Code,
the Bankruptcy Rules and the Bankruptcy Court. As of the Effective Date, all
property of each Reorganized Debtor shall be free and clear of all Liens, Claims
and Interests, except as specifically provided in the Plan or the Confirmation
Order. Without limiting the generality of the foregoing, each Reorganized Debtor
may, without application to or approval by the Bankruptcy Court, pay fees that
it incurs after the Effective Date for professional services and expenses.
L. Preservation of Rights of Action
Except as otherwise provided in the Plan or the Confirmation Order, or
in any contract, instrument, release, indenture or other agreement entered into
in connection with the Plan, in accordance with section 1123(b) of the
Bankruptcy Code, the Reorganized Debtors shall retain and may enforce, sue on,
settle or compromise (or decline to do any of the foregoing) all Litigation
Claims that the Debtors or the Estates may hold against any Person or entity.
Each Debtor or its successor(s) may pursue such retained Litigation Claims as
appropriate, in accordance with the best interests of the Reorganized Debtor or
its successor(s) who hold such rights. Schedule 5.9 to the Plan contains a non-
------------
exclusive list of claims or causes of actions that the Debtors hold or may hold
either in pending or potential litigation.
The failure of the Debtors to specifically list any claim, right of
action, suit, or proceeding herein or in the Plan does not, and will not be
deemed to, constitute a waiver or release by the Debtors of such claim, right of
action, suit, or proceeding, and the Reorganized Debtors will retain the right
to pursue additional claims, rights of action, suits or proceedings. In
addition, at any time before the Effective Date, notwithstanding anything in the
Plan to the contrary, the Debtors or the Reorganized Debtors may settle some or
all of the Litigation Claims with the approval of the Bankruptcy Court pursuant
to Fed. R. Bankr. P. 9019.
52
M. Other Matters
1. Treatment of Executory Contracts and Unexpired Leases
Under section 365 of the Bankruptcy Code, the Debtors have the right,
subject to Bankruptcy Court approval, to assume or reject any executory
contracts or unexpired leases. If the Debtors reject an executory contract or
unexpired lease that was entered into before the Petition Date, the contract or
lease will be treated as if it had been breached on the date immediately
preceding the Petition Date, and the other party to the agreement will have an
Impaired Unsecured Claim for damages incurred as a result of the rejection. In
the case of rejection of employment severance agreements and real property
leases, damages are subject to certain limitations imposed by sections 365 and
502 of the Bankruptcy Code.
a. Assumed Contracts and Leases
Except as otherwise provided in the Plan, or in any contract,
instrument, release, indenture or other agreement or document entered into in
connection with the Plan, as of the Effective Date each Debtor shall be deemed
to have assumed each executory contract and unexpired lease to which it is a
party, including those listed on Schedule 7.1 attached to the Plan, unless such
------------
contract or lease (i) was previously assumed or rejected by such Debtor, (ii)
previously expired or terminated pursuant to its own terms, or (iii) is listed
on Schedule 7.1 attached to the Plan as being an executory contract or unexpired
------------
lease to be rejected, provided, however, that the Debtors reserve their right,
-------- -------
at any time prior to the Confirmation Date, to amend Schedule 7.1 to delete any
------------
unexpired lease or executory contract therefrom or add any unexpired lease or
executory contract thereto. To the extent that an executory contract or
unexpired lease is not listed on either Schedule 7.1 nor Schedule 7.3, such
------------ ------------
executory contract or unexpired lease shall be deemed assumed as if such
executory contract or lease had been included on Schedule 7.1. The Confirmation
------------
Order shall constitute an order of the Bankruptcy Court under section 365 of the
Bankruptcy Code approving the contract and lease assumptions described above, as
of the Effective Date.
Each executory contract and unexpired lease that is assumed and
relates to the use, ability to acquire, or occupancy of real property shall
include (i) all modifications, amendments, supplements, restatements, or other
agreements made directly or indirectly by any agreement, instrument, or other
document that in any manner affect such executory contract or unexpired lease
and (ii) all executory contracts or unexpired leases appurtenant to the
premises, including all easements, licenses, permits, rights, privileges,
immunities, options, rights of first refusal, powers, uses, usufructs,
reciprocal easement agreements, vaults, tunnel or bridge agreements or
franchises, and any other interests in real estate or rights in rem related to
such premises, unless any of the foregoing agreements has been rejected pursuant
to an order of the Bankruptcy Court.
The Debtors have entered into tens of thousands of contracts with its
customers (the "Customer Contracts"). Under the Plan, to the extent that any of
the Customer Contracts are executory contracts under applicable law, such
contracts shall be deemed assumed. Due to the extremely large number of
Customer Contracts, such contracts are not listed on Schedule 7.1 to the Plan.
------------
A list of all of the Customer Contracts is available at the Debtors' corporate
headquarters, and will be made available
53
upon request to the Debtors. The Debtors do not believe any Cure amounts are
owed in connection with assumption of the Customer Contracts.
b. Payments Related To Assumption Of Contracts And Leases
Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default will be satisfied, under
section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor party
assuming such contract or lease, by Cure. If there is a dispute regarding (i)
the nature or amount of any Cure, (ii) the ability of a Reorganized Debtor or
any assignee to provide "adequate assurance of future performance" (within the
meaning of section 365 of the Bankruptcy Code) under the contract or lease to be
assumed, or (iii) any other matter pertaining to assumption, Cure will occur
following the entry of a Final Order resolving the dispute and approving the
assumption or assumption and assignment, as the case may be. The Confirmation
Order shall contain provisions providing for notices of proposed assumptions and
proposed cure amounts to be sent to applicable third parties and for procedures
for objecting thereto and resolution of disputes by the Bankruptcy Court.
c. Rejected Contracts and Leases
On the Effective Date, each executory contract and unexpired lease
listed on Schedule 7.3 to the Plan shall be rejected pursuant to section 365 of
------------
the Bankruptcy Code. Each contract or lease listed on Schedule 7.3 shall be
------------
rejected only to the extent that any such contract or lease constitutes an
executory contract or unexpired lease; provided, however, that the Debtors
-------- -------
reserve their right, at any time prior to the Confirmation Date, to amend
Schedule 7.3 to delete any unexpired lease or executory contract therefrom or
- ------------
add any unexpired lease or executory contract thereto. To the extent that an
executory contract or unexpired lease is not listed on either Schedule 7.3 nor
-------------
Schedule 7.1, such executory contract or unexpired lease shall be deemed assumed
- ------------
as if such executory contract or lease had been included on Schedule 7.1.
------------
Listing a contract or lease on Schedule 7.1 or Schedule 7.3 shall not constitute
----------- ------------
an admission by ICG nor Reorganized ICG that such contract or lease is an
executory contract or unexpired lease or that ICG or Reorganized ICG has any
liability thereunder. The Confirmation Order shall constitute an order of the
Bankruptcy Court approving such rejections, pursuant to section 365 or 1113 of
the Bankruptcy Code, as applicable, as of the Effective Date.
d. Rejection Damages Bar Date
If the rejection by a Debtor, pursuant to the Plan or otherwise, of an
executory contract or unexpired lease results in a Claim, then such Claim shall
be forever barred and shall not be enforceable against any Debtor or Reorganized
Debtor or the properties of any of them unless a proof of claim is filed with
the clerk of the Bankruptcy Court and served upon counsel to the Debtors,
counsel to the Creditors' Committee, within thirty (30) days after service of
the earlier of (i) notice of the Confirmation Order, or (ii) other notice that
the executory contract or unexpired lease has been rejected.
54
2. Administrative Claims
All requests for payment of an Administrative Claim (other than as set
forth in Article III of the Plan) must be filed with the Bankruptcy Court and
------------
served on counsel for the Debtors and counsel for the Trustee no later than
forty-five (45) days after the Effective Date. Unless the Debtors object to an
Administrative Claim within forty-five (45) Business Days after receipt, such
Administrative Claim shall be deemed allowed in the amount requested. In the
event that the Debtors object to an Administrative Claim, the Bankruptcy Court
shall determine the Allowed amount of such Administrative Claim. Notwithstanding
the foregoing, no request for payment of an Administrative Claim need be filed
with respect to an Administrative Claim which is paid or payable by a Debtor in
the ordinary course of business.
3. Professional Fee Claims
All final requests for compensation or reimbursement of Professional
Fees pursuant to sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy
Code for services rendered to the Debtors or the Creditors' Committee prior to
the Effective Date and Substantial Contribution Claims under section 503(b)(4)
of the Bankruptcy Code must be filed and served on the Reorganized Debtors and
their counsel no later than sixty (60) days after the Effective Date, unless
otherwise ordered by the Bankruptcy Court. Objections to applications of such
Professionals or other entities for compensation or reimbursement of expenses
must be filed and served on the Reorganized Debtors and their counsel and the
requesting Professional or other entity no later than sixty (60) days (or such
longer period as may be allowed by order of the Bankruptcy Court) after the date
on which the applicable application for compensation or reimbursement was
served.
4. Withholding and Reporting Requirements
In connection with the Plan and all distributions hereunder, the
Disbursing Agent shall, to the extent applicable, comply with all tax
withholding and reporting requirements imposed by any federal, state,
provincial, local or foreign taxing authority, and all distributions hereunder
shall be subject to any such withholding and reporting requirements. The
Disbursing Agent shall be authorized to take any and all actions that may be
necessary or appropriate to comply with such withholding and reporting
requirements. Notwithstanding any other provision of the Plan (i) each holder
of an Allowed Claim that is to receive a distribution of New Common Shares or
New Secured Notes pursuant to the Plan shall have sole and exclusive
responsibility for the satisfaction and payment of any tax obligations imposed
by any governmental unit, including income, withholding and other tax
obligations, on account of such distribution, and (ii) no distribution shall be
made to or on behalf of such holder pursuant to the Plan unless and until such
holder has made arrangements satisfactory to the Disbursing Agent for the
payment and satisfaction of such tax obligations. Any New Common Shares or New
Secured Notes to be distributed pursuant to the Plan shall, pending the
implementation of such arrangements, be treated as an undeliverable distribution
pursuant to Article XIII of the Plan.
------------
5. Setoffs
The Reorganized Debtors may, but shall not be required to, set off
against any Claim and the payments or other distributions to be made pursuant to
the Plan in respect of such Claim, claims of
55
any nature whatsoever that the Debtors or Reorganized Debtors may have against
the holder of such Claim; provided, however, that neither the failure to do so
nor the allowance of any Claim hereunder shall constitute a waiver or release by
the Reorganized Debtors of any such claim that the Debtors or Reorganized
Debtors may have against such holder.
N. Confirmation and/or Consummation
Described below are certain important considerations under the
Bankruptcy Code in connection with confirmation of the Plan.
1. Requirements for Confirmation of the Plan
Before the Plan can be confirmed, the Bankruptcy Court must determine
at the hearing on confirmation of the Plan (the "Confirmation Hearing") that the
following requirements for confirmation, set forth in section 1129 of the
Bankruptcy Code, have been satisfied:
a. The Plan complies with the applicable provisions of the Bankruptcy
Code.
b. The Debtors have complied with the applicable provisions of the
Bankruptcy Code.
c. The Plan has been proposed in good faith and not by any means
forbidden by law.
d. Any payment made or promised by the Debtors or by a person issuing
securities or acquiring property under the Plan for services or for
costs and expenses in, or in connection with, the Chapter 11 Cases,
or in connection with the Plan and incident to the Chapter 11
Cases, has been disclosed to the Bankruptcy Court, and any such
payment made before confirmation of the Plan is reasonable, or if
such payment is to be fixed after confirmation of the Plan, such
payment is subject to the approval of the Bankruptcy Court as
reasonable.
e. The Debtors have disclosed (i) the identity and affiliations of (x)
any individual proposed to serve, after confirmation of the Plan,
as a director, officer, or voting trustee of the Reorganized
Debtors, (y) any affiliate of the Debtors participating in a joint
plan with the Debtors, or (z) any successor to the Debtors under
the Plan (and the appointment to, or continuance in, such office of
such individual(s) is consistent with the interests of Creditors
and Interest holders and with public policy), and (ii) the identity
of any insider that will be employed or retained by the Debtors and
the nature of any compensation for such insider.
f. With respect to each Class of Claims or Interests, each Impaired
Creditor and Impaired Interest holder either has accepted the Plan
or will receive or retain under the Plan on account of the Claims
or Interests held by such
56
entity, property of a value, as of the Effective Date, that is not
less than the amount that such entity would receive or retain if
the Debtors were liquidated on such date under Chapter 7 of the
Bankruptcy Code. See Section XII.
--- ------------
g. The Plan provides that Administrative Claims and Priority Claims
other than Priority Tax Claims will be paid in full on the
Effective Date and that Priority Tax Claims will receive on account
of such Claims deferred cash payments, over a period not exceeding
six years after the date of assessment of such Claims, of a value,
as of the Effective Date, equal to the Allowed Amount of such
Claims, except to the extent that the holder of any such Claim has
agreed to a different treatment. See Section V.C.
--- ------- ----
h. If a Class of Claims is Impaired under the Plan, at least one Class
of Impaired Claims has accepted the Plan, determined without
including any acceptance of the Plan by insiders holding Claims in
such Class.
i. Confirmation of the Plan is not likely to be followed by the
liquidation, or the need for further financial reorganization, of
the Debtors or any successor to the Debtors under the Plan, unless
such liquidation or reorganization is proposed in the Plan. See
---
Section IX.D.
-------------
j. The Plan provides for the continuation after the Effective Date of
all retiree benefits, if any, at the level established pursuant to
section 1114(e)(1)(B) or 1114(g) of the Bankruptcy Code at any time
prior to confirmation of the Plan, for the duration of the period
the Debtors have obligated themselves to provide such benefits.
The Debtors believe that, upon receipt of the votes required to
confirm the Plan, the Plan will satisfy all the statutory requirements of
Chapter 11 of the Bankruptcy Code, that the Debtors have complied or will have
complied with all of the requirements of Chapter 11, and that the Plan has been
proposed and submitted to the Bankruptcy Court in good faith.
2. Conditions to Confirmation and Consummation
a. Conditions to Confirmation
The following are conditions precedent to the occurrence of the
Confirmation Date: (i) the entry of an order finding that the Disclosure
Statement contains adequate information pursuant to section 1125 of the
Bankruptcy Code, and (ii) the proposed Confirmation Order shall be in form and
substance acceptable to the Debtors and the Creditors' Committee.
b. Conditions to Effective Date
The following are conditions precedent to the occurrence of the
Effective Date, each of which may be satisfied or waived in accordance with
Article X of the Plan:
- ----------
57
(i) The Confirmation Order shall have been entered and become a
Final Order in form and substance reasonably satisfactory to
the Debtors and shall:
(1) provide that the Debtors and Reorganized Debtors are
authorized and directed to take all actions necessary
or appropriate to enter into, implement and consummate
the contracts, instruments, releases, leases,
indentures and other agreements or documents created in
connection with the Plan or the Restructuring
Transactions;
(2) authorize the issuance of the New Common Shares,
Management Options, the Rights, and New Secured Notes;
and
(3) find that the New Common Shares, the Rights, and the
New Secured Notes issued under the Plan in exchange for
Claims against the Debtors are exempt from registration
under the Securities Act of 1933 pursuant to section
1145 of the Bankruptcy Code except to the extent that
holders of the New Common Shares, the Rights, or the
New Secured Notes or Rights are "underwriters," as that
term is defined in section 1145 of the Bankruptcy Code.
(ii) All Plan Exhibits shall be in form and substance reasonably
acceptable to the Debtors and the Creditors' Committee and
shall have been executed and delivered.
(iii) All actions, documents and agreements necessary to implement
the Plan shall have been effected or executed.
O. Effects of Confirmation
1. Binding Effect
The Plan will be binding upon and inure to the benefit of the Debtors,
all present and former holders of Claims against the Debtors, whether or not
such holders will receive or retain any property or interest in property under
the Plan, their respective successors and assigns, including, but not limited
to, the Reorganized Debtors, and all parties-in-interest in the Chapter 11
Cases.
58
2. Discharge of the Debtors
Except as otherwise provided in the Plan or in the Confirmation Order,
all consideration distributed under the Plan will be in exchange for, and in
complete satisfaction, settlement, discharge, and release of, all Claims (other
than those Reinstated under the Plan) of any nature whatsoever against the
Debtors or any of their assets or properties, and regardless of whether any
property will have been distributed or retained pursuant to the Plan on account
of such Claims, and upon the Effective Date, the Debtors shall (i) be deemed
discharged and released under section 1141(d)(1)(A) of the Bankruptcy Code from
any and all Claims, including, but not limited to, demands and liabilities that
arose before the Confirmation Date, and all debts of the kind specified in
sections 502(g), 502(h) or 502(i) of the Bankruptcy Code, whether or not (a) a
Proof of Claim based upon such debt is filed or deemed filed under section 501
of the Bankruptcy Code, (b) a Claim based upon such debt is Allowed under
section 502 of the Bankruptcy Code, or (c) the holder of a Claim based upon such
debt accepted the Plan and (ii) terminate all ICG Interests.
As of the Confirmation Date, except as provided in the Plan or the
Confirmation Order, all entities shall be precluded from asserting against the
Debtors or the Reorganized Debtors, any other or further claims, debts, rights,
causes of action, liabilities or equity interests relating to the Debtors based
upon any act, omission, transaction or other activity of any nature that
occurred prior to the Confirmation Date. In accordance with the foregoing,
except as provided in the Plan or the Confirmation Order, the Confirmation Order
shall be a judicial determination of discharge of all such Claims and other
debts and liabilities against the Debtors and termination of all ICG Interests,
pursuant to sections 524 and 1141 of the Bankruptcy Code, and such discharge
shall void any judgment obtained against the Debtors at any time, to the extent
that such judgment relates to a discharged Claim or terminated Interest.
3. Permanent Injunction
Except as provided in the Plan or the Confirmation Order, as of the
Confirmation Date, all entities that have held, currently hold or may hold a
Claim or other debt or liability that is discharged or an Interest or other
right of an equity security holder that is terminated pursuant to the terms of
the Plan are permanently enjoined from the taking of any of the following
actions against the Debtors, the Reorganized Debtors or their property on
account of any such discharged Claims, debts or liabilities or terminated
interests or rights: (a) commencing or continuing, in any manner or in any
place, any action or other proceeding; (b) enforcing, attaching, collecting or
recovering in any manner any judgment, award, decree or order; (c) creating,
perfecting or enforcing any lien or encumbrance; (d) asserting a setoff, right
of subrogation or recoupment of any kind against any debt, liability or
obligation due to the Debtors; and (e) commencing or continuing any action, in
any manner, in any place that does not comply with or is inconsistent with the
provisions of the Plan.
As of the Effective Date, all entities that have held, currently hold
or may hold a claim, demand, debt, right, cause of action or liability that is
released pursuant to Section 5.12 or Section 12.11 of the Plan are permanently
------------ -------------
enjoined from taking any of the following actions on account of such released
claims, obligations, suits, judgments, damages, demands, debts, rights, causes
of action or liabilities: (a) commencing or continuing in any manner any action
or other proceeding; (b) enforcing, attaching, collecting or recovering in any
manner any judgment, award, decree or order; (c) creating, perfecting or
enforcing any lien or encumbrance; (d) asserting a setoff, right of subrogation
or
59
recoupment of any kind against any debt, liability or obligation due to any
released entity; and (e) commencing or continuing any action, in any manner, in
any place that does not comply with or is inconsistent with the provisions of
the Plan.
By accepting distribution pursuant to the Plan, each holder of an
Allowed Claim or Allowed Interest receiving distributions pursuant to the Plan
will be deemed to have specifically consented to the injunctions set forth in
Article XII of the Plan.
- -----------
4. Exculpation and Limitation on Liability; Indemnity
Neither the Debtors, the Reorganized Debtors, the Creditors'
Committee, nor any of their respective present or former members, officers,
directors, employees, advisors, attorneys, or agents, shall have or incur any
liability to any holder of a Claim or an Interest, or any other party in
interest, or any of their respective agents, employees, representatives,
financial advisors, attorneys, or affiliates, or any of their successors or
assigns, for any act or omission in connection with, relating to, or arising out
of, the Chapter 11 Case, formulating, negotiating or implementing the Plan, the
solicitation of acceptances of the Plan, the pursuit of confirmation of the
Plan, the confirmation of the Plan, the consummation of the Plan, or the
administration of the Plan or the property to be distributed under the Plan,
except for their willful misconduct, and in all respects shall be entitled to
reasonably rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan.
Notwithstanding any other provision of the Plan, no holder of a Claim
or Interest, no other party in interest, none of their respective agents,
employees, representatives, financial advisors, attorneys, or affiliates, and no
successors or assigns of the foregoing, shall have any right of action against
any Debtor or Reorganized Debtor, the Creditors' Committee, nor any of their
respective present or former members, officers, directors, employees, advisors,
attorneys, for any act or omission in connection with, relating to, or arising
out of, the Chapter 11 Cases, formulating, negotiating or implementing the Plan,
solicitation of acceptances of the Plan, the pursuit of confirmation of the
Plan, the consummation of the Plan, the confirmation of the Plan, or the
administration of the Plan or the property to be distributed under the Plan,
except for their willful misconduct.
Reorganized ICG shall indemnify each Person exculpated pursuant to
Section 12.11 of the Plan against, hold each such Person harmless from, and
- -------------
reimburse each such Person for any and all losses, costs, expenses (including
attorneys' fees and expenses), liabilities and damages sustained by such Person
arising from any liability described above.
The foregoing exculpation and limitation on liability shall not,
however, limit, abridge, or otherwise affect the rights of the Reorganized
Debtors to enforce, sue on, settle, or compromise the Litigation Claims retained
pursuant to Article V of the Plan.
---------
P. Retention of Jurisdiction
Pursuant to sections 105(a) and 1142 of the Bankruptcy Code, and
notwithstanding entry of the Confirmation Order and occurrence of the Effective
Date, the Bankruptcy Court will retain exclusive jurisdiction over all matters
arising out of, and related to, the Chapter 11 Cases and the Plan, including,
among other things, jurisdiction to:
60
a. Allow, disallow, determine, liquidate, classify, estimate or
establish the priority or secured or unsecured status of any
Claim or Interest not otherwise allowed under the Plan, including
the resolution of any request for payment of any Administrative
Claim and the resolution of any objections to the allowance or
priority of Claims or Interests;
b. Hear and determine all applications for compensation and
reimbursement of expenses of Professionals under the Plan or
under sections 330, 331, 503(b), 1103 and 1129(a)(4) of the
Bankruptcy Code; provided, however, that from and after the
Effective Date, the payment of the fees and expenses of the
retained Professionals of the Reorganized Debtors shall be made
in the ordinary course of business and shall not be subject to
the approval of the Bankruptcy Court;
c. Hear and determine all matters with respect to the assumption or
rejection of any executory contract or unexpired lease to which a
Debtor is a party or with respect to which a Debtor may be
liable, including, if necessary, the nature or amount of any
required Cure or the liquidation or allowance of any Claims
arising therefrom;
d. Effectuate performance of and payments under the provisions of
the Plan;
e. Hear and determine any and all adversary proceedings, motions,
applications, and contested or litigated matters arising out of,
under, or related to, the Chapter 11 Cases;
f. Enter such orders as may be necessary or appropriate to execute,
implement, or consummate the provisions of the Plan and all
contracts, instruments, releases, and other agreements or
documents created in connection with the Plan, the Disclosure
Statement or the Confirmation Order;
g. Hear and determine disputes arising in connection with the
interpretation, implementation, consummation, or enforcement of
the Plan, including disputes arising under agreements, documents
or instruments executed in connection with the Plan;
h. Consider any modifications of the Plan, cure any defect or
omission, or reconcile any inconsistency in any order of the
Bankruptcy Court, including, without limitation, the Confirmation
Order;
i. Issue injunctions, enter and implement other orders, or take such
other actions as may be necessary or appropriate to restrain
interference by any entity with implementation, consummation, or
enforcement of the Plan or the Confirmation Order;
61
j. Enter and implement such orders as may be necessary or
appropriate if the Confirmation Order is for any reason reversed,
stayed, revoked, modified, or vacated;
k. Hear and determine any matters arising in connection with or
relating to the Plan, the Disclosure Statement, the Confirmation
Order, or any contract, instrument, release, or other agreement
or document created in connection with the Plan, the Disclosure
Statement or the Confirmation Order;
l. Enforce all orders, judgments, injunctions, releases,
exculpations, indemnifications and rulings entered in connection
with the Chapter 11 Cases;
m. Except as otherwise limited herein, recover all assets of the
Debtors and property of the Debtors' Estates, wherever located;
n. Hear and determine matters concerning state, local, and federal
taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code;
o. Hear and determine all disputes involving the existence, nature,
or scope of the Debtors' discharge;
p. Hear and determine such other matters as may be provided in the
Confirmation Order or as may be authorized under, or not
inconsistent with, provisions of the Bankruptcy Code; and
q. Enter a final decree closing the Chapter 11 Cases.
VI. CERTAIN FACTORS TO BE CONSIDERED
The holder of a Claim against the Debtors should read and carefully
consider the following factors, as well as the other information set forth in
this Disclosure Statement (and the documents delivered together herewith and/or
incorporated by reference herein), before deciding whether to vote to accept or
reject the Plan.
A. General Considerations
The Plan sets forth the means for satisfying the Claims against each
of the Debtors. Certain Claims and Interests receive no distributions pursuant
to the Plan. Reorganization of certain of the Debtors' businesses and
operations under the proposed Plan also avoids the potentially adverse impact of
a liquidation on those Debtors' employees and other stakeholders.
B. Certain Bankruptcy Considerations
Even if all Impaired voting classes vote in favor of the Plan, and
with respect to any Impaired Class deemed to have rejected the Plan and the
requirements for "cramdown" are met, the
62
Bankruptcy Court, which, as a court of equity, may exercise substantial
discretion, may choose not to confirm the Plan. Section 1129 of the Bankruptcy
Code requires, among other things, a showing that confirmation of the Plan will
not be followed by liquidation or the need for further financial reorganization
of the Debtors, (see Section IX.D), and that the value of distributions to
--- ------------
dissenting holders of Claims and Interest may not be less than the value such
holders would receive if the Debtors were liquidated under Chapter 7 of the
Bankruptcy Code. See Section IX.E. Although the Debtors believe that the Plan
-------------
will meet such tests, there can be no assurance that the Bankruptcy Court will
reach the same conclusion. See Appendix D annexed hereto for a liquidation
----------
analysis of the Debtors.
The Plan provides for certain conditions that must be fulfilled prior
to confirmation of the Plan and the Effective Date. As of the date of this
Disclosure Statement, there can be no assurance that any or all of the
conditions in the Plan will be met (or waived) or that the other conditions to
consummation, if any, will be satisfied. Accordingly, even if the Plan is
confirmed by the Bankruptcy Court, there can be no assurance that the Plan will
be consummated and the restructuring completed. If a liquidation or protracted
reorganization were to occur, there is a substantial risk that the value of the
Debtors' enterprise would be substantially eroded to the detriment of all
stakeholders.
C. Inherent Uncertainty of Financial Projections
The Projections to be set forth in Appendix E hereto cover the
----------
Debtors' operations through fiscal December 31, 2005. These Projections are
based on numerous assumptions that are an integral part of the Projections,
including confirmation and consummation of the Plan in accordance with its
terms, realization of the operating strategy of the Reorganized Debtors,
industry performance, no material changes in applicable legislation or
regulations, exchange rates, or generally accepted accounting principles,
general business and economic conditions, competition, adequate financing,
success of the Rights Offering, absence of material contingent or unliquidated
litigation or indemnity claims, and other matters, many of which will be beyond
the control of the Reorganized Debtors and some or all of which may not
materialize. In addition, unanticipated events and circumstances occurring
subsequent to the date of this Disclosure Statement may affect the actual
financial results of the Reorganized Debtors' operations. Accordingly, the
actual performance may vary significantly from those set forth in the
Projections. Consequently, the projected financial information contained herein
should not be regarded as a representation or warranty by the Debtors, the
Debtors' advisors, or any other person that the Projections can or will be
achieved. See Section VI.
--- -----------
D. Lack of Established Market for the New Securities
There will be no existing market for the New Common Shares, the
Rights, or New Secured Notes and there can be no assurance that an active market
for such securities will develop or, if any such market does develop, that it
will continue to exist. Also, there can be no assurance as to the degree of
price volatility, or the liquidity for any of the New Securities, in any such
market that does develop.
As of the Petition Date, the Old Common Shares were traded on the
NASDAQ. The NASDAQ has certain listing criteria applicable to companies listed
on such exchanges, including financial criteria and minimum requirements as to
the number of holders of listed securities. On
63
November 18, 2000, shortly after the Petition Date, the NASDAQ halted trading of
the Old Common Shares and initiated delisting procedures. The Debtors will use
reasonable efforts to have the New Common Shares listed on a national securities
exchange. However, there can be no assurance that Reorganized ICG will be
successful in listing its securities with any exchange. In the event that
Reorganized ICG is unable to cause any of the New Common Shares to be listed on
any exchange or quoted on any quotation system, the liquidity of the New Common
Shares would be materially impaired.
E. Restricted Resale of the New Securities
The New Securities will be distributed pursuant to the Plan without
registration under the Securities Act and without qualification or registration
under State Laws, pursuant to exemptions from such registration and
qualification contained in section 1145(a) of the Bankruptcy Code. With respect
to certain persons who receive such securities pursuant to the Plan, these
Bankruptcy Code exemptions apply only to the distribution of such securities
under the Plan and not to any subsequent sale, exchange, transfer or other
disposition of such securities or any interest therein by such persons.
Therefore, subsequent sales, exchanges, transfers or other disposition of such
securities or any interest therein by "underwriters" or "issuers" would not be
exempted by section 1145 of the Bankruptcy Code from registration under the
Securities Act or the State Laws.
Additionally, New Securities may not be sold, exchanged, transferred,
or otherwise disposed of without registration or qualification under the State
Laws unless specific exemptions from such registration or qualification
requirements are available with respect to such sale, exchange, transfer, or
disposition. See Section VII.
-----------
F. Telecommunications Competition
ICG experiences competition from numerous types of telecommunications
service providers, including inter-exchange carriers, long-haul providers, local
telephone companies, broadband cable television companies and fixed wireless
providers. Accordingly, there can be no assurance that ICG will be able to
compete successfully against other providers of such services, or that ICG will
be able to achieve profitability from such services in future years.
In addition, the telecommunications services industry in general is
subject to rapid and significant changes in technology. These changes may
increase competitive pressures on Reorganized ICG or require capital investments
by Reorganized ICG in excess of its available resources. Because the rapid and
high level of technological change in the industry, the effect on the businesses
of Reorganized ICG cannot be predicted with any certainty.
G. Government Regulation
The telecommunications industry is extensively regulated by the FCC
and state public utility commissions. For example, the FCC is required to grant
prior approval of any assignment or transfer of control involving an entity that
holds an FCC license. Because of the inherent uncertainties in the application
process (e.g., a challenge to the FCC applications and composition of ownership
of voting securities), there can be no assurance that such applications will be
granted within two to three months of their filing or at all.
64
H. Reliance on Key Personnel
One of the Debtors' primary assets is their highly skilled
professionals, who have the ability to leave the Debtors and so deprive them of
the skill and knowledge essential for performance of new and existing contracts.
The Debtors operate a business that is highly dependent on highly skilled
employees, who will perform tasks of the highest standards over an extended
period of time. A loss of a significant number of key professionals will have a
material adverse effect on the Debtors and may threaten their ability to survive
as going concerns.
The Debtors' successful transition through the restructuring process
is dependent in part on their ability to retain and motivate their officers and
key employees. There can be no assurance that the Debtors will be able to
retain and employ qualified management and technical personnel. The Debtors
obtained Bankruptcy Court approval of a bonus program designed to retain certain
of their key employees, but there is no guarantee that such program will have
the intended effect. See Section IV.
----------
VII. APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
No registration statement will be filed under the Securities Act or
any state securities laws with respect to the issuance or subsequent transfer of
the New Common Shares, the Rights, or New Secured Notes under the Plan. The
Debtors believe that, subject to certain exceptions described below, various
provisions of the Securities Act, the Bankruptcy Code and state securities laws
exempt from federal and state securities registration requirements (i) the offer
and the sale of such securities pursuant to the Plan; and (ii) subsequent
transfers of such securities.
A. Offer and Sale of New Securities, Pursuant to the Plan: Bankruptcy Code
Exemption from Registration Requirements
Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale
of securities under a plan of reorganization from registration under both the
Securities Act and state securities laws, if three principal requirements are
satisfied: (i) the securities must be issued "under a plan" of reorganization by
the debtor or its successor under a plan or by an affiliate participating in a
joint plan of reorganization with the debtor; (ii) the recipients of the
securities must hold a pre-petition or administrative expense claim against the
debtor or an interest in the debtor; and (iii) the securities must be issued
entirely in exchange for the recipient's claim against or interest in the
debtor, or "principally" in such exchange and "partly" for cash or property.
The Debtors believe that the offer and sale of the New Common Shares, the
Rights, and the New Secured Notes under the Plan satisfies the requirements of
section 1145(a)(1) of the Bankruptcy Code and is, therefore, exempt from
registration under the Securities Act and state securities laws.
B. Subsequent Transfers of New Securities
1. Federal Securities Laws: Section 1145(c) of the Bankruptcy Code
Section 1145(c) of the Bankruptcy Code deems any offer or sale of
securities of the kind and in the manner specified in section 1145(a)(1) of the
Bankruptcy Code to have been a public offering. Accordingly, the New Secured
Notes, the Rights, and New Common Shares generally will be freely
65
transferable by holders of Claims under the Securities Act unless the Holder is
deemed, by section 1145(b) of the Bankruptcy Code, to be an "underwriter" for
purposes of section 2(11) of the Securities Act with respect to such securities.
Section 1145(b) of the Bankruptcy Code deems any entity to be an "underwriter"
under section 2(11) of the Securities Act, if such entity:
a. purchases a claim against, interest in, or claim for an
administrative expense in the case concerning, the debtor, if
such purchase is with a view to distributing any security
received in exchange for such a claim or interest;
b. offers to sell securities offered or sold under a plan for the
holders of such securities;
c. offers to buy securities offered or sold under the plan from the
holders of such securities, if the offer to buy is: (A) with view
to distribution of such securities; and (B) under an agreement
made in connection with the plan, with the consummation of the
plan, or with the offer or sale of securities under the plan; or
d. is an "issuer" with respect to the securities, as the term
"issuer" is defined in section 2(11) of the Securities Act.
Under section 2(11) of the Securities Act, an "issuer" includes any
person directly or indirectly controlling or controlled by the issuer, or any
person under direct or indirect common control with the issuer.
To the extent that holders of Impaired Claims who receive New Secured
Notes, Rights or New Common Shares pursuant to the Plan are deemed to be
"underwriters" or "issuers" such securities may not be resold by such persons
unless such securities are registered under the Securities Act or an exemption
from such registration requirements is available. However, it is anticipated
that such holders will be entitled to demand that the Reorganized Debtor
register the resale of such shares under the Securities Act and that such
holders will be permitted to obtain registration of the sale of their New Common
Shares, Rights or New Secured Notes in certain circumstances in connection with
certain registered offerings of New Securities by Reorganized ICG.
Whether or not any particular person would be deemed to be an
"underwriter" or "issuer" with respect to the New Common Shares, Rights, or New
Secured Notes would depend upon various facts and circumstances applicable to
that person. Accordingly, the Debtors express no view as to whether any
particular person under the Plan would be an "underwriter" or "issuer" with
respect to the New Secured Notes, Rights, or New Common Shares.
GIVEN THE COMPLEX AND SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A
PARTICULAR HOLDER MAY BE AN UNDERWRITER OR ISSUER, THE DEBTORS MAKE NO
REPRESENTATION CONCERNING THE RIGHT OF ANY PERSON TO TRADE IN THE NEW SECURED
NOTES, RIGHTS, OR NEW COMMON SHARES. THE DEBTORS RECOMMEND THAT POTENTIAL
RECIPIENTS OF THE NEW SECURITIES CONSULT THEIR OWN COUNSEL CONCERNING WHETHER
THEY MAY FREELY TRADE
66
NEW SECURED NOTES, RIGHTS, OR NEW COMMON SHARES WITHOUT COMPLIANCE WITH THE
SECURITIES ACT OR THE EXCHANGE ACT.
2. Subsequent Transfers of New Common Shares Under State Securities Laws
If the New Common Shares are listed on the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market, the New Common Shares
will be generally freely tradeable under state securities laws. If the New
Common Shares are not listed on any of the above exchanges or the Nasdaq
National Market, the New Common Shares will not be freely tradeable under state
securities laws unless there is an available exemption from registration under
such laws. A majority of states provide an exemption from registration for
secondary market transactions under the so-called "manual exemption" if
financial and other information about an issuer is published in certain manuals
published by Moody's Investor Service, Inc. or Standard & Poor's. If the New
Common Shares are not listed on one of the above exchanges or the Nasdaq
National Market, the Reorganized Debtors intend to provide the necessary
information in order to be able to take advantage of such manual exemptions.
VIII. INCOME TAX CONSEQUENCES OF THE PLAN
A summary description of certain income tax consequences of the Plan
is provided below. The description of tax consequences below is for
informational purposes only and, due to a lack of definitive judicial or
administrative authority or interpretation, substantial uncertainties exist with
respect to various tax consequences of the Plan as discussed herein. Only the
principal consequences of the Plan for certain Debtors and for holders of Claims
who are entitled to vote to accept or reject the Plan are described below. No
opinion of counsel has been sought or obtained with respect to any tax
consequences of the Plan. No rulings or determinations of the Internal Revenue
Service (the "IRS") or any other tax authorities have been sought or obtained
with respect to the tax consequences of the Plan, and the discussion below is
not binding upon the IRS or such other authorities. The Debtors are not making
any representations regarding the particular tax consequences of the
confirmation and consummation of the Plan as to any Claim holder, and are not
rendering any form of legal opinion as to such tax consequences.
The discussion of United States federal income tax consequences below
is based on the Internal Revenue Code of 1986, as amended (the "IRC"), the
Treasury regulations promulgated thereunder, judicial decisions, and published
administrative rulings and pronouncements of the IRS as in effect on the date
hereof. Legislative, judicial or administrative changes or interpretations
enacted or promulgated after the date hereof could alter or modify the analyses
set forth below with respect to the United States federal income tax
consequences of the Plan. Any such changes or interpretations may be
retroactive and could significantly affect the United States federal income tax
consequences discussed below.
Except to a limited extent, the following discussion does not address
foreign, state or local tax consequences of the Plan, nor does it purport to
address the United States federal tax consequences of the Plan to special
classes of taxpayers (such as foreign entities, S corporations, regulated
investment companies, insurance companies, financial institutions, small
business investment companies, broker-dealers and tax-exempt organizations).
Furthermore, United States
67
federal estate and gift tax issues are not addressed herein. The following
discussion assumes that Claim holders hold their Claims as capital assets for
United States federal income tax purposes.
Each holder of a Claim is strongly urged to consult its tax advisor
regarding the United States federal, state, and local and any foreign tax
consequences of the transactions described herein and in the Plan.
A. Federal Income Tax Consequences to the Debtors
1. Cancellation of Indebtedness Income
Under general United States federal income tax principles, each Debtor
will realize cancellation of debt ("COD") income to the extent that its
obligation to a Claim holder is discharged pursuant to the Plan for an amount
less than the adjusted issue price (in most cases, the amount the Debtors
received upon incurring the obligation, with certain adjustments) of such
holder's Claim. For this purpose, the amount paid to a Claim holder in
discharge of its Claim generally will equal the amount of Cash and the fair
market value on the Effective Date of any other property paid to such Claim
holder.
Because the Debtors each will be debtors in a bankruptcy case at the
time they realize COD income, they will not be required to include such COD
income in their gross income, but rather will be required to reduce certain of
their respective tax attributes by the amounts of COD income so excluded. Under
the general rules of IRC section 108, the required attribute reduction will be
applied to reduce the net operating losses ("NOLs") and NOL carryforwards, to
the extent of such NOLs and carryforwards, and certain other tax attributes of
the Debtors. IRC section 108(b)(5) permits a corporation in bankruptcy
proceedings to elect to apply the required attribute reduction to reduce first
the basis of its depreciable property to the extent of such basis, with any
excess applied next to reduce its NOLs and NOL carryforwards, and then certain
other tax attributes. The Debtors have not yet determined whether they will
make the election under IRC section 108(b)(5).
Although not free from doubt, based on existing authorities, the
Debtors believe that any reduction in Tax Attributes will generally occur on a
separate company basis even though the Debtors file a consolidated federal
income tax return. The IRS has recently taken the position, however, that
consolidated NOLs must be reduced irrespective of the source of those losses.
The current IRS position as to the impact of the attribute reduction rules on
other tax attributes of consolidated group members is unclear. While the
resolution of these issues may affect the timing and amount of the pre-
bankruptcy tax attributes, the Debtors do not believe that the unresolved nature
of these items will have a material impact on the Projections contained herein.
2. Utilization of Net Operating Loss Carryovers
Under IRC section 382, whenever there is a more than fifty percent
(50%) ownership change of a corporation during a three-year testing period, the
ability of the corporation to utilize its Net Operating Loss Carryovers ("NOLs")
generally is limited on an annual basis to the product of the fair market value
of the corporate equity immediately before the ownership change and the "long-
term tax-exempt rate," which is published monthly by the IRS. The annual
limitation may be increased by certain built-in gains realized after, but
accruing economically before, the ownership change and by the
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carryover of unused section 382 limitations from prior years. If the Debtors
have a net unrealized built-in loss at the time of the ownership change, any
recognized built-in loss generally during the five-year period following the
ownership change is also subject to the annual limitation. Additionally, any
amount which it is allowable to a Debtor as a deduction during the five year
period but which is attributable to periods before the ownership change date
will be treated as a recognized built-in loss for the taxable year for which it
is allowable as a deduction. If the amount of the net unrealized built-in loss
is not greater than the lesser of ten (10) million dollars or fifteen percent
(15%) of the fair market value of the Debtors' assets immediately before the
change date, then the net unrealized built-in loss of the Debtors is presumed to
be zero.
The effects of the ownership change rules can be ameliorated by an
exception that applies in the case of reorganizations under the Bankruptcy Code.
Under the so-called "Section 382(1)(5) bankruptcy exception", if the
reorganization results in an exchange by qualifying creditors and stockholders
of their claims and interests for at least fifty percent (50%) of the Debtors'
stock (in vote and value), then the general ownership change rules will not
apply. Instead, the Debtors will be subject to a different tax regime under
which the NOL is not limited on an annual basis but is reduced by the amount of
interest deductions claimed during the three (3) taxable years preceding the
date of the reorganization, and during the part of the taxable year prior to and
including the reorganization in respect of the debt converted into stock in the
reorganization. If the section 382(1)(5) bankruptcy exception applies, any
further ownership change of the Debtors within a two (2) year period will result
in forfeiture of all of the Debtors' NOLs incurred prior to the date of the
second ownership change.
If the Debtor would not qualify for the section 382(1)(5) bankruptcy
exception, or if the Debtor would qualify but the NOL reduction rules mandated
would greatly reduce the NOL, the Debtors may apply IRC section 382(1)(6) to the
ownership change, and thereby become subject to the annual limitation rules of
section 382 of the Tax Code. This section permits the Debtors to value the
equity of the corporation for purposes of computing the limitation by using the
Debtors' value immediately after the ownership change (by increasing the value
of the old loss corporation to reflect any surrender or cancellation of
creditors' claims) instead of immediately before the ownership change (the
"Section 382(1)(6) limitation").
3. Federal Alternative Minimum Tax
A corporation may incur alternative minimum tax liability even where
NOL carryovers and other tax attributes are sufficient to eliminate its taxable
income as computed under the regular corporate income tax. It is possible that
the Debtors will be liable for the alternative minimum tax.
B. Federal Income Tax Consequences to Claim Holders
The income tax consequences of the transactions contemplated by the
Plan to a Claim holder will depend upon a number of factors under United States
federal income tax law. For purposes of the following discussion, a "United
States Person" is any person or entity (1) who is a citizen or resident of the
United States, (2) that is a corporation or partnership created or organized in
or under the law of the United States or any state thereof, (3) that is an
estate, the income of which is subject to United States federal income taxation
regardless of its source or (4) that is a trust whose administration is subject
to the primary supervision of a United States court and with respect to which
one or more United
69
States persons have the authority to control all substantial decisions. A "Non-
United States Person" is any person or entity that is not a United States
Person. Income tax consequences to Claim holders that are Non-United States
Persons are generally discussed below under Section 2.
---------
The tax treatment of holders of Claims and the character and amount of
income, gain or loss recognized as a consequence of the Plan and the
distributions provided for by the Plan will depend upon, among other things, (1)
the manner in which a holder acquired a Claim; (2) the length of time the Claim
has been held; (3) whether the Claim was acquired at a discount; (4) whether the
holder has taken a bad debt deduction with respect to the Claim (or any portion
thereof) in the current or prior years; (5) whether the holder has previously
included accrued but unpaid interest with respect to the Claim; (6) the method
of tax accounting of the holder; (7) whether the Claim is an installment
obligation for United States federal income tax purposes; and (8) whether the
Claim constitutes a "security" for federal income tax purposes. Therefore,
holders of Claims should consult their tax advisors for information that may be
relevant to their particular situation and circumstances and the particular tax
consequences to them of the transactions contemplated by the Plan.
1. United States Federal Income Tax Consequences
a. General
A holder of a Claim against the Debtors that is a United States Person
and whose Claim is paid in full or otherwise discharged on the Effective Date
will recognize gain or loss for United States federal income tax purposes in an
amount equal to the difference between (A) the fair market value on the
Effective Date of such holder's Pro Rata share of any property received in
respect of its Claim and (B) the holder's adjusted tax basis in the Claim. A
holder's tax basis in property received in exchange for its Claim will generally
be equal to the fair market value of such property on the Effective Date. The
holding period for any such property will begin on the day after the Effective
Date.
b. Market Discount
The market discount provisions of the IRC may apply to holders of
certain Claims. In general, a debt obligation other than a debt obligation with
a fixed maturity of one (1) year or less that is acquired by a holder in the
secondary market (or, in certain circumstances, upon original issuance) is a
"market discount bond" as to that holder if its stated redemption price at
maturity (or, in the case of a debt obligation having original issue discount,
its revised issue price) exceeds the tax basis of the debt obligation in the
holder's hands immediately after its acquisition. However, a debt obligation
will not be a "market discount bond" if such excess is less than a statutory de
minimis amount. Gain recognized by a Claim holder with respect to a "market
discount bond" will generally be treated as ordinary interest income to the
extent of the market discount accrued on such bond during the Claim holder's
period of ownership, unless the Claim holder elected to include accrued market
discount in taxable income currently. A holder of a market discount bond that
is required under the market discount rules of the IRC to defer deduction of all
or a portion of the interest on indebtedness incurred or maintained to acquire
or carry the bond may be allowed to deduct such interest, in whole or in part,
on disposition of such bond.
70
c. Reorganization Treatment
The transactions contemplated by the Plan with respect to ICG and
Reorganized ICG, pursuant to which holders of Allowed Class 3 Claims will each
receive a Pro Rata share of 100% of the New Secured Notes and holders of Allowed
Class 5 Claims will each receive a Pro Rata share of 100% of the New Common
Shares, may be treated as a "reorganization" for United States federal income
tax purposes. If reorganization treatment is applicable, then the United States
federal income tax consequences arising from the Plan to holders of Allowed
Class 3 and 5 Claims may vary from those described above, depending upon, among
other things, whether such Claims constitute "securities" for United States
federal income tax purposes. The determination of whether a debt instrument
constitutes a "security" depends upon an evaluation of the term and nature of
the debt instrument. Generally, corporate debt instruments with maturities when
issued of less than five (5) years are not considered securities, and corporate
debt instruments with maturities when issued of ten years or more are considered
securities. The Debtors believe and intend to take the position that the Class
3 and 5 Claims should not be treated as securities for United States federal
income tax purposes. If, as the Debtors believe to be the case, the Class 3 and
5 Claims do not constitute securities for United States federal income tax
purposes, then a holder of a such a Claim would be subject to the tax treatment
described above.
It is possible that certain claims arising under the Pre-Petition
Credit Facility Agreement may constitute securities for United States federal
income tax purposes and that the exchange such Claims for New Common Shares may
constitute a reorganization for United States federal income tax purposes. In
that case, a holder of a Claim with respect to the Pre-Petition Credit Facility
Agreement should recognize gain, but not loss, with respect to each Claim
surrendered in an amount equal to the lesser of (x) the amount of gain realized
(i.e., the excess of the fair market value of any property received by such
holder in respect of its Claim over the adjusted tax basis of such Claim) and
(y) the "boot" (as described below) received by such holder, if any, in respect
of its Claim. A holder will be treated as receiving "boot" to the extent of the
fair market value of property other than the New Common Shares or New Secured
Notes received by the holder. Any such gain recognized will be treated as
capital gain unless the boot received has the effect of the distribution of a
dividend, in which case the gain will be treated as a dividend to the extent of
the holder's ratable share of ICG's undistributed earnings and profits. In
addition, a holder's aggregate tax basis in the New Common Shares should be
equal to the aggregate tax basis in the Claims exchanged therefor, decreased by
the amount of boot received and increased by any gain recognized, and such
holder's holding period for such property will include the holding period of the
Claims exchanged therefor. A holder's tax basis in any boot received will equal
the fair market value of such property on the Effective Date, and the holder's
holding period in such property will begin on the day after the Effective Date.
2. Non-United States Persons
A holder of a Claim against a Debtor that is a Non-United States
Person generally will not be subject to United States federal income tax with
respect to property received in exchange for such Claim pursuant to the Plan,
unless (a) such Claim holder is engaged in a trade or business in the United
States to which income, gain or loss from the exchange is "effectively
connected" for United States federal income tax purposes, or (b) if such Claim
holder is an individual, such Claim holder is present in
71
the United States for 183 days or more during the taxable year of the exchange,
and certain other requirements are met.
3. Information Reporting and Backup Withholding
Certain payments, including the payments with respect to Claims
pursuant to the Plan, are generally subject to information reporting by the
payor (the relevant Debtor) to the IRS. Moreover, such reportable payments are
subject to backup withholding under certain circumstances. Under the IRC's
backup withholding rules, a holder of a Claim may be subject to backup
withholding with respect to distributions or payments made pursuant to the Plan,
unless the holder: (a) comes within certain exempt categories (which generally
include corporations) and, when required, demonstrates this fact or (b) provides
a correct United States taxpayer identification number and certifies under
penalty of perjury that the taxpayer identification number is correct and that
the taxpayer is not subject to backup withholding because of a failure to report
all dividend and interest income.
Holders of Claims that are Non-United States Persons and that receive
payments or distributions under the Plan through a United States office of the
relevant Debtor will not be subject to backup withholding, provided that the
holders furnish certification of their status as Non-United States Persons (and
furnish any other required certifications), or are otherwise exempt from backup
withholding. Generally, such certification is provided on IRS Form W-8BEN.
Holders who receive payments or distributions under the Plan through a foreign
office of the relevant Debtor may, if the Debtor has certain types of
relationships to the United States, be subject to information reporting to the
IRS regarding the exchange (but not backup withholding) unless the Debtor
possesses in its files documentary evidence that the holder is a Non-United
States Person and certain other conditions are met, or the holder otherwise
establishes an exemption.
Backup withholding is not an additional tax. Amounts withheld under
the backup withholding rules may be credited against a holder's United States
federal income tax liability, and a holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by filing an appropriate
claim for refund with the IRS (generally, a United States federal income tax
return).
C. Importance of Obtaining Professional Tax Assistance
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN
INCOME TAX CONSEQUENCES OF THE PLAN AND IS NOT A SUBSTITUTE FOR CAREFUL TAX
PLANNING WITH A TAX PROFESSIONAL. THE ABOVE DISCUSSION IS FOR INFORMATIONAL
PURPOSES ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES ARE IN MANY CASES
UNCERTAIN AND MAY VARY DEPENDING ON A CLAIM HOLDER'S PARTICULAR CIRCUMSTANCES.
ACCORDINGLY, CLAIM HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS ABOUT THE
UNITED STATES FEDERAL, STATE, AND LOCAL, AND APPLICABLE FOREIGN INCOME AND OTHER
TAX CONSEQUENCES OF THE PLAN.
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IX. FEASIBILITY OF THE PLAN AND BEST INTERESTS OF CREDITORS
A. Feasibility of the Plan
In connection with confirmation of the Plan, the Bankruptcy Court will
have to determine that the Plan is feasible pursuant to section 1129(a)(11) of
the Bankruptcy Code, which means that the confirmation of the Plan is not likely
to be followed by the liquidation or the need for further financial
reorganization of the Debtors.
To support their belief in the feasibility of the Plan, the Debtors
have relied upon pro forma financial projections, which are annexed to this
Disclosure Statement as Appendix E.
----------
The Projections indicate that the Reorganized Debtors should have
sufficient cash flow to pay and service their debt obligations, and to fund
their operations as contemplated by the Business Plan. Accordingly, the Debtors
believe that the Plan complies with the financial feasibility standard of
section 1129(a)(11) of the Bankruptcy Code.
The Projections were not prepared with a view toward compliance with
the published guidelines of the American Institute of Certified Public
Accountants or any other regulatory or professional agency or body or generally
accepted accounting principles. Furthermore, the Debtors' independent certified
public accountants have not compiled or examined the Projections and accordingly
do not express any opinion or any other form of assurance with respect thereto
and assume no responsibility for the Projections.
The Projections assume that (i) the Plan will be confirmed and
consummated in accordance with its terms, (ii) there will be no material change
in legislation or regulations, or the administration thereof, including
environmental legislation or regulations, that will have an unexpected effect on
the operations of the Reorganized Debtors, (iii) there will be no change in
United States generally accepted accounting principles that will have a material
effect on the reported financial results of the Reorganized Debtors, and (iv)
there will be no material contingent or unliquidated litigation or indemnity
claims applicable to the Reorganized Debtors. To the extent that the
assumptions inherent in the Projections are based upon future business decisions
and objectives, they are subject to change. In addition, although they are
presented with numerical specificity and considered reasonable by the Debtors
when taken as a whole, the assumptions and estimates underlying the Projections
are subject to significant business, economic and competitive uncertainties and
contingencies, many of which will be beyond the control of the Reorganized
Debtors. Accordingly, the Projections are only an estimate that are necessarily
speculative in nature. It can be expected that some or all of the assumptions
in the Projections will not be realized and that actual results will vary from
the Projections, which variations may be material and are likely to increase
over time. The Projections should therefore not be regarded as a representation
by the Debtors or any other person that the results set forth in the Projections
will be achieved. In light of the foregoing, readers are cautioned not to place
undue reliance on the Projections. The Projections should be read together with
the information in Section VI of the Disclosure Statement entitled "Certain
----------
Factors to be Considered," which sets forth important factors that could cause
actual results to differ from those in the Projections.
73
ICG is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports and other information with the SEC relating to its business, financial
statements and other matters. Such filings will not include projected financial
information. The Debtors do not intend to update or otherwise revise the
Projections, including any revisions to reflect events or circumstances existing
or arising after the date of this Disclosure Statement or to reflect the
occurrence of unanticipated events, even if any or all of the underlying
assumptions do not come to fruition. Furthermore, the Debtors do not intend to
update or revise the Projections to reflect changes in general economic or
industry conditions.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995: The Projections contain statements which constitute "forward-
looking statements" within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, as amended by the Private Securities Litigation
Reform Act of 1995. "Forward-looking statements" in the Projections include the
intent, belief or current expectations of the Debtors and members of their
management team with respect to the timing of, completion of and scope of the
current restructuring, reorganization plan, Business Plan, bank financing, debt
and equity market conditions and the Debtors' future liquidity, as well as the
assumptions upon which such statements are based. While the Debtors believe
that the expectations are based on reasonable assumptions within the bounds of
their knowledge of their business and operations, parties in interest are
cautioned that any such forward-looking statements are not guarantees of future
performance, and involve risks and uncertainties, and that actual results may
differ materially from those contemplated by such forward-looking statements.
Important factors currently known to management that could cause actual results
to differ materially from those contemplated by the forward-looking statements
in the Projections include, but are not limited to, further adverse developments
with respect to the Debtors' liquidity position or operations of the Debtors'
various businesses, adverse developments in the Debtors' efforts to renegotiate
funding and adverse developments in the bank financing or public or private
markets for debt or equity securities, or adverse developments in the timing or
results of the Debtors' Business Plan (including the time line to emerge from
Chapter 11), the difficulty in controlling costs and integrating new operations,
the ability of the Debtors to realize the anticipated general and administrative
expense savings and overhead reductions presently contemplated, the ability of
the Debtors to obtain profitability, the ability of the Debtors' to recruit and
maintain skilled management and employees, the level and nature of any
restructuring and other one-time charges, the difficulty in estimating costs
relating to exiting certain markets and consolidating and closing certain
operations, and the possible negative effects of a change in applicable
legislation.
B. Acceptance of the Plan
As a condition to confirmation, the Bankruptcy Code requires that each
Class of Impaired Claims vote to accept the Plan, except under certain
circumstances.
Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by
a class of impaired claims as acceptance by holders of at least two-thirds (2/3)
in dollar amount and more than one-half (1/2) in number of claims in that class,
but for that purpose counts only those who actually vote to accept or to reject
the Plan. Thus, Classes 3, 4 and 5 will have voted to accept the Plan only if
two-thirds (2/3) in amount and a majority in number actually voting in each
Class cast their Ballots in
74
favor of acceptance. Holders of Claims who fail to vote are not counted as
either accepting or rejecting a plan.
C. Best Interests Test
As noted above, even if a plan is accepted by the holders of each
class of claims and interests, the Bankruptcy Code requires a Bankruptcy Court
to determine that the plan is in the best interests of all holders of claims or
interests that are impaired by the plan and that have not accepted the plan.
The "best interests" test, as set forth in section 1129(a)(7) of the Bankruptcy
Code, requires a Bankruptcy Court to find either that all members of an impaired
class of claims or interests have accepted the plan or that the plan will
provide a member who has not accepted the plan with a recovery of property of a
value, as of the effective date of the plan, that is not less than the amount
that such holder would recover if the debtor were liquidated under Chapter 7 of
the Bankruptcy Code.
To calculate the probable distribution to holders of each impaired
class of claims and interests if the Debtors were liquidated under Chapter 7, a
Bankruptcy Court must first determine the aggregate dollar amount that would be
generated from a debtor's assets if its Chapter 11 cases were converted to
Chapter 7 cases under the Bankruptcy Code. This "liquidation value" would
consist primarily of the proceeds from a forced sale of the debtor's assets by a
Chapter 7 trustee.
The amount of liquidation value available to unsecured creditors would
be reduced by, first, the claims of secured creditors to the extent of the value
of their collateral, and, second, by the costs and expenses of liquidation, as
well as by other administrative expenses and costs of both the Chapter 7 cases
and the Chapter 11 cases. Costs of liquidation under Chapter 7 of the
Bankruptcy Code would include the compensation of a trustee, as well as of
counsel and other professionals retained by the trustee, asset disposition
expenses, all unpaid expenses incurred by the debtor in its Chapter 11 cases
(such as compensation of attorneys, financial advisors and accountants) that are
allowed in the Chapter 7 cases, litigation costs, and claims arising from the
operations of the debtor during the pendency of the Chapter 11 cases. The
liquidation itself would trigger certain priority payments that otherwise would
be due in the ordinary course of business. Those priority claims would be paid
in full from the liquidation proceeds before the balance would be made available
to pay general claims or to make any distribution in respect of equity
interests. The liquidation would also prompt the rejection of a large number of
executory contracts and unexpired leases and thereby significantly enlarge the
total pool of unsecured claims by reason of resulting rejection claims.
Once the court ascertains the recoveries in liquidation of secured
creditors and priority claimants, it must determine the probable distribution to
general unsecured creditors and equity security holders from the remaining
available proceeds in liquidation. If such probable distribution has a value
greater than the distributions to be received by such creditors and equity
security holders under the plan, then the plan is not in the best interests of
creditors and equity security holders.
D. Liquidation Analysis
In order to determine the amount of liquidation value available to
creditors, the Debtors, with the assistance of their financial advisor, Zolfo
Cooper, prepared a liquidation analysis, annexed hereto as Appendix D (the
----------
"Liquidation Analysis"), which concludes that in a Chapter 7 liquidation,
75
holders of prepetition unsecured Claims would receive less of a recovery
compared to the recovery under the Plan, and, potentially, no recovery
whatsoever. This conclusion is premised upon the assumptions set forth in
Appendix D, which the Debtors and Zolfo Cooper believe are reasonable.
- ----------
Notwithstanding the foregoing, the Debtors believe that any
liquidation analysis with respect to the Debtors is inherently speculative. The
liquidation analysis for the Debtors necessarily contains estimates of the net
proceeds that would be received from a forced sale of assets and\or business
units, as well as the amount of Claims that will ultimately become Allowed
Claims. Claims estimates are based solely upon the Debtors' incomplete review
of any Claims filed and the Debtors' books and records. No Order or finding has
been entered by the Bankruptcy Court estimating or otherwise fixing the amount
of Claims at the projected amounts of Allowed Claims set forth in the
liquidation analysis. In preparing the liquidation analysis, the Debtors have
projected an amount of Allowed Claims that is at the lowest end of a range of
reasonableness such that, for purposes of the liquidation analysis, the largest
possible Chapter 7 liquidation dividend to holders of Allowed Claims can be
assessed. The estimate of the amount of Allowed Claims set forth in the
liquidation analysis should not be relied on for any other purpose, including,
without limitation, any determination of the value of any distribution to be
made on account of Allowed Claims under the Plan.
E. Valuation of the Reorganized Debtors
The Reorganized Debtors have been advised by DrKW with respect to the
value of Reorganized ICG. At the request of the Debtors, DrKW performed a
valuation analysis for the purposes of determining the value available to
distribute to holders of Claims and Interests pursuant to the Plan and to
analyze the relative recoveries to holders of Claims and Interests thereunder.
This analysis was based on the Debtors' financial projections, as well as
current market conditions and statistics. The values are as of an assumed
Effective Date of March 31, 2002, and are based upon information available to
and analyses undertaken by DrKW during November and December 2001.
The reorganization value of the Reorganized Debtors was assumed for
the purposes of the Plan by the Debtors, based on advice from DrKW, to be
between approximately $350 million to $500 million. Based upon the going
concern value of the Debtors' business and an assumed total debt (including the
Pre-Petition Credit Agreement and capital leases) of approximately $213 million,
and the Debtors have employed an assumed range of equity values for Reorganized
ICG of approximately $136.5 million to $286.5 million.
In performing its analysis, DrKW used discounted cash flow, comparable
companies trading multiples and comparable transaction multiples methodologies
to arrive at the going concern value of the Debtors' business. These valuation
techniques reflect both the market's current view of the Debtors' business plan
and operations, as well as a longer-term focus on the intrinsic value of the
cash flow projections in the Debtors' business plan. The valuation multiples
and discount rates used by DrKW to arrive at the going concern value of the
Debtors' business were based on the public market valuation of selected public
companies deemed generally comparable to the operating businesses of ICG. In
selecting such companies, DrKW considered factors such as the focus of the
comparable companies' businesses as well as such companies' current and
projected operating performance relative to the Debtors and the turnaround
required for ICG to perform as projected.
76
The foregoing valuations are based on a number of measured
assumptions, including a successful reorganization of the Debtors' business and
finances in a timely manner, the achievement of the forecasts reflected in the
financial projections, the availability of certain tax attributes, the outcome
of certain expectations regarding market conditions, and the Plan becoming
effective in accordance with its terms. The estimates of value represent
hypothetical reorganization values of the Reorganized Debtors as the continuing
operator of their business and assets, and do not purport to reflect or
constitute appraisals, liquidation values or estimates of the actual market
value that may be realized through the sale of any securities to be issued
pursuant to the Plan, which may be significantly different than the amounts set
forth herein. The value of an operating business such as the Debtors' business
is subject to uncertainties and contingencies that are difficult to predict, and
will fluctuate with changes in factors affecting the financial condition and
prospects of such a business.
In preparing a range of the estimated reorganization value of
Reorganized ICG and the going concern value of the Debtors' business, DrKW: (i)
reviewed certain historical financial information of the Debtors for recent
years and interim periods; (ii) reviewed certain internal financial and
operating data of the Debtors, including financial and operational projections
developed by management relating to its business and prospects; (iii) met with
certain members of senior management of the Debtors to discuss operations and
future prospects; (iv) reviewed publicly available financial data and considered
the market values of public companies deemed generally comparable to the
operating business of the Debtors; (v) considered certain economic and industry
information relevant to the operating business; and (vi) conducted such other
analyses as DrKW deemed appropriate such as sensitivity analyses to help assess
the volatility associated with the Debtors' financial results and projections.
Although DrKW conducted a review and analysis of the Debtors' business,
operating assets and liabilities and business plan, DrKW assumed and relied on
the accuracy and completeness of all financial and other information furnished
to it by the Debtors and publicly available information.
F. Application of the "Best Interests" of Creditors Test to the Liquidation
Analysis and the Valuation
It is impossible to determine with any specificity the value each
creditor will receive as a percentage of its Allowed Claim. This difficulty in
estimating the value of recoveries is due to, among other things, the inherent
uncertainty with respect to the Rights Offering and the lack of any public
market for the New Common Shares.
Notwithstanding the difficulty in quantifying recoveries to holders of
Allowed Claims with precision, the Debtors believe that the financial
disclosures and projections contained herein imply a greater or equal recovery
to holders of Claims in Impaired Classes than the recovery available in a
Chapter 7 liquidation. As set forth in the Liquidation Analysis, holders of
Allowed Claims in Class 3 are estimated to receive a 100% recovery in a Chapter
7 liquidation, and under the Plan, such Claim holders are also estimated to
receive a 100% recovery. In the Liquidation Analysis, holders of unsecured
Claims are estimated not to receive any material recovery in a Chapter 7
liquidation. Conversely, under the Plan, holders of Allowed Claims in Class 4
will receive 100% recovery and holders of Allowed Claims in Class 5 will receive
a recovery of the New Common Shares and the Rights.
Accordingly, the Debtors believe that the "best interests" test of
section 1129 of the Bankruptcy Code is satisfied.
77
G. Confirmation Without Acceptance of All Impaired Classes: The "Cramdown"
Alternative
In view of the deemed rejection by holders of Class 6 ICG Interests
and Subordinated Claims, the Debtors will seek confirmation of the Plan pursuant
to the "cramdown" provisions of the Bankruptcy Code. The Debtors further
reserve the right to seek confirmation of the Plan with respect to the holders
of Class 3, 4, and 5 Claims in the event such holders vote to reject the Plan.
Specifically, section 1129(b) of the Bankruptcy Code provides that a plan can be
confirmed even if the plan is not accepted by all impaired classes, as long as
at least one impaired class of claims has accepted it. The Bankruptcy Court may
confirm a plan at the request of the debtors if the plan "does not discriminate
unfairly" and is "fair and equitable" as to each impaired class that has not
accepted the plan. A plan does not discriminate unfairly within the meaning of
the Bankruptcy Code if a dissenting class is treated equally with respect to
other classes of equal rank.
The Debtors believe the Plan does not discriminate unfairly with
respect to holders of Class 3, 4 and 5 Claims and Class 6 ICG Interests and
Subordinated Claims. Class 6 includes all holders of ICG Interests and claims
subordinated to other Claims under section 510(b) or (c) of the Bankruptcy Code,
holders of which are not entitled to payment under the absolute priority rule
until all creditors have been paid in full. Thus, because all interest holders
and subordinated claimholders are similarly treated, there is no unfair
discrimination with respect to holders of Class 6 ICG Interests and Subordinated
Claims.
A plan is fair and equitable as to a class of unsecured claims which
rejects a plan if the plan provides (a) for each holder of a claim included in
the rejecting class to receive or retain on account of that claim property that
has a value, as of the effective date of the plan, equal to the allowed amount
of such claim; or (b) that the holder of any claim or interest that is junior to
the claims of such class will not receive or retain on account of such junior
claim or interest any property at all.
A plan is fair and equitable as to a class of equity interests that
rejects a plan if the plan provides (a) that each holder of an interest included
in the rejecting class receive or retain on account of that interest property
that has a value, as of the effective date of the plan, equal to the greatest of
the allowed amount of any fixed liquidation preference to which such holder is
entitled, any fixed redemption price to which such holder is entitled, or the
value of such interest; or (b) that the holder of any interest that is junior to
the interests of such class will not receive or retain under the plan on account
of such junior interest any property at all.
The Debtors believe that they will meet the "fair and equitable"
requirements of section 1129(b) with respect to holders of Class 3, 4 and 5
Claims and Class 6 Claims in that no holders of junior claims or interests will
receive distributions under the Plan.
78
X. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN
The Debtors believe that the Plan affords holders of Class 3, 4, and 5
Claims the potential for the greatest realization on the Debtors' assets and,
therefore, is in the best interests of such holders. If, however, the requisite
acceptances are not received, or the Plan is not confirmed and consummated, the
theoretical alternatives include: (a) formulation of an alternative plan or
plans of reorganization, or (b) liquidation of the Debtors under Chapter 7 or 11
of the Bankruptcy Code.
A. Alternative Plan(s) of Reorganization
If the requisite acceptances are not received or if the Plan is not
confirmed, the Debtors (or, if the Debtors' exclusive periods in which to file
and solicit acceptances of a plan of reorganization have expired, any other
party in interest) could attempt to formulate and propose a different plan or
plans of reorganization. Such a plan or plan(s) might involve either a
reorganization and continuation of the Debtors' businesses or an orderly
liquidation of assets.
With respect to an alternative plan, the Debtors have explored various
alternatives in connection with formulation and development of the Plan. See
----
Section IX. The Debtors believe that the Plan enables creditors to realize the
- ----------
greatest possible value under the circumstances, and, that as compared to any
alternative plan of reorganization, has the greatest chance to be confirmed and
consummated.
B. Liquidation under Chapter 7 or Chapter 11
If no plan is confirmed, the Chapter 11 Cases may be converted to
cases under Chapter 7 of the Bankruptcy Code, pursuant to which a trustee would
be elected or appointed to liquidate the Debtors' assets for distribution to
Creditors in accordance with the priorities established by the Bankruptcy Code.
It is impossible to predict precisely how the proceeds of the liquidation would
be distributed to the respective holders of Claims against or Interests in the
Debtors.
The Debtors believe that in a liquidation under Chapter 7, additional
administrative expenses involved in the appointment of a trustee or trustees and
attorneys, accountants and other professionals to assist such trustees would
cause a substantial diminution in the value of the Debtors' Estates. The assets
available for distribution to creditors would be reduced by such additional
expenses and by Claims, some of which would be entitled to priority, arising by
reason of the liquidation and from the rejection of leases and other executory
contracts in connection with the cessation of operations and the failure to
realize the greater going concern value of the Debtors' assets. More
importantly, as set forth in Appendix D, consequences of conversion to a Chapter
----------
7 liquidation would likely result in the immediate cessation of the Debtors'
businesses, leaving little value for prepetition unsecured creditors.
The Debtors could also be liquidated pursuant to the provisions of a
Chapter 11 plan of reorganization. In a liquidation under Chapter 11, the
Debtors' assets could theoretically be sold in an orderly fashion over a more
extended period of time than in a liquidation under Chapter 7. Because there
will be no need to appoint a Chapter 7 trustee and hire new professionals, a
Chapter 11 liquidation might be less costly than a Chapter 7 liquidation and
thus provide larger net distributions to creditors than in a
79
Chapter 7 liquidation. Any recovery in a Chapter 11 liquidation, while
potentially greater than in a Chapter 7 liquidation, would also be highly
uncertain.
Although preferable to a Chapter 7 liquidation, the Debtors believe
that any alternative liquidation under Chapter 11 is a much less attractive
alternative to creditors than the Plan because of the greater return anticipated
by the Plan.
XI. THE SOLICITATION; VOTING PROCEDURE
A. Parties in Interest Entitled to Vote
Under section 1124 of the Bankruptcy Code, a class of claims or
interests is deemed to be "impaired" under a plan unless (i) the plan leaves
unaltered the legal, equitable, and contractual rights to which such claim or
interest entitles the holder thereof or (ii) notwithstanding any legal right to
an accelerated payment of such claim or interest, the plan cures all existing
defaults (other than defaults resulting from the occurrence of events of
bankruptcy) and reinstates the maturity of such claim or interest as it existed
before the default.
In general, a holder of a claim or interest may vote to accept or to
reject a plan if (i) the claim or interest is "allowed," which means generally
that no party in interest has objected to such claim or interest, and (ii) the
claim or interest is impaired by the plan. If, however, the holder of an
impaired claim or interest will not receive or retain any distribution under the
plan on account of such claim or interest, the Bankruptcy Code deems such holder
to have rejected the plan, and, accordingly, holders of such claims and
interests do not actually vote on the plan. If a claim or interest is not
impaired by the plan, the Bankruptcy Code deems the holder of such claim or
interest to have accepted the plan and, accordingly, holders of such claims and
interests are not entitled to vote on the plan.
B. Classes Impaired under the Plan
Classes 3, 4, and 5 are entitled to vote to accept or reject the Plan.
By operation of law, each Unimpaired Class of Claims is deemed to have accepted
the Plan and, therefore, is not entitled to vote to accept or reject the Plan.
By operation of law, Class 6 is deemed to have rejected the Plan and therefore
is not entitled to vote to accept or reject the Plan.
C. Waivers of Defects, Irregularities, Etc.
Unless otherwise directed by the Bankruptcy Court, all questions as to
the validity, form, eligibility (including time of receipt), acceptance, and
revocation or withdrawal of Ballots will be determined by the Voting Agent and
the Debtors in their sole discretion, which determination will be final and
binding. As indicated below under "Withdrawal of Ballots; Revocation," effective
withdrawals of Ballots must be delivered to the Voting Agent prior to the Voting
Deadline. The Debtors reserve the absolute right to contest the validity of any
such withdrawal. The Debtors also reserve the right to reject any and all
Ballots not in proper form, the acceptance of which would, in the opinion of the
Debtors or their counsel, be unlawful. The Debtors further reserve the right to
waive any defects or irregularities or conditions of delivery as to any
particular Ballot. The interpretation (including the Ballot and the respective
instructions thereto) by the Debtors, unless otherwise directed by the
Bankruptcy Court, will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with deliveries of Ballots must be cured within
such time as the Debtors (or the Bankruptcy Court) determine. Neither the
Debtors nor any other person will be under any duty to provide notification of
defects or irregularities with respect to deliveries of Ballots nor will any of
them incur any liabilities for failure to provide such notification. Unless
otherwise directed by the Bankruptcy Court, delivery of such Ballots will not be
deemed to have been made until such irregularities have been cured or waived.
Ballots previously furnished (and as to which any irregularities have not
theretofore been cured or waived) will be invalidated.
D. Withdrawal of Ballots; Revocation
Any party who has delivered a valid Ballot for the acceptance or
rejection of the Plan may withdraw such acceptance or rejection by delivering a
written notice of withdrawal to the Voting Agent at any time prior to the Voting
Deadline. A notice of withdrawal, to be valid, must (i) contain the description
of the Claim(s) to which it relates and the aggregate principal amount
represented by such Claim(s), (ii) be signed by the withdrawing party in the
same manner as the Ballot being withdrawn, (iii) contain a certification that
the withdrawing party owns the Claim(s) and possesses the right to withdraw the
vote sought to be withdrawn and (iv) be received by the Voting Agent in a timely
manner at the address set forth below. The Debtors intend to consult with the
Voting Agent to determine whether any withdrawals of Ballots were received and
whether the Requisite Acceptances of the Plan have been received. As stated
above, the Debtors expressly reserve the absolute right to contest the validity
of any such withdrawals of Ballots.
Unless otherwise directed by the Bankruptcy Court, a purported notice
of withdrawal of Ballots which is not received in a timely manner by the Voting
Agent will not be effective to withdraw a previously cast Ballot.
Any party who has previously submitted to the Voting Agent prior to
the Voting Deadline a properly completed Ballot may revoke such Ballot and
change his or its vote by submitting to the Voting Agent prior to the Voting
Deadline a subsequent properly completed Ballot for acceptance or rejection of
the Plan. In the case where more than one timely, properly completed Ballot is
received, only the Ballot which bears the latest date will be counted for
purposes of determining whether the Requisite Acceptances have been received.
E. Further Information; Additional Copies
If you have any questions or require further information about the
voting procedure for voting your Claim or about the packet of material you
received, or if you wish to obtain an additional copy of the Plan, the
Disclosure Statement, or any exhibits or appendices to such documents (at your
own expense, unless otherwise specifically required by Bankruptcy Rule 3017(d)),
please contact the Voting Agent:
Logan & Company, Inc.
546 Valley Road
Upper Montclair, NJ 07043
(973) 509-3190 (telephone)
(973) 509-3191 (facsimile)
81
XII RECOMMENDATION AND CONCLUSION
For all of the reasons set forth in this Disclosure Statement, the
Debtors believe that confirmation and consummation of the Plan is preferable to
all other alternatives. Consequently, the Debtors urge all holders of Class 3,
4 and 5 Claims to vote to ACCEPT the Plan, and to complete and return their
ballots so that they will be RECEIVED by the Voting Agent on or before ______,
2002 prevailing Eastern Time on the Voting Deadline.
Dated: December 19, 2001
Englewood, Colorado
ICG Communications, Inc.
(for itself and on behalf of the
Subsidiary Debtors)
By: /s/ Randall E. Curran
---------------------------------
Name: Randall E. Curran
Title: Chief Executive Officer of ICG
Communications, Inc.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
David S. Kurtz
Timothy R. Pohl
Rena M. Samole
333 W. Wacker Drive
Chicago, Illinois 60606-1285
(312) 407-0700
-and-
/s/ Gregg M. Galardi
- ----------------------------------------
Skadden, Arps, Slate, Meagher & Flom LLP
Gregg M. Galardi
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
(302) 651-3000
Attorneys for Debtors and Debtors-in-Possession
APPENDIX A
JOINT PLAN OF REORGANIZATION OF
ICG COMMUNICATIONS, INC., et al.
--------------------------------
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
- - - - - - - - - - - - - - - - - - - - - - - - x
- - : Chapter 11
:
In re: :
: Case No. 00-4238 (PJW)
ICG COMMUNICATIONS, INC. :
et al., :
-- -- .
: Jointly Administered
Debtors. :
x
- - - - - - - - - - - - - - - - - - - - - - - -
JOINT PLAN OF REORGANIZATION OF ICG COMMUNICATIONS, INC. AND
ITS AFFILIATED DEBTORS AND DEBTORS IN POSSESSION
------------------------------------------------
David S. Kurtz
Timothy R. Pohl
Rena M. Samole
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606-1285
(312) 407-0700
- and -
Gregg M. Galardi (I.D. No. 2991)
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM LLP
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899
(302) 651-3000
Counsel for Debtors and Debtors in Possession
Dated: December 19, 2001
TABLE OF CONTENTS
Page
----
EXHIBITS............................................................................. iii
- --------
INTRODUCTION......................................................................... 1
ARTICLE IDEFINITIONS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW........................................... 1
A. Scope Of Definitions; Rules Of Construction................................. 1
-------------------------------------------
B. Definitions................................................................. 1
-----------
1.1 "Administrative Claim"......................................... 1
1.2 "Allowed Claim"................................................ 1
1.3 "Allowed Class..... Claim"..................................... 2
1.4 "Ballots"...................................................... 2
1.5 "Bankruptcy Code".............................................. 2
1.6 "Bankruptcy Court"............................................. 2
1.7 "Bankruptcy Rules"............................................. 2
1.8 "Bar Date(s)".................................................. 2
1.9 "BoA".......................................................... 2
1.10 "Business Day"................................................. 2
1.11 "Cash"......................................................... 2
1.12 "Chapter 11 Case".............................................. 2
1.13 "Chief Executive Officer"...................................... 2
1.14 "Claim"........................................................ 3
1.15 "Claims Objection Deadline".................................... 3
1.16 "Claims Resolution Committee".................................. 3
1.17 "Class"........................................................ 3
1.18 "Collateral"................................................... 3
1.19 "Confirmation"................................................. 3
1.20 "Confirmation Date"............................................ 3
1.21 "Confirmation Hearing"......................................... 3
1.22 "Confirmation Order"........................................... 3
1.23 "Convenience Claims"........................................... 3
1.24 "Credit Documents"............................................. 3
1.25 "Creditor"..................................................... 3
1.26 "Creditors' Committee"......................................... 3
1.27 "Cure"......................................................... 3
1.28 "Debtor(s)".................................................... 4
1.29 "Dilution"..................................................... 4
1.30 "Disclosure Statement"......................................... 4
1.31 "Disbursing Agent"............................................. 4
1.32 "Disputed Claim"............................................... 4
1.33 "Disputed Claim Amount"........................................ 4
1.34 "Distribution Date"............................................ 5
ii
1.35 "Distribution Record Date"....................................... 5
1.36 "Effective Date"................................................. 5
1.37 "Estate(s)"...................................................... 5
1.38 "Face Amount".................................................... 5
1.39 "Final Order".................................................... 5
1.40 "General Unsecured Claim"........................................ 5
1.41 "ICG Interests".................................................. 5
1.42 "Impaired"....................................................... 6
1.43 "Indemnification Obligation"..................................... 6
1.44 "Indenture Trustee".............................................. 6
1.45 "Intercompany Claim"............................................. 6
1.46 "Interest"....................................................... 6
1.47 "Lender"......................................................... 6
1.48 "Lender Claim"................................................... 6
1.49 "Lien"........................................................... 6
1.50 "Litigation Claims".............................................. 6
1.51 "Management Option Plan"......................................... 6
1.52 "Management Option Plan Participants"............................ 7
1.53 "Management Options"............................................. 7
1.54 "New Common Shares".............................................. 7
1.55 "New Secured Notes".............................................. 7
1.56 "New Securities"................................................. 7
1.57 "Non-Debtor Subsidiaries"........................................ 7
1.58 "Norwest"........................................................ 7
1.59 "Old Common Shares".............................................. 7
1.60 "Old Indentures"................................................. 7
1.61 "Old Note Claims"................................................ 7
1.62 "Old Notes"...................................................... 7
1.63 "Old Preferred Shares"........................................... 8
1.64 "Old Securities"................................................. 8
1.65 "Old Stock Options".............................................. 8
1.66 "Other Priority Claim"........................................... 8
1.67 "Other Secured Claims"........................................... 8
1.68 "Person"......................................................... 8
1.69 "Petition Date".................................................. 8
1.70 "Plan"........................................................... 8
1.71 "Plan Exhibit"................................................... 8
1.72 "Pre-Petition Credit Agreement".................................. 8
1.73 "Pre-Petition Credit Facility Agreements"........................ 8
1.74 "Priority Tax Claim"............................................. 8
1.75 "Professional"................................................... 8
1.76 "Professional Fee Claim"......................................... 9
1.77 "Pro Rata"....................................................... 9
1.78 "Proof of Claim"................................................. 9
1.79 "Quarterly Distribution Date".................................... 9
iii
1.80 "Registration Rights Agreement".................................. 9
1.81 "Reinstated" or "Reinstatement".................................. 9
1.82 "Reorganized Debtor(s)".......................................... 9
1.83 "Reorganized Subsidiary Debtor(s)"............................... 10
1.84 "Reorganized ICG"................................................ 10
1.85 "Restructuring Transactions"..................................... 10
1.86 "Rights"......................................................... 10
1.87 "Rights Offering"................................................ 10
1.88 "Rights Offering Commencement Date".............................. 10
1.89 "Rights Offering Distribution Pool".............................. 10
1.90 "Rights Offering Expiration Date"................................ 10
1.91 "Rights Offering Record Date".................................... 10
1.92 "Rights Offering Pro Rata Share"................................. 10
1.93 "Schedules"...................................................... 10
1.94 "Secondary Liability Claim"...................................... 10
1.95 "Secured Claim".................................................. 11
1.96 "Secured Lender Claim"........................................... 11
1.97 "Securities Act"................................................. 11
1.98 "Special Committee".............................................. 11
1.99 "Subordinated Claims"............................................ 11
1.100 "Subsidiaries"................................................... 11
1.101 "Subsidiary Debtors"............................................. 11
1.102 "Subsidiary Interests"........................................... 11
1.103 "Substantial Contribution Claim"................................. 11
1.104 "Unimpaired"..................................................... 11
1.105 "Unimpaired Claim"............................................... 11
1.106 "Voting Record Date"............................................. 12
C. Rules of Interpretation........................................................... 12
-----------------------
D. Computation of Time............................................................... 12
-------------------
E. Governing Law..................................................................... 12
-------------
ARTICLE II CLASSIFICATION OF CLAIMS AND INTERESTS...................................... 12
2.1 Introduction.................................................... 12
2.2 Classification of Unimpaired Claims and Interests............... 13
2.3 Classification of Impaired Claims And Interests................. 13
ARTICLE III TREATMENT OF CLAIMS AND INTERESTS.......................................... 14
3.1 Unclassified Claims..................................................... 14
(a) Administrative Claims..................................... 14
(b) Priority Tax Claims....................................... 14
3.2 Unimpaired Classes Of Claims and Interests.............................. 14
(a) Class 1: Other Priority Claims........................... 14
iv
(b) Class 2: Other Secured Claims............................ 15
3.3 Impaired Classes Of Claims and Interests................................. 15
(a) Class 3: Secured Lender Claims........................... 15
(b) Class 4: Convenience Claims.............................. 15
(c) Class 5: General Unsecured Claims........................ 15
(d) Class 6: ICG Interests and Subordinated Claims........... 16
3.4 Reservation of Rights Regarding Claims................................... 16
ARTICLE IV ACCEPTANCE OR REJECTION OF THE PLAN......................................... 16
4.1 Impaired Classes of Claims and Interests
Entitled to Vote................................................. 16
4.2 Acceptance by an Impaired Class.................................. 16
4.3 Presumed Acceptances by Unimpaired Classes....................... 16
4.4 Classes Deemed to Reject Plan.................................... 16
4.5 Summary of Classes Voting on the Plan............................ 16
4.6 Confirmation Pursuant to Section 1129(b) of the
Bankruptcy Code.................................................. 16
ARTICLE V MEANS FOR IMPLEMENTATION OF THE PLAN......................................... 17
5.1 Continued Corporate Existence.................................... 17
5.2 Cancellation Of Old Securities And Agreements.................... 17
5.3 Certificates of Incorporation and By-laws........................ 17
5.4 Restructuring Transactions....................................... 17
5.5 Issuance of New Common Stock, New Secured Notes and
Rights........................................................... 18
5.6 Compensation And Benefit Programs................................ 19
5.7 Directors And Officers of Reorganized Debtors.................... 19
5.8 Revesting Of Assets; Releases of Liens........................... 20
5.9 Preservation Of Rights Of Action................................. 20
5.10 Effectuating Documents; Further Transactions..................... 20
5.11 Exemption From Certain Transfer Taxes............................ 20
5.12 Releases and Related Matters..................................... 21
5.13 Lucent Settlement................................................ 22
5.14 Cisco Settlement................................................. 22
ARTICLE VI SUBSTANTIVE CONSOLIDATION................................................... 22
6.1 Substantive Consolidation........................................ 22
6.2 Order Granting Substantive Consolidation......................... 23
ARTICLE VII TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES...................... 23
7.1 Assumed Contracts And Leases..................................... 23
7.2 Payments Related To Assumption Of
Contracts And Leases............................................. 24
7.3 Rejected Contracts And Leases.................................... 24
v
7.4 Rejection Damages Bar Date........................................ 24
ARTICLE VIII PROVISIONS GOVERNING DISTRIBUTIONS........................................ 25
8.1 Distributions For Claims Allowed As Of The
Effective Date.................................................... 25
8.2 Interest On Claims................................................ 25
8.3 Distributions by Disbursing Agent................................. 25
8.4 Record Date For Distributions To Holders Of Lender
Claims and Old Notes.............................................. 25
8.5 Means Of Cash Payment............................................. 26
8.6 Calculation Of Distribution Amounts Of New Common
Shares............................................................ 26
8.7 Delivery Of Distributions......................................... 26
8.8 Surrender of Securities and Instruments........................... 27
8.9 Withholding And Reporting Requirements............................ 27
8.10 Setoffs........................................................... 28
ARTICLE IX PROCEDURES FOR RESOLVING DISPUTED, CONTINGENT, AND UNLIQUIDATED CLAIMS
AND DISTRIBUTIONS WITH RESPECT THERETO............................................. 28
9.1 Prosecution Of Objections to Claims............................... 28
9.2 Treatment of Disputed Claims...................................... 29
9.3 Disputed Claims Reserves.......................................... 29
9.4 Distributions on Account of Disputed Claims Once
They Are Allowed and Additional Distributions on
Account of Previously Allowed Claims.............................. 29
ARTICLE X CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF
THE PLAN........................................................................... 30
10.1 Conditions To Confirmation........................................ 30
10.2 Conditions To Effective Date...................................... 30
10.3 Waiver Of Conditions.............................................. 30
ARTICLE XI RETENTION OF JURISDICTION................................................... 31
ARTICLE XII MISCELLANEOUS PROVISIONS................................................... 32
12.1 Professional Fee Claims........................................... 32
12.2 Administrative Claims Bar Date.................................... 33
12.3 Payment Of Statutory Fees......................................... 33
12.4 Modifications and Amendments...................................... 33
12.5 Severability Of Plan Provisions................................... 33
12.6 Successors And Assigns............................................ 34
12.7 Compromises and Settlements....................................... 34
12.8 Releases And Satisfaction Of Subordination Rights................. 34
12.9 Discharge Of The Debtors.......................................... 34
vi
12.10 Injunction........................................................ 35
12.11 Exculpation And Limitation Of Liability........................... 35
12.12 Binding Effect.................................................... 36
12.13 Revocation, Withdrawal, Or Non-Consummation....................... 36
12.14 Plan Exhibits..................................................... 37
12.15 Notices........................................................... 37
12.16 Indemnification and Related Matters............................... 38
12.17 Prepayment........................................................ 38
12.18 Dissolution of the Creditors' Committee and
Establishment of the Claims Resolution Committee.................. 39
12.19 Term Of Injunctions Or Stays...................................... 41
vii
EXHIBITS
--------
Exhibit A Form of Certificate of Incorporation of Reorganized ICG
Exhibit B Form of Bylaws of Reorganized ICG
Exhibit C Form of Management Option Plan
Exhibit D Form of Registration Rights Agreement
Exhibit E Term Sheet for Rights Offering
Exhibit F(1) Term Sheet for New Secured Notes if Class 3 Accepts the Plan
Exhibit F(2) Term Sheet for New Secured Notes if Class 3 Does Not Accept
the Plan
SCHEDULES
---------
Schedule 1.57 Schedule of Non-Debtor Subsidiaries
Schedule 1.101 Schedule of Subsidiary Debtors
Schedule 5.9 Schedule of Causes of Action to be Retained by Reorganized ICG
Schedule 5.13 Lucent Settlement Agreement
Schedule 5.14 Cisco Settlement Agreement
Schedule 7.1 Non-Exclusive Schedule of Assumed Contracts
Schedule 7.3 Exclusive Schedule of Rejected Contracts
viii
INTRODUCTION
ICG Communications, Inc., a Delaware corporation ("ICG"), and those
entities listed on Schedule 1.101 hereto (collectively, the "Subsidiary
Debtors"), hereby propose the following joint plan of reorganization (the
"Plan") for the resolution of their outstanding creditor Claims (as defined
herein) and equity Interests (as defined herein). Reference is made to the
Disclosure Statement (as defined herein) distributed contemporaneously herewith,
for a discussion of the Debtors' history, businesses, properties, results of
operations, projections for future operations, risk factors, a summary and
analysis of the Plan, and certain related matters, including the New Securities
(as defined herein) to be issued under the Plan. The Debtors are the proponents
of this Plan within the meaning of section 1129 of the Bankruptcy Code.
All holders of Claims are encouraged to read this Plan and the Disclosure
Statement in their entirety before voting to accept or reject this Plan.
Subject to certain restrictions and requirements set forth in section 1127 of
the Bankruptcy Code and Fed. R. Bankr. P. 3019 and Article XII of this Plan, the
Debtors reserve the right to alter, amend, modify, revoke or withdraw this Plan
prior to its substantial consummation.
ARTICLE I
DEFINITIONS, RULES OF INTERPRETATION,
COMPUTATION OF TIME AND GOVERNING LAW
A. Scope Of Definitions; Rules Of Construction
-------------------------------------------
For purposes of this Plan, except as expressly provided or unless the
context otherwise requires, all capitalized terms not otherwise defined shall
have the meanings ascribed to them in Article I of this Plan. Any term used in
this Plan that is not defined herein, but is defined in the Bankruptcy Code or
the Bankruptcy Rules, shall have the meaning ascribed to that term in the
Bankruptcy Code or the Bankruptcy Rules. Whenever the context requires, such
terms shall include the plural as well as the singular number, the masculine
gender shall include the feminine, and the feminine gender shall include the
masculine.
B. Definitions
-----------
1.1 "Administrative Claim" means a Claim for payment of an administrative
expense of a kind specified in section 503(b) or 1114(e)(2) of the Bankruptcy
Code and entitled to priority pursuant to section 507(a)(1) of the Bankruptcy
Code, including, but not limited to, (a) the actual, necessary costs and
expenses, incurred after the Petition Date, of preserving the Estates and
operating the businesses of the Debtors, including wages, salaries, or
commissions for services rendered after the commencement of the Chapter 11 Case,
(b) Professional Fee Claims, (c) all fees and charges assessed against the
Estates under 28 U.S.C. (S) 1930 and (d) all Allowed Claims that are entitled to
be treated as Administrative Claims pursuant to a Final Order of the Bankruptcy
Court under section 546(c)(2)(A) of the Bankruptcy Code.
1.2 "Allowed Claim" means a Claim or any portion thereof (a) that has been
allowed by a Final Order, or (b) as to which, on or by the Effective Date, (i)
no proof of claim has been filed with the Bankruptcy Court and (ii) the
liquidated and noncontingent amount of which is Scheduled, other than a Claim
that is Scheduled at zero, in an unknown amount, or as disputed, or (c) for
which a proof of claim in a liquidated amount has been timely filed with the
Bankruptcy Court pursuant to the Bankruptcy Code, any Final Order of the
Bankruptcy Court or other applicable
bankruptcy law, and as to which either (i) no objection to its allowance has
been filed within the periods of limitation fixed by the Plan, the Bankruptcy
Code or by any order of the Bankruptcy Court or (ii) any objection to its
allowance has been settled or withdrawn, or has been denied by a Final Order, or
(d) that is expressly allowed in a liquidated amount in this Plan.
1.3 "Allowed Class . . . Claim" means an Allowed Claim in the particular
Class described.
1.4 "Ballots" means each of the ballot forms distributed with the
Disclosure Statement to holders of Impaired Claims entitled to vote as specified
in Section 4.1 of this Plan, in connection with the solicitation of acceptances
of the Plan.
1.5 "Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as codified
in title 11 of the United States Code, 11 U.S.C. (S)(S) 101-1330, as now in
effect or hereafter amended.
1.6 "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Delaware or such other court as may have jurisdiction over the
Chapter 11 Case.
1.7 "Bankruptcy Rules" means, collectively, the Federal Rules of
Bankruptcy Procedure and the Official Bankruptcy Forms, as amended, the Federal
Rules of Civil Procedure, as amended, as applicable to the Chapter 11 Case or
proceedings therein, and the Local Rules of the Bankruptcy Court, as applicable
to the Chapter 11 Case or proceedings therein, as the case may be.
1.8 "Bar Date(s)" means the date(s), if any, designated by the Bankruptcy
Court as the last dates for filing proofs of Claim or Interest against the
Debtors.
1.9 "BoA" means Bank of America, N.A.
1.10 "Business Day" means any day, excluding Saturdays, Sundays or "legal
holidays" (as defined in Fed. R. Bankr. P. 9006(a)), on which commercial banks
are open for business in New York, New York.
1.11 "Cash" means legal tender of the United States or equivalents thereof.
1.12 "Chapter 11 Case" means the jointly administered Chapter 11 cases of
the Debtors.
1.13 "Chief Executive Officer" means, at any time prior to the Effective
Date, the Person holding the title of chief executive officer of ICG, and at any
time after the Effective Date, the Person holding the title of chief executive
officer of Reorganized ICG.
1.14 "Claim" means a claim against the Debtors, or any of them, whether or
not asserted, as defined in Section 101(5) of the Bankruptcy Code.
1.15 "Claims Objection Deadline" means the last day for filing objections
to Disputed Claims, which day shall be ninety (90) days after the Effective
Date.
1.16 "Claims Resolution Committee" means the committee established pursuant
to Section 12.18 of this Plan.
1.17 "Class" means a category of holders of Claims or Interests, as
described in Article II of this Plan.
1.18 "Collateral" means any property or interest in the property of a
Debtor's Estate subject to a Lien to secure the payment or performance of a
Claim, which Lien is not subject to avoidance under the Bankruptcy Code or
otherwise invalid under the Bankruptcy Code or applicable state law.
1.19 "Confirmation" means entry by the Bankruptcy Court of the Confirmation
Order.
2
1.20 "Confirmation Date" means the date of entry by the clerk of the
Bankruptcy Court of the Confirmation Order.
1.21 "Confirmation Hearing" means the hearing to consider confirmation of
the Plan under section 1128 of the Bankruptcy Code.
1.22 "Confirmation Order" means the order entered by the Bankruptcy Court
confirming the Plan.
1.23 "Convenience Claims" means any Claim that otherwise would be an
Allowed Class 5 Claim against the Debtors in an amount (i) equal to or less than
$500, or (ii) greater than $500 but which is reduced to $500 by an irrevocable
written election of the holder of such Claim made on a validly executed and
timely delivered Ballot.
1.24 "Credit Documents" means the "Credit Documents" as defined in the Pre-
Petition Credit Agreement.
1.25 "Creditor" means any Person who holds a Claim against any of the
Debtors.
1.26 "Creditors' Committee" means the official committee of unsecured
creditors appointed pursuant to section 1102(a) of the Bankruptcy Code in the
Chapter 11 Case.
1.27 "Cure" means the distribution of Cash, or such other property as may
be agreed upon by the parties or ordered by the Bankruptcy Court, with respect
to the assumption of an executory contract or unexpired lease, pursuant to
section 365(b) of the Bankruptcy Code, in an amount equal to all unpaid monetary
obligations, without interest, or such other amount as may be agreed upon by the
parties, under such executory contract or unexpired lease, to the extent such
obligations are enforceable under the Bankruptcy Code and applicable bankruptcy
law.
1.28 "Debtor(s)" means, individually, ICG and each of the Subsidiary
Debtors, and collectively, ICG and the Subsidiary Debtors, including in their
capacity as debtors-in-possession pursuant to sections 1107 and 1108 of the
Bankruptcy Code, and as reorganized hereunder.
1.29 "Dilution" means dilution subsequent to the Effective Date (a) to the
extent necessary to give effect to the exercise of the Management Options, (b)
as a result of exercise of the Rights, or (c) otherwise as a result of the
issuance of common shares, implementation of other management incentive programs
or other action taken by the board of directors of Reorganized ICG.
1.30 "Disclosure Statement" means the written disclosure statement that
relates to the Plan, as amended, supplemented, or modified from time to time,
and that is prepared and distributed in accordance with section 1125 of the
Bankruptcy Code and Fed. R. Bankr. P. 3018.
1.31 "Disbursing Agent" means Reorganized ICG or any party designated by
Reorganized ICG, in its sole discretion, to serve as disbursing agent under the
Plan.
1.32 "Disputed Claim" means any Claim that has not been Allowed pursuant to
the Plan or a Final Order of the Bankruptcy Court, and
(a) if no Proof of Claim has been, or deemed to have been filed, by
the applicable Bar Date, which has been or hereafter is listed on the Schedules
as unliquidated, contingent, or disputed, and which has not been resolved by
written agreement of the parties or an order of the Bankruptcy Court;
(b) if a Proof of Claim has been filed, or deemed to have been filed,
by the applicable Bar Date (i) a Claim for which a corresponding Claim has been
listed on the Schedules as unliquidated, contingent or disputed; (ii) a Claim
for which a corresponding Claim has been listed on the Schedules as other than
unliquidated, contingent or disputed, but the amount of such Claim as asserted
in the Proof of Claim varies from the amount of such Claim as listed in the
Schedules; or (iii) as to which a Debtor has timely filed an objection or
request for estimation in accordance with the Plan, the Bankruptcy Code, the
Bankruptcy Rules, and any orders of the Bankruptcy Court, or which is otherwise
disputed by a Debtor in accordance with applicable law, which objection, request
for estimation or dispute has not been withdrawn, or determined by a Final
Order;
3
(c) for which a Proof of Claim was required to be filed by order of
the Bankruptcy Court, but as to which a Proof of Claim was not timely or
properly filed; or
(d) that is disputed in accordance with the provisions of this Plan.
1.33 "Disputed Claim Amount" means (a) if a liquidated amount is set forth
in the Proof of Claim relating to a Disputed Claim, (i) the liquidated amount
set forth in the Proof of Claim relating to the Disputed Claim; (ii) an amount
agreed to by the Debtors and the holder of such Disputed Claim; or (iii) if a
request for estimation is filed by the Debtors, the amount at which such Claim
is estimated by the Bankruptcy Court; (b) if no liquidated amount is set forth
in the Proof of Claim relating to a Disputed Claim, (i) an amount agreed to by
the Debtors and the holder of such Disputed Claim or (ii) the amount estimated
by the Bankruptcy Court with respect to such Disputed Claim; or (c) if the Claim
was listed on the Schedules as unliquidated, contingent or disputed and no Proof
of Claim was filed, or deemed to have been filed, by the applicable Bar Date and
the Claim has not been resolved by written agreement of the parties or an order
of the Bankruptcy Court, zero.
1.34 "Distribution Date" means the date, occurring as soon as practicable
after the Effective Date, upon which distributions are made by the Reorganized
Debtors, to holders of Allowed Claims entitled to receive distributions under
this Plan.
1.35 "Distribution Record Date" means the record date for purposes of
making distributions under the Plan on account of Allowed Claims, which date
shall be the Confirmation Date or such other date designated in the Confirmation
Order.
1.36 "Effective Date" means the Business Day on which all conditions to the
consummation of the Plan as set forth in Section 10.2 of this Plan have been
satisfied or waived as provided in Article X of this Plan and is the effective
date of the Plan.
1.37 "Estate(s)" means, individually, the estate of each Debtor in the
Chapter 11 Case, and, collectively, the estates of all Debtors in the Chapter 11
Case, created pursuant to section 541 of the Bankruptcy Code.
1.38 "Face Amount" means (a) when used in reference to a Disputed Claim,
the full stated amount claimed by the holder of such Claim in any proof of Claim
timely filed with the Bankruptcy Court or otherwise deemed timely filed by any
Final Order of the Bankruptcy Court or other applicable bankruptcy law, and (b)
when used in reference to an Allowed Claim, the allowed amount of such Claim.
1.39 "Final Order" means an order or judgment of the Bankruptcy Court, or
other court of competent jurisdiction, as entered on the docket in the Chapter
11 Case, the operation or effect of which has not been stayed, reversed, or
amended and as to which order or judgment (or any revision, modification, or
amendment thereof) the time to appeal or seek review or rehearing has expired
and as to which no appeal or petition for review or rehearing was filed or, if
filed, remains pending.
1.40 "General Unsecured Claim" means a Claim against the Debtors that is
not an Administrative Claim, Priority Tax Claim, Other Priority Claim, Other
Secured Claim, Secured Lender Claim, Subordinated Claim or Convenience Claim.
1.41 "ICG Interests" means, collectively, the Old Common Shares, the Old
Preferred Shares, and the Old Stock Options, together with any other options,
warrants, conversion rights, rights of first refusal or other rights,
contractual or otherwise, to acquire or receive any Old Common Shares, Old
Preferred Shares, Old Stock Options, or other equity ownership interests in ICG
or any Subsidiary Debtor (other than the Subsidiary Interests), and any
contracts subscriptions, commitments or agreements pursuant to which a party was
or could have been entitled to receive shares, securities or other ownership
interests in ICG or any Subsidiary Debtor (other than the Subsidiary Interests).
1.42 "Impaired" means, when used with reference to a Claim or Interest, a
Claim or Interest that is impaired within the meaning of section 1124 of the
Bankruptcy Code.
4
1.43 "Indemnification Obligation" means any obligation of any of the
Debtors to indemnify, reimburse or provide contribution to any present or former
officer, director or employee, or any present or former professionals, advisors
or representatives of the Debtors, pursuant to by-laws, articles of
incorporation, contract or otherwise as may be in existence immediately prior to
the Petition Date.
1.44 "Indenture Trustee" means Norwest Bank Colorado, National Association
or its successor, in either case, in its capacity as indenture trustee for each
of the Old Notes.
1.45 "Intercompany Claim" means, as the case may be, any Claim (a) by a
Debtor against another Debtor or (b) by a Non-Debtor Subsidiary against a
Debtor.
1.46 "Interest" means (a) the legal, equitable, contractual and other
rights of any Person (including any 401K plan or plan participant) with respect
to ICG Interests, (b) the legal, equitable, contractual or other rights of any
Person with respect to the Subsidiary Interests and (c) the legal, equitable,
contractual or other rights of any Person to acquire or receive any of the
foregoing.
1.47 "Lender" means a "Lender" as defined in the Pre-Petition Credit
Agreement, dated as of August 12, 1999, Royal Bank of Canada as administrative
agent and collateral agent, Morgan Stanley Senior Funding, Inc. as sole book-
runner and lead arranger for the Lenders, BoA and Barclays Bank Plc as co-
documentation agents, and their individual successors and assigns.
1.48 "Lender Claim" means a Claim of a Lender arising under or as a result
of the Pre-Petition Credit Facility Agreements.
1.49 "Lien" means a charge against or interest in property to secure
payment of a debt or performance of an obligation.
1.50 "Litigation Claims" means the claims, rights of action, suits, or
proceedings, whether in law or in equity, whether known or unknown, that the
Debtors or their Estates may hold against any Person, which are to be retained
by the Reorganized Debtors pursuant to Section 5.9 of this Plan.
1.51 "Management Option Plan" means a stock option plan to be adopted by
Reorganized ICG pursuant to Section 5.6 of this Plan, in substantially the form
of Exhibit C to this Plan.
1.52 "Management Option Plan Participants" means the employees of
Reorganized ICG entitled to participate in the Management Option Plan.
1.53 "Management Options" means the options to be issued by Reorganized ICG
to the Management Option Plan Participants to purchase New Common Shares
pursuant to the provisions of the Management Option Plan.
1.54 "New Common Shares" means the common shares of Reorganized ICG
authorized under Section 5.5 of this Plan.
1.55 "New Secured Notes" means the new promissory notes to be issued on the
Effective Date by Reorganized ICG pursuant to Section 5.5 of this Plan, with the
terms and conditions set forth on either Exhibit F(1) or Exhibit F(2) to this
Plan based upon whether Class 3 accepts the Plan, as set forth in Section 3.3(a)
of this Plan.
1.56 "New Securities" means, collectively, the New Common Shares, New
Secured Notes, Management Options, and the Rights.
1.57 "Non-Debtor Subsidiaries" means, collectively, the direct and indirect
subsidiaries of ICG listed on Schedule 1.57, which have not commenced Chapter 11
cases and thus are not Debtors.
1.58 "Norwest" means Norwest Bank Colorado, National Association.
5
1.59 "Old Common Shares" means the common shares of ICG issued and
outstanding as of the Petition Date.
1.60 "Old Indentures" means Indentures (a) dated April 27, 1998, between
Norwest, as trustee, and ICG Services, Inc., for the 9 7/8% Senior Notes due
2008; (b) dated February 12, 1998, between Norwest, as trustee, and ICG
Services, Inc., for the 10% Senior Notes due 2008; (c) dated March 11, 1997,
between Norwest, as trustee, and ICG Holdings, Inc., for the 11 5/8% Senior
Notes due 2007; (d) dated April 30, 1996, between Norwest, as trustee, and ICG
Telecom Group, Inc. (f/k/a Intelcom Group, Inc.) for the 12 1/2% Senior Notes
due 2006; and (e) dated August 8, 1995, between Norwest, as trustee, and ICG
Telecom Group, Inc. (f/k/a Intelcom Group, Inc.), for the 13 1/2% Senior Notes
due 2005, pursuant to which the Old Notes were issued and are outstanding.
1.61 "Old Note Claims" means any Claim arising from the Old Notes.
1.62 "Old Notes" means the (a) 9 7/8% Senior Notes due 2008 issued by ICG
Services, Inc.; (b) the 10% Senior Notes due 2008, dated February 12, 1998
issued by ICG Services, Inc.; (c) the 11 5/8% Senior Notes due 2007 issued by
ICG Holdings, Inc.; (d) the 12 1/2% Senior Notes due 2006 issued by ICG Telecom
Group, Inc. (f/k/a Intelcom Group, Inc.); and (e) the 13 1/2% Senior Notes due
2005 issued by ICG Telecom Group, Inc. (f/k/a Intelcom Group, Inc.), issued and
outstanding under the Old Indentures.
1.63 "Old Preferred Shares" means the preferred shares of any of the
Debtors issued and outstanding as of the Petition Date, including (i) ICG
Communications, Inc. 8% Series A-1, A-2, and A-3 Convertible Preferred
Securities Mandatorily Redeemable 2009; (ii) ICG Funding, LLC Exchangeable
Limited Liability Company Preferred Securities Mandatorily Redeemable 2009;
(iii) ICG Communications, Inc. 6 3/4% Preferred Stock Mandatorily Redeemable
2009; (iv) ICG Holdings, Inc. 14% Preferred Stock, Mandatorily Redeemable 2008;
and (v) ICG Holdings, Inc. 14 1/4% Preferred Stock Mandatorily Redeemable 2007.
1.64 "Old Securities" means collectively, the Old Common Shares, the Old
Preferred Shares, the Old Stock Options and the Old Notes.
1.65 "Old Stock Options" means the outstanding options to purchase Old
Common Shares, or Old Preferred Shares, as of the Petition Date.
1.66 "Other Priority Claim" means a Claim entitled to priority pursuant to
section 507(a) of the Bankruptcy Code other than a Priority Tax Claim or an
Administrative Claim.
1.67 "Other Secured Claims" means all Secured Claims against any of the
Debtors, as the case may be, other than the Secured Lender Claims.
1.68 "Person" means Person as defined in section 101 (41) of the Bankruptcy
Code.
1.69 "Petition Date" means the date on which the Debtors filed their
petitions for relief commencing the Chapter 11 Case.
1.70 "Plan" means this Chapter 11 reorganization plan and all exhibits
annexed hereto or referenced herein, as the same may be amended, modified or
supplemented from time to time.
1.71 "Plan Exhibit" means any exhibit or schedule attached hereto.
1.72 "Pre-Petition Credit Agreement" means the Credit Agreement, dated as
of August 12, 1999, among ICG, as borrower, the Lenders, Royal Bank of Canada,
as administrative agent and collateral agent, Morgan Stanley Senior Funding,
Inc., as sole book-runner and lead arranger for the Lenders, and BoA and
Barclays Bank Plc as co-documentation agents, as amended.
1.73 "Pre-Petition Credit Facility Agreements" mean the Pre-Petition Credit
Agreement and the Credit Documents.
6
1.74 "Priority Tax Claim" means a Claim that is entitled to priority
pursuant to section 507(a)(8) of the Bankruptcy Code.
1.75 "Professional" means any professional employed in the Chapter 11 Case
pursuant to sections 327 or 1103 of the Bankruptcy Code or otherwise and any
professionals seeking compensation or reimbursement of expenses in connection
with the Chapter 11 Case pursuant to section 503(b)(4) of the Bankruptcy Code.
1.76 "Professional Fee Claim" means a Claim of a Professional for
compensation or reimbursement of costs and expenses relating to services
incurred after the Petition Date and prior to and including the Effective Date.
1.77 "Pro Rata" means, at any time, the proportion that the Face Amount of
a Claim in a particular Class bears to the aggregate Face Amount of all Claims
(including Disputed Claims) in such Class, unless the Plan provides otherwise.
1.78 "Proof of Claim" means the proof of claim that must be filed by a
holder of an Impaired Unsecured Claim by the Bar Date.
1.79 "Quarterly Distribution Date" means the last Business Day of the month
following the end of each calendar quarter after the Effective Date; provided,
however, that if the Effective Date is within 30 days of the end of a calendar
quarter, the first Quarterly Distribution Date will be the last Business Day of
the month following the end of the first calendar quarter after the calendar
quarter in which the Effective Date falls.
1.80 "Registration Rights Agreement" means an agreement to be entered into
between Reorganized ICG and certain holders of General Unsecured Claims with
respect to rights of registration as to the New Common Shares, in substantially
the form set forth in Exhibit E to this Plan.
1.81 "Reinstated" or "Reinstatement" means (i) leaving unaltered the legal,
equitable, and contractual rights to which a Claim entitles the holder of such
Claim or Interest so as to leave such Claim or Interest unimpaired in accordance
with section 1124 of the Bankruptcy Code or (ii) notwithstanding any contractual
provision or applicable law that entitles the holder of such Claim to demand or
receive accelerated payment of such Claim or Interest after the occurrence of a
default (a) curing any such default that occurred before or after the Petition
Date, other than a default of a kind specified in section 365(b)(2) of the
Bankruptcy Code; (b) reinstating the maturity of such Claim or Interest as such
maturity existed before such default; (c) compensating the holder of such Claim
or Interest for any damages incurred as a result of any reasonable reliance by
such holder on such contractual provision or such applicable law; and (d) not
otherwise altering the legal, equitable, or contractual rights to which such
Claim or Interest entitles the holder of such Claim or Interest; provided,
however, that any contractual right that does not pertain to the payment when
due of principal and interest on the obligation on which such Claim or Interest
is based, including, but not limited to, financial covenant ratios, negative
pledge covenants, covenants or restrictions on merger or consolidation, and
affirmative covenants regarding corporate existence prohibiting certain
transactions or actions contemplated by the Plan, or conditioning such
transactions or actions on certain factors, shall not be required to be
reinstated in order to accomplish Reinstatement.
1.82 "Reorganized Debtor(s)" means, individually, any Reorganized Debtor
and, collectively, all Reorganized Debtors, on or after the Effective Date.
1.83 "Reorganized Subsidiary Debtor(s)" means, individually, a Reorganized
Subsidiary Debtor, and, collectively, all Reorganized Subsidiary Debtors, on or
after the Effective Date.
1.84 "Reorganized ICG" means reorganized ICG or its successor, on and after
the Effective Date.
1.85 "Restructuring Transactions" has the meaning ascribed thereto in
Section 5.4 of this Plan.
1.86 "Rights" means certificated, transferable rights issued by Reorganized
ICG. The securities to be offered pursuant to the Rights will be New Common
Shares.
7
1.87 "Rights Offering" means the issuance of the Rights by Reorganized ICG
to holders of Allowed Class 5 Claims on the Rights Offering Commencement Date,
on the terms and conditions set forth in Exhibit E to this Plan.
1.88 "Rights Offering Commencement Date" means the date on which ICG
commences the Rights Offering by mailing to holders of Allowed Class 5 Claims as
of the Rights Offering Record Date certificates representing the Rights and
instructions for the exercise thereof, which date shall be as soon as
practicable after the Effective Date.
1.89 "Rights Offering Distribution Pool" means all of the Rights.
1.90 "Rights Offering Expiration Date" means thirty (30) calendar days
after the date on which all the conditions to the Effective Date have occurred.
1.91 "Rights Offering Record Date" means the date that is the record date
to determine which holders of Claims are entitled to receive Rights, which shall
be the Confirmation Date or the date set forth in the Confirmation Order.
1.92 "Rights Offering Pro Rata Share" means, as to any Allowed Class 5
Claim on the Rights Offering Record Date, a fraction, (i) the numerator of which
is the amount of such Allowed Class 5 Claim as of the Rights Offering Record
Date and (ii) the denominator of which is the aggregate amount of Allowed Class
5 Claims as of the Rights Offering Record Date.
1.93 "Schedules" means the schedules of assets and liabilities and the
statements of financial affairs, if any, filed in the Bankruptcy Court by the
Debtors as such schedules or statements as may be amended or supplemented from
time to time in accordance with Fed. R. Bankr. P. 1009 or orders of the
Bankruptcy Court.
1.94 "Secondary Liability Claim" means a Claim that arises from a Debtor
being liable as a guarantor of, or otherwise being jointly, severally, or
secondarily liable for, any contractual, or tort, or other obligation of another
Debtor, including any Claim based on: (a) guaranties of collection, payment, or
performance; (b) indemnity bonds, obligations to indemnify, or obligations to
hold harmless; (c) performance bonds; (d) contingent liabilities arising out of
contractual obligations or out of undertakings (including any assignment or
other transfer) with respect to leases, operating agreements, or other similar
obligations made or given by a Debtor relating to the obligations or performance
of another Debtor; (e) vicarious liability; or (f) any other joint or several
liability that any Debtor may have in respect of any obligation that is the
basis of a Claim.
1.95 "Secured Claim" means a Claim that is secured by a Lien on property in
which an Estate has an interest or that is subject to setoff under section 553
of the Bankruptcy Code, to the extent of the value of the Claim holder's
interest in the Estate's interest in such property or to the extent of the
amount subject to setoff, as applicable, as determined pursuant to section
506(a) of the Bankruptcy Code.
1.96 "Secured Lender Claim" means a Secured Claim of a Lender arising under
or as a result of the Pre-Petition Credit Facility Agreement, which Claims shall
be deemed Allowed pursuant to this Plan in the aggregate amount of $84.6
million.
1.97 "Securities Act" means the Securities Act of 1933, 15 U.S.C. (S)(S)
77a-77aa, as now in effect or hereafter amended.
1.98 "Special Committee" means the Special Committee of the Board of
Directors of ICG, which is comprised of Messrs. William J. Laggett, John U.
Moorhead, II, Leontis Teryazos, and Walter Threadgill.
1.99 "Subordinated Claims" means any Claim subordinated pursuant to
sections 510(b) or (c) of the Bankruptcy Code, which shall include any Claim
arising from the rescission of a purchase or sale of any Old Security, any Claim
for damages arising from the purchase or sale of an Old Security, or any Claim
for reimbursement, contribution or indemnification on account of any such Claim.
1.100 "Subsidiaries" mean, collectively, the Subsidiary Debtors and the
Non- Debtor Subsidiaries.
8
1.101 "Subsidiary Debtors" means the direct and indirect subsidiaries of
ICG listed on Schedule 1.101, each of which are Debtors.
1.102 "Subsidiary Interests" means, collectively, the issued and
outstanding shares of stock of the Subsidiary Debtors directly or indirectly
owned by ICG, as of the Petition Date.
1.103 "Substantial Contribution Claim" means a claim for compensation or
reimbursement of expenses incurred in making a substantial contribution in the
Chapter 11 Case pursuant to section 503(b)(3),(4), or (5) of the Bankruptcy
Code.
1.104 "Unimpaired" means, when used with reference to a Claim or Interest,
a Claim or Interest that is not impaired within the meaning of section 1124 of
the Bankruptcy Code.
1.105 "Unimpaired Claim" means a Claim that is not an Impaired Claim.
1.106 "Voting Record Date" means the voting record date for voting to
accept or reject this Plan, as determined by the Bankruptcy Court.
C. Rules of Interpretation
-----------------------
For purposes of the Plan (a) any reference in the Plan to a contract,
instrument, release, indenture, or other agreement or documents being in a
particular form or on particular terms and conditions means that such document
shall be substantially in such form or substantially on such terms and
conditions, (b) any reference in the Plan to an existing document or exhibit
filed or to be filed means such document or exhibit as it may have been or may
be amended, modified, or supplemented, (c) unless otherwise specified, all
references in the Plan to sections, articles, schedules, and exhibits are
references to sections, articles, schedules, and exhibits of or to the Plan, (d)
the words "herein" and "hereto" refer to the Plan in its entirety rather than to
a particular portion of the Plan, (e) captions and headings to articles and
sections are inserted for convenience of reference only and are not intended to
be a part of or to affect the interpretation of the Plan, and (f) the rules of
construction set forth in section 102 of the Bankruptcy Code and in the
Bankruptcy Rules shall apply.
D. Computation of Time
-------------------
In computing any period of time prescribed or allowed by the Plan, the
provisions of Fed. R. Bankr. P. 9006(a) shall apply.
E. Governing Law
-------------
Unless a rule of law or procedure is supplied by federal law (including the
Bankruptcy Code and Bankruptcy Rules), the laws of (i) the State of Delaware
shall govern the construction and implementation of the Plan and any agreements,
documents, and instruments executed in connection with the Plan and (ii) the
laws of the state of incorporation of each Debtor shall govern corporate
governance matters with respect to such Debtor, in either case without giving
effect to the principles of conflicts of law thereof.
ARTICLE II
CLASSIFICATION OF CLAIMS AND INTERESTS
2.1 Introduction
The Plan is premised on the substantive consolidation of the Debtors for
purposes of voting on, distributions under, and Confirmation of the Plan only,
as provided in Section 6.1 of the Plan.
9
In accordance with section 1123(a)(1) of the Bankruptcy Code,
Administrative Claims and Priority Tax Claims, have not been classified, and the
respective treatment of such unclassified claims is set forth in Section 3.1 of
the Plan.
A Claim or Interest is placed in a particular Class only to the extent that
the Claim or Interest falls within the description of that Class. A Claim may
be and is classified in other Classes to the extent that any portion of the
Claim or Interest falls within the description of such other Classes. A Claim
is also placed in a particular Class only to the extent that such Claim is an
Allowed Claim in that Class and such Claim has not been paid, released, or
otherwise settled prior to the Effective Date.
2.2 Classification of Unimpaired Claims and Interests
(a) Class 1: Other Priority Claims
Class 1 consists of all Other Priority Claims.
(b) Class 2: Other Secured Claims
Class 2 consists of separate subclasses for each Other Secured
Claim secured by a Lien upon property in which an Estate has an
interest. Each subclass is deemed to be a separate Class for all
purposes under the Bankruptcy Code.
2.3 Classification of Impaired Claims And Interests.
(a) Class 3: Secured Lender Claims
Class 3 consists of all Secured Lender Claims.
(b) Class 4: Convenience Claims
Class 4 consists of all Convenience Claims.
(c) Class 5: General Unsecured Claims
Class 5 consists of all General Unsecured Claims.
(d) Class 6: ICG Interests and Subordinated Claims
Class 6 consists of all ICG Interests and any Subordinated
Claims.
ARTICLE III
TREATMENT OF CLAIMS AND INTERESTS
3.1 Unclassified Claims
(a) Administrative Claims
Except as otherwise provided for herein, and subject to the requirements of
Sections 12.1 -12.3 of this Plan, on, or as soon as reasonably practicable
after, the latest of (i) the Distribution Date, (ii) the date such
Administrative Claim becomes an Allowed Administrative Claim, or (iii) the date
such Administrative Claim becomes payable pursuant to any agreement between a
Debtor and the holder of such Administrative Claim, each holder of an Allowed
Administrative Claim shall receive in full satisfaction, settlement, release,
and discharge of and in exchange for such Allowed Administrative Claim (x) Cash
equal to the unpaid portion of such Allowed Administrative Claim or (y) such
other treatment as to which the applicable Debtor, and such holder shall have
agreed upon in writing; provided, however, that Allowed Administrative Claims
with respect to liabilities incurred by a Debtor in the ordinary course of
10
business during the Chapter 11 Case shall be paid in the ordinary course of
business in accordance with the terms and conditions of any agreements relating
thereto.
(b) Priority Tax Claims
Each holder of an Allowed Priority Tax Claim, at the sole option of the
Debtors, shall be entitled to receive on account of such Allowed Priority Tax
Claim, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Priority Tax Claim, (i) equal Cash payments made on
the last Business Day of every three (3) month period following the Effective
Date, over a period not to exceed six (6) years after the assessment of the tax
on which such Claim is based, totaling the principal amount of such Claim plus
simple interest on any outstanding balance from the Effective Date calculated at
the interest rate available on ninety (90) day United States Treasuries on the
Effective Date or (ii) such other treatment agreed to by the Allowed Priority
Tax Claim holder and the Debtors.
3.2 Unimpaired Classes Of Claims and Interests
(a) Class 1: Other Priority Claims
On, or as soon as reasonably practicable after, the latest of (i) the
Distribution Date, (ii) the date such Claim becomes an Allowed Class 1 Claim, or
(iii) the date such Class 1 Claim becomes payable pursuant to any agreement
between a Debtor and the holder of such Class 1 Claim, each holder of an Allowed
Class 1 Claim shall receive in full satisfaction, settlement, release, and
discharge of and in exchange for such Allowed Class 1 Claim (x) Cash equal to
the unpaid portion of such Allowed Class 1 Claim or (y) such other treatment as
to which a Debtor and such holder shall have agreed upon in writing.
(b) Class 2: Other Secured Claims
On the Effective Date, the legal, equitable and contractual rights of
holders of an Allowed Class 2 Claim shall be Reinstated, subject to the
provisions of Article VIII of this Plan. The Debtors' failure to object to any
such Class 2 Claims in the Chapter 11 Cases shall be without prejudice to ICG's
or the Reorganized Debtors' right to contest or otherwise defend against such
Claim in the appropriate forum when and if such Claim is sought to be enforced
by the Other Secured Claim holder. Notwithstanding section 1141(c) or any other
provision of the Bankruptcy Code, all pre-petition liens on property of any
Debtor held by or on behalf of the Other Secured Claim holders with respect to
such Claims shall survive the Effective Date and continue in accordance with the
contractual terms of the underlying agreements with such Claim holders until, as
to each such Claim holder, the Allowed Claims of such Other Secured Claim holder
are paid in full, subject to the provisions of Article VIII of this Plan.
Nothing in this Section 3.2(b) or elsewhere in this Plan shall preclude the
Debtors or Reorganized Debtors from challenging the validity of any alleged lien
on any asset of a Debtor or the value of such Collateral.
3.3 Impaired Classes Of Claims and Interests
(a) Class 3: Secured Lender Claims
On the Effective Date, each holder of an Allowed Class 3 Claim, in full
satisfaction, settlement, release, and discharge of and in exchange for such
Allowed Class 3 Claim, shall receive on or as soon as practicable after the
Distribution Date, its Pro Rata share of one-hundred percent (100%) of the New
Secured Notes. If Class 3 accepts the Plan, the New Secured Notes shall have
the terms and conditions set forth on Plan Exhibit F(1). If Class 3 does not
accept the Plan, the New Secured Notes shall have the terms and conditions set
forth on Plan Exhibit F(2). If Class 3 votes against the Plan, the Debtors
shall seek confirmation of the Plan pursuant to section 1129(b) of the
Bankruptcy Code with respect to Class 3.
(b) Class 4: Convenience Claims
On the Effective Date, each holder of an Allowed Class 4 Claim will receive
cash equal to the amount of such Allowed Claim (as reduced, if applicable,
pursuant to an election by the holder thereof).
(c) Class 5: General Unsecured Claims
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On the Effective Date, each holder of an Allowed Class 5 Claim, shall
receive, in full satisfaction, settlement, release and discharge of and in
exchange for such Allowed Class 5 Claim:
(i) its Pro Rata share of 100% of the New Common Shares issued and
outstanding as of the Effective Date (subject to Dilution); plus
(ii) for each holder of an Allowed Class 5 Claim as of the Rights
Offering Record Date, on the Rights Offering Commencement Date, its Rights
Offering Pro Rata Share of the Rights Offering Distribution Pool.
(d) Class 6: ICG Interests and Subordinated Claims
The holders of ICG Interests and Subordinated Claims shall not receive or
retain any property under the Plan on account of such Interests or Claims. On
the Effective Date, all of the ICG Interests shall be deemed cancelled and
extinguished.
3.4 Reservation of Rights Regarding Claims
Except as otherwise explicitly provided in the Plan, nothing shall affect
the Debtors' or Reorganized Debtors' rights and defenses, both legal and
equitable, with respect to any Claims, including, but not limited to, all rights
with respect to legal and equitable defenses to alleged rights of setoff or
recoupment.
ARTICLE IV
ACCEPTANCE OR REJECTION OF THE PLAN
4.1 Impaired Classes of Claims and Interests Entitled to Vote.
Subject to Section 4.4 of the Plan, Claim and Interest holders in each Impaired
Class of Claims or Interests are entitled to vote as a class to accept or reject
the Plan.
4.2 Acceptance by an Impaired Class. In accordance with section
1126(c) of the Bankruptcy Code and except as provided in section 1126(e) of the
Bankruptcy Code, an Impaired Class of Claims shall have accepted the Plan if the
Plan is accepted by the holders of at least two-thirds ([_]) in dollar amount
and more than one-half (1/2) in number of the Allowed Claims of such Class that
have timely and properly voted to accept or reject the Plan.
4.3 Presumed Acceptances by Unimpaired Classes. Classes 1 and 2 are
Unimpaired by the Plan. Under section 1126(f) of the Bankruptcy Code, such
Claim holders are conclusively presumed to accept the Plan, and the votes of
such Claim holders will not be solicited.
4.4 Classes Deemed to Reject Plan. Holders of Interests and Claims in
Class 6 are not entitled to receive or retain any property under the Plan. Under
section 1126(g) of the Bankruptcy Code, Class 6 Interest and Claim holders are
deemed to reject the Plan, and the votes of such Interest or Claim holders will
not be solicited.
4.5 Summary of Classes Voting on the Plan. As a result of the
provisions of Sections 4.1, 4.3 and 4.4 of this Plan, the votes of holders of
Claims in Classes 3, 4 and 5 will be solicited with respect to this Plan.
4.6 Confirmation Pursuant to Section 1129(b) of the Bankruptcy Code.
To the extent that any Impaired Class rejects the Plan or is deemed to have
rejected the Plan, the Debtors will request confirmation of the Plan, as it may
be modified from time to time, under section 1129(b) of the Bankruptcy Code. The
Debtors reserve the right to alter, amend, modify, revoke or withdraw the Plan
or any Plan Exhibit or Schedule, including to amend or modify it to satisfy the
requirements of section 1129(b) of the Bankruptcy Code, if necessary.
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ARTICLE V
MEANS FOR IMPLEMENTATION OF THE PLAN
5.1 Continued Corporate Existence
Subject to the Restructuring Transactions defined in Section 5.4 of the
Plan, the Reorganized Debtors shall continue to exist after the Effective Date
as separate corporate entities, in accordance with the applicable law in the
respective jurisdictions in which they are incorporated and pursuant to their
respective certificates or articles of incorporation and by-laws in effect prior
to the Effective Date, except to the extent such certificates or articles of
incorporation and by-laws are amended by this Plan.
5.2 Cancellation Of Old Securities And Agreements
On the Effective Date, except as otherwise provided for herein, (a) the Old
Securities and any other note, bond, indenture, or other instrument or document
evidencing or creating any indebtedness or obligation of a Debtor, shall be
canceled, and (b) the obligations of the Debtors under any agreements,
indentures or certificates of designations governing the Old Securities and any
other note, bond, indenture or other instrument or document evidencing or
creating any indebtedness or obligation of a Debtor, as the case may be, shall
be discharged.
5.3 Certificates of Incorporation and By-laws
The certificate or articles of incorporation and by-laws of each Debtor
shall be amended as necessary to satisfy the provisions of the Plan and the
Bankruptcy Code and shall include, among other things, pursuant to section
1123(a)(6) of the Bankruptcy Code, a provision prohibiting the issuance of non-
voting equity securities, but only to the extent required by section 1123(a)(6)
of the Bankruptcy Code. The amended Certificate of Incorporation and By-laws of
Reorganized ICG shall be in substantially the form attached to this Plan as
Exhibits A and B, respectively.
5.4 Restructuring Transactions
(a) On or after the Effective Date, the applicable Reorganized
Debtors may enter into such transactions and may take such actions as may be
necessary or appropriate to effect a corporate restructuring of their respective
businesses, to otherwise simplify the overall corporate structure of the
Reorganized Debtors, or to reincorporate certain of the Subsidiary Debtors under
the laws of jurisdictions other than the laws of which the applicable Subsidiary
Debtors are presently incorporated. Such restructuring may include one or more
mergers, consolidations, restructures, dispositions, liquidations, or
dissolutions, as may be determined by the Debtors or Reorganized Debtors to be
necessary or appropriate (collectively, the "Restructuring Transactions"). The
actions to effect the Restructuring Transactions may include: (a) the execution
and delivery of appropriate agreements or other documents of merger,
consolidation, restructuring, disposition, liquidation, or dissolution
containing terms that are consistent with the terms of the Plan and that satisfy
the applicable requirements of applicable state law and such other terms to
which the applicable entities may agree; (b) the execution and delivery of
appropriate instruments of transfer, assignment, assumption, or delegation of
any asset, property, right, liability, duty, or obligation on terms consistent
with the terms of the Plan and having such other terms to which the applicable
entities may agree; (c) the filing of appropriate certificates or articles of
merger, consolidation, or dissolution pursuant to applicable state law; and (d)
all other actions that the applicable entities determine to be necessary or
appropriate, including making filings or recordings that may be required by
applicable state law in connection with such transactions. The Restructuring
Transactions may include one or more mergers, consolidations, restructures,
dispositions, liquidations, or dissolutions, as may be determined by the
Reorganized Debtors to be necessary or appropriate to result in substantially
all of the respective assets, properties, rights, liabilities, duties, and
obligations of certain of the Reorganized Debtors vesting in one or more
surviving, resulting, or acquiring corporations. In each case in which the
surviving, resulting, or acquiring corporation in any such transaction is a
successor to a Reorganized Debtor, such surviving, resulting, or acquiring
corporation will perform the obligations of the applicable Reorganized Debtor
pursuant to the Plan to pay or otherwise satisfy the Allowed Claims against such
Reorganized Debtor, except as provided in any contract, instrument, or other
agreement or document effecting a disposition to such surviving, resulting, or
acquiring corporation, which may provide that another Reorganized Debtor will
perform such obligations.
(b) As part of the Restructuring Transactions, on, prior to, or as
soon as
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practicable after, the Effective Date, Reorganized ICG shall take whatever steps
are necessary and appropriate to wind-up and terminate the following entities'
corporate existence: ICG Tevis, Inc. (Delaware); ICG Funding, LLC (Delaware);
ICG Canadian Acquisition, Inc. (Delaware); ICG Holdings (Canada) Co. (Nova
Scotia Unlimited Liability Company); ICG Services, Inc. (Delaware); ICG Enhanced
Services, Inc. (Colorado); Communications Buying Group, Inc. (Ohio); PTI Harbor
Bay, Inc. (Washington); Bay Area Teleport, Inc. (Delaware); ICG Access Services-
Southeast-Inc. (Delaware); Trans American Cable, Inc. (Kentucky); ICG Telecom of
San Diego, L.P. (CA Limited Partnership); Western Plains Finance, L.L.C. (NV
Limited Liability Company); ICG Telecom Canada, Inc. (Federal Canadian); Zycom
Corporation (Alberta, Canada); Zycom Corporation (Texas); Zycom Network
Services, Inc. (Texas); DownNorth, Inc. (Georgia); and ICG NetAhead, Inc.
(Delaware).
5.5 Issuance of New Common Stock, New Secured Notes and Rights
On the Effective Date, Reorganized ICG shall issue for distribution in
accordance with the terms of the Plan the New Secured Notes and ten (10) million
shares of New Common Stock to the holders of Allowed Claims in Classes 3 and 5,
respectively. In addition, in accordance with the terms of the Rights Offering
termsheet attached hereto as Exhibit E, on and as of the Rights Offering
Commencement Date, Reorganized ICG will issue the Rights to the holders of
Allowed Claims in Class 5 as of the Rights Offering Record Date, as contemplated
by this Plan, and sufficient shares of New Common Stock for purchase pursuant to
the Rights. The issuance of the New Common Stock, the New Secured Notes, and
the Rights, and the distribution thereof shall be exempt from registration under
applicable securities laws pursuant to section 1145 of the Bankruptcy Code.
Without limiting the effect of section 1145 of the Bankruptcy Code, on the
Effective Date, Reorganized ICG will enter into a Registration Rights Agreement
with each Allowed Class 5 Claim holder (a) who by virtue of holding New Common
Stock, the Rights to be distributed under the Plan and/or its relationship with
Reorganized ICG could reasonably be deemed to be an "underwriter" or "affiliate"
(as such terms are used within the meaning of applicable securities laws) of
Reorganized ICG, and (b) who requests in writing that Reorganized ICG execute
such agreement. The Registration Rights Agreements may contain certain demand
and piggyback registration rights for the benefit of the signatories thereto.
The Registration Rights Agreement shall be in substantially the form attached to
this Plan as Exhibit D. Reorganized ICG shall use reasonable efforts to have
the New Common Stock listed for trading on a national securities exchange.
5.6 Compensation And Benefit Programs
(a) Except and to the extent previously assumed or rejected by an
order of the Bankruptcy Court on or before the Confirmation Date, all employee
compensation and benefit programs of the Debtors, including programs subject to
sections 1114 and 1129(a)(13) of the Bankruptcy Code, entered into before or
after the Petition Date and not since terminated, shall be deemed to be, and
shall be treated as though they are, executory contracts that are assumed under
Section 7.1 of this Plan.
(b) On or about the Effective Date, management and the designated
employees of Reorganized ICG and the other Reorganized Debtors shall receive
stock options which are more specifically described in the Management Option
Plan. The Management Option Plan shall be substantially in the form as Exhibit
C to this Plan.
5.7 Directors And Officers of Reorganized Debtors
(a) Appointment. The existing senior officers of ICG shall serve
initially in the same capacities after the Effective Date for Reorganized ICG.
The initial board of directors of Reorganized ICG shall consist of seven (7)
directors. Such board of directors shall be divided into Class I and Class II,
with Class I consisting of four (4) directors, and Class II consisting of three
(3) directors. The Creditors' Committee shall be entitled to appoint all Class
I directors, and the Chief Executive Officer shall be entitled to appoint all
Class II directors. All of the selected directors shall be reasonably
acceptable to the Chief Executive Officer and the Creditors' Committee. The
Chief Executive Officer shall be Chairman of the board of directors. The
Persons designating board members shall file with the Bankruptcy Court and give
to ICG written notice of the identities of such members on a date that is not
less than five (5) days prior to the Confirmation Hearing; provided, however,
that if and to the extent that the Creditors' Committee fails to file and give
such notice, ICG shall designate the members of the board of directors of
Reorganized ICG by announcing their identities at the Confirmation Hearing.
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(b) Terms. Reorganized ICG board members shall serve for an initial
two (2) year term commencing on the Effective Date as determined by the Debtors.
The terms will be staggered such that each year one class of directors will
stand for re-election.
(c) Vacancies. Until the first annual meeting of shareholders of
Reorganized ICG after the Effective Date, any vacancy in the directorship
originally (i) selected by the Creditors' Committee shall be filled by a person
designated by such director as a replacement to serve out the remainder of the
applicable term; and (ii) selected by the Chief Executive Officer, shall be
filled by a person designated by the Chief Executive Officer to serve out the
remainder of the applicable term.
5.8 Revesting Of Assets; Releases of Liens
The property of each Debtor's Estate, together with any property of each
Debtor that is not property of its Estate and that is not specifically disposed
of pursuant to the Plan, shall revest in the applicable Debtor on the Effective
Date. Thereafter, each Debtor may operate its business and may use, acquire,
and dispose of property free of any restrictions of the Bankruptcy Code, the
Bankruptcy Rules, and the Bankruptcy Court. As of the Effective Date, all
property of each Debtor shall be free and clear of all Claims and Interests,
except as specifically provided in the Plan or the Confirmation Order. Without
limiting the generality of the foregoing, each Debtor may, without application
to or approval by the Bankruptcy Court, pay fees that it incurs after the
Effective Date for reasonable professional fees and expenses.
5.9 Preservation Of Rights Of Action
Except as otherwise provided in this Plan or the Confirmation Order, or in
any contract, instrument, release, indenture or other agreement entered into in
connection with the Plan, in accordance with section 1123(b) of the Bankruptcy
Code, the Reorganized Debtors shall retain and may enforce, sue on, settle, or
compromise (or decline to do any of the foregoing) all Litigation Claims that
the Debtors or the Estates may hold against any Person or entity. Each Debtor
or its successor(s) may pursue such retained Litigation Claims as appropriate,
in accordance with the best interests of the Reorganized Debtor or its
successor(s) who hold such rights. Schedule 5.9 to the Plan contains a non-
exclusive list of claims or causes of actions that the Debtors hold or may hold
either in pending or potential litigation. The Debtors reserve their right to
modify Schedule 5.9 to add or delete parties or causes of action, but disclaim
any obligation to do so.
5.10 Effectuating Documents; Further Transactions
The Chief Executive Officer, chief financial officer, or any other
appropriate officer of ICG or any applicable Debtor, as the case may be, shall
be authorized to execute, deliver, file, or record such contracts, instruments,
releases, indentures, and other agreements or documents, and take such actions
as may be necessary or appropriate to effectuate and further evidence the terms
and conditions of the Plan. The secretary or assistant secretary of ICG or any
applicable Debtor, as the case may be, shall be authorized to certify or attest
to any of the foregoing actions.
5.11 Exemption From Certain Transfer Taxes
Pursuant to section 1146(c) of the Bankruptcy Code, any transfers from a
Debtor to a Reorganized Debtor or any other Person or entity pursuant to the
Plan in the United States shall not be subject to any document recording tax,
stamp tax, conveyance fee, intangibles or similar tax, mortgage tax, stamp act,
real estate transfer tax, mortgage recording tax or other similar tax or
governmental assessment, and the Confirmation Order shall direct the appropriate
state or local governmental officials or agents to forego the collection of any
such tax or governmental assessment and to accept for filing and recordation any
of the foregoing instruments or other documents without the payment of any such
tax or governmental assessment.
5.12 Releases and Related Matters
(a) Releases by Debtors
15
As of the Effective Date, for good and valuable consideration, the adequacy
of which is hereby confirmed, the Debtors and Reorganized Debtors will be
deemed to forever release, waive and discharge all claims, obligations, suits,
judgments, damages, demands, debts, rights, causes of action and liabilities
whatsoever in connection with or related to the Debtors and the Subsidiaries,
the Chapter 11 Case or the Plan (other than the rights of the Debtors or
Reorganized Debtors to enforce the Plan and the contracts, instruments,
releases, indentures, and other agreements or documents delivered thereunder)
whether liquidated or unliquidated, fixed or contingent, matured or unmatured,
known or unknown, foreseen or unforseen, then existing or thereafter arising, in
law, equity or otherwise that are based in whole or part on any act, omission,
transaction, event or other occurrence taking place on or prior to the Effective
Date in any way relating to the Debtors, the Reorganized Debtors or their
Subsidiaries, the Chapter 11 Case or the Plan, and that may be asserted by or on
behalf of the Debtors or their Estates or the Reorganized Debtors against (i)
the Debtors' or Subsidiaries' present and former directors, officers, employees,
agents and professionals as of the Petition Date or thereafter and (ii) the
Creditors' Committee and its members.
(b) Release by Holders of Claims and Interests
As of the Effective Date, for good and valuable consideration, the adequacy
of which is hereby confirmed, each holder of a Claim or Interest that
affirmatively votes in favor of the Plan shall have agreed to forever release,
waive and discharge all claims, obligations, suits, judgments, damages, demands,
debts, rights, causes of action and liabilities whatsoever in connection with or
related to the Debtors and the Subsidiaries, the Chapter 11 Case or the Plan
(other than the rights of the Debtors or Reorganized Debtors to enforce the Plan
and the contracts, instruments, releases, indentures, and other agreements or
documents delivered thereunder) whether liquidated or unliquidated, fixed or
contingent, matured or unmatured, known or unknown, foreseen or unforseen, then
existing or thereafter arising, in law, equity or otherwise that are based in
whole or part on any act, omission, transaction, event or other occurrence
taking place on or prior to the Effective Date in any way relating to the
Debtors, the Reorganized Debtors or their Subsidiaries, the Chapter 11 Case or
the Plan, against (i) the Debtors and their Subsidiaries, (ii) the Debtors' and
their Subsidiaries' present and former directors, officers, employees, agents
and professionals as of the Petition Date or thereafter and (iii) the Creditors'
Committee and its members.
(c) Injunction Related to Releases
As further provided in Article XII of this Plan, the Confirmation Order
will enjoin the prosecution, whether directly, derivatively or otherwise, of any
claim, obligation, suit, judgment, damage, demand, debt, right, cause of action,
liability or interest released, discharged or terminated pursuant to the Plan.
5.13 Lucent Settlement
On the Effective Date, the Debtors and Lucent Technologies, Inc. (together
with its subsidiaries and affiliates, "Lucent") will enter into the settlement
agreement as set forth on Plan Schedule 5.13, in full satisfaction of all claims
and disputes between the parties arising out of agreements, acts or events in
existence or occurring prior to the Effective Date.
5.14 Cisco Settlement
On the Effective Date, the Debtors and Cisco Systems, Inc. and Cisco
Capital (collectively, "Cisco") will enter into the settlement agreement as set
forth on Plan Schedule 5.14, in full satisfaction of all claims and disputes
between the parties arising out of agreements, acts or events in existence or
occurring prior to the Effective Date.
ARTICLE VI
SUBSTANTIVE CONSOLIDATION
6.1 Substantive Consolidation
16
The Plan is premised upon the substantive consolidation of the Debtors
only for purposes of the Plan, for voting, confirmation and distribution
purposes. Except as set forth in Section 5.4, the Plan does not contemplate the
merger or dissolution of any Debtor entity or the transfer or commingling of any
asset of any Debtor. On the Effective Date, (a) all assets and liabilities of
the Debtors shall be deemed merged or treated as though they were merged into
and with the assets and liabilities of ICG Communications, Inc.; (b) no
distributions shall made under the Plan on account of Intercompany Claims; (c)
no distributions shall be made under the Plan on account of Subsidiary
Interests; and (d) all guarantees of the Debtors of the obligations of any other
Debtor shall be deemed eliminated so that any claim against any Debtor and any
guarantee thereof executed by any other Debtor and any joint or several
liability of any of the Debtors shall be deemed to be one obligation of the
consolidated Debtors. Such substantive consolidation (other than for purposes
related to the Plan) shall not affect (i) the legal and corporate structures of
the Reorganized Debtors, subject to the right of the Debtors or Reorganized ICG
to effect Restructuring Transactions as provided in Section 5.4 of the Plan,
(ii) Intercompany Claims, (iii) Subsidiary Interests, and (iv) pre and post
Commencement Date guarantees that are required to be maintained (x) in
connection with executory contracts or unexpired leases that were entered into
during the Chapter 11 Cases or that have been or will be assumed, or (y)
pursuant to the Plan.
6.2 Order Granting Substantive Consolidation
This Plan shall serve as a motion seeking entry of an order substantively
consolidating the Chapter 11 Cases, as described in Section 6.1 above. Unless
an objection to substantive consolidation is made in writing by any creditor
affected by the Plan as herein provided on or before five (5) days prior to the
date that is fixed by the Court as the last date on which acceptances to this
Plan may be received, or such other date as may be fixed by the Court, the
Substantive Consolidation order (which may be the Confirmation Order) may be
entered by the Court. In the event any such objections are timely filed, a
hearing with respect thereto shall be scheduled by the Court, which hearing may,
but need not, coincide with the Confirmation Hearing.
ARTICLE VII
TREATMENT OF EXECUTORY CONTRACTS
AND UNEXPIRED LEASES
7.1 Assumed Contracts And Leases
(a) Except as otherwise provided in the Plan, or in any contract,
instrument, release, indenture or other agreement or document entered into in
connection with the Plan, as of the Effective Date each Debtor shall be deemed
to have assumed each executory contract and unexpired lease to which it is a
party, including those listed on Schedule 7.1 attached hereto, unless such
contract or lease (i) was previously assumed or rejected by such Debtor, (ii)
previously expired or terminated pursuant to its own terms, or (iii) is listed
on Schedule 7.3 attached hereto as being an executory contract or unexpired
lease to be rejected, provided, however, that the Debtors reserve their right,
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at any time prior to the Confirmation Date, to amend Schedule 7.1 to delete an
unexpired lease or executory contract therefrom or add any unexpired lease or
executory contract thereto. To the extent that an executory contract or
unexpired lease is not listed on either Schedule 7.1 or Schedule 7.3, such
executory contract or unexpired lease shall be deemed assumed as if such
executory contract or lease had been included on Schedule 7.1. The Confirmation
Order shall constitute an order of the Bankruptcy Court under section 365 of the
Bankruptcy Code approving the contract and lease assumptions described above, as
of the Effective Date.
(b) Each executory contract and unexpired lease that is assumed and
relates to the use, ability to acquire, or occupancy of real property shall
include (i) all modifications, amendments, supplements, restatements, or other
agreements made directly or indirectly by any agreement, instrument, or other
document that in any manner affect such executory contract or unexpired lease
and (ii) all executory contracts or unexpired leases appurtenant to the
premises, including all easements, licenses, permits, rights, privileges,
immunities, options, rights of first refusal, powers, uses, usufructs,
reciprocal easement agreements, vaults, tunnel or bridge agreements or
franchises, and any other interests in real estate or rights in rem related to
such premises, unless any of the foregoing agreements has been rejected pursuant
to an order of the Bankruptcy Court.
17
(c) To the extent that any of the Debtors' contracts with its
customers are executory contracts within the meaning of applicable law, such
contracts shall be deemed assumed pursuant to Section 7.1(a) of this Plan. Due
to the extremely large number of customer contracts, customer contracts are not
listed on Schedule 7.1. A list of all of the Debtors' customer contracts is
available at the Debtors' corporate headquarters, and will be made available
upon request to the Debtors.
7.2 Payments Related To Assumption Of Contracts And Leases
Any monetary amounts by which each executory contract and unexpired lease
to be assumed pursuant to the Plan is in default shall be satisfied, under
section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor party to
the contract or lease or the assignee of such Debtor party assuming such
contract or lease, by Cure. If there is a dispute regarding (a) the nature or
amount of any Cure, (b) the ability of any Reorganized Debtor or any assignee to
provide "adequate assurance of future performance" (within the meaning of
section 365 of the Bankruptcy Code) under the contract or lease to be assumed,
or (c) any other matter pertaining to assumption, Cure shall occur following the
entry of a Final Order resolving the dispute and approving the assumption or
assumption and assignment, as the case may be. The Confirmation Order shall
contain provisions providing for notices of proposed assumptions and proposed
cure amounts to be sent to applicable third parties and for procedures for
objecting thereto and resolution of disputes by the Bankruptcy Court.
7.3 Rejected Contracts And Leases
On the Effective Date, each executory contract and unexpired lease listed
on Schedule 7.3 to this Plan shall be rejected pursuant to section 365 of the
Bankruptcy Code. Each contract or lease listed on Schedule 7.3 shall be
rejected only to the extent that any such contract or lease constitutes an
executory contract or unexpired lease; provided, however, that the Debtors
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reserve their right, at any time prior to the Confirmation Date, to amend
Schedule 7.3 to delete an unexpired lease or executory contract therefrom or add
any unexpired lease or executory contract thereto. To the extent that an
executory contract or unexpired lease is not listed on either Schedule 7.1 or
Schedule 7.3, such executory contract or unexpired lease shall be deemed assumed
as if such executory contract or lease had been included on Schedule 7.1.
Listing a contract or lease on Schedule 7.1 or 7.3 shall not constitute an
admission by ICG nor Reorganized ICG that such contract or lease is an executory
contract or unexpired lease or that ICG or Reorganized ICG has any liability
thereunder. The Confirmation Order shall constitute an order of the Bankruptcy
Court approving such rejections, pursuant to section 365 of the Bankruptcy Code,
as applicable, as of the Effective Date.
7.4 Rejection Damages Bar Date
If the rejection by a Debtor, pursuant to the Plan or otherwise, of an
executory contract or unexpired lease results in a Claim, then such Claim shall
be forever barred and shall not be enforceable against any Debtor or Reorganized
Debtor or the properties of any of them unless a Proof of Claim is filed with
the clerk of the Bankruptcy Court and served upon counsel to the Debtors, and
counsel to the Creditors' Committee, within thirty (30) days after service of
the earlier of (a) notice of the Confirmation Order, or (b) other notice that
the executory contract or unexpired lease has been rejected.
ARTICLE VIII
PROVISIONS GOVERNING DISTRIBUTIONS
8.1 Distributions For Claims Allowed As Of The Effective Date
Except as otherwise provided herein or as ordered by the Bankruptcy Court,
and subject to the provisions of Section 9.3 and 9.4 of this Plan, all
distributions to holders of Allowed Claims as of the Effective Date shall be
made on the Distribution Date. Distributions on account of Claims that first
become Allowed Claims after the Effective Date shall be made pursuant to Section
9.4 of this Plan. Notwithstanding the date on which any distribution of New
Securities is actually made to a holder of a Claim that is an Allowed Claim on
the Effective Date, as of the date of the distribution of such securities such
holder shall be deemed to have the rights of a holder as of the Effective Date.
8.2 Interest On Claims
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Unless otherwise specifically provided for in this Plan or the Confirmation
Order, or required by applicable bankruptcy law, post-petition interest shall
not accrue or be paid on Claims, and no holder of a Claim shall be entitled to
interest accruing on or after the Petition Date on any Claim. Interest shall not
accrue or be paid upon any Disputed Claim in respect of the period from the
Petition Date to the date a final distribution is made thereon if and after such
Disputed Claim becomes an Allowed Claim.
8.3 Distributions by Disbursing Agent
(a) The Disbursing Agent shall make all distributions required
under this Plan.
(b) If the Disbursing Agent is an independent third party
designated by the Reorganized Debtors to serve in such capacity, such Disbursing
Agent shall receive, without further Bankruptcy Court approval, reasonable
compensation for distribution services rendered pursuant to the Plan and
reimbursement of reasonable out-of-pocket expenses incurred in connection with
such services from the Reorganized Debtors on terms acceptable to the
Reorganized Debtors. No Disbursing Agent shall be required to give any bond or
surety or other security for the performance of its duties unless otherwise
ordered by the Bankruptcy Court.
8.4 Record Date For Distributions To Holders Of Lender Claims and Old
Notes
At the close of business on the Distribution Record Date, the transfer
records for the Old Notes and Lender Claims shall be closed, and there shall be
no further changes in the record holders of the Old Notes or Lender Claims. None
of Reorganized ICG, the Disbursing Agent, nor the administrative agent for the
Lenders shall have any obligation to recognize any transfer of such Old Notes or
Lender Claims occurring after the Distribution Record Date and shall be entitled
instead to recognize and deal for all purposes hereunder with only those record
holders as of the close of business on the Distribution Record Date.
8.5 Means Of Cash Payment
Cash payments made pursuant to this Plan shall be in U.S. funds, by the
means agreed to by the payor and the payee, including by check or wire transfer,
or, in the absence of an agreement, such commercially reasonable manner as the
payor shall determine in its sole discretion.
8.6 Calculation Of Distribution Amounts Of New Common Shares
No fractional shares of New Common Shares shall be issued or distributed
under the Plan or by Reorganized ICG or the Disbursing Agent. Each Person
entitled to receive New Common Shares will receive the total number of whole
shares of New Common Shares to which such Person is entitled. Whenever any
distribution to a particular Person would otherwise call for distribution of a
fraction of a share of New Common Shares, the actual distribution of shares of
such stock shall be rounded to the next higher or lower whole number as follows:
(a) fractions one-half ( 1/2) or greater shall be rounded to the next higher
whole number, and (b) fractions of less than one-half ( 1/2) shall be rounded to
the next lower whole number. No consideration shall be provided in lieu of
fractional shares that are rounded down.
8.7 Delivery Of Distributions
Distributions to holders of Allowed Claims shall be made by the Disbursing
Agent (a) at the addresses set forth on the Proofs of Claim filed by such
holders (or at the last known addresses of such holders if no Proof of Claim is
filed or if the Debtors have been notified of a change of address), (b) at the
addresses set forth in any written notices of address changes delivered to the
Disbursing Agent after the date of any related Proof of Claim, (c) at the
addresses reflected in the Schedules if no Proof of Claim has been filed and the
Disbursing Agent has not received a written notice of a change of address, or
(d) in the case of the holder of an Allowed Old Note Claim, at the addresses
contained in the official records of the indenture trustee under the Old
Indenture, or (e) at the addresses set forth in a properly completed letter of
transmittal accompanying securities properly remitted to the Debtors. If any
holder's distribution is returned as undeliverable, no further distributions to
such holder shall be made unless and until the Disbursing Agent is notified of
such holder's then current address, at which time all missed distributions shall
be made to such holder without interest. Amounts in respect of undeliverable
distributions made by the Disbursing Agent, shall be returned to
19
the Reorganized Debtors until such distributions are claimed. All claims for
undeliverable distributions made by the Disbursing Agent must be made on or
before the first (1/st/) anniversary of the Effective Date, after which date all
unclaimed property shall revert to the Reorganized Debtors free of any
restrictions thereon and the claims of any holder or successor to such holder
with respect to such property shall be discharged and forever barred,
notwithstanding any federal or state escheat laws to the contrary. Nothing
contained in the Plan shall require the Debtors, Reorganized Debtors, any
Disbursing Agent or the Indenture Trustee to attempt to locate any holder of an
Allowed Claim.
8.8 Surrender of Securities and Instruments
(a) Old Notes
Except as provided in Section 8.8(b) of the Plan for lost, stolen,
mutilated or destroyed Old Notes, each holder of an Allowed Claim evidenced by
an Old Note shall tender such Old Note to the Indenture Trustee in accordance
with written instructions to be provided in a letter of transmittal to such
holders by the Indenture Trustee as promptly as practicable following the
Effective Date. Such letter of transmittal shall specify that delivery of such
Old Notes will be effected, and risk of loss and title thereto will pass, only
upon the proper delivery of such Old Notes with the letter of transmittal in
accordance with such instructions. Such letter of transmittal shall also
include, among other provisions, customary provisions with respect to the
authority of the holder of the applicable Old Note to act and the authenticity
of any signatures required on the letter of transmittal. All surrendered notes
and Old Notes shall be marked as canceled and delivered by the Indenture Trustee
to Reorganized ICG.
(b) Lost, Stolen, Mutilated or Destroyed Old Notes
In addition to any requirements under the applicable certificate or
articles of incorporation or by-laws of the applicable Debtor, any holder of a
Claim evidenced by an Old Note that has been lost, stolen, mutilated or
destroyed shall, in lieu of surrendering such Old Note, deliver to the Indenture
Trustee: (i) evidence satisfactory to the Indenture Trustee of the loss, theft,
mutilation or destruction; and (ii) such indemnity as may be required by the
Indenture Trustee to hold the Indenture Trustee harmless from any damages,
liabilities or costs incurred in treating such individual as a holder of an Old
Note that has been lost, stolen, mutilated or destroyed. Upon compliance with
this Section 8.8(b) by a holder of a Claim evidenced by an Old Note, such holder
shall, for all purposes under the Plan, be deemed to have surrendered its Old
Note, as applicable.
(c) Failure to Surrender Canceled Old Notes
Any holder of an Old Note that fails to surrender or be deemed to have
surrendered such note or Old Note before the second (2nd) anniversary of the
Effective Date shall have its claim for a distribution on account of such Old
Note discharged and shall be forever barred from asserting any such claim
against any Reorganized Debtor or their respective property.
8.9 Withholding And Reporting Requirements
In connection with this Plan and all distributions hereunder, the
Disbursing Agent shall, to the extent applicable, comply with all tax
withholding and reporting requirements imposed by any federal, state,
provincial, local, or foreign taxing authority, and all distributions hereunder
shall be subject to any such withholding and reporting requirements. The
Disbursing Agent shall be authorized to take any and all actions that may be
necessary or appropriate to comply with such withholding and reporting
requirements. Notwithstanding any other provision of the Plan: (a) each holder
of an Allowed Claim that is to receive a distribution of New Securities pursuant
to the Plan shall have sole and exclusive responsibility for the satisfaction
and payment of any tax obligations imposed by any governmental unit, including
income, withholding and other tax obligations, on account of such distribution,
and (b) no distribution shall be made to or on behalf of such holder pursuant to
the Plan unless and until such holder has made arrangements satisfactory to the
Disbursing Agent for the payment and satisfaction of such tax obligations. Any
New Securities to be distributed pursuant to the Plan shall, pending the
implementation of such arrangements, be treated as an undeliverable distribution
pursuant to Section 8.7 of this Plan.
8.10 Setoffs
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The Reorganized Debtors may, but shall not be required to, set off against
any Claim, and the payments or other distributions to be made pursuant to the
Plan in respect of such Claim, claims of any nature whatsoever that the Debtors
or Reorganized Debtors may have against the holder of such Claim; provided,
however, that neither the failure to do so nor the allowance of any Claim
hereunder shall constitute a waiver or release by the Reorganized Debtors of any
such claim that the Debtors or Reorganized Debtors may have against such holder.
ARTICLE IX
PROCEDURES FOR RESOLVING DISPUTED,
CONTINGENT, AND UNLIQUIDATED CLAIMS AND
DISTRIBUTIONS WITH RESPECT THERETO
9.1 Prosecution Of Objections to Claims
(a) Objections to Claims
All objections to Claims must be filed and served on the holders of such
Claims by the Claims Objection Deadline. If an objection has not been filed to a
Proof of Claim or a scheduled Claim by the Claims Objection Deadline, the Claim
to which the Proof of Claim or scheduled Claim relates will be treated as an
Allowed Claim if such Claim has not been allowed earlier.
(b) Authority to Prosecute Objections
(i) After the Confirmation Date, only the Reorganized
Debtors will have the authority to file objections, settle, compromise, withdraw
or litigate to judgment objections to Claims, including Claims for reclamation
under section 546(c) of the Bankruptcy Code. Except as provided in Section 12.7,
from and after the Effective Date, the Reorganized Debtors may settle or
compromise any Disputed Claim without approval of the Bankruptcy Court.
(ii) On or before the last Business Day of each month or as
otherwise agreed in writing by the Creditors' Committee or the Claims Resolution
Committee, as set forth in Section 12.18, the Reorganized Debtors will provide
counsel to the Claims Resolution Committee with written notice of each Disputed
Claim that has been settled or compromised in the prior month, other than such
settlements or compromises that fall within the parameters of settlement
guidelines to be agreed to by the Debtors and the Creditors' Committee or the
Claims Resolution Committee. Within ten (10) days after the receipt of such
notice, the Claims Resolution Committee will provide the Reorganized Debtors
with written notice of any such settlements or compromises with which it does
not concur. If the Reorganized Debtors and the Claims Resolution Committee
cannot reach agreement with respect to any such settlement or compromise, the
Claims Resolution Committee will be permitted to file and serve on the
Reorganized Debtors an objection to the reasonableness of such settlement or
compromise by the last Business Day of the month following the month in which
the Claims Resolution Committee received written notice of the settlement or
compromise, with the reasonableness of such settlement or compromise to be
determined by the Bankruptcy Court. If the Claims Resolution Committee does not
provide a written notice and file and serve an objection as specified in this
Section with respect to any particular settlement or compromise, then such
settlement or compromise will be deemed resolved on the terms and subject to the
conditions agreed to by the Reorganized Debtors. The Reorganized Debtors and the
Claims Resolution Committee may modify the foregoing procedures by a writing
executed by both.
9.2 Treatment of Disputed Claims
Notwithstanding any other provisions of the Plan, no payments or
distributions will be made on account of a Disputed Claim, or, if less than the
entire claim is a Disputed Claim, the portion of a Claim that is disputed, until
such Claim becomes an Allowed Claim.
9.3 Disputed Claims Reserves
Prior to making any distributions of the New Common Shares to holders of
Allowed Class 5 Claims, the Disbursing Agent shall establish appropriate
reserves for Disputed Claims in Class 5, to withhold from any such
21
distributions 100% of distributions to which holders of Disputed Claims in Class
5 would be entitled under the Plan as of such date if such Disputed Claims in
Class 5 were Allowed Claims in their Disputed Claim Amount. The Disbursing Agent
shall also establish appropriate reserves for Disputed Claims in other Classes,
as it determines necessary and appropriate.
9.4 Distributions on Account of Disputed Claims Once They Are Allowed
and Additional Distributions on Account of Previously Allowed Claims
On each Quarterly Distribution Date, the Reorganized Debtors will make
distributions (a) on account of any Disputed Claim that has become an Allowed
Claim during the preceding calendar quarter and (b) on account of previously
Allowed Claims, from the Disputed Claim reserves, of property that would have
been distributed to such Claim holders on the dates distributions previously
were made to holders of Allowed Claims had the Disputed Claims that have become
Allowed Claims been Allowed on such dates. Such distributions will be made
pursuant to the provisions of the Plan governing the applicable Class. Holders
of such claims that are ultimately Allowed will also be entitled to receive, on
the basis of the amount ultimately allowed, the amount of any dividends or other
distributions, if any, received on account of the shares of New Common Shares
between the Effective Date and the date such shares are distributed to such
Claim holder.
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ARTICLE X
CONDITIONS PRECEDENT TO CONFIRMATION
AND CONSUMMATION OF THE PLAN
10.1 Conditions To Confirmation
The following are conditions precedent to the occurrence of the
Confirmation Date: (a) the entry of an order finding that the Disclosure
Statement contains adequate information pursuant to section 1125 of the
Bankruptcy Code and (b) the proposed Confirmation Order shall be in form and
substance acceptable to the Debtors.
10.2 Conditions To Effective Date
The following are conditions precedent to the occurrence of the Effective
Date, each of which must be satisfied or waived in accordance with Section 10.3
of this Plan:
(a) The Confirmation Order shall have been entered and become a
Final Order in form and substance reasonably satisfactory to the Debtors and
shall:
(i) provide that the Debtors and Reorganized Debtors are
authorized and directed to take all actions necessary or appropriate to enter
into, implement and consummate the contracts, instruments, releases, leases,
indentures and other agreements or documents created in connection with the Plan
or the Restructuring Transactions;
(ii) authorize the issuance of New Securities; and
(iii) provide that the New Common Shares, New Secured Notes,
and Rights issued under the Plan in exchange for Claims against the Debtors are
exempt from registration under the Securities Act of 1933 pursuant to section
1145 of the Bankruptcy Code, except to the extent that holders of the New Common
Shares or Rights are "issuers" or "underwriters," as those terms are defined in
section 1145 of the Bankruptcy Code.
(b) All Plan Exhibits shall be in form and substance reasonably
acceptable to the Debtors and the Creditors' Committee, and shall have been
executed and delivered.
(c) All actions, documents and agreements necessary to implement
the Plan shall have been effected or executed.
10.3 Waiver Of Conditions
Each of the conditions set forth in Section 10.2 of the Plan may be waived
in whole or in part by the Debtors. The failure to satisfy or waive any
condition to the Effective Date may be asserted by the Debtors or Reorganized
Debtors regardless of the circumstances giving rise to the failure of such
condition to be satisfied (including any action or inaction by a Debtor or
Reorganized Debtor). The failure of a Debtor or Reorganized Debtor to exercise
any of the foregoing rights shall not be deemed a waiver of any other rights,
and each such right shall be deemed an ongoing right that may be asserted at any
time.
ARTICLE XI
RETENTION OF JURISDICTION
11.1 Under sections 105(a) and 1142 of the Bankruptcy Code, and
notwithstanding entry of the Confirmation Order and occurrence of the Effective
Date, the Bankruptcy Court shall retain exclusive jurisdiction over all matters
arising out of, and related to, the Chapter 11 Case and the Plan to the fullest
extent permitted by law, including, among other things, jurisdiction to:
23
(a) Allow, disallow, determine, liquidate, classify, estimate or
establish the priority or secured or unsecured status of any Claim or Interest
not otherwise allowed under the Plan, including the resolution of any request
for payment of any Administrative Claim and the resolution of any objections to
the allowance or priority of Claims or Interests;
(b) Hear and determine all applications for compensation and
reimbursement of expenses of Professionals under the Plan or under sections 330,
331, 503(b), 1103 and 1129(a)(4) of the Bankruptcy Code; provided, however, that
from and after the Effective Date, the payment of the fees and expenses of the
retained Professionals of the Reorganized Debtors shall be made in the ordinary
course of business and shall not be subject to the approval of the Bankruptcy
Court;
(c) Hear and determine all matters with respect to the assumption
or rejection of any executory contract or unexpired lease to which a Debtor is a
party or with respect to which a Debtor may be liable, including, if necessary,
the nature or amount of any required Cure or the liquidation or allowance of any
Claims arising therefrom;
(d) Effectuate performance of and payments under the provisions
of the Plan;
(e) Hear and determine any and all adversary proceedings,
motions, applications, and contested or litigated matters arising out of, under,
or related to, the Chapter 11 Case;
(f) Enter such orders as may be necessary or appropriate to
execute, implement, or consummate the provisions of the Plan and all contracts,
instruments, releases, and other agreements or documents created in connection
with the Plan, the Disclosure Statement or the Confirmation Order;
(g) Hear and determine disputes arising in connection with the
interpretation, implementation, consummation, or enforcement of the Plan,
including disputes arising under agreements, documents or instruments executed
in connection with the Plan;
(h) Consider any modifications of the Plan, cure any defect or
omission, or reconcile any inconsistency in any order of the Bankruptcy Court,
including, without limitation, the Confirmation Order;
(i) Issue injunctions, enter and implement other orders, or take
such other actions as may be necessary or appropriate to restrain interference
by any entity with implementation, consummation, or enforcement of the Plan or
the Confirmation Order;
(j) Enter and implement such orders as may be necessary or
appropriate if the Confirmation Order is for any reason reversed, stayed,
revoked, modified, or vacated;
(k) Hear and determine any matters arising in connection with or
relating to the Plan, the Disclosure Statement, the Confirmation Order, or any
contract, instrument, release, or other agreement or document created in
connection with the Plan, the Disclosure Statement or the Confirmation Order;
(l) Enforce all orders, judgments, injunctions, releases,
exculpations, indemnifications and rulings entered in connection with the
Chapter 11 Case;
(m) Except as otherwise limited herein, recover all assets of the
Debtors and property of the Debtors' Estates, wherever located;
(n) Hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy
Code;
(o) Hear and determine all disputes involving the existence,
nature, or scope of the Debtors' discharge;
24
(p) Hear and determine such other matters as may be provided in
the Confirmation Order or as may be authorized under, or not inconsistent with,
provisions of the Bankruptcy Code; and
(q) Enter a final decree closing the Chapter 11 Case.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Professional Fee Claims
All final requests for compensation or reimbursement of Professional Fees
pursuant to sections 327, 328, 330, 331, 503(b) or 1103 of the Bankruptcy Code
for services rendered to the Creditors' Committee prior to the Effective Date
and Substantial Contribution Claims under section 503(b)(4) of the Bankruptcy
Code must be filed and served on the Reorganized Debtors and their counsel no
later than 60 days after the Effective Date, unless otherwise ordered by the
Bankruptcy Court. Objections to applications of such Professionals or other
entities for compensation or reimbursement of expenses must be filed and served
on the Reorganized Debtors and their counsel and the requesting Professional or
other entity no later than sixty (60) days (or such longer period as may be
allowed by order of the Bankruptcy Court) after the date on which the applicable
application for compensation or reimbursement was served.
12.2 Administrative Claims Bar Date
All requests for payment of an Administrative Claim (other than as set
forth in Sections 3.1 and 12.1 of this Plan) must be filed with the Bankruptcy
Court and served on counsel for the Debtors and counsel for the Creditors'
Committee no later than forty-five (45) days after the Effective Date. Unless
the Debtors object to an Administrative Claim within forty-five (45) Business
Days after receipt, such Administrative Claim shall be deemed allowed in the
amount requested. In the event that the Debtors object to an Administrative
Claim, the Bankruptcy Court shall determine the Allowed amount of such
Administrative Claim. Notwithstanding the foregoing, no request for payment of
an Administrative Claim need be filed with respect to an Administrative Claim
which is paid or payable by a Debtor in the ordinary course of business.
12.3 Payment Of Statutory Fees
All fees payable pursuant to Section 1930 of Title 28 of the United States
Code, as determined by the Bankruptcy Court at the Confirmation shall be paid on
or before the Effective Date.
12.4 Modifications and Amendments
The Debtors may alter, amend, or modify the Plan or any Plan Exhibit under
section 1127(a) of the Bankruptcy Code at any time prior to the Confirmation
Date. After the Confirmation Date and prior to substantial consummation of the
Plan, as defined in section 1101(2) of the Bankruptcy Code, the Debtors may,
under section 1127(b) of the Bankruptcy Code, institute proceedings in the
Bankruptcy Court to remedy any defect or omission or reconcile any
inconsistencies in the Plan, the Disclosure Statement, or the Confirmation
Order, and such matters as may be necessary to carry out the purposes and
effects of the Plan and such proceedings do not materially adversely affect the
treatment of holders of Claims under the Plan; provided, however, that prior
notice of such proceedings shall be served in accordance with the Bankruptcy
Rules or order of the Bankruptcy Court.
12.5 Severability Of Plan Provisions
If, prior to Confirmation, any term or provision of the Plan is held by the
Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court, at
the request of any Debtor, shall have the power to alter and interpret such term
or provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be
invalid, void or unenforceable, and such term or provision shall then be
applicable as altered or interpreted. Notwithstanding any such holding,
alteration or interpretation, the remainder of the terms and provisions of the
Plan shall remain in full force and effect and shall in no way be affected,
impaired or invalidated by such holding, alteration or interpretation. The
Confirmation Order shall constitute a judicial
25
determination and shall provide that each term and provision of the Plan, as it
may have been altered or interpreted in accordance with the foregoing, is valid
and enforceable pursuant to its terms.
12.6 Successors And Assigns
The rights, benefits and obligations of any entity named or referred to in
the Plan shall be binding on, and shall inure to the benefit of, any heir,
executor, administrator, successor or assign of such entity.
12.7 Compromises and Settlements
Pursuant to Fed. R. Bankr. P. 9019(a), the Debtors may compromise and
settle various Claims against them and/or claims that they may have against
other Persons. The Debtors expressly reserve the right (with Bankruptcy Court
approval, following appropriate notice and opportunity for a hearing) to
compromise and settle Claims against them and claims that they may have against
other Persons up to and including the Effective Date.
12.8 Releases And Satisfaction Of Subordination Rights
All Claims of the holders of the Lender Claims and the Old Note Claims
against the Debtors and all rights and claims between or among such holders
relating in any manner whatsoever to any claimed subordination rights, shall be
deemed satisfied by the distributions under, described in, contemplated by,
and/or implemented in Section 3.3 of this Plan. Distributions under, described
in, contemplated by, and/or implemented by this Plan to the various Classes of
Claims hereunder shall not be subject to levy, garnishment, attachment, or like
legal process by any holder of a Claim, including, but not limited to, holders
of Lender Claims and Old Note Claims, by reason of any claimed subordination
rights or otherwise, so that each holder of a Claim shall have and receive the
benefit of the distributions in the manner set forth in the Plan.
12.9 Discharge Of The Debtors
(a) Except as otherwise provided herein or in the Confirmation
Order, all consideration distributed under the Plan shall be in exchange for,
and in complete satisfaction, settlement, discharge, and release of, all Claims
of any nature whatsoever against the Debtors or any of their assets or
properties, and, and regardless of whether any property shall have been
distributed or retained pursuant to the Plan on account of such Claims, upon the
Effective Date, the Debtors, and each of them, shall (i) be deemed discharged
and released under section 1141(d)(1)(A) of the Bankruptcy Code from any and all
Claims, including, but not limited to, demands and liabilities that arose before
the Confirmation Date, and all debts of the kind specified in sections 502(g),
502(h) or 502(i) of the Bankruptcy Code, whether or not (a) a Proof of Claim
based upon such debt is filed or deemed filed under section 501 of the
Bankruptcy Code, (b) a Claim based upon such debt is Allowed under section 502
of the Bankruptcy Code, or (c) the holder of a Claim based upon such debt
accepted the Plan, and (ii) terminate all ICG Interests.
(b) As of the Confirmation Date, except as provided in the Plan
or the Confirmation Order, all entities shall be precluded from asserting
against the Debtors or the Reorganized Debtors, any other or further claims,
debts, rights, causes of action, liabilities or equity interests relating to the
Debtors based upon any act, omission, transaction or other activity of any
nature that occurred prior to the Confirmation Date. In accordance with the
foregoing, except as provided in the Plan or the Confirmation Order, the
Confirmation Order shall be a judicial determination of discharge of all such
Claims and other debts and liabilities against the Debtors and termination of
all ICG Interests, pursuant to sections 524 and 1141 of the Bankruptcy Code, and
such discharge shall void any judgment obtained against the Debtors at any time,
to the extent that such judgment relates to a discharged Claim or terminated
Interest.
12.10 Injunction
(a) Except as provided in the Plan or the Confirmation Order, as
of the Confirmation Date, all entities that have held, currently hold or may
hold a Claim or other debt or liability that is discharged or an Interest or
other right of an equity security holder that is terminated pursuant to the
terms of the Plan are permanently enjoined from taking any of the following
actions against the Debtors, Reorganized Debtors or their property on account of
any such discharged Claims, debts or liabilities or terminated Interests or
rights: (i) commencing or continuing, in any
26
manner or in any place, any action or other proceeding; (ii) enforcing,
attaching, collecting or recovering in any manner any judgment, award, decree or
order; (iii) creating, perfecting or enforcing any lien or encumbrance; (iv)
asserting a setoff, right of subrogation or recoupment of any kind against any
debt, liability or obligation due to the Debtors; and (v) commencing or
continuing any action, in any manner, in any place that does not comply with or
is inconsistent with the provisions of the Plan.
(b) As of the Effective Date, all entities that have held,
currently hold or may hold a Claim, demand, debt, right, cause of action or
liability that is released pursuant to Section 5.12 or 12.11 of this Plan are
permanently enjoined from taking any of the following actions on account of such
released Claims, obligations, suits, judgments, damages, demands, debts, rights,
causes of action or liabilities: (i) commencing or continuing in any manner any
action or other proceeding; (ii) enforcing, attaching, collecting or recovering
in any manner any judgment, award, decree or order; (iii) creating, perfecting
or enforcing any lien or encumbrance: (iv) asserting a setoff, right of
subrogation or recoupment of any kind against any debt, liability or obligation
due to any released entity; and (v) commencing or continuing any action, in any
manner, in any place that does not comply with or is inconsistent with the
provisions of the Plan.
(c) By accepting distribution pursuant to the Plan, each holder
of an Allowed Claim or Allowed Interest receiving distributions pursuant to the
Plan will be deemed to have specifically consented to the injunctions set forth
in this Section 12.10.
12.11 Exculpation And Limitation Of Liability
(a) None of the Debtors, the Reorganized Debtors, the Creditors'
Committee, nor any of their respective present or former members, officers,
directors, employees, advisors, or attorneys shall have or incur any liability
to any holder of a Claim or an Interest, or any other party in interest, or any
of their respective agents, employees, representatives, financial advisors,
attorneys, or affiliates, or any of their successors or assigns, for any act or
omission in connection with, relating to, or arising out of, the Chapter 11
Case, formulating, negotiating or implementing the Plan, the solicitation of
acceptances of the Plan, the pursuit of confirmation of the Plan, the
confirmation of the Plan, the consummation of the Plan, or the administration of
the Plan or the property to be distributed under the Plan, except for their
willful misconduct, and in all respects shall be entitled to reasonably rely
upon the advice of counsel with respect to their duties and responsibilities
under the Plan.
(b) Notwithstanding any other provision of this Plan, no holder
of a Claim or Interest, no other party in interest, none of their respective
agents, employees, representatives, financial advisors, attorneys, or
affiliates, and no successors or assigns of the foregoing, shall have any right
of action against any Debtor or Reorganized Debtor, nor any statutory committee,
nor any of their respective present or former members, officers, directors,
employees, advisors or attorneys, for any act or omission in connection with,
relating to, or arising out of, the Chapter 11 Case, formulating, negotiating or
implementing the Plan, solicitation of acceptances of the Plan, the pursuit of
confirmation of the Plan, the consummation of the Plan, the confirmation of the
Plan, or the administration of the Plan or the property to be distributed under
the Plan, except for their willful misconduct.
(c) Reorganized ICG shall indemnify each Person exculpated
pursuant to this Section 12.11 against, hold each such Person harmless from, and
reimburse each such Person for, any and all losses, costs, expenses (including
attorneys' fees and expenses), liabilities and damages sustained by such Person
arising from any liability described in this Section 12.11.
(d) The foregoing exculpation and limitation on liability shall
not, however, limit, abridge, or otherwise affect the rights, if any, of the
Reorganized Debtors to enforce, sue on, settle, or compromise the Litigation
Claims retained pursuant to Sections 5.8 and 5.9 of this Plan.
12.12 Binding Effect
The Plan shall be binding upon and inure to the benefit of the Debtors, all
present and former holders of Claims against and Interests in the Debtors, their
respective successors and assigns, including, but not limited to, the
Reorganized Debtors, and all other parties-in-interest in this Chapter 11 Case.
27
12.13 Revocation, Withdrawal, Or Non-Consummation
The Debtors reserve the right to revoke or withdraw the Plan at any time
prior to the Confirmation Date and to file subsequent plans of reorganization.
If the Debtors revoke or withdraw the Plan, or if Confirmation or Consummation
does not occur, then (a) the Plan shall be null and void in all respects, (b)
any settlement or compromise embodied in the Plan (including the fixing or
limiting to an amount certain any Claim or Class of Claims), assumption or
rejection of executory contracts or leases effected by the Plan, and any
document or agreement executed pursuant to the Plan shall be deemed null and
void, and (c) nothing contained in the Plan, and no acts taken in preparation
for consummation of the Plan, shall (x) constitute or be deemed to constitute a
waiver or release of any Claims by or against, or any Interests in, any Debtor
or any other Person, (y) prejudice in any manner the rights of any Debtor or any
Person in any further proceedings involving a Debtor, or (z) constitute an
admission of any sort by any Debtor or any other Person.
12.14 Plan Exhibits
Any and all Plan Exhibits, or other lists or schedules not filed with the
Plan shall be filed with the Clerk of the Bankruptcy Court at least five (5)
Business Days prior to date of the commencement of the Confirmation Hearing.
Upon such filing, such documents may be inspected in the office of the Clerk of
the Bankruptcy Court during normal court hours. Holders of Claims or Interests
may obtain a copy of any such document upon written request to the Debtors in
accordance with Section 12.15 of the Plan.
12.15 Notices
Any notice, request, or demand required or permitted to be made or provided
to or upon a Debtor or Reorganized Debtor under the Plan shall be (a) in
writing, (b) served by (i) certified mail, return receipt requested, (ii) hand
delivery, (iii) overnight delivery service, (iv) first class mail, or (v)
facsimile transmission, and (b) deemed to have been duly given or made when
actually delivered or, in the case of notice by facsimile transmission, when
received and telephonically confirmed, addressed as follows:
ICG COMMUNICATIONS, INC., et al.
-- ---
161 Inverness Drive West
Englewood, Colorado 80112
Att'n: Bernard L. Zuroff, Esq.
Telephone: (303) 414-5872
Facsimile: (304) 414-8869
with a copy to:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
333 West Wacker Drive
Chicago, Illinois 60606-1285
Att'n: David S. Kurtz, Esq.
Timothy R. Pohl, Esq.
Rena M. Samole, Esq.
Telephone: (312) 407-0700
Facsimile: (312) 407-0411
with a copy to:
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52/nd/ Street
New York, NY 10019
Attn: Chaim J. Fortgang, Esq.
28
Richard Mason, Esq.
Telephone: (212) 403-1000
Facsimile: (212) 403-2000
SHEARMAN & STERLING
599 Lexington Avenue
New York, NY 10002
Attn: Mark J. Shapiro, Esq.
Andrew Tenzer, Esq.
Telephone: (212) 848-8195
Facsimile: (212) 848-7179
12.16 Indemnification and Related Matters
(a) Third-Party Indemnification
Indemnification Obligations owed to any present or former professionals or
advisors of the Debtors arising out of acts that occurred prior to the Petition
Date, including, without limitation, accountants, auditors, financial
consultants, underwriters, or attorneys, shall be deemed to be, and shall be
treated as though they are, executory contracts that are rejected pursuant to
section 365 of the Bankruptcy Code under this Plan.
(b) Indemnification of Debtors' Directors, Officers and Employees
Reorganized ICG shall provide standard and customary indemnification for
all officers and directors (as of the Petition Date and thereafter) for all
actions or events occurring after the Petition Date. Indemnification Obligations
to present and former officers and directors for actions or events occurring
prior to the Petition Date shall be limited to director and officer liability
insurance coverage; provided however that all Indemnification Obligations to
-------- -------
members of the Special Committee, including for actions or events occurring
prior to the Petition Date, shall be deemed to be, and shall be treated as
though they are, executory contracts that are assumed pursuant to section 365 of
the Bankruptcy Code. In addition, Reorganized ICG shall indemnify present and
former officers and directors for all legal fees and expenses and shall advance
all such fees and expenses, as well as any insurance deductibles (if
applicable), related to any claims or lawsuits for any actions or events
occurring prior to the Petition Date. Reorganized ICG shall also reimburse the
Special Committee and its members for all legal fees and expenses incurred by
them in connection with the Chapter 11 Cases and the Plan.
12.17 Prepayment
Except as otherwise provided in this Plan, any ancillary documents entered
into in connection therewith, or the Confirmation Order, the Debtors shall have
the right to prepay, without penalty, all or any portion of an Allowed Claim at
any time; provided, however, that any such prepayment shall not be violative of,
or otherwise prejudice, the relative priorities and parities among the classes
of Claims.
12.18 Dissolution of the Creditors' Committee and Establishment of the
Claims Resolution Committee
(a) Creditors' Committee
On the Effective Date, the Creditors' Committee will dissolve and its
members will be released and discharged from all duties and obligations arising
from or related to the Chapter 11 Cases. The Professionals retained by the
Creditors' Committee and the members thereof will not be entitled to
compensation or reimbursement of expenses for any services rendered after the
Effective Date.
(b) Claims Resolution Committee
29
(i) Function and Composition of the Committee
On the Effective Date, the Claims Resolution Committee will be established.
Its sole functions will be: (A) in connection with applications for allowance of
compensation and reimbursement of expenses for Professionals filed before or
after the Effective Date, (B) to monitor the Reorganized Debtors' progress in
(x) reconciling and resolving Disputed Claims and (y) making distributions on
account of such Claims once resolved and (C) to review and assert objections to
the reasonableness of settlements and compromises of such Claims, pursuant to
Section 9.1. The Claims Resolution Committee will consist of three holders of
Class 5 Claims who sit on the Creditors' Committee as of the Effective Date or
other holders selected by the Creditors' Committee.
(ii) Committee Procedures
The Claims Resolution Committee will adopt by-laws that will control its
functions. These by-laws, unless modified by the Claims Resolution Committee,
will provide the following: (A) a majority of the Claims Resolution Committee
will constitute a quorum, (B) one member of the Claims Resolution Committee will
be designated by the majority of its members as its chairperson, (C) meetings of
the Claims Resolution Committee will be called by its chairperson on such notice
and in such manner as its chairperson may deem advisable and (D) the Claims
Resolution Committee will function by decisions made by a majority of its
members in attendance at any meeting.
(iii) Employment of Professionals by the Committee and
Reimbursement of Committee Members
The Claims Resolution Committee will be authorized to retain and employ
counsel to assist with the claims reconciliation process. The role of the Claims
Resolution Committee's professionals will be strictly limited to assisting the
committee in its functions as set forth herein. The Reorganized Debtors will pay
the actual, necessary, reasonable and documented fees and expenses of the
professionals retained by the Claims Resolution Committee, as well as the
actual, necessary, reasonable and documented expenses incurred by each committee
member in the performance of its duties upon the monthly submission of bills to
the Reorganized Debtors and the members of the Claims Resolution Committee. If
no objection to payment is received within 30 days following delivery of the
bill, the bill will be paid by the Reorganized Debtors. Other than as specified
in the preceding sentence, the members of the Claims Resolution Committee will
serve without compensation. If there is any unresolved dispute between the
Reorganized Debtors and the Claims Resolution Committee, its professionals or a
member thereof as to any fees or expenses, such dispute will be submitted to the
Bankruptcy Court for resolution. The undisputed portion of each bill will be
paid on the 31/st/ day after delivery.
(iv) Dissolution of the Committee
Subject to further order of the Bankruptcy Court, the Claims Resolution
Committee will dissolve on the date that an officer of Reorganized ICG files and
serves on counsel to the Claims Resolution Committee by overnight delivery
service or facsimile transmission a certification that the aggregate Face Amount
of the remaining Disputed Claims in Class 5 is equal to or less than $25
million, or on the date that any objection filed to such certification is
resolved by the Bankruptcy Court such that the aggregate Face Amount of the
remaining Disputed Claims in Class 5 is equal to or less than $25 million. The
Claims Resolution Committee may file and serve on the Reorganized Debtors an
objection to the certification within ten (10) days of receipt thereof, with the
issue of the aggregate Face Amount of remaining Disputed Claims to be determined
by the Bankruptcy Court. The professionals retained by the Claims Resolution
Committee and the members of the committee will not be entitled to compensation
or reimbursement of expenses for any services rendered after the date of
dissolution of the committee. Notwithstanding the foregoing, the Claims
Resolution Committee will not dissolve until orders regarding final requests for
compensation by professionals become Final Orders and until the Confirmation
Order becomes a Final Order.
30
12.19 Term Of Injunctions Or Stays
Unless otherwise provided herein or in the Confirmation Order, all
injunctions or stays provided for in the Chapter 11 Case under sections 105 or
362 of the Bankruptcy Code or otherwise, and extant on the Confirmation Date
(excluding any injunctions or stays contained in this Plan or the Confirmation
Order), shall remain in full force and effect until the Effective Date.
Dated: December 19, 2001
ICG Communications, Inc.
(for itself and on behalf of the Subsidiary Debtors)
By: /s/ Randall E. Curran
---------------------
Name: Randall E. Curran
Title: Chief Executive Officer of ICG
Communications, Inc.
Skadden, Arps, Slate, Meagher & Flom (Illinois)
David S. Kurtz
Timothy R. Pohl
Rena M. Samole
333 W. Wacker Drive
Chicago, Illinois 60606-1285
(312) 407-0700,
Skadden, Arps, Slate, Meagher & Flom LLP
/s/ Gregg M. Galardi
- --------------------
Gregg M. Galardi
One Rodney Square
P.O. Box 636
Wilmington, Delaware 19899-0636
(302) 651-3000
Attorneys for ICG Communications, Inc., et al.
-- ---
APPENDIX B-1
EXISTING ORGANIZATION STRUCTURE OF DEBTORS
------------------------------------------
APPENDIX B-2
CHART DEPICTING ANTICIPATED CORPORATE STRUCTURE CHANGES
-------------------------------------------------------
APPENDIX B-3
ORGANIZATION STRUCTURE OF REORGANIZED DEBTORS
---------------------------------------------
APPENDIX C
ELECTION FORM FOR RIGHTS OFFERING
---------------------------------
APPENDIX D
LIQUIDATION ANALYSIS
--------------------
BEST INTEREST TEST
Pursuant to section 1129(a)(7)(A)(ii) of the Bankruptcy Code (the "Best Interest
Test"), notwithstanding acceptance of the Plan by each impaired Class, to
confirm the Plan the Bankruptcy Court must determine that the Plan is in the
best interests of each holder of a Claim of Interest who is a member of any
impaired Class and who has not voted to accept the Plan. Accordingly, if an
impaired Class does not vote unanimously to accept the Plan, the Best Interest
Test requires that the Bankruptcy Court find that the Plan provides to each
dissenting member of such impaired Class a recovery on account of the Class
member's Claim or Interest that has a value, as of the Effective date, at least
equal to the value of the distribution that such class member would receive if
the Debtors were liquidated under chapter 7 of the Bankruptcy Code on such date.
LIQUIDATION ANALYSIS
The following is an analysis of the results of a hypothetical liquidation of the
Debtors under chapter 7 of the Bankruptcy Code.
The Debtors believe that under the Plan, Holders of Impaired Claims and Impaired
Interests will receive property with a value equal to or in excess of the value
such Holder would receive in a liquidation of the Debtors under chapter 7 of the
Bankruptcy Code.
To estimate the likely returns to Holders of Claims and Interests in a chapter 7
liquidation, the Debtors determined the amount of liquidation proceeds that
would be available for distribution and the allocation of such proceeds among
the Classes of Claims and Interests based on their relative priority. In
conducting this analysis, the Debtors were assisted by Zolfo Cooper, one of
their restructuring advisors in this matter. As further described below, to
estimate the liquidation proceeds, the Debtors assumed that ICG and all
subsidiaries are treated as a substantively consolidated entity during a nine-
month wind-down period in which the assets of ICG and its subsidiaries are sold
in a straight liquidation. Liquidation proceeds available for distribution to
Holders of Claims would consist of the net proceeds from the disposition of the
assets, augmented by other cash held by the Debtors.
The relative priority of distribution of liquidation proceeds with respect to
any Claim or Interest depends on (i) its status as secured, priority unsecured,
or non-priority unsecured and (ii) its relative subordination.
In general, liquidation proceeds would be allocated in the following priority
(i) first, to the Claims of secured creditors to the extent of the value of
their collateral; (ii) second, to the costs, fees and expenses of the
liquidation, as well as other administrative expenses of the Debtors' chapter 7
case, including tax liabilities; (iii) third, to the unpaid Administrative
Claims of the chapter 11 case; (iv) fourth, to Priority Tax Claims and other
Claims entitled to priority in payment under the Bankruptcy Code; and (v) fifth,
to unsecured Claims. The Debtors' liquidation costs in Chapter 7 would include
the compensation of a bankruptcy trustee, as well as compensation of counsel and
of other professionals retained by such trustee, asset disposition expenses,
applicable taxes, litigation costs, claims arising from the operation of the
Debtors during the pendency of the chapter 7 case and all unpaid Administrative
Claims incurred by
the Debtors during the Chapter 11 case that are Allowed Claims in the chapter 7
case. The liquidation itself would trigger certain Priority Claims, such as
Claims for severance pay to certain employees.
As set forth in the schedule below, the Debtors' management estimates that the
Debtors' gross liquidation proceeds would range from approximately $208.2MM to
$294.7MM. Based on the priorities outlined above, the Debtors believe that
remaining proceeds, if any, available as recovery to Impaired Claims would be
significantly less than those under the Plan.
The following chapter 7 liquidation analysis is provided solely to discuss the
effects of a hypothetical chapter 7 liquidation of the Debtors. This liquidation
analysis is based on numerous estimates and assumptions that, although developed
and considered reasonable by the Debtors' management and its financial advisors,
are inherently subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Debtors. This liquidation analysis is
also based upon assumptions with regard to liquidation decisions that are
subject to change. Accordingly, there can be no assurance that the values
reflected in this liquidation analysis would be realized if the Debtors were, in
fact, to undergo such a liquidation.
I. SIGNIFICANT UNCERTAINTIES
-------------------------
In addition to the General and Principal Assumptions that are set forth on the
following pages, there are significant areas of uncertainty that exist with
respect to this liquidation analysis.
(1) The liquidation analysis assumes that the liquidation of the Debtors'
Estates would commence on January 1, 2002 and would be substantially
complete within a nine-month period. The wind-down costs during the nine-
month liquidation period have been estimated by the Debtors' management
and any deviation from this time frame could have a material impact on the
wind-down costs, Administrative Claims, proceeds from asset sales, and the
ultimate recovery to the creditors of the Debtors' Estates.
(2) If the implementation of the liquidation plan were to be delayed, there is
a possibility that the Debtors would sustain significant operating losses
during the delay period, thus adversely impacting the net liquidation
value of the Estates.
(3) In any liquidation there is a general risk of unanticipated events, which
could have a significant impact on the projected cash receipts and
disbursements. These events include changes in the general economic
condition, changes in consumer preferences, obsolescence, changes in the
market value of the Debtors' assets and problems with current and former
employees.
In addition to the specific assumptions described in the footnotes to the table
below, the following general assumptions were used in formulating the
liquidation analysis.
II. GENERAL ASSUMPTIONS
-------------------
(1) Substantive Consolidation - For purposes of both the Plan and the
hypothetical chapter 7 liquidation analysis, it is assumed that each of
the Debtors are combined into a single entity and treated as substantively
consolidated.
(2) Nature and Timing of the Liquidation Process - Under section 704 of the
Bankruptcy Code, a chapter 7 trustee must, among other duties, collect and
convert the property of the debtor's estate to cash and close the estate
as expeditiously as is compatible with the best interests of the parties
in interest. Solely for purposes of preparing this liquidation analysis,
it is assumed that the Debtors would voluntarily convert the pending
chapter 11 case to a chapter 7 liquidation on January 1, 2002. The
Debtors' assets are assumed to be sold during the following nine-month
period. Included in this period is a 90 day time allotment for notifying
commercial dial tone customers of services terminations (certain dial tone
telecom services are subject to regulatory requirements of termination
notice). Management believes that it is unlikely that the actual sale
periods would be shorter than those assumed, and there can be no assurance
that the actual sale period would not be longer than assumed. It is likely
that if the sale period was extended, sale proceeds would be diminished.
(3) Estimated Liquidation Proceeds - All telecom equipment and fiber are
assumed to be sold in a straight liquidation to the highest bidder. Zolfo
Cooper assisted the Debtors in estimating the potential proceeds from the
disposition of assets. The following list identifies factors considered by
the Debtors and Zolfo Cooper in estimating the proceeds that might be
received from the liquidation sales.
. The historical cost of the assets
. Asset location and local market demand (particularly for fiber assets)
. Previously issued third-party appraisals, and subsequent follow up
discussions related to further deterioration in the telecom equipment
values since the original appraisals
. Recently transacted telecom equipment sales
. Managements' experience and expertise in asset resale values
. Analysis of liabilities and obligations relating to particular assets
. Current industry trends including general availability of used telecom
equipment, the number of companies in the industry selling telecom
equipment, and the current technology being used in telecom equipment
build outs
. A "distress sale value." A distress sale value differs from the price at
which assets would be sold to a willing buyer by a willing seller,
assuming neither is under any compulsion to buy or sell, and assuming
both are informed of the relevant facts
. The inability to convey software rights with certain equipment
(4) Certain Tax Matters - Management believes that it is unlikely that any
taxable gains would be triggered through a liquidation of the Debtors'
assets. However, if for some reason there were to be a taxable gain from
the liquidation of the Debtors' assets, any realized gains would be
reduced to zero by the Debtors' net operating loss carryforward.
(5) Additional Liabilities and Reserves - The Debtors believe that in addition
to the expenses that would be incurred in a Chapter 11 reorganization,
there would be certain actual and contingent liabilities and expenses for
which provision would be required in a Chapter 7 liquidation before
distributions could be made to creditors, including: (a) certain
liabilities that are not dischargeable pursuant to the Bankruptcy Code;
(b) Administrative Claims including damages from rejected post petition
contracts, the fees of a trustee and of counsel and other professionals
(including financial advisors and accountants), retention bonuses paid to
employees required to effectuate the wind down process and other
liabilities (including retirement, vacation pay, and other employee-
related administrative costs and liabilities) that would be funded from
continuing operations if the Debtors were reorganized as a going concern;
and (c) certain administrative costs. Management believes that there is
significant uncertainty as to the reliability of the Debtors' estimates of
the amounts related to the foregoing that have been assumed in the
liquidation analysis.
(6) Distributions: Absolute Priority - Under a chapter 7 liquidation, all
secured claims are required to be satisfied from the proceeds of the
collateral securing such claims before any such proceeds would be
distributed to any other creditors. The following analysis assumes the
application of the rule of absolute priority of distributions with respect
to the remaining proceeds of the Debtors. Under that rule, no junior
creditor receives any distribution until all senior creditors are paid in
full. To the extent that proceeds remain after satisfaction of all secured
claims, the proceeds would first be distributed to the Holders of
Administrative Claims, then to Priority Claims and finally to the
Unsecured Claims. Based on the liquidation assumptions of the Debtors'
management, the proceeds generated from the liquidation of the Debtors'
assets would not likely be sufficient to fully pay Priority Claims and no
proceeds would likely be available for Unsecured Claims.
(7) Conclusion - The Debtors believe that a chapter 7 liquidation of the
Debtors would result in a substantial diminution in the value to be
realized by the Holders of Unsecured Claims. The Holders of Unsecured
Claims are expected to receive recoveries under the Plan in excess of that
realized in a chapter 7 liquidation. Consequently, the Debtors believe
that the Plan, which provides for the continuation of the Debtors'
businesses, will provide a substantially greater ultimate return to
Holders of Unsecured Claims than would a chapter 7 liquidation.
Low Value High Value
Estimated Low High Recovery Recovery
Note Claim Value Value % %
-----------------------------------------------------------
Proceeds:
Gross liquidation proceeds A $208.2 $294.7
Distributions:
Secured senior credit facility B $ 84.6 $ 84.6 $ 84.6 100.0% 100.0%
claim
Trustee fees, professional
fees, wind-down costs, and 100.0%
other chapter 7 Administrative C $ 87.7 87.7 87.7 100.0%
costs
Chapter 11 Administrative D $ 83.2 35.9 83.2 43.2% 100.0%
claim
Priority claims E $ 19.7 - 19.7 0.0% 100.0%
Unsecured claims F $2,643.1 - 19.5 0.0% 0.7%
Total Distributions $208.2 $294.7
Notes:
-----
(A) Includes assumed gross proceeds from sale in liquidation of the
Debtors' assets and existing cash balances (high/low) as follows (in
millions):
Low Value High Value
------------ ----------
Cash and cash equivalents $136.5 $136.5
Accounts receivable 21.2 37.8
Telecom equipment 24.2 43.1
Fiber assets
Owned 10.0 50.0
IRUs fully paid 2.0 5.0
Other assets 14.3 22.3
----------- ----------
Gross liquidation proceeds $208.2 $294.7
=========== ==========
Cash is assumed recoverable at 100% in both high and low liquidation
scenarios.
The values of accounts receivable considered the aging of the current
balances, the specific customer base and historical payment trends.
The recovery percentages of accounts receivable ranged from
approximately 50% to 90% of net outstanding balances.
The recovery values of telecom equipment considered the market demand
and condition of the assets along with available software rights.
The recovery percentages of fiber assets consider the condition and
location of the fiber and the ability to transfer IRUs.
Other assets consist of furniture and fixtures and assets currently
held for sale. Recovery percentages of other assets range from 64% to
100% of carrying values.
(B) Senior Credit Facility claim of $84.6MM secured by all Services assets
as of the filing date.
(C) Estimated Chapter 7 administrative and wind-down expenses of $87.7MM.
The estimated wind-down expense is net of projected cash receipts from
operations and interest income. A summary of administrative and wind-
down expenses is as follows (in millions):
Costs, net of revenues, of providing dial tone services during a three month $32.5
shut down period required for regulatory purposes
Administrative claims
Severance and vacation 20.9
Trustee fees 7.5
Professional fees 1.6
Property taxes 7.5
Termination penalties from rejection of post petition agreements 10.4
Wind down expenses
Payroll and benefits 4.9
Retention bonuses 1.2
Other expenses, net of interest income 1.2
--------
Total $87.7
========
Operating expenses in excess of revenues related to dial tone services
are expected to be incurred during the shut down period required for
regulatory purposes. Projected costs are higher than revenues due to
the cost of the network infrastructure required to be in place to
support dial tone services. All other services, including dial up
services and point to point broadband, will be terminated immediately.
Severance and vacation costs are limited to current contractual
obligations to employees.
Trustee fees approximate 3.0% of the net proceeds to be realized in
the liquidation of the assets.
Property taxes are the estimate of obligations for 2002.
Termination penalties from rejection of post petition agreements
reflect $10.4MM from the lease on the headquarters building entered
into in June 2001.
Wind down expenses consists primarily of employee related costs
including stay bonuses for personnel necessary for the wind down
process.
(D) Estimated Administrative Claim expenses incurred during the pendency
of the chapter 11 case.
(E) Estimated claims subject to priority payment under the Bankruptcy
Code.
(F) Includes Unsecured Claims estimated in the Plan and estimated
incremental deficiency claims incurred with the hypothetical
conversion to a chapter 7 liquidation.
APPENDIX E
PRO FORMA FINANCIAL PROJECTIONS
-------------------------------
1
Consolidated Pro Forma Balance Sheets Giving Effect to the Plan of
Reorganization
The following Consolidated Pro Forma Balance Sheets as of December 31, 2001
reflects the effects of certain transactions that will occur at the consummation
of the Plan of Reorganization ("the Plan"). For purposes of the following
Consolidated Pro Forma Balance Sheets, the assumed Effective Date of the Plan is
December 31, 2001. Other significant assumptions on which the pro forma
adjustments are based are set forth in the notes to the Consolidated Pro Forma
Balance Sheets.
THE PRO FORMA BALANCE SHEETS SET FORTH IN THIS SECTION ILLUSTRATE THE
EFFECT ON THE DEBTORS' BALANCE SHEETS UPON CONSUMMATION OF THE PLAN. THESE
BALANCE SHEETS, BOTH PRE-PETITION AND POST-PETITION, HAVE NOT BEEN PREPARED IN
CONFORMITY WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN ORDER TO MORE
CLEARLY ILLUSTRATE THE REDUCTION IN THE DEBTORS' LIABILITIES PURSUANT TO THE
PLAN AND RESTRUCTURING OF THE CAPITAL OF THE DEBTOR.
Pursuant to the guidance provided by SOP 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code", the Company will adopt
"fresh start" accounting upon emerging from bankruptcy. Under fresh start
accounting, the reorganization value of the entity (generally representing its
fair value) is allocated to the entity's assets in conformity with SFAS 141,
"Business Combinations".
DrKW has provided a range of the value of Reorganized ICG of $350MM to
$500MM. For the purpose of the following Consolidated Pro Forma Balance Sheets,
a reorganization value of $375 million has been assigned and allocated to the
post-bankruptcy assets and liabilities in accordance with SFAS 141. This
estimated reorganization value, as well as its allocation to the specific assets
and liabilities may be significantly different from the final amounts that will
be determined upon the Debtors' emergence from bankruptcy.
2
ICG Communications, Inc.
Consolidated Pro Forma Balance Sheets
As of December 31, 2001 (unaudited)
(in thousands)
Pro Forma Adjustments to Record Confirmation of
the Plan
---------------------------------------------------
Projected Pre- Pro Forma
Confirmation Settlement Debt Fresh Start Reorganized
Balance Sheet of Claims Discharge Accounting Balance Sheet
------------- ---------- --------- ----------- -------------
Assets
Current assets:
Cash and short-term investments $ 134,802 $ (7,765) (1) $ - $ - $ 93,758
(19,279) (2)
(12,500) (3)
(1,500) (5)
Receivables, net 48,283 48,283
Prepaid expenses and inventory 8,753 8,753
------------- ---------- --------- ----------- -------------
Current assets 191,838 (41,044) - - 150,794
Property and equipment, net 574,180 (10,000) (3) (210,407) (7) 353,773
Other assets 19,019 4,710 (1) (3,209) (7) 20,520
------------- ---------- --------- ----------- -------------
Total Assets $ 785,037 $ (46,334) $ - $ (213,616) $ 525,087
============= ========== ========= =========== =============
See Notes to Consolidated Pro Forma Balance Sheets
3
ICG Communications, Inc.
Consolidated Pro Forma Balance Sheets
As of December 31, 2001 (unaudited), continued
(in thousands)
Pro Forma Adjustments to Record Confirmation
of the Plan
--------------------------------------------------
Projected Pre-
Confirmation Settlement Debt Fresh Start
Balance Sheet of Claims Discharge Accounting
------------- ---------- ----------- -----------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 32,420 $ - $ - $ -
Accrued liabilities 35,329 (2,220) (1)
14,332 (2)
Deferred revenue 25,724
------------- ---------- ----------- -----------
Current liabilities 93,473 12,112 - -
Long-term liabilities:
Term loan 84,574
Deferred revenue 138,511 (94,009) (7)
Capital lease obligation 50,708 54,899 (1)
Other debt 1,541 4,848 (2)
17,000 (3)
------------- ---------- ----------- -----------
Long-term liabilities 275,334 76,747 - (94,009)
Liabilities subject to compromise:
Unsecured creditors 2,300,353 68,360 (3) (2,477,648) (6)
110,435 (4)
(1,500) (5)
Capital lease obligations 185,029 (55,734) (1)
(18,860) (3)
(110,435) (4)
Priority creditors 23,022 (23,022) (2)
------------- ---------- ----------- -----------
Liabilities subject to compromise 2,508,404 (30,756) (2,477,648) -
------------- ---------- ----------- -----------
Total liabilities 2,877,211 58,103 (2,477,648) (94,009)
Redeemable preferred stock 1,366,660 (1,366,660) (7)
Stockholders' deficit - old (3,458,834) (15,437) (2) 2,336,218 (6) 1,247,053 (7)
(109,000) (3)
Stockholders' equity - new - 20,000 (3) 141,430 (6)
------------- ---------- ----------- -----------
Total Liabilities and Stockholders' Equity (Deficit) $ 785,037 $ (46,334) $ - $ (213,616)
============= ========== =========== ===========
Pro Forma
Reorganized
Balance Sheet
-------------
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 32,420
Accrued liabilities 47,441
Deferred revenue 25,724
-------------
Current liabilities 105,585
Long-term liabilities:
Term loan 84,574
Deferred revenue 44,502
Capital lease obligation 105,607
Other debt 23,389
-------------
Long-term liabilities 258,072
Liabilities subject to compromise:
Unsecured creditors -
Capital lease obligations -
Priority creditors -
-------------
Liabilities subject to compromise -
-------------
Total liabilities 363,657
Redeemable preferred stock -
Stockholders' deficit - old -
Stockholders' equity - new 161,430
-------------
Total Liabilities and Stockholders' Equity (Deficit) $ 525,087
=============
See Notes to Consolidated Pro Forma Balance Sheets
4
Notes to Consolidated Pro Forma Balance Sheets (Unaudited), in thousands
1) Refinance the term loan and $54,899 of capital leases incurring $4,710 of
fees and paying $3,055 of accrued interest and past due principal.
2) Settlement of estimated Administrative claims (i.e., professionals) for
$16,526 of cash and estimated Priority claims (primarily tax claims) for
$2,753 of cash and $4,848 of debt. Additionally, reclassify $15,421 of
priority claims that will continue post bankruptcy (primarily accrued
vacation).
3) Record the affirmation of executory contracts through the payment of $12,500
of cash, return of $8,000 of value of equipment, and issuance of $17,000 of
debt and $20,000 of new common stock. Capital lease obligations of $18,860
were rejected and $2,000 of equipment was returned. Additionally, estimated
damage claims of $109,000 on rejected executory contracts were recorded.
4) Reclassify $110,435 of claims in excess of the security interest.
5) Record settlement of convenience class claims of $1,500.
6) Adjustment to pre petition unsecured debt resulting from debt discharge
pursuant to confirmation of a Plan of Reorganization.
7) Fresh start accounting adjustments, reflecting the $375,000 enterprise
value of ICG Communications, Inc., adjusting the carrying value of property
and equipment, other assets and deferred revenue.
5
Projected Financial Information
Introduction
As a condition to confirmation of a plan of reorganization, the Bankruptcy Code
requires, among other things, that the bankruptcy court determine that
confirmation is not likely to be followed by the liquidation or the need for
further financial reorganization of the debtor. In connection with the
development of the Plan, and for purposes of determining whether the Plan
satisfies this feasibility standard, the Debtors' management analyzed the
ability of the Reorganized ICG to meet their obligations under the Plan with
sufficient liquidity and capital resources to conduct their businesses. In that
connection, the Debtor's management developed and prepared certain projections
(the "Projections") of the Debtors' operating profit, cash flow and certain
other items for the period from January 1, 2002 through December 31, 2005 (the
"Projection Period").
THE DEBTORS DO NOT, AS A MATTER OF COURSE, PUBLISH THEIR BUSINESS PLANS, BUDGETS
OR STRATEGIES OR MAKE EXTERNAL PROJECTIONS OR FORECASTS OF THEIR ANTICIPATED
FINANCIAL POSITION OR RESULTS OF OPERATIONS. ACCORDINGLY, THE DEBTORS
(INCLUDING THE REORGANIZED ICG) DO NOT ANTICIPATE THAT THEY WILL, AND DISCLAIM
ANY OBLIGATION TO, FURNISH UPDATED BUSINESS PLANS, BUDGETS OR PROJECTIONS TO
HOLDERS OF CLAIMS OR INTERESTS PRIOR TO THE EFFECTIVE DATE OR TO STOCKHOLDERS OR
DEBTHOLDERS AFTER THE EFFECTIVE DATE OR TO INCLUDE SUCH INFORMATION IN DOCUMENTS
REQUIRED TO BE FILED WITH THE SEC, ANY CSA OR ANY STOCK EXCHANGE OR OTHERWISE
MAKE SUCH INFORMATION PUBLICLY AVAILABLE.
The Projections should be read in conjunction with the assumptions,
qualifications and explanations set forth herein, as well as the Annual Report
on form 10-K for the year ended December 31, 2000 filed with the SEC.
General Assumptions
The Projections reflect numerous assumptions, including various assumptions with
respect to the anticipated future performance of the Reorganized ICG, industry
performance, general business and economic conditions and other matters, most of
which are beyond the control of the Reorganized ICG. In addition, unanticipated
events and circumstances may affect the actual financial results of the
Reorganized ICG. THEREFORE, WHILE THE PROJECTIONS ARE NECESSARILY PRESENTED
WITH NUMERICAL SPECIFICITY, THE ACTUAL RESULTS ACHIEVED THROUGHOUT THE
PROJECTION PERIOD WILL VARY FROM THE PROJECTED RESULTS. THESE VARIATIONS MAY BE
MATERIAL. ACCORDINGLY, NO REPRESENTATIONS CAN BE MADE OR IS MADE WITH RESPECT
TO THE ACCURACY OF THE PROJECTIONS OR THE ABILITY OF REORGANIZED ICG TO ACHIEVE
THE PROJECTED RESULTS. See Section VI for a discussion of certain factors that
may affect the future financial performance of the Reorganized ICG and of the
various risks associated with the securities of the Reorganized ICG.
6
The Projections have been prepared by the Debtors' management, and while they
believe that the assumptions underlying the projections for the Projection
Period, when considered on an overall basis, are reasonable in light of current
circumstances, no assurance can be given or is given that the projections will
be realized. The projections were not prepared in accordance with standards for
projections promulgated by the American Institute of Certified Public
Accountants or with a view to compliance with published guidelines of the SEC
regarding projections or forecasts. The Projections have not been audited or
compiled by the Debtors' independent auditors. As indicated below, the business
plan on which the Projections are based assumes, among other things,
improvements in the Reorganized ICG's results of operations during fiscal year
2002 as compared to fiscal year 2001 and continued improvements during the
remainder of the Projection Period.
Holders of Claims and Interests must make their own determinations as to the
reasonableness of such assumptions and the reliability of the projections in
reaching their determinations of whether to accept or reject the Plan.
Principal Assumptions
The Projections are based upon forecasts of operating results during the
Projection Period. The following is a listing of the principal assumptions that
were used to develop the Projections.
1) The Projections assume an Effective Date of December 31, 2001. It is
assumed that as of the Effective Date the equity value of the
Reorganized ICG will be calculated in accordance with the formula
set forth in the Plan.
2) The Projections assume zero proceeds from the Rights Offering.
3) It is assumed that no changes in the U.S. tax laws will occur that
will adversely impact the Reorganized ICG's ability to utilize its
net operating loss carryforwards.
In addition to the aforementioned assumptions, the Projections are based on
numerous detailed operating and financial assumptions. The Projections assume
the successful implementation of the Debtors' business plan. The descriptions
below summarize the operating and financial information that management believes
are significant and upon which the financial results of Reorganized ICG will
depend during the Projection Period.
(a) Effective Date; Plan Terms. The Projections assume Confirmation of the
Plan and that all transactions and settlement agreements contemplated by the
Plan will be consummated by the Effective Date of December 31, 2001. DrKW has
provided a range of the value of Reorganized ICG of $350MM to $500MM. The
Projections have been preparing assuming a $375MM value of Reorganized ICG.
(b) Balance Sheet. The Projected balance sheet data presented below, reflects
all Adjustments to Record Confirmation of the Plan (i.e., debt discharge and
fresh-start
7
accounting entries) as presented in the "Consolidated Pro Forma Balance Sheets
Giving Effect to the Plan of Reorganization" section. Projected balance sheet
information is presented below for the years ending December 31, 2001 (post
Effective Date) through December 31, 2005.
Days sales outstanding, used to calculate changes to working capital from
accounts receivable balances, is projected to remain at approximately 35 days in
each of the four years of the Projection Period. Days payable outstanding, used
to calculate changes to working capital from accounts payable balances, is
projected to be 37 in 2002 and 39 thereafter in the Projection Period.
Depreciation rates are projected to remain constant at an overall rate of 16.7%
per year.
(c) Revenues. The Debtors generate revenues from three product lines:
Corporate Services, Dial-Up, and Point-to-Point Broadband. The Debtors also
earn Reciprocal Compensation, primarily from Dial-Up services.
(c) (1) Corporate Services. Net revenues (comprised of voice, NikoNet and DIA
services) are projected at: $100.0MM; $140.8MM; $241.8MM; and $368.8MM for 2002
through 2005, respectively. Projected revenue increases result primarily from
increased sales of DIA services to corporate customers and the addition of DIA
value-added services projected to become available during 2002 and 2003. DIA
services leverage the Company's existing nationwide data infrastructure.
DIA gross new T1 unit sales are projected to grow from 450 in 2002 to 3,542 in
2005, with T3 unit sales projected to grow from 150 in 2002 to 1,369 in 2005.
The Projections assume pricing decreases of 25% and 18% for T1 and T3 lines,
respectively, in 2002 and pricing decreases of 10% annually thereafter for each
product (excluding value-added revenues and local loop charges). Gross margins
for these services improve over the plan period primarily as a result of
economies of scale and increased sales of value added services. T1 gross
margins are projected to increase from 61% in 2002 to 69% in 2005 and T3 gross
margins from 49% in 2002 to 65% in 2005.
Voice revenues are projected at: $81.6MM; $76.2MM; $74.2MM; and $74.3MM during
the four years beginning January 1, 2002, respectively. Declining revenue
reflects a shift in focus in new sales from voice services to DIA.
(c) (2) Dial-Up. Net revenues are projected at: $232.1MM; $286.7MM; $306.9MM;
and $304.8MM from 2002 through 2005, respectively. The Projections reflect
Dial-Up growth driven by increased user time online and industry consolidation.
Increased time online per user requires ISPs to purchase more capacity from
dial-up providers such as the Debtor.
During the Projection Period, the Company anticipates an increase in cumulative
net Dial-Up Ports from approximately 640,000 on January 1, 2002 to approximately
1,500,000 on December 31, 2005. Pricing decreases and a shift over time from
higher margin services to lower margin services, somewhat offset by assumed line
cost decreases, yield a decline in Dial-Up gross margin percentages from 66% in
2002 to 61% in 2005.
8
(c) (3) Point-to-Point Broadband. Net revenues are projected at: $150.7MM;
$163.6MM; $185.1MM; and $217.6MM from 2002 through 2005, respectively. Revenues
primarily consist of Special Access services but also include SS7 and Switched
Access services. The Projections assume that growth in data communications will
drive growth in bandwidth demand.
The projections include Special Access capital investments of: $20MM; $30MM;
$40MM; and $50MM in years 2002 through 2005, respectively, all with an assumed
24 month payback on investment. Average gross margins are assumed to improve
from 64% in 2002 to 67% in 2005.
SS7 revenues and Switched Access revenues are projected to be flat during the
Projection Period at $22MM per annum.
(c) (4) Reciprocal Compensation. The revenue stream from Reciprocal
Compensation is projected to be phased out during 2003 and 2004, in accordance
with current FCC rulings and existing agreements. Net reciprocal compensation
is projected at: $74.2MM; $47.8MM; and $13.1MM, from 2002 through 2004,
respectively. Projections are based on anticipated minutes of use and
applicable contracted or FCC rates.
(d) Operating Costs. Operating costs consist of line costs and other operating
costs including operating facilities rent, systems maintenance and related
personnel costs.
Line costs are projected to be: $194.1MM; $234.7MM; $284.0MM; and $336.2MM in
years 2002 through 2005, respectively; or 35%; 37%; 38%; and 38% of revenue,
respectively. Line costs expressed as a percent of revenue are projected to
increase from 2002 to 2005 primarily due to the reduction and eventual
elimination of reciprocal compensation.
Other operating costs are projected to be: $135.1MM; $156.1MM; $170.1MM; and
$179.1MM in years 2002 through 2005, respectively; or 24%; 24%; 23%; and 20% of
revenue, respectively. Other operating costs as a percentage of revenue decline
as the Debtor leverages its existing operating facilities and personnel.
Employee compensation included in operating costs transfers are projected using
the same methodologies discussed under the Selling, General, and Administration
Expenses section presented below.
Overall gross margins resulting from the operating costs assumptions above are
41%, 39%, 39%, and 42% in years 2002 through 2005, respectively. Gross margins
are projected to initially decline as reciprocal compensation is phased out, and
are projected to subsequently increase with increased revenue and improved
efficiencies.
(e) Selling, General, and Administrative Expenses. SG&A expenditures are
projected to be: $120.2MM; $140.3MM; $161.9MM; and $185.6MM in years 2002
through 2005, respectively; or 22%; 22%; 22% and 21% or revenue, respectively.
Employee compensation expense projections are based upon average salaries and
commissions (where applicable) by department, adjusted for normal raises,
bonuses, and benefits. Headcount projections are
9
based on estimated operational cost drivers by department. Cost increases over
the period are driven by inflation and company growth.
(f) Capital Expenditures. Capital expenditures are projected to be: $98.2MM;
$103.8MM; $116.7MM; and $167.5MM during years 2002 through 2005, respectively.
A significant component of each year, as described above, is for investments in
Special Access services. Other significant capital expenditures are projected
for maintenance capital, system reliability, and investments in backbone
equipment (particularly in 2004 and 2005 as the Debtor turns up its existing OC-
48 backbone capacity). The expenditures are projected to provide adequate
capacity by line of service through the projection period.
(g) Interest Expense. Subsequent to the Effective Date, and over the course of
the Projection Period, Reorganized ICG is projected to incur interest expense on
its existing capital leases, the new term loan, and a new revolver.
Capital leases include IRUs and the headquarters building and are projected to
total $105.6MM at the Effective Date. Interest expense is assumed to average
14.8% per annum for IRUs and 11.8% per annum for the building based on terms of
agreements affirmed on the Effective Date.
The new term loan is projected to have a principal balance of $84.6MM as of the
Effective Date. Interest is assumed at 11.0% per annum payable quarterly. The
principal balance of the loan is projected to begin amortizing in 2002.
A new $50.0MM revolving credit facility is projected. Costs of the facility are
projected as interest at 11.0% per annum, payable monthly, and a 1.0% unused
line fee, also payable monthly. Reorganized ICG projects to initially draw on
the revolver in 2004.
Other debt as of the Effective Date consists primarily of notes issued to
vendors and taxing authorities upon the Effective Date, and are projected to
have a principal balance totaling $22.8MM. Associated interest expense is
projected at 11.0%, payable monthly. The total principal balance is amortized
over a five period.
(h) Income Taxes. It is assumed that the tax operating loss carry forward in
existence subsequent to the Effective Date will be sufficient to offset any tax
liabilities incurred during the Projection Period. As such, there are no
projected income tax liabilities.
(i) Ability to Service Debt. Based on the Projections and subject to the
assumptions set forth the Debtors project the following debt service coverage
ratios:
- ------------------------------------------------------------------
2002 2003 2004 2005
- ------------------------------------------------------------------
EBITDA/Interest Expense, net 4.8:1 4.9:1 5.9:1 8.2:1
Debt/EBITDA 1.9:1 1.8:1 1.4:1 1.0:1
- ------------------------------------------------------------------
10
The Company is projected to have $93.8MM in cash on the Effective Date and Plan
projections utilize approximately $83.5MM of this amount, plus additional
funding from the revolving credit facility, to fund the capital program,
principal and interest obligations, and working capital requirements over the
Projection period. The Company requires approximately $43.2MM of funding in
2004 through 2005.
There can be no assurances that the projected results necessary to general
adequate funds for the retirement of this indebtedness will be achieved. If
these results are not obtained, funds will have to be derived from alternative
sources, such as reduced discretionary capital expenditures and/or additional
borrowing. See Section VI. If alternative sources of funds are available to
----------
the Debtor, any utilization of alternative sources of funds may impair the
competitive position of the Debtor, reduce its cash flows or have other adverse
consequences, including the imposition of additional burdensome covenants,
security interests or other obligations that could be adverse to Debtors and to
the holders of Claims and Interests.
11
ICG COMMUNICATIONS, INC.
Consolidated Projected Balance Sheets
Plan of Reorganization Projections
(in thousands)
December 31,
--------------------------------------------------------------------
2001 2002 2003 2004 2005
--------------------------------------------------------------------
Current assets:
Cash and short-term investments $ 93,758 $ 71,244 $ 34,733 $ 9,401 $ 10,227
Accounts receivables, net 48,283 58,173 61,074 71,574 85,594
Prepaid expenses & Inventory 8,753 8,428 6,819 4,650 6,937
--------------------------------------------------------------------
Current assets 150,794 137,844 102,626 85,625 102,759
Property and equipment, net 353,773 380,861 400,915 415,585 457,708
Other assets, net 20,520 18,578 17,636 16,694 15,752
--------------------------------------------------------------------
Total assets $525,087 $537,283 $521,178 $517,904 $576,218
====================================================================
Current liabilities:
Accounts payable $ 32,420 $ 35,552 $ 39,002 $ 45,340 $ 56,225
Accrued liabilities 47,441 58,846 62,677 66,001 68,896
Deferred revenue 25,724 25,724 25,724 25,724 25,724
--------------------------------------------------------------------
Current liabilities 105,585 120,122 127,403 137,065 150,845
Long-term liabilities
Term loan 84,574 80,345 76,117 67,659 59,202
Revolver - - - 11,265 43,196
Deferred revenue 44,502 33,702 22,902 12,102 1,302
Capital lease obligations 105,607 101,076 95,829 89,765 82,781
Other debt 23,389 17,845 12,697 7,017 4,194
--------------------------------------------------------------------
Long-term liabilities 258,072 232,968 207,545 187,809 190,674
--------------------------------------------------------------------
Total liabilities 363,657 353,090 334,948 324,874 341,519
Total stockholders' equity 161,430 184,193 186,230 193,030 234,699
--------------------------------------------------------------------
Total liabilities and stockholders' equity $525,087 $537,283 $521,178 $517,904 $576,218
====================================================================
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ICG COMMUNICATIONS, INC.
Projected Statement of Operations
Plan of Reorganization Projections
(in thousands)
Years Ending December 31,
-----------------------------------------------------
2002 2003 2004 2005
-----------------------------------------------------
Revenue $ 556,953 $ 638,979 $ 747,024 $ 891,212
Operating costs 329,209 390,860 454,101 515,335
----------------------------------------------------
Gross Profit 227,744 248,119 292,923 375,877
Selling, general and administrative 120,168 140,344 161,891 185,567
expenses
----------------------------------------------------
EBITDA 107,576 107,775 131,032 190,310
Depreciation and amortization 66,938 83,726 102,008 125,333
Interest expense, net 22,455 22,013 22,224 23,308
Other (income) (4,580) - - -
----------------------------------------------------
Net income $ 22,763 $ 2,036 $ 6,800 $ 41,669
====================================================
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ICG COMMUNICATIONS, INC.
Projected Statements of Cash Flows
Plan of Reorganization Projections
(in thousands)
Years Ending December 31,
----------------------------------------------------------
2002 2003 2004 2005
----------------------------------------------------------
Cash flow from operating activities:
EBITDA $107,576 $ 107,775 $ 131,032 $ 190,310
Adjustments
Deferred revenue recognition (10,800) (10,800) (10,800) (10,800)
Change in working capital 6,069 5,997 1,339 (2,519)
----------------------------------------------------------
Net cash from operating activities 102,845 102,972 121,571 176,991
Cash flow from investing activities:
Capital expenditures (98,156) (103,781) (116,678) (167,456)
Proceeds from sale of PP&E & other assets 8,710 -- -- --
----------------------------------------------------------
Net cash from investing activities (89,446) (103,781) (116,678) (167,456)
Cash flow from financing activities:
Proceeds from the revolving credit agreement - - 11,265 31,930
Principal payments on term loan (4,229) (4,228) (8,458) (8,457)
Principal payments on LT debt & cap leases (14,937) (14,682) (15,359) (12,644)
Interest payments, net (16,747) (16,792) (17,673) (19,538)
----------------------------------------------------------
Net cash from financing activities (35,913) (35,702) (30,225) (8,709)
Net increase (decrease) in cash and equivalents (22,514) (36,511) (25,332) 826
Cash and equivalents, beginning of year 93,758 71,244 34,733 9,401
----------------------------------------------------------
Cash and equivalents, end of year $ 71,244 $ 34,733 $ 9,401 $ 10,227
==========================================================
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