SHARED ADMINISTRATIVE AND
OPERATIONAL SERVICES AGREEMENT
This Services Agreement (this "Agreement), is effective as of January 23,
1998, between ICG Communications, Inc., a Delaware corporation, ("ICG") and ICG
Services, Inc., a Delaware corporation (the "Company").
RECITALS
A. The Company and ICG desire to provide services to each other (and to
each other's controlled Affiliates) for the administration and
operation of the businesses.
B. This Agreement sets forth the general terms upon which ICG and the
Company will provide such services, facilities, benefits and personnel
to each other.
In consideration of the mutual promises contained in this Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ICG and the Company agree as follows:
Section 1. Services.
(a) Provision of Services. At the request of the Company, ICG shall
provide, and shall cause its Restricted Subsidiaries to provide,
services to the Company for the administration and operation of the
businesses of the Company and its controlled Affiliates and shall
devote thereto such time as may be necessary for the proper and
efficient administration and operation of such businesses. At the
request of ICG, the Company shall provide, and shall cause its
controlled Affiliates to provide, services to ICG for the
administration and operation of the businesses of ICG and its
Restricted Subsidiaries and shall devote thereto such time as may be
necessary for the proper and efficient administration and operation of
such businesses.
(b) Description of Services. The services to be provided by ICG and the
Company pursuant to this Section 1 shall include, without limitation,
the following types of services (collectively, "Services") as the
Company or ICG may request from time to time:
(i) tax reporting, internal and external financial reporting,
payroll, employee benefit administration, workers' compensation
administration, telephone, fleet management, package delivery,
management information systems, billing, lock box, remittance
processing, risk management services and general accounting;
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(ii) other services typically performed by ICG's (and its Restricted
Subsidiaries') or the Company's (and its controlled Affiliates')
executive, accounting, sales and marketing, finance, treasury,
corporate, legal, tax, benefits, insurance, facilities,
purchasing, fleet management, advanced information technology
department personnel, business development and engineering;
(iii)use of telecommunications and data facilities and of systems and
software developed, acquired or licensed by ICG (and its
Restricted Subsidiaries) or the Company (and its controlled
Affiliates) from time to time for financial forecasting,
budgeting and similar purposes, and for other administrative and
general operational purposes, including any such software for use
on personal computers, in any case to the extent available under
copyright law or any applicable third-party contract:
(iv) technology support and consulting services;
(v) purchasing of equipment; telecommunications transmission,
facilities, capacity and materials and such other materials as
are requested, for or on behalf of a Party, including the
provision of turnkey projects and operating leases;
(vi) labor and services associated with providing the installation,
construction and engineering associated with the items described
in Section 1(b)(v) above.
(vii)such other management, supervisory, strategic planning or other
services as the Company or ICG may from time to time request; and
(viii) such other services, materials, and equipment as may be
requested by the other Party in the ordinary course of business.
(c) Use of Premises. ICG shall also provide the Company and its controlled
Affiliates the use of its facilities and leased premises (the
"Premises") as the Company shall require in the conduct and operation
of its businesses.
Section 2. Compensation for Services.
(a) Services Provided by ICG. As a compensation for Services and Premises
rendered by ICG and its Restricted Subsidiaries to the Company and its
controlled Affiliates pursuant to this Agreement, the Company shall
reimburse ICG for (i) all direct expenses incurred by ICG in providing
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Services, provided that the incurrence of such expenses is consistent
with practices generally followed by ICG in managing or operating its
own business and the businesses of its Restricted Subsidiaries and
(ii) the fair market value of the Company's pro rata share of ICG's
indirect overhead expenses based on a quarterly determination of the
usage (as determined on a percentage basis) by the Company of Services
during the prior quarter. Such indirect expenses shall include (i) the
salaries and other compensation of ICG's (and its Restricted
Subsidiaries') officers and employees who perform Services for the
Company, (ii) general and administrative overhead expenses, (iii) the
costs and expenses of ICG's physical facilities and telecommunications
networks that are utilized by the Company and its controlled
Affiliates; and (iv) sales commissions and other compensation payable
by the Company on account of sales and marketing activities conducted
by ICG personnel on behalf of the Company and its controlled
Affiliates. ICG shall keep true, complete and accurate books of
account containing such information as may be necessary for the
purpose of calculating the above costs.
(b) Services Provided by the Company. As a compensation for Services
rendered by the Company and its controlled Affiliates to ICG and its
Restricted Subsidiaries pursuant to this Agreement, ICG shall
reimburse the Company for (i) all direct expenses incurred by the
Company and its controlled Affiliates in providing Services, provided
that the incurrence of such expenses is consistent with practices
generally followed by the Company in managing or operating its own
business and the businesses of its controlled Affiliates and (ii) the
fair market value of ICG's pro rata share of the Company's indirect
overhead expenses based on a quarterly determination of the usage (as
determined on a percentage basis) by ICG of Services during the prior
quarter. Such indirect expenses shall include (i) the salaries and
other compensation of the Company's (and its controlled Affiliates')
officers and employees who perform Services for the Company; (ii)
general and administrative overhead expenses; (iii) the fair market
value of purchasing services provided by ICG Equipment to or for the
benefit of ICG; and (iv) sales commissions and other compensation
payable by ICG and its Restricted Subsidiaries on account of sales and
marketing activities conducted by Company personnel on behalf of ICG
and its Restricted Subsidiaries. The Company shall keep true, complete
and accurate books of account containing such information as may be
necessary for the purpose of calculating the above costs.
(c) Procedure for Calculating Compensation. The compensation payable by a
Party under this Section 2 shall be determined on a quarterly basis in
accordance with the procedures set forth in Attachment I, attached
hereto and incorporated herein by reference. The Parties shall
cooperate with each other to develop and implement recordkeeping and
other supplemental procedures in addition to those set forth in
Attachment I to ensure the accuracy and accountability of the
compensation determinations required under this Section 2.
Section 3. Term.
(a) Commencement. This Agreement shall be effective as of the date first
above written (the "Effective Date").
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(b) Termination. .Except as otherwise expressly provided herein, this
Agreement, the rights and obligations of the Parties under this
Agreement shall remain in effect until terminated by agreement of the
Parties or in the event either party materially breaches this
Agreement and fails to cure such breach within sixty (60) days after
written notice thereof from the non-breaching party. The non-breaching
party shall thereafter be entitled to terminate this Agreement.
(c) Effect of Termination. In the event any termination of this Agreement,
each Party shall remain liable for all obligations of such Party
accrued under this Agreement prior to the date of such termination,
including, without limitation, (i) all obligations of such Party to
reimburse the other for Services, and as applicable, the Premises,
provided under this Agreement through the termination date, in each
case as provided in Section 3, provide further that no termination
shall effect obligations of the Parties to one another under any other
agreement related to, including without limitation the following: (i)
all obligations of ICG or its controlled Affiliates arising by virtue
of its obligations to pay for Equipment and related services purchased
for, on behalf of, or leased to it by ICG Equipment, and (ii) all
obligations of the other Party relating to the use of
telecommunications facilities of the other, and (iii) amounts due for
sales of the other Parties' services. The provisions of Section 6
shall survive indefinitely, notwithstanding any termination of this
Agreement.
Section 4. Indemnification Obligations.
(a) Each Party hereby indemnifies, defends and holds harmless the other
Party and its agents, officers and employees from any and all losses,
damages, costs, expenses (including reasonable attorneys fees),
actions, or claims for personal injury, damage to property, or other
damage or financial loss of whatever nature in any way arising out of
any acts or omissions of such Party, or its agents, officers and
employees in connection with this Agreement. IN NO EVENT SHALL EITHER
PARTY BE LIABLE TO THE OTHER PARTY OR ANY THIRD PARTY FOR
CONSEQUENTIAL OR INCIDENTAL DAMAGES OF ANY KIND OR NATURE ARISING OUT
OF OR IN CONNECTION WITH THE PERFORMANCE OR FAILURE TO PERFORM THE
OBLIGATIONS UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO, LOSS
OF PROFITS OR REVENUE, REGARDLESS OF THE FORESEEABILITY THEREOF.
(b) This Section 4 will survive the expiration or termination of this
Agreement, regardless of the reason for such expiration or
termination.
Section 5. Definitions.
Capitalized terms used in this Agreement shall have the meanings ascribed
to them as set forth in other Sections. In addition, the following terms shall
have the following meanings:
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"Affiliate" means a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
another Person. With respect to the Company, the term "controlled Affiliate"
shall include entities in which the Company owns, directly or indirectly, a 50
percent equity or voting interest.
"Control" means the power, directly or indirectly, to direct the management
and policies of any Person, through the ownership of voting shares or other
equity interest, by contract or otherwise.
"Equipment" means any equipment, materials and related software and
services, including installation, engineering and related services.
"Party" and "Parties" means ICG Communications, Inc. and ICG Services,
Inc., and their respective controlled Affiliates as the context requires.
"Person" means an individual, and a corporation, partnership, joint
venture, joint stock company, association, trust, limited liability company,
unincorporated organization or any other entity.
Section 6. Miscellaneous.
(a) Entire Agreement. This Agreement including Attachment I hereto
constitutes the entire agreement between the Parties with respect to
the subject matter of this Agreement and supersedes all previous
agreements, negotiations, understandings and commitments with respect
to such subject matter, whether or not in writing. This Agreement
including Attachment I hereto specifically amends and restates that
certain Administrative Services Agreement, the form of which was
attached to the Intercompany Agreement, effective as of January 23,
1998, between the parties.
(b) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware, without regard to
any choice or conflicts-of-laws or rules or provisions (whether or not
those of the State of Delaware) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.
(c) Notices. All notices, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly
given: (i) on the day of delivery if delivered personally to the Party
to whom notice is to be given; (ii) on the day of transmission if sent
via facsimile transmission to the facsimile number given below (with
confirmation of delivery received); or (iii) on the day of delivery of
Federal Express or similar overnight courier, to the Party as follows:
If to ICG:
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ICG Communications, Inc.
161 Inverness Drive West
Englewood, Colorado 80112
Attention: General Counsel
Facsimile: 303/ 414-8839
If to the Company:
ICG Services, Inc.
161 Inverness Drive West
Englewood, Colorado 80112
Attention: General Counsel
Facsimile: 303/ 414-8839
Any Party may change its address for the purpose of this Section 6(c) by giving
the other Party written notice of its new address in the manner set forth above.
(d) Amendment. This Agreement may not be amended or modified in any
respect except by a written agreement signed by the Parties.
(e) Successors and Assigns; No Third-Party Beneficiaries. This Agreement
and all of the provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties and their respective successors
and permitted assigns. Neither this Agreement nor any of the rights,
interests and obligations under this Agreement shall be assigned by
either Party, by operation of law or otherwise, without the prior
written consent of the other Party. Nothing contained in this
Agreement, except as expressly set forth herein, is intended to confer
upon any other Persons other than the Parties and their respective
successors and permitted assigns, any rights or remedies.
(f) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. This
Agreement may be delivered by facsimile transmission and facsimile
signatures shall be treated as original signatures for all applicable
purposes.
(g) No Waiver. No waver by either Party of any term or condition of this
Agreement, in any one or more instances, shall operate as a waiver of
such term or condition at any other time. No waiver of any term or
condition of this Agreement shall be effective unless in a writing
signed by the Party entitled to give such waiver.
(h) Relations Between the Parties. The Parties are independent
contractors. Nothing in this Agreement shall constitute either Party,
being considered a partner of, or joint venturer with, the other
Party.
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(i) Severability. If any provision of this Agreement or its application to
any Person or circumstances shall be held to be invalid or
unenforceable, the remainder of this Agreement, or the application of
such provision to Persons or circumstances other than those to which
it was held to be invalid or unenforceable, shall not be affected
thereby; provided that the Parties shall negotiate in good faith with
respect to an equitable modification of the provision or application
thereof held to be invalid.
(j) Headings, Terms. The Section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the
meaning or interpretation of this Agreement. Terms used with initial
capital letters will have the meanings specified, applicable to both
singular and plural forms, for all purposes of this Agreement. All
pronouns (and any variation) will be deemed to refer to the masculine,
feminine or neuter, as the identity of the Person may require. The
singular or plural includes the other, as the context requires or
permits. The word include (and any variation) is used in an
illustrative sense rather than a limiting sense. The word day means a
calendar day. All references to "Section" are to sections of this
Agreement.
(k) Arbitration. Any disputes arising under or in connection with this
Agreement, including, without limitation, those involving claims for
specific performance or other equitable relief, will be submitted to
binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association under the authority of federal and
state arbitration statutes, and will not be the subject of litigation
in any forum. EACH PARTY, BY SIGNING THIS AGREEMENT, VOLUNTARILY,
KNOWINGLY AND INTELLIGENTLY WAIVES ANY RIGHTS SUCH PARTY MAY OTHERWISE
HAVE TO SEEK REMEDIES IN COURT OR OTHER FORUMS, INCLUDING THE RIGHT TO
JURY TRIAL. The arbitration will be conducted only in Denver,
Colorado, or another location mutually agreed by the Parties, before a
single arbitrator selected by the Parties or, if they are unable to
agree on an arbitrator, before a panel of three arbitrators, one
selected by ICG, one selected by the Company and the third selected by
the other two arbitrators. The arbitrators will have full authority to
order specific performance and award damages and other relief
available under this Agreement or applicable law, but will have no
authority to add to, detract from, change or amend the terms of this
Agreement or existing law. All arbitration proceedings, including
settlements and awards , will be confidential. The decision of the
arbitrators will be final and binding, and judgment on the award by
the arbitrators may be entered in any court of competent jurisdiction.
THIS SUBMISSION AND AGREEMENT TO ARBITRATE WILL BE SPECIFICALLY
ENFORCEABLE. The arbitrator will have no power to award punitive or
exemplary damages to ignore or vary the terms of this Agreement, and
will be bound to apply controlling law. The Party who prevails on
entry of the award of judgment will be entitled to his or its costs
and expenses, including reasonable attorney's fees incurred in
connection with the arbitration. A judgment upon the award may be
entered in any court having jurisdiction.
(l) Confidentiality. Each Party will hold, and will cause its
shareholders, officers, directors, employees, partners, consultants,
advisors, representatives and agents to hold, in confidence, any
information with respect to the terms and provisions of this
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Agreement, except (i) if compelled to disclose by judicial or
administrative process or by other requirements of law, including
financial reporting and securities laws compliance requirements and
reporting to creditors, bondholders and trustees and that is required
under applicable financial agreements of a Party, (ii) to the extent
required to perform its obligations under or to enforce its rights
pursuant to this Agreement, (iii) if mutually agreed by the Parties in
writing in advance of such disclosure, or (iv) to the extent that such
information can be shown to have been in the public domain through no
fault of such Party, provided that each Party may disclose information
regarding this Agreement, on a need to know basis only, to
shareholders, officers, directors, employees, partners, consultants,
advisors, representatives, and agents (collectively, "Bound Persons"),
so long as such Bound Persons are informed by such Party of the
confidential nature of such information and such Bound Persons agree
to treat the information confidentially, and the disclosing Party
agrees to be responsible for any breach of the provisions of this
Section 6(1) by any Bound Persons to whom such Party disclosed
information. Each Party's obligation to hold information in confidence
shall be satisfied if it exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of
its own similar information. This Section 6(l) will survive the
expiration or termination of this Agreement.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
effective as of the day and year first written above.
ICG COMMUNICATIONS, INC.
By: /s/ Sheldon S. Ohringer
----------------------------------
Name: Sheldon S. Ohringer
Title: Executive Vice President-Telecom
ICG SERVICES, INC.
By: /s/ Don Teague
----------------------------------
Name: H. Don Teague
Title: Executive Vice President, General
Counsel and Secretary
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ATTACHMENT I TO
Shared Administrative and Operational
Services Agreement
Procedures to Determine Compensation
The following procedures will be utilized to determine the compensation
payable by each Party pursuant to Section 2. The Parties will from time to time
review, revise and supplement these procedures, as mutually agreed to be
appropriate or necessary to ensure the accurate determination, recordkeeping and
accountability of such compensation.
1. Determination of Direct and Indirect Costs.
(a) ICG and the Company shall develop specific written procedures to be
followed by departments. Each Department Head shall create specific
recordkeeping functions which shall be disseminated to all of the
personnel in the Department Head's department and shall be utilized
within their departments to determine, record and account for all
direct and indirect costs incurred by such department that are
reimbursable under Section 2.
(b) As soon after the end of each calendar month as is practicable, the
Department Head will provide the information for the previous month to
ICG's corporate accounting department. All information is reviewed by
ICG corporate accounting. Within approximately thirty (30) days after
the end of each calendar month ending after the date of this
Agreement, ICG's corporate accounting department shall, based on the
information an data recorded and maintained during such month by each
division, determine the actual direct and indirect costs that were
incurred by each department which are reimbursable under Section 2.
ICG's corporate accounting department shall determine, based on such
reports and other information as shall be deemed relevant, the fair
market value of such reimbursable direct and indirect costs. In making
such determination the following principles shall be applied by ICG's
corporate accounting department:
(i) The fair market value of direct costs shall be the actual
out-of-pocket costs expended by a Party on behalf of the other
Party.
(ii) The fair market value of indirect costs shall be the amount equal
to the fully burdened costs incurred in providing such Services
rendered, taking into account, among other factors, the type of
Services provided and the time spent by applicable department
personnel in rendering such Services, together with associated
costs, plus a five percent (5%) profit mark-up.
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2. Determination of Boards of Directors.
Each quarter upon the making of the determination set forth in Section 1(b)
of this Attachment I, ICG corporate accounting and ICG legal departments shall
deliver a written report to the Boards of Directors of ICG and the Company, in
such detail as required by the Boards of Directors, of the amounts reimbursable
for compensation under Section 2. Based on such report and such other
supplemental information and determinations as the Boards of Directors shall
require, the Boards of Directors shall jointly determine the fair market value
of the Services provided by ICG and the Company to each other under this
Agreement. The Boards of Directors may, but shall not be required to, consult
third party consultants in making their fair market value determinations. Upon
the completion of such joint determination, settlement statements shall be
prepared and issued by ICG and the Company detailing the compensation payable by
each Party under Section 2, and amounts owing under such settlement statements
shall be settled (including by way of set-off) and paid within forty-five (45)
days after the quarter end.
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