EXHIBIT 10.23
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated March 17, 1999, between
Convergent Communications, Inc., a Colorado corporation (the "Company"), and
each of the entities named on Exhibit A hereto (each an "Initial Purchaser"
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and, collectively, the "Initial Purchasers").
In consideration of the representations, warranties, and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
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1.0 Certain Definitions. As used in this Agreement, the following
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terms shall have the following meanings:
"Accredited Investor" has the meaning set forth in Regulation D promulgated
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under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
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investigations, charges, complaints, claims, demands, injunctions, Judgments,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, Liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
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Section 1504(a).
"Agreement" means this Stock Purchase Agreement, including all exhibits and
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schedules thereto, between the Parties, as the same may be amended from time to
time in accordance with the provisions hereof.
"Assets" means all properties and assets, real and personal, tangible and
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intangible, of every type and description, whether owned or leased or otherwise
possessed, used, held for use or usable in the Company's or any of its
Subsidiaries' businesses, including the Licenses, the Intangible Property and
the Company Contracts.
"Balance Sheet" means the most recently dated consolidated balance sheet of
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the Company and its Subsidiaries included in the Financial Statements.
"Basis" means any past or present fact, situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act or transaction that reasonably could form the basis for any
specified consequence.
"Business Day" has the meaning set forth in Exhibit B.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Commission" means the Securities and Exchange Commission or any successor
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Governmental Authority.
"Common Stock" has the meaning set forth in Exhibit B.
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"Company" has the meaning set forth in the preface above.
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"Company Contracts" has the meaning set forth in Section 3.20.
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"Company Parties" means the Company and its Subsidiaries.
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"Company's Knowledge" means the present conscious knowledge of the
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Company's officers, without any duty of inquiry.
"Contract" means any agreement, contract, commitment, indenture, lease,
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license, instrument, note, bond, security, agreement in principle, letter of
intent, undertaking, promise, covenant, arrangement or understanding, whether
written or oral.
"Disclosure Schedule" has the meaning set forth in the preface of Article
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III.
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"Employee Benefit Plan" means any (i) nonqualified deferred compensation or
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retirement plan or arrangement which is an Employee Pension Benefit Plan, (ii)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (iii) qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (iv) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
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3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
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3(1).
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"Entity" means a partnership, limited liability partnership, corporation,
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limited liability company, association, joint stock company, trust, estate,
joint venture, or unincorporated organization.
"Environmental, Health, and Safety Laws" means federal, state, local, and
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foreign statutes, regulations and ordinances concerning pollution or protection
of the environment, public health and safety, or employee health and safety,
including laws relating to emissions, discharges, releases, or threatened
releases of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes into ambient air, surface water, ground water, or
lands or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes.
"Environmental Studies" has the meaning set forth in Section 3.14(d).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"ERISA Affiliate" means each entity which is treated as a single employer
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with the Company for purposes of Code Section 414.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
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"Financial Statements" has the meaning set forth in Section 3.09.
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"First Closing" has the meaning set forth in Section 2.02(b).
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"GAAP" means United States generally accepted accounting principles as in
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effect from time to time.
"Governmental Authority" means any nation or government, any state or other
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political subdivision thereof, and any Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Hazardous Materials" shall mean any substance which is or contains: (i)
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any "hazardous substance" as now defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section
9601 et seq.) or any regulations promulgated thereunder; (ii) any "hazardous
waste" as now defined in the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.) or regulations promulgated thereunder; (iii) any substance
regulated by the Toxic Substances Control Act (15 U.S.C. Section 2601 et. seq.);
(iv) gasoline, diesel fuel or other petroleum hydrocarbons; (v) asbestos and
asbestos containing materials, in any form, whether friable or nonfriable; (vi)
polychlorinated biphenyls; (vii) radon gas; and (viii) any additional substances
or materials which are now classified or considered to be hazardous or toxic
under any laws, ordinances, statutes, codes, rules, regulations, agreements, and
Judgments, now or hereafter enacted, promulgated, or amended, of the United
States, the states, the counties, the cities
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or any other political subdivisions in which any real property owned, leased or
occupied by the Company or any of its Subsidiaries is located and any other
political subdivision, agency or instrumentality exercising jurisdiction over
the owner of such real property, such real property or the use of such real
property relating to Environmental, Health and Safety Laws.
"Indemnified Party" has the meaning set forth in Section 5.04.
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"Indemnifying Party" has the meaning set forth in Section 5.04.
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"Indenture" means the Indenture dated April 2, 1998 between Convergent
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Communications, Inc. as Issuer and Norwest Bank Colorado, N.A., as Trustee.
"Initial Purchased Securities" means the collective reference to the
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Initial Purchased Shares and the Initial Warrants.
"Initial Purchased Shares" has the meaning set forth in Section 2.02(a).
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"Initial Purchasers" has the meaning set forth in the preface above.
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"Initial Warrants" has the meaning set forth in Section 2.02(a).
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"Intangible Property" means all certificates of deposit, bank accounts,
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securities, partnership or other ownership interests, rights to receive money or
property by assignment, future interests, claims and rights against third
parties, accounts and notes receivables owned or held directly or beneficially
by or on behalf of the account of the Company or any of its Subsidiaries, the
Licenses, the Intellectual Property and any other intangible property of any
nature of the Company or any of its Subsidiaries.
"Intellectual Property" means (i) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, (ii) all
trademarks, service marks, trade dress, logos, trade names, and corporate names,
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (iv) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (v) all
computer software (including data and related documentation), (vi) all other
proprietary rights, and (vii) all copies and tangible embodiments thereof (in
whatever form or medium).
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"Investor Rights Agreement" means the Investor Rights Agreement, dated as
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of the date of this Agreement, between the Company and each of the Purchasers,
as it may be amended from time to time in accordance with its terms.
"Joinder Agreement" has the meaning set forth in Section 2.03(b).
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"Judgment" means any judgment, writ, order or decree of or by any
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arbitrator, court, judge, justice or magistrate, including any bankruptcy court
or judge, and any order of or by any other Governmental Authority.
"Liability" means any liability (whether known or unknown, whether asserted
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or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any such liability for Taxes and any such liability with respect to any
Redeemable Equity.
"Licenses" has the meaning set forth in Section 3.16.
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"Lien" means any mortgage, pledge, lien (statutory or other), encumbrance,
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hypothecation, charge, security interest, claim, option, right to acquire,
adverse interest, assignment, deposit arrangement, restriction, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the foregoing and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Material Adverse Effect" means any event, fact, circumstance or occurrence
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which results or would result in a material adverse change in or a material
adverse effect on any of (i) the financial condition, business, or operations of
the Company and its Subsidiaries taken as one enterprise, or (ii) the legality
or validity as to the Company or enforceability as against the Company of any
Transaction Document or (iii) the ability of the Company or any of its
Subsidiaries to perform its material obligations hereunder or under any other
Transaction Document.
"MJM Associates" has the meaning set forth in Section 4.10.
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"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
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"Ordinary Course of Business" means the ordinary course of business of the
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Company and its Subsidiaries consistent with past custom and practice (including
with respect to quantity and frequency) taking into consideration increases in
quantity and frequency resulting from the recent growth of the Company.
"Parties" means the Company, the Initial Purchasers and, from and after the
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Second Closing, each Second Purchaser that is not an Initial Purchaser.
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"PBGC" means the Pension Benefit Guaranty Corporation.
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"Permitted Liens" means (i) mechanic's, materialmen's, and similar Liens
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for construction in progress or evidencing indebtedness for related services
that are not more than sixty days past due, (ii) Liens for Taxes not yet due and
payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (iii) purchase money Liens and Liens securing rental
payments under capital lease arrangements, (iv) Liens incurred pursuant to the
transactions entered into in connection with, or permitted by, the Indenture;
(v) Liens existing as of the date hereof and disclosed in the Disclosure
Schedule or disclosed to Purchasers pursuant to Section 3.25; and (vi) other
Liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money which do not materially impair the current use,
occupancy or value or the marketability of title of the Asset subject thereto.
"Person" means an individual Entity, or Governmental Authority.
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"Prohibited Transaction" has the meaning set forth in ERISA Section 406 and
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Code Section 4975.
"Purchased Securities" means the collective reference to the Initial
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Purchased Securities and the Second Closing Securities.
"Purchasers" means (i) as of any time prior to the Second Closing, the
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Initial Purchasers and (ii) from and after the Second Closing, the Initial
Purchasers and the Second Purchasers.
"Purchased Share" means any share of the Series A Preferred Stock purchased
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pursuant to this Agreement.
"Purchaser Indemnified Parties" means (i) each Purchaser and its Affiliates
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and (ii) the respective successors, heirs and legal representatives of the
foregoing.
"Qualified Assignee" has the meaning set forth in Section 2.03(b).
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"Redeemable Equity" of any Person means any equity interest of such Person
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that by its terms or otherwise, absolutely, contingently or otherwise, is or may
be required to be redeemed or repurchased by such Person or is or may become
redeemable or repurchasable at the option of the holder thereof at any time.
"Registrable Shares" has the meaning set forth in the Investor Rights
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Agreement.
"Related Persons" means, as to any Person, (i) any Affiliate of such Person
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(other than a Company Party), (ii) any Entity (other than a Company Party) of
which such Person or any of its Related Persons is a director, officer, partner,
manager or other member of management with the power to direct the management
and policies of such Entity, (ii) any Entity (other than a Company
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Party) that is the issuer of any equity interests of any class or series
beneficially owned by such Person or any of its Related Persons which represent
10% or more of all outstanding equity interests of that class or series, or
(iii) any trust or estate in which such Person has a substantial beneficial
interest or as to which such Person serves as trustee or in a similar capacity.
If such Person is a natural person, such Person's "Related Persons" shall also
include such Person's parents, children, siblings and spouse, the parents and
siblings of such Person's spouse and the spouses of such Person's children and
any Entity (other than a Company Party), trust or estate with which any such
relative of such Person has any relationship specified in clause (i), (ii) or
(iii) of the first sentence of this definition.
"Remedies Exception" means (i) applicable bankruptcy, insolvency,
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reorganization, moratorium, and other laws of general application, heretofore or
hereafter enacted or in effect, affecting the rights and remedies of creditors
generally, and (ii) the exercise, whether in an action or proceeding at law or
in equity, of judicial or administrative discretion in accordance with general
equitable principles, particularly as to the availability of the remedy of
specific performance or other injunctive relief.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
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"Requirement of Law" means, as to any Person, the charter and bylaws or
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other organizational or governing documents of such Person, and all federal,
state and local laws, rules, regulations, Judgments or other determinations of
an arbitrator, court or other Governmental Authority, applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Rights" means, with respect to any Person, any subscription, option,
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warrant, convertible or exchangeable security or other right, however
denominated, to subscribe for, purchase or otherwise acquire any capital stock,
other equity interest or other security of any class or series and of any
issuer, with or without payment of additional consideration in cash or property,
either immediately or upon the occurrence of a specified date or a specified
event or the satisfaction or happening of any other condition or contingency.
"SCP Partnerships" means Sandler Capital Partners IV, L.P., a Delaware
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limited partnership, and Sandler Capital FTE Partners, L.P., a Delaware limited
partnership, or their respective successors.
"Second Closing" has the meaning set forth in Section 2.03(c).
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"Second Closing Date" has the meaning set forth in Section 2.03(c).
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"Second Closing Shares" has the meaning assigned to it in Section 2.03(a).
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"Second Closing Warrants" has the meaning set forth in Section 2.03(a).
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"Second Closing Securities" means the collective reference to the Second
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Closing Shares and the Second Closing Warrants.
"Second Purchasers" has the meaning set forth in Section 2.03(b).
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"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Series A Articles of Amendment" means the Articles of Amendment to the
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Amended and Restated Articles of Incorporation of the Company setting forth a
copy of the resolution adopted by the Board of Directors of the Company creating
and authorizing the Series A Preferred Stock, as filed with the Secretary of
State of the State of Colorado on or prior to the date hereof, in the form
attached hereto as Exhibit B, or any successor provisions of the Corporation's
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Articles of Incorporation.
"Series A Preferred Stock" means the Series A Senior Convertible Preferred
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Stock, no par value, of the Company.
"Subsidiary" means, when used with respect to any Person as of any time,
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any other Person as to which any of the following statements is true as of such
time:
(i) such second Person is an Affiliate of such first Person which is,
directly or indirectly through one or more intermediaries, controlled by such
first Person, or
(ii) such first Person owns or controls, directly or indirectly
through one or more intermediaries, 50% or more of the outstanding equity
interests in such second Person having ordinary voting power to elect a majority
of the members of the board of directors or joint venture, partnership or other
management committee, trustees, managers or other Persons ordinarily having the
power, authority or responsibility for managing or directing the management of
such second Person, or
(iii) such first Person, directly or indirectly through one or
more intermediaries, is entitled under ordinary circumstances to 50% or more of
the profits or losses of such second Person or to receive upon dissolution and
liquidation of such second Person 50% or more of the assets available for
distribution to the holders of equity interests in such second Person,
and in the case of any of clauses (i), (ii) and (iii), disregarding any voting
power, equity interests or other rights or interests which any Person other than
the first Person or another Subsidiary of the first Person would or might have
upon the happening of any contingency, the satisfaction of any condition or the
occurrence of any event which has not happened, been satisfied or occurred as of
such time.
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"Tax" means any federal, state, local, or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, required to be filed
under any statute, rule or regulation.
"Third Party Claim" has the meaning set forth in Section 5.04 below.
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"Transaction Documents" means this Agreement, each Joinder Agreement, the
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Investor Rights Agreement, the Series A Articles of Amendment, the Warrant
Agreement, the Warrants and each other certificate, instrument or agreement
executed and delivered by the Company or any of its Subsidiaries pursuant to or
in connection with the transactions contemplated by any of the foregoing.
"Transactions" means any and all of the transactions contemplated by this
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Agreement or any of the other Transaction Documents, including the issuance,
sale and purchase of the Purchased Shares and the Warrants on the date hereof or
at the Second Closing, the issuance and sale of Warrant Securities upon the
exercise of any Warrants and the issuance and delivery of Conversion Securities
upon the conversion of any Series A Preferred Stock.
"Unaudited Financial Statements" has the meaning set forth in Section 3.09.
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"Underlying Shares" means the collective reference to the Shares of Common
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Stock issuable upon conversion of the Series A Preferred Stock in accordance
with the Series A Articles of Amendment or upon exercise of the Warrants in
accordance with the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement, dated the date hereof,
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between the Company and the several Purchasers, as it may be amended from time
to time in accordance with its terms.
"Warrant Certificate" means any certificate evidencing one or more Warrants
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which may at any time or from time to time be outstanding in accordance with the
terms of the Warrant Agreement.
"Warrants" means the Warrants to purchase shares of Common Stock issued and
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sold by the Company to, and purchased by, the several Purchasers pursuant to
this Agreement and the Warrant Agreement.
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"Warrant Securities" has the meaning set forth in the Warrant Agreement.
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1.02 Certain Rules of Construction. This Agreement is to be
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interpreted in accordance with the following rules of construction:
(i) Number and Gender. All definitions of terms apply equally to both the
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singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.
(ii) "Including," "Herein," Etc. The words "include," "includes" and
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"including" are deemed to be followed by the phrase "without limitation". The
words "herein", "hereof", and "hereunder" and words of similar import refer to
this Agreement (including all Exhibits and Schedules) in its entirety and are
not limited to any part hereof unless the context shall otherwise require. The
word "or" is not exclusive and means "and/or."
(iii) Subdivisions and Attachments. All references in this Agreement
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to Articles, Sections, subsections, Exhibits and Schedules are, respectively,
references to Articles, Sections and subsections of, and Exhibits and Schedules
attached to, this Agreement, unless otherwise specified.
(iv) References to Documents and Laws. All references to any Transaction
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Document are to it as amended, modified and supplemented from time to time in
accordance with its terms. All references to (x) any other agreement or
instrument or (y) any Requirement of Law, License or similar item are to it as
amended and supplemented from time to time (and, in the case of a statute, law
or regulation, to any corresponding provisions of successor statutes, laws or
regulations), unless otherwise specified.
(v) References to Days. Any reference in this Agreement or a Transaction
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Document to a "day" or number of "days" (without the explicit qualification
"Business") is a reference to a calendar day or number of calendar days. If any
action or notice is to be taken or given on or by a particular calendar day, and
such calendar day is not a Business Day, then such action or notice may be taken
or given on the next Business Day.
(vi) Examples. If, in any provision of any Transaction Document, any
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example is given (through the use of the words "such as," "for example," "e.g."
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or otherwise) of the meaning, intent or operation of any provision, such example
is intended to be illustrative only and not exclusive.
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(vii) Participation in Drafting. The Parties and their respective
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legal counsel have participated in the drafting of this Agreement, and this
Agreement will be construed simply and according to its fair meaning and not
strictly for or against any Party.
(viii) Headings. The table of contents and section headings contained in
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this Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
ARTICLE II
PURCHASE AND SALE
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2.01 Authorization of Securities. Prior to the execution and delivery
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of this Agreement, (i) the Company has duly (A) designated, created and
authorized the Series A Preferred Stock and the issuance and sale of shares
thereof pursuant to this Agreement and (B) authorized the Warrants and the
issuance and sale thereof pursuant to this Agreement; and (ii) the Company and
the Initial Purchasers have executed and delivered the Warrant Agreement.
2.02 Initial Purchase.
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(a) Sale and Purchase. Simultaneously with the execution and delivery of
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this Agreement, the Company has issued and sold to the Initial Purchasers,
severally and not jointly, and the Initial Purchasers have purchased from the
Company, severally and not jointly, for an aggregate purchase price of
$16,000,000, (i) a total of 640,000 shares of Series A Preferred Stock (the
"Initial Purchased Shares") and (ii) Warrants each representing the right to
acquire, initially, one share of Common Stock and representing, in the
aggregate, the right to acquire, initially, 800,000 shares of Common Stock, in
each case subject to adjustment in accordance with the Warrant Agreement (the
"Initial Warrants"). The number of Initial Purchased Shares and the number of
Initial Warrants purchased by each Initial Purchaser, and the aggregate purchase
price paid by such Initial Purchaser therefor, are set forth on Exhibit A.
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(b) Delivery of Securities; Payment of Purchase Price. The closing of the
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purchase and sale of the Initial Purchased Securities (the "First Closing") is
taking place simultaneously with the execution and delivery of this Agreement at
the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (the date on which the First Closing occurs is referred to as
the "First Closing Date"). Delivery of the Initial Purchased Securities
purchased by each Initial Purchaser pursuant to this Agreement is being made at
the First Closing by the Company delivering to such Initial Purchaser, against
payment of the purchase price therefor, (i) a stock certificate or certificates,
dated the date hereof, representing the number of Initial Purchased Shares
purchased by such Initial Purchaser, with each such certificate being registered
in the name of such Initial Purchaser and (ii) a Warrant Certificate or Warrant
Certificates, dated the date hereof, representing the number of Initial Warrants
purchased by such Initial Purchaser, with each such certificate being registered
in the name of such Initial Purchaser. Payment by each Initial Purchaser of the
agreed purchase price for the Initial Purchased Shares and Initial Warrants
purchased by such
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Initial Purchaser has been made by wire transfer (to the account of the Company
previously designated by it in writing) and the Company hereby acknowledges
receipt from each Initial Purchaser of payment in full.
2.03 Second Purchase.
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(a) Sale and Purchase. Subject to the terms and conditions contained in
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this Agreement, on the Second Closing Date, the Second Purchasers shall purchase
from the Company, and the Company shall issue and sell to the Second Purchasers,
severally and not jointly, for an aggregate purchase price of $4,000,000, (i) a
total of 160,000 shares of Series A Preferred Stock (the "Second Closing
Shares") and (ii) Warrants, each representing the right to acquire, initially,
one share of Common Stock, and representing, in the aggregate, the right to
acquire, initially, 200,000 shares of Common Stock, subject to adjustment in
accordance with the Warrant Agreement (the "Second Closing Warrants").
(b) Assignment of Second Purchase Right and Obligation. The SCP
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Partnerships, in their discretion, may assign to one or more other Persons, the
right and obligation to purchase all or such portion of the Second Closing
Securities as the Initial Purchasers may determine in their discretion, subject
to the following:
(i) if any such Person to whom any such assignment is made is not an
Initial Purchaser, such Person (a "Qualified Assignee") (A) shall be an
Accredited Investor, (B) shall be an Affiliate of the SCP Partnerships, a
general or limited partner of an SCP Partnership, an Affiliate of a general
or limited partner of an SCP Partnership, a Person or an Affiliate of a
Person that has previously made at least two prior co-investments with an
SCP Partnership or one or more Affiliates of an SCP Partnership or some
other institutional or private investor reasonably satisfactory to the
Company, and (C) shall execute and deliver to the Company and the other
Second Purchasers, at or prior to the Second Closing, a Joinder Agreement
substantially in the form of Exhibit C hereto (a "Joinder Agreement");
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(ii) each Second Securities Purchaser shall purchase Second Closing
Securities having an aggregate purchase price of at least $1,000,000;
(iii) the Second Closing Securities purchased by and sold to each
Second Purchaser shall be in the proportion of one and one-quarter Warrants
(initially representing the right to acquire one and one-quarter shares of
Common Stock) for each share of Series A Preferred Stock purchased by and
sold to such Second Purchaser, with the purchase price payable for any such
combination of one share of Series A Preferred Stock and one and one-
quarter Warrants being equal to Twenty-Five Dollars.
Not later than the second Business Day before the Second Closing Date, the SCP
Partnerships shall deliver to the Company a written notice that (i) identifies
each Second Purchaser and (ii) states the number of Second Closing Shares and
Second Closing Warrants to be purchased by each Second
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Purchaser and the purchase price payable therefor. If no such notice is given by
such second Business Day, then the Second Purchasers shall be the SCP
Partnerships, and the number of Second Closing Shares and Second Closing
Warrants to be purchased by and sold to each shall be in the same proportions as
the Initial Shares and Initial Warrants purchased by and sold to them pursuant
to Section 2.02. If any Person named in such notice, other than an SCP
------------
Partnership, shall fail to deliver its Joinder Agreement prior to the Second
Closing or, having done so shall default in its obligation to purchase Second
Closing Securities, or if the condition stated in clause (ii) of Section 2.03(d)
---------------
or in clause (i) of Section 2.03(f) is not satisfied with respect to any such
---------------
Second Purchaser, then the SCP Partnerships shall (on the terms and subject to
the conditions contained in this Section 2.03) purchase, and the Company shall
------------
issue and sell to the SCP Partnership's (in the same proportions as the Initial
Shares and Initial Warrants purchased by and sold to them pursuant to Section
-------
2.02), the Second Closing Securities allocated to such Person. As used in this
----
Agreement, the term "Second Purchaser" shall mean each purchaser of Second
Closing Securities determined in accordance with the foregoing provisions of
this Section 2.03(b).
---------------
(c) Second Closing. The closing of the purchase and sale of the Second
--------------
Closing Securities (the "Second Closing") shall take place at the offices of
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, at 10:00 A.M., Denver time, on March 31, 1999, or such later time or
date upon which all conditions to the Second Closing have been satisfied (or
waived by the appropriate party). (The date on which the Second Closing occurs
is referred to as the "Second Closing Date.") Delivery of the Second Closing
Securities purchased by each Second Purchaser pursuant to this Agreement shall
be made at the Second Closing by the Company delivering to such Second
Purchaser, against payment of the purchase price therefor, (i) a stock
certificate or certificates, dated the Second Closing Date, representing the
number of Second Closing Shares purchased by such Second Purchaser, with each
such certificate being registered in the name of such Second Purchaser and (ii)
a Warrant Certificate or Warrant Certificates, dated the Second Closing Date,
representing the number of Second Closing Warrants purchased by such Second
Purchaser, with each such certificate being registered in the name of such
Second Purchaser, against payment by such Second Purchaser of the purchase price
for such Second Closing Shares and Second Closing Warrants (determined
consistently with Section 2.03(b) above) purchased by such Second Purchaser by
---------------
wire transfer to the account of the Company designated by it in a written notice
given at least two Business Days prior to the Second Closing Date.
(d) Conditions of Each Party. The obligation of the Company and each
------------------------
Second Purchaser to consummate the sale and purchase of the Second Closing
Securities as contemplated by this Agreement is subject to the satisfaction of
the following conditions, any of which may be waived in writing by the Company
and the Second Purchasers:
(i) Proceedings Not Restrained. No order or injunction shall have
--------------------------
been issued by a court of competent jurisdiction preventing the consummation of
the transactions contemplated hereby, and no action, suit, proceeding or
investigation shall have been instituted or threatened that seeks to restrain,
restrict or prohibit or impose substantial penalties or damages with respect to
(or any other materially adverse relief or remedy in connection with) such
transactions.
-13-
(ii Purchase Permitted By Applicable Laws. The purchase and
-------------------------------------
sale of the Second Closing Securities to be purchased at the Second Closing by
the Second Purchasers on the terms and conditions herein provided (including the
application of the proceeds therefrom by the Company) shall not violate any
applicable Requirement of Law.
(e) Conditions of Each Second Purchaser. The obligation to purchase
-----------------------------------
and pay for the Second Closing Securities to be purchased by the Second
Purchasers at the Second Closing Date as contemplated by this Agreement is
several and not joint and is subject to the satisfaction, on or before the
Second Closing Date, of the following conditions, any of which may be waived in
writing by the Second Purchasers:
(i) Certain Documents. In addition to the stock certificates and
-----------------
Warrant Certificates required by Section 2.03(c), the Second Purchasers
---------------
shall have received the following, each dated the Second Closing Date
(except as otherwise specified below):
(A) a certificate of the Secretary or an Assistant Secretary
of the Company certifying (x) the names and signatures of the officers
of the Company authorized to sign the certificates and other documents
to be delivered by the Company on the Second Closing Date and (y) that
the conditions contained in subdivisions (ii), (iii) and (iv) of this
Section 2.03(e) and, to the knowledge of the Company, subdivision (i)
---------------
of Section 2.03(d), have been satisfied ;
---------------
(B) a certificate of the chief executive officer of the
Company and the Secretary of the Company (x) attaching copies,
certified by such officers as true and complete, of the
resolutions of the Board of Directors of the Company in
connection with the authorization and approval of the execution,
delivery and performance of the Transaction Documents and
consummation of the Transactions and of all other documents
evidencing all necessary corporate action taken in connection
therewith, (y) attaching copies, certified by such officers as
true and complete, of the Amended and Restated Articles of
Incorporation and By-laws of the Company and of the Series A
Articles of Amendment, each as amended through the Second Closing
Date, and (z) which includes a representation by such officers
that the copies of the Articles or Certificate of Incorporation
and By-Laws or other organizational documents of each Subsidiary
of the Company, as previously provided to the Initial Purchasers,
are true and complete in all respects;
(C) A favorable opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
counsel to the Company, substantially in the form and to the effect of
the opinion of such firm rendered to the Initial Purchasers at the
First Closing.
(ii) Representations and Warranties; No Default. The
------------------------------------------
representations and warranties of the Company contained in this Agreement
shall have been true and correct on the date of this Agreement and shall be
true and correct on and as of the Second Closing Date
-14-
with the same force and effect as if they had been made on and as of the
Second Closing Date (and as if each reference to the First Closing Date in
the introductory paragraph of Article III was a reference to the Second
-----------
Closing Date), except to the extent of changes caused by the consummation
of the transactions contemplated hereby; each of the Series A Articles of
Amendment, the Investor Rights Agreement and the Warrant Agreement shall be
in full force and effect; and the Company shall have performed and complied
with all agreements, covenants and obligations contained in this Agreement,
the Series A Articles of Amendment, the Investor Rights Agreement and the
Warrant Agreement that are required to be performed or complied with by it
on or before the Second Closing.
(iii) No Material Adverse Change. During the period from the
--------------------------
date of this Agreement through the Second Closing Date, the Company shall
have operated its business only in the Ordinary Course of Business and
there shall not exist or have occurred any condition, event or state of
facts that has had or is reasonably likely to have a Material Adverse
Effect, whether or not arising in the Ordinary Course of Business.
(iv) Absence of Certain Events. No Sale of the Company (as
-------------------------
defined in Exhibit B), no Reorganization Event (as defined in Exhibit B)
--------- ---------
and no action or event shall have been taken or shall have occurred which
has or would result in any adjustment under Section 10 of the Series A
Articles of Amendment or Article III of the Warrant Agreement. Since the
time immediately after the First Closing, there shall have been no change
in the capitalization of the Company other than changes resulting from any
exercises of Existing Rights (as defined in Exhibit B).
---------
(f) Company's Conditions. The Company's obligation to issue and sell
--------------------
the Second Closing Securities to be sold to and purchased by the Second
Purchasers at the Second Closing Date as contemplated by this Agreement is
subject to the satisfaction of the conditions, which may be waived in writing by
the Company, that (i) the representations and warranties contained in Article IV
of this Agreement (except Section 4.10, unless such Second Purchaser is MJM
------------
Associates) shall be true and correct in all material respects on and as of the
Second Closing Date with respect to each Second Purchaser as if each reference
therein to "such Initial Purchaser" were to such Second Purchaser, each
reference to the "Initial Securities" were to the Purchased Securities being
acquired by such Second Purchaser at the Second Closing and each reference to
the "Initial Closing" were a reference to the Second Closing, and the Company
shall have received a certificate to that effect signed by such Second
Purchaser; and (ii) no action shall have been taken by the Initial Purchasers
which would cause the sale to the Second Purchasers to be other than exempt
under the Securities Act.
(g) Covenant Regarding Closing Conditions; Covenant of Company
----------------------------------------------------------
Regarding Adjustment Events. Each party hereto covenants to the other parties
---------------------------
to exercise its reasonable efforts to perform, comply with, and otherwise
satisfy each of the conditions to the Second Closing to be satisfied by such
party hereunder. The Company covenants to and agrees with the Initial
Purchasers that, from the date hereof through the first to occur of the Second
Closing Date or the date of
-15-
termination of this Section 2.03 pursuant to Section 2.03(h), the Company shall
------------ ---------------
not take, consummate, approve or authorize any action or transaction that
results or (with the passage of time or otherwise) would result in any
adjustment pursuant to Section 10 of the Series A Articles of Amendment or
Article III of the Warrant Agreement.
(h) Termination. This Section 2.03 may be terminated at any time
----------- ------------
prior to the Second Closing:
(i) by mutual consent of the Company and the Initial Purchasers;
or
(ii by the Company or the Initial Purchasers, by written notice
to the other(s), if the Second Closing shall not have occurred on or before
March 31, 1999, unless the failure of the Second Closing to occur by such date
shall be due to the failure to perform or observe the covenants and agreements
hereunder of the Company, if the Company is the party seeking to terminate this
Section 2.03, or of any Initial Purchaser, if the Initial Purchasers are the
------------
parties seeking to terminate this Section 2.03.
------------
In the event of termination of Section 2.03 pursuant to this Section 2.03(h),
------------ ---------------
Section 2.03 shall forthwith become void and have no effect, and no party shall
------------
have any liability of any nature whatsoever under such Section, or in connection
with the transactions contemplated thereby, except that a termination shall not
relieve or release any party from any liabilities or damages arising out of its
breach of any provision of this Agreement.
2.04 Use of Proceeds. The Company covenants to and agrees with the
---------------
Purchasers that it shall use all proceeds of the sale of Purchased Shares for
working capital and capital expenditures as provided in the Company's 1999
business plan heretofore approved by the Company's Board of Directors.
ARTICLE III
COMPANY REPRESENTATIONS AND WARRANTIES
---------------------------------------
The Company (i) represents and warrants to each Purchaser that each of the
statements set forth in Sections 3.01 through 3.29, inclusive, other than
------------- ----
Section 3.04(b) was true and correct in all respects immediately prior to the
---------------
First Closing, and (ii) represents and warrants to and covenants and agrees with
each Purchaser that each of such statements (other than that set forth in
subsection (a) of Section 3.04), and the statement set forth in Section 3.04(b),
--- ------------ ---------------
shall be, after giving effect to all of the Transactions being consummated on
the First Closing Date, true and correct in all respects immediately after the
First Closing with the same force and effect as if made at and as of such time,
in each case, except as set forth in the disclosure schedule delivered by the
Company to the Purchasers on the date hereof (the "Disclosure Schedule"). Such
representations, warranties, covenants and agreements have constituted a
material inducement to each Purchaser to enter into this Agreement, to enter
into the other Transaction Documents to which it has become a party, to purchase
the securities purchased by it pursuant hereto and to consummate the other
Transactions.
-16-
The Disclosure Schedule is arranged in sections corresponding to the lettered
and numbered sections in this Agreement which require the disclosure. Any matter
disclosed in one section of the Disclosure Schedule may be cross-referenced in
other sections of the Disclosure Schedule, and upon such cross-referencing shall
be deemed disclosed for all purposes of the section of the Disclosure Schedule
in which such cross-reference is contained.
3.0 Certain Representations and Warranties Regarding the Transactions.
-----------------------------------------------------------------
(a) Authorization of Transactions. The Company has full power and
-----------------------------
authority to execute and deliver this Agreement and each other Transaction
Document and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by the Company of this Agreement and each
other Transaction Document have been duly authorized by the Board of Directors
of the Company and by all other necessary corporate action on the part of the
Company. Each of this Agreement and each other Transaction Document to which the
Company is a named party has been duly executed and delivered by the Company and
constitutes the valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the Remedies
Exception. The Company is not required to give any notice, declaration, report
or statement to, make any filing with, or obtain any authorization, consent,
declaration or approval of any Governmental Authority or any other Person in
connection with the execution, delivery or performance by the Company or any of
its Subsidiaries of this Agreement or any other Transaction Document or the
consummation of the Transactions or in order to preclude any termination,
suspension, modification or impairment of any of the Company Contracts or any
legal or contractual right, privilege, license or franchise which is included in
the Assets.
(b) Filing of Series A Articles of Amendment. All actions necessary in
----------------------------------------
order to duly and validly authorize and designate the Series A Preferred Stock
and authorize and create the Warrants, including all necessary corporate action
on the part of the Company and its stockholders and the filing with the Colorado
Secretary of State of the Series A Articles of Amendment, have been taken and
the Series A Articles of Amendment in the form attached hereto as Exhibit B and
the Warrant Agreement are each in full force and effect and have not been
amended, modified or supplemented.
(c) Brokers' Fees. Neither the Company nor any of its Subsidiaries has any
-------------
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the Transactions, except for a fee of 2% of the total
proceeds due to ▇▇▇▇▇ Partners, four-fifths of which will be paid on the First
Closing Date and the balance of which will be paid the Second Closing Date.
(d) Offerees. None of the Company Parties, their respective directors and
--------
officers, their respective Affiliates or any Person acting as agent for or on
behalf of any of the Company Parties has, directly or indirectly, sold, offered
for sale, or solicited offers to buy any of the Purchased Securities or other
securities of the Company so as to bring the offer, issuance or sale of the
Purchased Securities as contemplated by this Agreement within the registration
requirements of Section 5 of the Securities Act, or within the registration or
qualification requirements of any "blue
-17-
sky" or securities laws of any state or other jurisdiction. Assuming the
Purchasers are Accredited Investors, the offering, issuance and sale of the
Purchased Securities are exempt from the registration provisions of the
Securities Act; provided, that no representation or warranty is made regarding
--------
the activities of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
3.0 Organization, Qualification, and Corporate Power. The Company is a
------------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado. Each of its Subsidiaries is a limited liability
company or a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Each of the Company
Parties is duly authorized, qualified and licensed and is in good standing to
conduct business under the laws of each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or license necessary, except in such jurisdictions
where the lack of such qualification or license or the failure to be in good
standing would not have a Material Adverse Effect. Each jurisdiction in which
the Company or any of its Subsidiaries is authorized to conduct business is
identified in the Disclosure Schedule. Each of the Company Parties has full
corporate power and authority to carry on the businesses in which it is engaged
as such businesses are now being conducted and to own, lease and use the
properties currently owned, leased and used by it. The Disclosure Schedule
lists the directors and officers of the Company and the managers or directors
and officers, as the case may be, of each of its Subsidiaries. The Company has
made available to the Purchasers true, correct and complete copies of the
charter and bylaws or other operational documents of each of its Subsidiaries
(in each case as amended to date).
3.0 Terms, Validity, Etc. The Company has delivered to the Purchasers
---------------------
true and complete copies of its Certificate of Incorporation and By-Laws as in
effect on the date hereof. The Purchased Shares and the Warrants, when issued
as provided herein, and the Underlying Shares, when issued upon conversion of
Series A Shares in accordance with the Series A Articles of Amendment or the
exercise, conversion or exchange of Warrants in accordance with the Warrant
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, free and clear of any Lien, restriction or claim, other than any
restriction on transfer under applicable Federal and State securities laws, and
with no personal liability attaching to the ownership thereof, and the holder
thereof will have the respective rights, preferences and privileges, and will be
subject only to the applicable limitations and restrictions, provided in the
Company's Certificate of Incorporation (including the Series A Articles of
Amendment), the Warrant Agreement and the other Transaction Documents.
3.0 Capitalization.
--------------
(a) Immediately prior to the First Closing, the authorized and issued
capital stock of the Company consisted solely of (i) 100,000,000 authorized
shares of Common Stock, of which 27,920,704 shares were issued and outstanding,
all Persons owning of record greater than 5% of the outstanding shares are named
in the Disclosure Schedule and no shares were held in treasury, and (ii)
1,000,000 authorized shares of "blank-check" Preferred Stock, none of which was
designated, issued or outstanding, except for 800,000 unissued shares designated
as Series A Preferred Stock.
-18-
As of such time, except as set forth in the Disclosure Schedule, (i) no shares
of capital stock of the Company of any class or series were reserved for
issuance except for the shares of Common Stock issuable upon conversion of the
Purchased Shares or exercise of the Warrants; and (ii) other than pursuant to
certain provisions of the Transaction Documents, there were no voting trusts or
other Contracts, arrangements or understandings to which the Company was a party
or by which it was bound or of which the Company had knowledge that directly,
indirectly, absolutely or contingently, related to the issuance, ownership,
pledge, transfer, purchase, redemption or repurchase, voting or registration
under the Securities Act of, or any restrictions with respect to, any shares of
authorized, issued, or outstanding capital stock of the Company of any class or
series. No Redeemable Equity of the Company is authorized, issued or
outstanding.
(b) Immediately after the First Closing and after giving effect to the
issuance of the Preferred Shares and the Warrants, the statements in Section
-------
3.04(a) shall be true, accurate and complete, except that the Initial Purchased
-------
Shares and the Initial Warrants will be outstanding.
(c) Except as set forth in the Disclosure Schedule there are no
outstanding or authorized Rights or other Contracts, commitments, arrangements
or understandings that could require the Company to issue, sell, or otherwise
cause to become outstanding any shares of its capital stock, or stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the Company. No capital stock or other securities of the Company
have been, and the Purchased Securities are not being, and the Underlying
Shares, when issued upon conversion of the Series A Shares or exercise of the
Warrants, as the case may be, will not be, issued in violation of any preemptive
rights. The Company has duly reserved 5,000,000 shares of Common Stock for
issuance upon conversion, exercise or exchange of the Purchased Shares and the
Warrants. None of the issuance or sale of the Securities, any future
conversion, exercise or exchange of any Series A Share or Warrant, nor any
future adjustments in the number of shares of Common Stock or the kinds or
amounts of other securities or property deliverable upon exercise, conversion or
exchange of the Warrants or conversion of Series A Shares or in the amount of
consideration payable by holders upon such exercise or conversion shall (i) give
any Person any preemptive right or any similar or other right to subscribe for,
purchase or otherwise acquire any of the Purchased Securities, any Warrant
Securities, any Conversion Securities, any other shares of capital stock of the
Company of any class or series or any Rights with respect thereto or any other
securities of the Company or (ii) result in any adjustments in the number of
shares of Common Stock or the kinds or amounts of other securities or property
deliverable upon exercise of the Existing Rights or in the amount of
consideration payable by the holders thereof upon such exercise.
3.05 Indebtedness. The Disclosure Schedule contains a list of all
------------
outstanding loan or credit agreements, notes, bonds, mortgages, indentures and
other similar agreements and instruments pursuant to which the Company or any of
its Subsidiaries has borrowed money (other than purchase money indebtedness and
indebtedness for money borrowed by a Subsidiary from the Company, in each case
incurred in the Ordinary Course of Business) in excess of $250,000, and the
respective amounts of principal and accrued and unpaid interest outstanding
thereunder as of a recent date.
-19-
3.0 Noncontravention. Neither the execution, delivery or performance of
----------------
this Agreement or any other Transaction Document, nor the consummation of any of
the Transactions does or will (i) violate any Requirement of Law or Judgment to
which the Company, any of its Subsidiaries or any of the Assets is subject or
bound, or any provision of the charter or bylaws of the Company or of the
charter, bylaws, operating agreement or other organizational document of any of
its Subsidiaries, or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under, any
Company Contract or any legal or contractual right, privilege, License or
franchise which is included in the Assets, or result in the imposition of any
Lien upon any of the Assets, except where any such violation, conflict, breach,
default, right to accelerate, terminate, modify or cancel, or require a notice
or result in the imposition of a Lien would not have a Material Adverse Effect.
Assuming that the respective representations and warranties of the Purchasers
contained herein are true, neither the Company nor any of its Subsidiaries is
required to give any notice, declaration, report or statement to, make any
filing with, or obtain any authorization, consent, declaration or approval of
any Governmental Authority or other third party in connection with the execution
and delivery by the Parties of, or the consummation of the Transactions or in
order to preclude any termination, suspension, modification or impairment of any
of the Company Contracts or any material legal or contractual right, privilege,
License or franchise which is included in the Assets.
3.0 Subsidiaries. The Disclosure Schedule sets forth for each Subsidiary
------------
of the Company (i) its name and jurisdiction of organization, (ii) its form of
organization and capital structure, and (iii) the capital stock or membership or
other equity interests held by the Company in such Subsidiary. The Company
holds of record and owns beneficially all of the outstanding shares of capital
stock or other equity or ownership interests in each of its Subsidiaries, free
and clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws or as disclosed on the Disclosure
Schedule), Taxes, Liens, options, warrants, purchase rights, contracts,
commitments, equities, claims, and demands of any nature whatsoever. Except as
set forth on the Disclosure Schedule there are no outstanding or authorized
Rights, Contracts, arrangements or understandings that could require the Company
or any of its Subsidiaries to sell, transfer, or otherwise dispose of any equity
or ownership interest in any of its Subsidiaries or that could require any
Subsidiary of the Company to issue, sell, or otherwise cause to become
outstanding any of its own shares of capital stock or membership or other equity
or ownership interests or any shares of capital stock or membership or other
equity or ownership interests in any other Subsidiary. There are no (i)
authorized or outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to or Redeemable Equity of, any
Subsidiary of the Company or (ii) voting trusts, proxies, or other agreements
or understandings with respect to the voting of any capital stock, membership
interest or other equity or ownership interests of any such Subsidiary. Except
as set forth in the Disclosure Schedule, none of the Company Parties controls
directly or indirectly or has any direct or indirect equity participation or
other investment in any Person which is not a Subsidiary.
-20-
3.0 Corporate Records. The minute books or similar records of the Company
-----------------
and each of its Subsidiaries have been made available to the Purchasers, contain
true and complete records in all material respects of all meetings of, or
written consents in lieu of meetings executed by, the respective boards of
directors (and all committees thereof) and shareholders or other equity owners
of the Company and each such Subsidiary. All material actions and transactions
taken or entered into by the Company or any such Subsidiary and requiring action
by its Board of Directors (or Persons performing similar functions for any non-
corporate Subsidiary) or shareholders or other equity owners have been duly
authorized or ratified as necessary and are evidenced in such minute books;
except where the failure of such authorization, ratification or evidence in the
minute book would not have a Material Adverse Effect. The stock certificate
books and stock records of the Company and each such Subsidiary, as made
available to the Purchasers, are true and complete.
3.0 Financial Statements.
--------------------
(a) The Company has delivered true, accurate and complete copies of
the following financial statements (collectively the "Financial Statements"):
(i) audited consolidated balance sheets and statements of operations,
shareholders' equity and cash flows, including the notes thereto, as of and for
the year ended December 31, 1997 for the Company and its Subsidiaries; and (ii)
unaudited consolidated balance sheets and statements of operation, shareholders'
equity and cash flows as of and for the year ended December 31, 1998 for the
Company and its Subsidiaries (the "Unaudited Financial Statements"). The
Financial Statements (including the notes thereto) present fairly the financial
position of the Company and its Subsidiaries as of such dates and the results of
operations and cash flows of the Company and its Subsidiaries for such periods
in conformity with GAAP applied on a consistent basis throughout the periods
covered thereby; provided, however, that the Unaudited Financial Statements are
-------- -------
subject to normal year-end adjustments, none of which will be material in nature
or amount, and lack footnotes.
(b) There are no unfulfilled contractual obligations for capital
expenditures of any Company Party which are not reflected in the Unaudited
Financial Statements.
(c) The books of account of each Company Party are true, accurate and
complete in all material respects, have been maintained in accordance with good
business practices and fairly reflect all of the properties, Assets, liabilities
and transactions of each Company Party in accordance with GAAP consistently
applied. The Financial Statements and books and records, do not, because of the
provision of services or the bearing of costs and expenses by any Affiliate of
the Company or for any other reason, understate the true costs and expenses of
conducting the businesses of the Company Parties.
3.1 Events Subsequent to Most Recent Fiscal Period End. Except as
--------------------------------------------------
disclosed in the Disclosure Schedule, since the date of the Balance Sheet, there
has not been any Material Adverse Effect and each Company Party has conducted
its business and affairs in the Ordinary Course of Business. Without limiting
the generality of the foregoing, since the date of the Balance Sheet:
-21-
(a) none of the Company Parties has sold, leased, transferred, or
assigned any of its Assets, other than (i) immaterial Assets or (ii) Assets
sold, leased, transferred or assigned in the Ordinary Course of Business;
(b) none of the Company Parties has entered into any agreement,
Contract or license (or series of related Contracts) involving more than
$250,000 and outside the Ordinary Course of Business;
(c) none of the Company Parties has accelerated, terminated (other
than upon the expiration of its term), modified, or canceled any Contract
(or series of related Contracts) outside of the Ordinary Course of Business
and involving more than $250,000 to which the Company or any of its
Subsidiaries is or was a party or by which it is or was bound;
(d) none of the Company Parties has imposed or suffered to exist any
Lien upon any of the Assets, other than Permitted Liens;
(e) none of the Company Parties has purchased, leased or acquired any
Assets or made any capital or operating expenditure (or series of related
capital or operating expenditures), capital addition or improvement, in
either case, outside of the Ordinary Course of Business and involving more
than $250,000;
(f) none of the Company Parties has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other
Person (or series of related capital investments, loans, and acquisitions)
involving more than $250,000 and outside the Ordinary Course of Business;
(g) none of the Company Parties has issued any note, bond or other
debt security or Redeemable Equity or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligations involving more than $250,000 singly or $500,000 in the
aggregate (other than purchase money indebtedness and indebtedness for
money borrowed by a Subsidiary from the Company, in each case incurred in
the Ordinary Course of Business);
(h) there has been no change made or authorized in the charter or
bylaws of the Company or in the charter, bylaws, operating agreement or
other organizational documents of any of its Subsidiaries (except for the
designation of the Series A Preferred Stock);
(i) the Company has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash,
securities, property or otherwise) or redeemed, purchased, or otherwise
acquired any of its capital stock, or granted any Rights to purchase or
obtain (including upon conversion, exchange, or exercise) any of its
capital stock;
-22-
(j) none of the Company Parties has experienced any damage,
destruction, or loss (whether or not covered by insurance) to any material
amount of its Assets;
(k) none of the Company Parties has made any loan to, or entered into
any other transaction with or for the benefit of, any of the Company's
stockholders, directors, officers, or employees outside the Ordinary Course
of Business involving more than $25,000;
(l) none of the Company Parties has discharged or satisfied any Lien,
or paid, canceled, compromised or otherwise satisfied any obligation,
indebtedness or Liability (absolute or contingent) other than the payment
in the Ordinary Course of Business of current Liabilities shown on the
Balance Sheet or incurred since the date thereof in the Ordinary Course of
Business;
(m) none of the Company Parties has (A) increased the rate of
compensation payable or to become payable by it to any of its officers,
directors, or agents, except for increases in the Ordinary Course of
Business or required under the terms of employment agreements, or (B)
granted, made or accrued any bonus, incentive compensation, service award
or other like benefit, contingently or otherwise, to or for the credit of
any of its officers, directors, or agents, other than in the Ordinary
Course of Business, or made any employee welfare, pension, retirement,
profit sharing or similar payment except pursuant to regularly scheduled
payments required pursuant to the existing plans and arrangements described
in the Disclosure Schedule or (C) paid or granted any right to receive any
severance or termination pay to any officer, director, or agent;
(n) except as disclosed in the Financial Statements none of the
Company Parties has made any material change in any method of accounting or
any accounting practice; and
(o) none of the Company Parties has entered into any Contract to do
any of the foregoing.
3.11 Undisclosed Liabilities. To the Company's Knowledge, (i) none of the
-----------------------
Company Parties has any Liability or other obligation which, singly or in the
aggregate, would be required to be reflected or reserved against in a balance
sheet of the Company and its Subsidiaries prepared in accordance with GAAP and
(ii) there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
which if asserted could result in any such Liability or other obligation which,
singly or in the aggregate, would be required to be reflected or reserved
against in a balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP, except for (x) Liabilities set forth on the face of the
Balance Sheet (rather than in any notes thereto), (y) Liabilities which have
arisen after the date of the Balance Sheet in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of Contract, tort, infringement, or violation of law)
and (z) Liabilities that do not have Material Adverse Effect on the Company
Parties.
-23-
3.1 Legal Compliance. Each of the Company Parties has complied in all
----------------
respects with all applicable Requirements of Law and Judgments, and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against any of them alleging any failure so
to comply except to the extent that such failure would not have a Material
Adverse Effect.
3.1 Tax Matters.
-----------
(a) Each of the Company Parties has filed on a timely basis all Tax
Returns that it was required to file on or prior to the date hereof. All such
Tax Returns were, when filed, correct and complete in all material respects.
All Taxes owed by the Company Parties (whether or not shown on any Tax Return)
have been paid or accrued. None of the Company Parties is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by a Governmental Authority in a jurisdiction where any
of the Company Parties does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the Assets that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Each Company Party has withheld and paid to the proper
Governmental Authority all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax Liability of the
Company or any of its Subsidiaries either (i) claimed or raised by any
Governmental Authority in writing or (ii) to the Company's knowledge, based upon
personal contact by any officer or employee of the Company or any of its
Subsidiaries with any agent of any Governmental Authority. The Disclosure
Schedule lists all federal, state, local, and foreign income Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit.
(d) None of the Company Parties has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) None of the Company Parties has filed a consent under Code Section
341(f) concerning collapsible corporations. None of the Company Parties has
made any payments, is obligated to make any payments, nor is a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Code Section 280G. None of the
Company Parties is a party to any Tax allocation or sharing agreement which will
not be terminated effective as of the First Closing. None of the Company and
nor its Subsidiaries has been a member of an Affiliated Group filing a
consolidated federal income Tax Return other than a group the common parent of
which was the Company.
(f) None of the Company Parties has any liability for the Taxes of any
Person other than another Company Party under Reg. Section 1.1502-6 (or any
similar provisions of state, local, or foreign law, as a transferee or
successor, by contract or otherwise).
-24-
3.1 Real Property.
-------------
(a) The Disclosure Schedule identifies all real property as to which
the Company or any of its Subsidiaries is the fee owner or the lessee under a
lease described in Section 3.14(e).
---------------
(b) To the Company's Knowledge there are no pending actions or
proceedings (including condemnation proceedings) concerning any such real
property that, if adversely determined to the Company or its Subsidiaries, can
reasonably be expected to have a Material Adverse Effect and, to the Company's
knowledge, no such action or proceeding has been threatened.
(c) None of the Company Parties has received any written notice from
any city, village or Governmental Authority requiring the correction of any
condition with respect to any Property by reason of a violation or alleged
violation of any applicable law or regulation which, if not cured, could
reasonably be expected to have a Material Adverse Effect, other than notices
with respect to violations or alleged violations that have been cured.
(d) The Company has made available to the Purchasers complete copies
of any third party reports that are in the Company's possession or control, have
been prepared within the last two years, and relate to the physical or
environmental condition of any of the real property owned, leased or occupied by
the Company or any of its Subsidiaries (the "Environmental Studies").
---------------------
(e) The Disclosure Schedule contains a list of all leases or other
Contracts or arrangements pursuant to which real property is leased to or
otherwise occupied or used by any Company Party requiring payments in excess of
$500,000 per year. With respect to each such Contract:
(i) if written, the Company has provided the Purchasers with true,
correct and complete copy thereof, as in effect and as amended or modified or
agreed to be amended or modified;
(ii) such Contract is in full force and effect and is legal,
valid, binding and enforceable against the parties thereto, subject to the
Remedies Exception; and
(iii) neither the Company nor any of its Subsidiaries is in
default in its obligations to pay rent under such Contract and to the Company's
knowledge, neither the Company nor any of its Subsidiaries nor any other party
thereto is in default in any of its other material obligations thereunder.
(f) No Company Party nor, to the Company's knowledge, any owner of any
real property owned, leased or occupied by the Company or any of its
Subsidiaries has received any outstanding written notice from any governmental
agency or official regarding any actual or alleged material violation of
Environmental, Health, and Safety Laws relating to such property or its
occupancy or use by the Company or any of its Subsidiaries and arising under
Environmental,
-25-
Health, and Safety Laws, which if adversely determined to the Company, any of
its Subsidiaries or such owner, as the case may be, and if not cured could
reasonably be expected to have a Material Adverse Effect.
(g) Except as described in the Environmental Studies, each of the
Company Parties has complied and is in compliance, in each case in all material
respects, with all Environmental, Health, and Safety Laws and has obtained, has
complied, and is in compliance with, in each case in all material respects, all
permits, Licenses and other authorizations that are required pursuant to
Environmental, Health, and Safety Laws for the occupation of its facilities and
the operation of its businesses, in each case where noncompliance could
reasonably be expected to have a Material Adverse Effect.
3.1 Intellectual Property.
---------------------
(a) The Company is the sole and exclusive owner of all Intellectual
Property listed in the Disclosure Schedule. The Company has rights to use all
Intellectual Property material to its Business or has readily available
substitutes for such Intellectual Property.
(b) Each of the Company Parties owns or has adequate rights to use (in
the manner and to the extent presently used) all of the Intellectual Property
used in the operation and conduct of its business as presently or proposed to be
conducted, without, to the Company's knowledge, any material conflict or claim
of conflict with the rights of others. None of such Intellectual Property is
subject to any outstanding Judgment restricting the use thereof by the Company
or any of its Subsidiaries.
(c) To the knowledge of the Company, (i) none of the Company Parties
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties and (ii) no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of the Company Parties.
(d) No Company Party is in material default in the payment of any
royalties, license fees or other consideration to any owner or licensor of any
Intellectual Property used in or necessary for the conduct of its business as
now conducted and as proposed to be conducted or to any agent or representative
of any such owner or licensor by reason of such Company Party's use thereof nor
otherwise is in default in any material respect in the performance of any of its
obligations to any such owner or licensor, and no such owner or licensor, nor
any such agent or representative, has notified any Company Party in writing of
any claim of any such default.
(e) The Disclosure Schedule sets forth an accurate and complete list
of the material Intellectual Property owned by the Company Parties.
-26-
3.16 Licenses; Requirements of Law. Each of the Company Parties possesses
-----------------------------
all material authorizations, approvals, consents, licenses, permits, easements,
certificates and other rights and permissions necessary to conduct its
respective business and to own, lease and operate its respective properties as
currently or proposed to be conducted, owned, leased or operated (collectively
for all Company Parties, the "Licenses"). All of the Licenses are in full force
and effect. The Company has no reason to believe that any of the Licenses will
be revoked, canceled, rescinded, or not renewed in the ordinary course and on
the same or more favorable material terms, other than any such revocation,
cancellation, rescission, or non-renewal of any License which is not
individually or in the aggregate with one or more other License(s), material to
the business or operations of the Company and the Subsidiaries taken as whole.
To the knowledge of the Company, there is not now pending any material complaint
nor any basis for any such complaint, which might have any of the results
referred to in the immediately preceding sentence. Each of the Company Parties
is operating in all material respects in accordance with the terms of the
Licenses. Each of the Company Parties is, and has conducted its business and
affairs, in compliance with all applicable Requirements of Law, except where the
failure to comply has not had and, insofar as reasonably can be foreseen, will
not have a Material Adverse Effect.
3.17 Title to Personal Property; Liens; Intangible Property. Each Company
------------------------------------------------------
Party has good title to all of its properties which are not real property, free
and clear of all Liens, other than Permitted Liens.
3.18 Insurance. The properties and operations of each Company Party are
---------
insured under various policies of general liability and other forms of insurance
covering such risks as are usually insured against by reasonably prudent
companies engaged in the businesses and activities in which such Company Party
is engaged, in amounts which are customarily considered adequate in relation to
the business and properties of such Company Party, and all premiums to date have
been paid in full. No Company Party has been refused any insurance, nor has its
coverage been limited, by an insurance carrier to which it has applied for
insurance or with which it has carried insurance during the past five years.
3.19 Absence of Certain Interests of Affiliated Parties. Except as set
--------------------------------------------------
forth in the Disclosure Schedule, no present or former stockholder, partner,
director, officer or employee of any Company Party nor any of their Related
Persons owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, in any Intellectual Property or any other
material asset or property which any Company Party owns, possesses or uses in
its business as now or proposed to be conducted, or is involved in any business
arrangement or relationship with any Company Party which is material to the
business and operations of the Company Parties. None of the present or former
stockholders, partners, joint venturers, directors or officers of any Company
Party or any Related Person of any of the foregoing is indebted to any Company
Party, and no Company Party is indebted or has any other liability to any such
Person, except (i) pursuant to the express terms of one or more Contracts
identified in the Disclosure Schedule and (ii) liabilities to directors or
officers for compensation for services in such capacity (or as employees) or to
stockholders who are employees rendered since the end of the last calendar
month.
-27-
3.20 Contracts. The Disclosure Schedule lists the following contracts and
---------
other agreements to or by which the Company or any of its Subsidiaries is a
party or bound (the "Company Contracts"):
(i) Contract with any present or former stockholder, director, officer,
or consultant or any Related Person of such Person or for the employment of any
such Person involving payments in excess of $200,000 per year, including any
consultant or any oral contract with any such Person which is not terminable at
will by the Company Party which is a party thereto without any payment of any
kind and except for (x) employment contracts with stockholders who are employees
of the Company, (y) the Company Plans and (z) Contracts exclusively between and
for the benefit of and enforceable by Company Parties;
(ii) Contract outside the Ordinary Course of Business for the future
purchase of, or payment for, equipment, inventory, supplies, other goods or
products or services having a total value or involving total payments or costs
of $250,000 or more in any one case or in the aggregate for all Contracts which
are related or which are with the same Person or group of affiliated Persons;
(iii) Contract outside the Ordinary Course of Business continuing over a
period of more than six months from the date hereof having a total value or
involving total payments or costs of $250,000 or more in any one case or in the
aggregate for all Contracts which are related or which are with the same Person
or a group of affiliated Persons;
(iv) distribution, dealer, representative or agency Contract outside the
Ordinary Course of Business which, individually or together with one or more
such Contracts which are related or are with the same Person or group of
affiliated Persons, involve payments in excess of $250,000.
(v) lease outside the Ordinary Course of Business under which any Company
Party is either lessor or lessee of any real property or any material personal
property having annual lease payments in excess of $250,000;
(vi) note, debenture, bond or other security or evidence of indebtedness,
equipment trust agreement, letter of credit agreement, loan agreement, pledge or
security agreement, mortgage or other Contract pursuant to which any material
contingent obligation (or any other Liability) in excess of $250,000 and outside
the Ordinary Course of Business of any Company Party to any other Person or of
any other Person to any Company Party was incurred or may be incurred in the
future or otherwise relating to any such contingent obligation or other
Liability;
(vii) Except as provided in the Company's budget previously approved by the
Company's board of directors, Contract for any capital expenditure or leasehold
improvement outside the Ordinary Course of Business in excess of $250,000 per
year in any single case or $500,000 per year in the aggregate for all cases;
-28-
(viii) Contract, not otherwise disclosed (with sufficient specificity
regarding the following), limiting or restraining any Company Party from
engaging in any business or competing in any manner generally or in any specific
geographic area or obligating any Company Party to present any business or other
opportunity to any other Person or grant or offer to grant any other Person any
participation or other interest in any business or other opportunity;
(ix) Contract, not otherwise disclosed (with sufficient specificity
regarding the following), pursuant to which any Person has a right of first
refusal, a "tag-along" right or any similar right with respect to any proposed
disposition by any Company Party of any equity interest in another Company Party
or of any other property of such first Company Party;
(x) Contract with any labor union;
(xi) bonus, pension, profit-sharing, retirement, stock purchase, stock
option, deferred compensation, stock bonus, stock or equity appreciation plan,
phantom stock or equity interest plan, death benefit, disability, insurance,
medical reimbursement, fringe benefit plan, or similar plan, program or Contract
in effect with respect to its employees or the employees of others, except for
the Employee Benefit Plans;
(xii) Except as otherwise disclosed, any Contract which provides for
"golden parachute" or similar benefits;
(xiii) Except as otherwise disclosed, any Material Contract outside the
Ordinary Course of Business relating to the mortgaging, pledging or other
placing of a Lien on any properties of any Company Party;
(xiv) Except as otherwise disclosed, any Contract under which the
consequences of a default or termination would have a Material Adverse Effect;
The Company has made available to the Purchasers a correct and complete copy of
each written Contract (as amended to date) listed in the Disclosure Schedule.
Each Contract required to be identified in the Disclosure Schedule is in full
force and effect and, to the Company's knowledge, is the legal, valid and
binding obligation of the parties thereto other than a Company Party and
enforceable against such other parties in accordance with its terms, subject to
the Remedies Exception.
3.21 Litigation. The Disclosure Schedule sets forth each Judgment entered
against or specifically relating to any of the Company Parties or any of the
Assets. No Company Party is a party to or otherwise involved in or, to the
Company's knowledge, is threatened to be made a party to or threatened to be
involved in any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator which,
individually or in the aggregate, would, if determined adversely, have a
Material Adverse Effect.
-29-
3.22 Employees. Except as set forth in the Disclosure Schedule, none of
---------
the Company Parties is a party to or bound by any collective bargaining
agreement, nor has any Company Party experienced any strikes, grievances, claims
of unfair labor practices, or other collective bargaining disputes. None of the
Company Parties has committed any unfair labor practice proscribed by any
applicable Requirement of Law. Except as set forth in the Disclosure Schedule
to the Company's Knowledge, there is no organizational effort presently being
made or threatened by or on behalf of any labor union with respect to employees
of any Company Party.
3.23 Employee Benefits.
-----------------
(a) The Disclosure Schedule lists each Employee Benefit Plan that the
Company or any of its Subsidiaries maintains or to which the Company or any of
its Subsidiaries contributes, and in which employees or former employees of the
Company or any of its Subsidiaries participates. Each Employee Benefit Plan
required to be listed in the Disclosure Schedule (and each related trust,
insurance contract or fund) complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and other
applicable Requirements of Law. Except as set forth on the Disclosure Schedule,
none of the Company Parties maintains any Employee Benefit Plan which is an
Employee Pension Benefit Plan. The Company has made available to the Purchasers
correct and complete copies of the plan documents and summary plan descriptions,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that any of the Company
Parties or any ERISA Affiliate maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute:
(i) To the knowledge of the Company, no Such Employee Benefit Plan
which is an Employee Pension Benefit Plan has been completely or partially
terminated or been the subject to a Reportable Event as to which notice
would be required to be filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened.
(ii) To the knowledge of the Company, there have been no Prohibited
Transactions with respect to any such Employee Benefit Plan. No Fiduciary
has any Liability for breach of fiduciary duty or any other failure to act
or comply in connection with the administration or investment of the assets
of any such Employee Benefit Plan that would have a Material Adverse
Effect.
(iii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending
or, to the Company's knowledge, threatened, except where the action, suit,
proceeding, hearing or investigation would not have a Material Adverse
Effect.
-30-
(iv) None of the Company Parties nor any ERISA Affiliate has incurred
any Liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal Liability) or under the
Code with respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(c) None of the Company Parties nor any ERISA Affiliate contributes to,
ever has contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability) under
any Multiemployer Plan.
(d) None of the Company Parties maintains nor ever has maintained nor
contributes, nor ever has contributed, nor ever has been required to contribute
to any Employee Welfare Benefit Plan providing medical, health, or life
insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Part 6 of Title I of ERISA).
(e) The Company Parties have complied with the applicable requirements of
Parts 6 and 7 of Title I of ERISA with respect to any Employee Welfare Benefit
Plan providing health benefits, except where such noncompliance would not have a
Material Adverse Effect.
3.24 Guaranties. Except as set forth in the Disclosure Schedule and
----------
except for guarantees of customer obligations to equipment lessors made in the
Ordinary Course of Business, none of the Company Parties is a guarantor or co-
borrower in respect of any Liability or obligation or is otherwise liable for
any Liability or obligation (including indebtedness) of any other Person other
than another Company Party.
3.25 Availability of Documents. The Company has made available to the
-------------------------
Purchasers copies of all documents, including all Contracts, insurance polices,
leases, plans, instruments, and Licenses listed in the Disclosure Schedule or
otherwise referred to herein. Such copies are true and complete and include all
amendments, supplements and modifications thereto or waivers currently in effect
thereunder. The Company has delivered to the Purchasers, simultaneously with the
First Closing, (i) a certificate, dated the date hereof, of the chief executive
officer of the Company and the Secretary of the Company (A) attaching copies,
certified by such officers as true and complete, of the resolutions of the Board
of Directors of the Company in connection with the authorization and approval of
the execution, delivery and performance of the Transaction Documents and
consummation of the Transactions and of all other documents evidencing all
necessary corporate action taken in connection therewith, (B) attaching copies,
certified by such officers as true and complete, of the Amended and Restated
Articles of Incorporation and By-laws of the Company and of the Series A
Articles of Amendment, (C) which includes a representation by such officers that
the copies of the Articles of Incorporation and By-Laws or other organizational
documents of each Subsidiary of the Company, as previously provided to the
Purchasers, are true and complete in all respects, and (D) setting forth the
incumbency of the officer or officers of the Company who have executed and
delivered this Agreement and each other Transaction Document, including therein
a signature specimen of each such officer or officers; (ii) copies, certified by
an officer of the
-31-
Company, of each Company Party's Articles of Incorporation or other
organizational documents (including, in the case of the Company, the Series A
Articles of Amendment), in each case as of the date of this Agreement, (iii) the
results of such Lien and suits and Judgment searches previously requested by the
Purchasers and performed by a company specializing in such searches and (iv) the
opinion of counsel to the Company in the form previously agreed upon by the
Company and the Purchasers. The Company covenants and agrees with the Purchasers
that it shall deliver to the Purchasers, as promptly after the Initial Closing
as the same may be obtained from the Colorado Secretary of State, a long form
certificate of existence and good standing (including tax good standing) as to
each Company Party, dated as of a recent date, of the Secretary of State of the
State of Colorado of the jurisdiction of incorporation of such Company Party.
3.26 Restrictions. Other than the Indenture, none of the Company Parties
------------
is currently a party to or bound by any Contract, subject to any restriction of
any nature under any of its charter or other organizational or constituent
documents, subject to any Requirements of Law or subject to any Judgment which
materially adversely affects or materially restricts or, so far as the Company
can now reasonably foresee, may in the future have a Material Adverse Effect or
materially restrict, the business, operations, properties, results of
operations, prospects or condition (financial or otherwise) of such Company
Party.
3.27 Key Employees. None of the officers or key employees of any Company
-------------
Party, to the Company's knowledge, presently intends to terminate his or her
employment by such Company Party.
3.28 Other Agreements. All representations and warranties of any Company
----------------
Party contained in any of the Transaction Documents other than this Agreement
are accurate and complete in all material respects.
3.29 Disclosure. The representations and warranties contained in this
----------
Article III hereto) do not contain any untrue statement of a material fact or
-----------
omit to state any material fact necessary in order to make the statements and
information contained in this Article III not misleading.
-----------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH INITIAL PURCHASER
--------------------------------------------------------
Each Initial Purchaser, severally and not jointly, agrees with, and
represents and warrants, to the Company as follows:
4.01 Purchase for Investment. The Purchased Securities being acquired on
-----------------------
the date hereof by such Initial Purchaser pursuant to this Agreement are being
acquired for its own account and with no intention of distributing or reselling
such Purchased Securities or any part thereof in any transaction which would be
in violation of the Securities Act, without prejudice, however, to any right of
such Initial Purchaser to sell or otherwise dispose of all or any part of such
Purchased Securities pursuant to a registration under the Securities Act or
under an exemption from such
-32-
registration available under the Securities Act, and subject, nevertheless, to
the disposition of such Initial Purchaser's property being at all times within
its control and discretion.
4.02 Status As Accredited Investor. Except if such Initial Purchaser is
-----------------------------
MJM Associates, L.P. ("MJM Associates"), such Initial Purchaser is an Accredited
Investor.
4.03 Power. If such Initial Purchaser is a partnership or a corporation,
-----
such Initial Purchaser has all requisite partnership power or corporate power
and authority, respectively, to execute, deliver and perform its obligations
under each of the Transaction Documents to which it is a party, and to
consummate the respective transactions contemplated hereby and thereby.
4.04 Execution and Delivery; Authorization. Each of the Transaction
-------------------------------------
Documents to which such Purchaser is a party has been duly and validly executed
and delivered by such Initial Purchaser. The execution, delivery and performance
by such Initial Purchaser of, and the consummation of the transactions
contemplated by, this Agreement and each of the other Transaction Documents to
which it is a party have been duly and validly authorized by all necessary
partnership action on the part of such Initial Purchaser which is a party hereto
or thereto. Each of the Transaction Documents to which such Initial Purchaser
is a party, when executed and delivered, will constitute a legal, valid and
binding obligation of such Initial Purchaser, enforceable in accordance with its
terms, subject to the Remedies Exception.
4.05 Broker's Fees. Such Initial Purchaser does not have any liability or
-------------
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the Transactions.
4.06 Restricted Securities. Such Initial Purchaser understands that the
---------------------
Initial Securities being acquired by it at the First Closing have not been
registered under the Securities Act or the securities laws of any state, based
upon an exemption from such registration requirements for non-public offerings
pursuant to Regulation D under the Securities Act or other exemptions
thereunder, and that such Initial Securities are "restricted securities," as
said term is defined in Rule 144 of the Rules and Regulations promulgated under
the Securities Act.
4.07 Information.
-----------
(i) Such Initial Purchaser has had a reasonable opportunity to ask
questions of and receive answers and documents from the Company concerning the
Company, and such Initial Purchaser has such knowledge and expertise in
financial and business matters that such Initial Purchaser is capable of
evaluating the merits and risk involved in an investment in the Securities;
(ii) Except as set forth in this Agreement and the other Transaction
Documents, no representations or warranties have been made to such Purchaser by
the Company or any agent, employee or affiliate of the Company relying upon any
other information; and
-33-
(iii) Such Initial Purchaser understands that the Initial Securities
being acquired by it at the First Closing are being offered and sold to it in
reliance on specific exemptions from the registration requirements of United
States federal and state securities laws and that the Company is relying upon
the truth and accuracy of the representations and warranties of such Initial
Purchaser set forth in this Agreement in order to determine the applicability of
such exemptions and the suitability of such Initial Purchaser to acquire such
Initial Securities.
4.08 HSR Act. Immediately after the Initial Closing, such Initial
-------
Purchaser, together with all Persons which are under "common control" with such
Initial Purchaser, will not "hold", as a result of the acquisition of the
Initial Purchased Shares acquired by such Initial Purchaser at the Initial
Closing "voting securities" of which the Company is the issuer that have a
"value" in excess of $15,000,000, as such quoted terms are defined in the rules
and regulations promulgated under the HSR Act, as interpreted by the Federal
Trade Commission.
4.09 Independent Directors. The Purchasers acknowledge and agree that the
---------------------
following persons are, as of the date of this Agreement, and shall be
Independent Directors as such term is defined in the Series A Articles of
Amendment and the Investor Rights Agreement: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
4.10 Additional Representations of MJM Associates. MJM Associates
--------------------------------------------
represents and warrants to the Company as follows:
(i) It recognizes that an investment in the Initial Purchased
Securities being acquired by it may involve a number of risks, and that no
federal or state agency has passed upon such securities or made any finding or
determination as to the fairness of this investment.
(ii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, a director of the Company, is the general
partner of MJM Associates, and has acted as advisor to MJM Associates and its
stockholders in connection with MJM Associates' purchase of such Initial
Purchased Securities. ▇▇. ▇▇▇▇▇▇▇ has such knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the investment by MJM Associates contemplated by this Agreement. MJM
Associates is able to bear the economic risk of such investment.
(iii) MJM Associates is not relying on the Company with respect to the
tax and other economic considerations relating to its investment in such Initial
Purchased Securities. In regard to such considerations, MJM Associates has
relied solely on the advice of, or has consulted with, only its own advisors.
(iv) MJM Associates was not formed for the purpose of making an
investment in the Company.
-34-
ARTICLE V
INDEMNIFICATION
---------------
5.01 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties of the Company contained in Sections 3.01, 3.02,
------------- ----
3.03 and 3.04 of this Agreement shall survive the First Closing and the Second
---- ----
Closing hereunder and continue in full force and effect until the Purchasers,
collectively, own fewer than 250,000 Registrable Shares. All of the other
representations and warranties of the parties contained in this Agreement or any
Joinder Agreement shall survive and continue in full force and effect, subject
to any applicable statutes of limitations, until the later of (i) receipt by the
Purchasers of audited consolidated financial statements of the Company and its
Subsidiaries for calendar year 1999 and (ii) the first anniversary of the First
Closing.
5.02 Indemnification Provisions for Benefit of the Purchasers. The
--------------------------------------------------------
Company agrees to defend, protect, indemnify and hold harmless each Purchaser
Indemnified Party against, from and for any and all Adverse Consequences of any
kind or nature (including reasonable fees and disbursements of counsel and other
costs reasonably incurred in connection with any action, suit or proceeding
initiated by such Purchaser Indemnified Party in connection with securing,
exercising, enjoying and enforcing such Purchaser Indemnified Party's rights,
benefits and privileges or enforcing any Company Party's obligations and
liabilities under any Transaction Document), whether direct, indirect or
consequential, in any manner resulting from, arising out of, based upon or
related or attributable to: (i) any breach or inaccuracy of any representation
or warranty of, or any breach or failure to perform any covenant, agreement or
obligation, of any Company Party contained in this Agreement or any other
Transaction Document; (ii) the invalidity or unenforceability, or alleged
invalidity or unenforceability, of any provision of any Transaction Document; or
(iii) any claim by any holder or former holder of capital stock, equity
interests or other securities, or any creditor, of any Company Party or any
Affiliate of any Company Party or any other Person with whom any Company Party
has contractual relationships relating to any claim against any Company Party or
by reason of consummation of any of the Transactions. For purposes of clause (i)
of the immediately preceding sentence only, no representation and warranty of
any Company Party made herein or in any other Transaction Document, other than
the representations and warranties of the Company contained in Section
-------
3.01, 3.02, 3.03 and 3.04 of this Agreement that is not already, by its terms,
---- ---- ---- ----
qualified by a materiality or Material Adverse Effect qualification, shall give
rise to a right of indemnification under such clause unless such breach
(individually or together with all other breaches of that or any representation
or warranty) has a Material Adverse Effect.
5.03 Indemnification Provisions for Benefit of the Company. In the event
-----------------------------------------------------
that any Purchaser breaches (or in the event any third party alleges facts that,
if true, would mean any Purchasers has breached) any of its representations,
warranties, and covenants contained herein, and, if there is an applicable
survival period pursuant to Section 5.01 above, provided that the Company makes
------------
a written claim for indemnification against such Purchaser pursuant to Section
-------
5.04 within such survival period, then such Purchaser shall protect, defend,
----
hold harmless and indemnify the Company against, from and for the entirety of
any Adverse Consequences the Company may suffer
-35-
through and after the date of the claim for indemnification (but excluding any
Adverse Consequences the Company may suffer after the end of any applicable
survival period) resulting from or caused by the breach (or the alleged breach),
including all Adverse Consequences arising out of the enforcement of this
Section 5.03.
------------
5.04 Matters Involving Third Parties.
-------------------------------
(a) If any third party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this Article V, then the Indemnified Party shall promptly notify each
---------
Indemnifying Party thereof in writing; provided, however, that no delay on the
-----------------
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced; it being understood
and agreed that the failure of the Indemnified Party to so notify the
Indemnifying Party prior to settling a Third Party Claim (whether by paying a
claim or executing a binding settlement agreement with respect thereto) or the
entry of a judgment or issuance of an award with respect to a Third Party Claim
shall constitute actual prejudice to the Indemnifying Party's ability to defend
against such Third Party Claim.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 30 calendar days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party or Parties will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim (it being understood by the Parties that the
Indemnified Party may take such actions as are reasonable in connection with its
defense until it receives such notice from the Indemnifying Party), and (ii) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 5.04(b) above, (i) the Indemnified
---------------
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim (provided that the
Indemnified Party will have the right to employ separate counsel to represent
the Indemnified Party (the fees and expenses of which will be borne by the
Indemnifying Party if, in the Indemnified Party's reasonable judgment, a
conflict of interest between the Indemnified Party and the Indemnifying Party
exists with respect to such claim), (ii) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably), and (iii) the Indemnifying Party will not,
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably), consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim in which any relief other than the payment
of money damages is sought against any Indemnified Party, unless such
settlement, compromise or consent includes as
-36-
an unconditional term thereof the giving by the claimant, petitioner or
plaintiff, as applicable, to such Indemnified Party of a release from all
liability with respect to such Third Party Claim.
(d) In the event any of the conditions in Section 5.04(b) above is or
---------------
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Article V.
---------
ARTICLE VI
MISCELLANEOUS
-------------
6.01 Obligations Several, Not Joint. Each Purchaser shall be (i)
------------------------------
obligated hereunder only with respect to the purchase of the number and kind of
Purchased Securities allocable to such Purchaser pursuant to Section 2.02 or
------------
2.03 (as applicable), and no Purchaser shall have any liability with respect to
----
any other Purchaser's obligations hereunder and (ii) separately and
independently entitled to rely on the representations and warranties of each
other party made to such Purchaser in this Agreement and each other Transaction
Document and to the benefit of all agreements, covenants, obligations and
commitments of each other Party made with or to such Purchaser herein or
therein.
6.02 No Third Party Beneficiaries. Except as expressly provided in
----------------------------
Article V, nothing in this Agreement, expressed or implied, is intended to
confer upon-any Person other than the Parties or their respective successors and
permitted assigns any rights, benefits, remedies, obligations or liabilities
under or by reason of this Agreement.
6.03 Entire Agreement. This Agreement and the Transaction Documents
----------------
collectively constitute the entire agreement among the Parties with reference to
the matters set forth herein and therein and supersede any prior understandings,
negotiations, agreements, or representations by or among the Parties, written or
oral, to the extent they related in any way to the subject matter hereof or
thereof.
6.04 Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns; provided, however, that, except as otherwise specifically
-------- -------
permitted or contemplated by this Agreement, neither this Agreement nor any of
the rights, interests or obligations of such Party hereunder shall be assigned
or delegated by such Party without the prior written consent of the other
Parties, which consent may be withheld in the sole discretion of such Parties.
-37-
6.05 Counterparts. This Agreement and each other Transaction Document may
------------
be executed in counterparts, each of which shall be deemed to be an original and
all of which together shall be deemed to constitute one and the same agreement.
In addition to any other lawful means of execution or delivery, this Agreement
and the other Transaction Documents may be executed by facsimile signatures and
may be delivered by the exchange of counterparts of signature pages by means of
telecopier transmission.
6.06 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Company: Convergent Communications, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to any Purchaser, to such Purchaser at such Purchaser's address supplied from
time to time in writing to the Company, with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, facsimile transmission ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be deemed
to have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other
-38-
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
6.07 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado without giving effect to any
choice or conflict of law provision or rule (whether of the State of Colorado or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Colorado.
6.08 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence. No waiver shall be effective
hereunder unless contained in a writing signed by the Party sough to be charged
with such waiver.
6.09 Severability. If any provision of this Agreement or any other
------------
Transaction Document or the application thereof to any person or circumstance is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions hereof, or the application of such provision to Persons
or circumstances other than those as to which it has been held invalid, void or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, provided, that if any provision
--------
hereof or thereof or the application of any such provisions shall be so held to
be invalid, void or unenforceable by a court of competent jurisdiction, then
such court may substitute therefor a suitable and equitable provision in order
to carry out, so far as may be valid and enforceable, the intent and purpose of
the invalid, void or unenforceable provision and, if such court shall fail or
decline to do so, the Parties shall negotiate in good faith a suitable and
equitable substitute provision. To the extent that any such provision shall be
judicially unenforceable in any one or more states, such provision shall not be
affected with respect to any other state, each provision with respect to each
state being construed as several and independent.
6.10 Expenses. Unless otherwise provided herein, each of the Parties
--------
shall bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Company covenants and agrees to pay all of the costs and expenses
and the reasonable out-of-pocket expenses incurred by the Purchasers in
connection with the negotiation, preparation, review, execution, delivery,
collection and enforcement of this Agreement, or any other Transaction Document
or supplement to or modification hereof or thereof. The Company also agrees to
pay any and all stamp, transfer and other similar taxes payable or determined to
be payable in connection with the execution and delivery of this Agreement or
any other Transaction Document, or the issuance and sale of the Securities.
6.11 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
---------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof.
-39-
* * * * *
[END OF PAGE - SIGNATURE PAGE IMMEDIATELY FOLLOWS]
-40-
IN WITNESS WHEREOF, the Parties hereto have executed this Securities Purchase
Agreement as an instrument under seal on the date first above written.
CONVERGENT COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
SANDLER CAPITAL PARTNERS IV, L.P.
By: SANDLER INVESTMENT PARTNERS, General Partner
By: SANDLER CAPITAL MANAGEMENT, General Partner
By: MJDM MEDIA CORP., a General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
SANDLER CAPITAL PARTNERS IV, FTE, L.P.
By: SANDLER INVESTMENT PARTNERS, General Partner
By: SANDLER CAPITAL MANAGEMENT, General Partner
By: MJDM MEDIA CORP., a General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: President
APPLEWOOD ASSOCIATES, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
_______________________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: General Partner
▇▇▇▇▇▇▇ ▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------------------------
MJM ASSOCIATES L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: General Partner
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇ ▇▇▇, individually
/s/ ▇▇▇▇▇ ▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇, individually
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------------------
EXHIBIT A
Number Number of Aggregate
Purchaser of Initial Shares Initial Warrants Purchase Price
------------------------------------- ----------------- ---------------- --------------
Sandler Capital Partners IV, LP 377,400 471,750 $ 9,435,000
Sandler Capital Partners IV FTE, LP 154,600 193,250 $ 3,865,000
Applewood Associates, L.P. 60,000 75,000 $ 1,500,000
▇▇▇▇▇▇▇ ▇▇▇▇▇ 10,000 12,500 $ 250,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 10,000 12,500 $ 250,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 6,800 8,500 $ 170,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 6,800 8,500 $ 170,000
MJM Associates L.P. 6,800 8,500 $ 170,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 2,800 3,500 $ 70,000
▇▇▇▇▇ ▇▇▇ 2,400 3,000 $ 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1200 1,500 $ 30,000
▇▇▇▇▇▇ ▇▇▇▇▇ 1200 1,500 $ 30,000
------- ------- -----------
Totals: 640,000 800,000 $16,000,000
-44-
EXHIBIT B
Series A Articles of Amendment
------------------------------
-45-
EXHIBIT C
Joinder Agreement
-----------------
Reference is made to the Securities Purchase Agreement, dated March
___, 1999, amended (the "Purchase Agreement"), between Convergent
Communications, Inc., a Colorado corporation (the "Company"), and each of the
entities named on Exhibit A thereto (each an "Initial Purchaser" and,
---------
collectively, the "Initial Purchasers"). Capitalized terms used in this Joinder
have the meanings given to them in the Purchase Agreement.
The undersigned hereby agrees to be a party to the Purchase Agreement
as a Second Purchaser, with the same effect and, subject to the terms and
conditions set forth in the Purchase Agreement, to purchase at the Second
Closing the number of Second Closing Shares and the number of Second Closing
Warrants set forth adjacent to the undersigned's signature below, for the
aggregate purchase price indicated.
In addition, the undersigned hereby agrees to become, automatically
upon the Second Closing, (i) a party to the Warrant Agreement as an Investor
(as defined therein) as if an original signatory and (ii) a party to the
Investor Rights Agreement as an Investor (as defined therein) as if an original
signatory.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
duly executed on its behalf as of this ___ day of March, 1999.
Second Closing Second Closing Purchase
[NEW PURCHASER] Shares Warrants Price
-------------------- ------------------ --------
By:
----------------------------------------
Name:
Title:
Agreed and Accepted as of
the date written above:
CONVERGENT COMMUNICATIONS, INC.
By:
----------------------------------------
Name:
Title:
-46-
