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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ____)*
Convergent Communications, Inc.
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(Name of Issuer)
Common Stock, no par value
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(Title of Class of Securities)
211914-40-3
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(CUSIP Number)
Paul J. Shim, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
(212) 225-2000
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
April 4, 2000
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the
following box. |_|
Note: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. Seess. 240.13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 13 Pages
<PAGE>
SCHEDULE 13D
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CUSIP No. 211914-40-3 Page 2 of 13 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TPG Advisors III, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
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3
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4 SOURCE OF FUNDS*
00 - Contributions of Partners of Affiliates
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED BY --------------------------------------------------
8 SHARED VOTING POWER
EACH REPORTING 13,138,461** (See Items 4 and 5.)
PERSON --------------------------------------------------
9 SOLE DISPOSITIVE POWER
WITH
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,138,461** (See Items 4 and 5.)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,138,461** (See Items 4 and 5.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
31.23% (See Items 4 and 5.)
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 211914-40-3 Page 3 of 13 Pages
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** Pursuant to the Securities Purchase Agreement, dated as of April 4, 2000,
among Convergent Communications, Inc., TPG Convergent I, L.L.C. ("TPG"), Sandler
Capital Partners IV, L.P., and Sandler Capital Partners V, L.P., whereby TPG is
acquiring 150,000 shares of Series B Senior Cumulative Convertible Preferred
Stock (currently convertible into 11,538,461 shares of Common Stock) and
warrants currently exercisable for 1,600,000 shares of Common Stock.
<PAGE>
SCHEDULE 13D
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CUSIP No. 211914-40-3 Page 4 of 13 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
T3 Advisors, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
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3
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4 SOURCE OF FUNDS*
00 - Contributions of Partners of Affiliates
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS
IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED BY --------------------------------------------------
8 SHARED VOTING POWER
EACH REPORTING 13,138,461** (See Items 4 and 5.)
PERSON --------------------------------------------------
9 SOLE DISPOSITIVE POWER
WITH
--------------------------------------------------
10 SHARED DISPOSITIVE POWER
13,138,461** (See Items 4 and 5.)
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
13,138,461** (See Items 4 and 5.)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
31.23% (See Items 4 and 5.)
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP No. 211914-40-3 Page 5 of 13 Pages
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** Pursuant to the Securities Purchase Agreement, dated as of April 4, 2000,
among Convergent Communications, Inc., TPG Convergent I, L.L.C. ("TPG"), Sandler
Capital Partners IV, L.P., and Sandler Capital Partners V, L.P., whereby TPG is
acquiring 150,000 shares of Series B Senior Cumulative Convertible Preferred
Stock (currently convertible into 11,538,461 shares of Common Stock) and
warrants currently exercisable for 1,600,000 shares of Common Stock.
<PAGE>
Item 1. Security and Issuer.
This statement relates to the Common Stock, no par value
("Common Stock"), of Convergent Communications, Inc., a Colorado corporation
(the "Company"), whose principal executive offices are located at 400 Inverness
Drive South, Suite 400, Englewood, CO 80112.
Item 2. Identity and Background.
This statement is filed by TPG Advisors III, Inc. ("TPG
Advisors III") and T3 Advisors, Inc. ("T3 Advisors"). The address of the
principal business and office of each of TPG Advisors and T3 Advisors is 201
Main Street, Suite 2420, Fort Worth, Texas 76102.
TPG Advisors III is a Delaware corporation, the principal
business of which is to serve as the general partner of TPG GenPar III, L.P., a
Delaware limited partnership ("TPG GenPar III"). The principal business of TPG
GenPar III is to serve as the general partner of each of TPG Partners III, L.P.,
a Delaware limited partnership ("TPG Partners III"), TPG Parallel III, L.P., a
Delaware limited partnership ("TPG Parallel III"), TPG Investors III, L.P., a
Delaware limited partnership ("TPG Investors III"), TPG Dutch Parallel III,
C.V., a Netherlands limited partnership ("TPG Dutch III"), FOF Partners III,
L.P., a Delaware limited partnership ("FOF Partners III"), FOF Partners III-B,
L.P., a Delaware limited partnership ("FOF Partners III-B") and other related
entities engaged in making investments in securities of public and private
corporations.
T3 Advisors is a Delaware corporation, the principal business
of which is to serve as the general partner of T3 GenPar, L.P., a Delaware
limited partnership ("T3 GenPar"). The principal business of T3 GenPar is to
serve as the general partner of each of T3 Partners, L.P., a Delaware limited
partnership ("T3 Partners"), T3 Parallel, L.P., a Delaware limited partnership
("T3 Parallel"), T3 Investors, L.P., a Delaware limited partnership ("T3
Investors"), T3 Dutch Parallel, C.V., a Netherlands limited partnership ("T3
Dutch") and other related entities engaged in making investments in securities
of public and private corporations in the telecommunications and technology
industries.
The executive officers and directors of each of TPG Advisors
III and T3 Advisors are David Bonderman (director and President), James Coulter
(director and Executive Vice President), William Price (director and Executive
Vice President), Richard Schifter (Vice President), James O'Brien (Vice
President and Treasurer), Richard Ekleberry (Vice President and Secretary),
Thomas Reinhart (Vice President), Jeffrey Shaw (Vice President), Jonathan Coslet
(Vice President), Linda Rogenski (Assistant Secretary) and S. Michelle Reese
(Assistant Secretary), each of whom is a natural person. No other persons
control TPG Partners III, TPG Parallel III, TPG Investors III, TPG Dutch III,
FOF Partners III, FOF Partners III-B, TPG GenPar III, TPG Advisors III, T3
Partners, T3 Parallel, T3 Investors, T3 Dutch, T3 GenPar or T3 Advisors.
David Bonderman has his business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Mr. Bonderman's principal occupation is as
a director and President of TPG Advisors III, T3 Advisors and affiliated
entities. Mr. Bonderman is a citizen of the United States.
Page 6 of 13
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James Coulter has his business address at 345 California
Street, Suite 3300, San Francisco, California 94104. Mr. Coulter's principal
occupation is as a director and Executive Vice President of TPG Advisors III, T3
Advisors and affiliated entities. Mr. Coulter is a citizen of the United States.
William Price has his business address at 345 California
Street, Suite 3300, San Francisco, California 94104. Mr. Price's principal
occupation is as a director and Executive Vice President of TPG Advisors III, T3
Advisors and affiliated entities. Mr. Price is a citizen of the United States.
Richard Schifter has his business address at 1133 Connecticut
Avenue, N.W., Washington, D.C. 20036. Mr. Schifter's principal occupation is as
a Vice President of TPG Advisors III, T3 Advisors and affiliated entities. Mr.
Schifter is a citizen of the United States.
James O'Brien has his business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Mr. O'Brien's principal occupation is as a
Vice President and Treasurer of TPG Advisors III, T3 Advisors and affiliated
entities. Mr. O'Brien is a citizen of the United States.
Richard Ekleberry has his business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Mr. Ekleberry's principal occupation is as
a Vice President and Secretary of TPG Advisors III, T3 Advisors and affiliated
entities. Mr. Ekleberry is a citizen of the United States.
Thomas Reinhart has his business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Mr. Reinhart's principal occupation is as a
Vice President of TPG Advisors III, T3 Advisors and affiliated entities. Mr.
Reinhart is a citizen of the United States.
Jeffrey Shaw has his business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Mr. Shaw's principal occupation is as a
Vice President of TPG Advisors III, T3 Advisors and affiliated entities. Mr.
Shaw is a citizen of the United States.
Jonathan Coslet has his business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Mr. Coslet's principal occupation is as a
Vice President of TPG Advisors III, T3 Advisors and affiliated entities. Mr.
Coslet is a citizen of the United States.
Linda Rogenski has her business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Ms. Rogenski's principal occupation is as
an Assistant Secretary of TPG Advisors III, T3 Advisors and affiliated entities.
Ms. Rogenski is a citizen of the United States.
S. Michelle Reese has her business address at 201 Main Street,
Suite 2420, Fort Worth, Texas 76102. Ms. Reese's principal occupation is as an
Assistant Secretary of TPG Advisors III, T3 Advisors and affiliated entities.
Ms. Reese is a citizen of the United States.
During the last five years, neither of TPG Advisors III or T3
Advisors, and to the best knowledge of TPG Advisors III and T3 Advisors,
respectively, none of TPG GenPar III, T3 GenPar, or the executive officers or
directors of TPG Advisors III or T3 Advisors, has been
Page 7 of 13
<PAGE>
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the last five years, neither of TPG Advisors III or T3
Advisors, and to the best knowledge of TPG Advisors III and T3 Advisors,
respectively, none of TPG GenPar III, T3 GenPar or such individuals, has been a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described under Item 4 below, TPG (as defined
below), among other parties, has entered into the Securities Purchase Agreement
(as defined below), pursuant to which TPG has agreed to purchase the Securities
(as defined below) for aggregate consideration of $150,000,000 in cash. It is
currently anticipated that the funds required for the purchase of the Securities
by TPG will be obtained from general funds available to TPG and its affiliates.
Item 4. Purpose of Transaction.
Securities Purchase Agreement.
On April 4, 2000, TPG Convergent I, L.L.C., a Delaware limited
liability company ("TPG"), Sandler Capital Partners IV, L.P., and Sandler
Capital Partners V, L.P., (collectively, the "Investors") and the Company
entered into a Securities Purchase Agreement (the "Securities Purchase
Agreement"), providing for, among other things, the purchase by TPG of (i)
150,000 shares of the Company's Series B Senior Cumulative Convertible Preferred
Stock, no par value (the "Series B Preferred Stock"), (ii) warrants expiring
five years from the Closing Date (as defined in the Securities Purchase
Agreement) to purchase 600,000 shares of Common Stock with an exercise price of
$20.00 per share (the "Series A Warrants") and (iii) warrants expiring five
years from the Closing Date to purchase 1,000,000 shares of Common Stock with an
exercise price of $25.00 per share (the "Series B Warrants"). The Series B
Preferred Stock, the Series A Warrants and the Series B Warrants, taken
together, are referred to herein as the "Securities." The aggregate purchase
price to be paid for the Securities by TPG pursuant to the Securities Purchase
Agreement is $150,000,000 in cash.
The obligations of TPG to purchase the Securities pursuant to
the Securities Purchase Agreement are subject to the satisfaction and waiver of
certain conditions, including, among other things, the receipt of applicable
regulatory approvals and the non-occurrence of a Material Adverse Change (as
defined in the Securities Purchase Agreement).
The Securities Purchase Agreement may be terminated by either
TPG or the Company if: the closing of the purchase and sale of the Preferred
Stock has not occurred on or before May 31, 2000; any governmental entity has
issued a judgment, injunction, order or decree or taken other action enjoining
the transactions contemplated by the Securities Purchase Agreement; or TPG and
the Company mutually agree in writing. In addition, TPG may terminate the
Securities Purchase Agreement if the Company solicits, negotiates or enters into
any agreement resulting in any person other than TPG beneficially owning 25% or
more of any class of equity securities of the Company. In certain circumstances,
TPG will be entitled to
Page 8 of 13
<PAGE>
receive from the Company a termination fee in the amount of $4,500,000 in the
event that the Company consummates a sale or investment transaction following a
termination of the Securities Purchase Agreement.
Series B Preferred Stock.
The Series B Preferred Stock will have a liquidation
preference of $1,000 per share (plus accumulated and unpaid dividends), and will
accumulate dividends at a rate of 8.00% per annum. The Series B Preferred Stock
will be mandatorily redeemable by the Company at a price equal to the greater of
(i) its liquidation preference plus accrued and unpaid dividends and (ii) 60% of
the market value of the shares of Common Stock into which it is convertible, in
each case on the tenth anniversary of its original issuance. The Company also
will have the option to redeem shares of Series B Preferred Stock after the
fifth anniversary of its original issuance at a price equal to the greater of
(i) its liquidation preference plus accrued and unpaid dividends and (ii) the
market value of the shares of Common Stock into which it is convertible, in each
case at the time of redemption, plus a "make whole premium" designed to
compensate holders for the loss of such holders' dividend income as a result of
the redemption. In addition, the Series B Preferred Stock will be convertible
into Common Stock at the option of the holders at any time at a conversion price
of $13.00 per share of Common Stock.
The Series B Preferred Stock will entitle the holders thereof
to vote together with holders of Common Stock (and any holders of shares of
Series A Preferred Stock), as a single class, as if it had been converted to
Common Stock. Accordingly, the holders of Series B Preferred Stock will
initially have 11,538,461 votes, representing the number of shares of Common
Stock into which the Series B Preferred Stock will be initially convertible.
The Articles of Amendment to the Company's Amended and
Restated Articles of Incorporation setting forth the terms of the Series B
Preferred Stock (the "Articles") also contain covenants which restrict the
ability of the Company to take certain significant actions without the consent
of a majority of the holders of the Series B Preferred Stock including: altering
its by-laws, the Articles, or other instrument establishing and designating any
of the capital stock of the Company; creating any new class or series of capital
stock, issuing or selling any shares of capital stock, or recapitalizing the
Series B Preferred Stock; any sale, merger or reorganization of the Company
unless the Investors would receive in the transaction the greater of twice the
Liquidation Price (as defined in the Articles) or a 30% internal rate of return
on their original investment in the Series B Preferred Stock; appoint or
terminate the CEO or any other member of the senior management of the Company;
or alter the number of directors comprising the Board. These restrictive
covenants will terminate at such time as TPG and their affiliates beneficially
own less than 40% of the Originally Issued Shares (as defined in the Articles).
Upon a Change of Control (as defined in the Articles), the
holders of the Series B Preferred Stock may require the Company to redeem their
shares at a per share price equal to 101% of the Stated Value (as defined in the
Securities Purchase Agreement) of the Series B Preferred Stock plus the
aggregate amount of all other accumulated and unpaid dividends on such share.
Warrant Agreement.
Page 9 of 13
<PAGE>
In connection with the purchase of the Securities under the
Securities Purchase Agreement, the Investors and the Company will enter into a
Warrant Agreement (the "Warrant Agreement"), which will provide that the Series
A Warrants are exercisable for 600,000 shares of Common Stock at an exercise
price of $20.00 per share, and the Series B Warrants are exercisable for
1,000,000 shares of Common Stock at an exercise price of $25.00 per share. The
exercise price is payable in cash or securities of the Company, including
additional Series A Warrants or Series B Warrants. The Series A Warrants and the
Series B Warrants will become fully exercisable upon the Closing Date and remain
valid until their expiration date, five years after the Closing Date.
Investor Rights Agreement.
At the closing of the purchase of the Securities under the
Securities Purchase Agreement, the Investors and the Company will enter into an
Investor Rights Agreement (the "Investor Rights Agreement") which will provide
for certain transfer restrictions, demand, piggyback, and Form S-3 registration
rights and rights of first offer.
In addition, the Investor Rights Agreement will provide that,
for so long as TPG is the beneficial owner of at least 40% of the Originally
Issued Shares (as defined in the Investor Rights Agreement), the Company will
cause its Board of Directors (the "Board") to consist of seven members, and will
cause two individuals designated by TPG (the "Designated Nominees") to be
elected as directors of the Company ("Series B Directors"), along with one
independent director acceptable to TPG. At each annual meeting of the Company's
shareholders following the issuance of the Series B Preferred Stock, each of the
Company and the Investors is required to use its best efforts, subject to the
fiduciary duties of the Board, to cause the election of the Designated Nominees
then up for election. In addition, at least one-third of the members of each
committee of the Board shall be comprised of Series B Directors. The rights of
TPG to select Designated Nominees are not assignable to persons other than
affiliates of TPG. If at any time TPG is eligible to have two Series B Directors
and the Board shall not include two such designees of TPG, the number of
directors constituting the Board shall be increased by three, and the holders of
the Series B Preferred Stock shall have, in addition to their other voting
rights, the exclusive right, voting as a separate class, to elect three
directors of the Company.
In addition, pursuant to the Investor Rights Agreement, for so
long as TPG beneficially owns 40% or more of the Originally Issued Shares, if
the Company fails to comply with any material provision of its annual budget or
any budget, restrictive or financial covenant in any credit agreement of the
Company with respect to indebtedness in excess of $5,000,000, the Board shall
establish and maintain an Operating Committee (as defined in the Investor Rights
Agreement), consisting of five members, two of whom shall be Series B Directors
and one of whom shall be a representative of Sandler Capital Partners IV, L.P.
The Operating Committee will be authorized and empowered to implement business
plans and budgets of the Company.
General.
The provisions of the Securities Purchase Agreement and the
forms of the Warrant Agreement and Investor Rights Agreement are set forth in
Exhibit 1 to this Schedule, and are incorporated herein in their entirety by
this reference in response to this Item. The foregoing
Page 10 of 13
<PAGE>
description of the terms and provisions of these documents is a summary only,
and is qualified in its entirety by reference to such documents.
Subject to the restrictions described above, TPG may, from
time to time, subject to developments with respect to the Company and market
conditions, consider and determine to effect the purchase or sale of shares of
Series B Preferred Stock or other securities of the Company.
Except as set forth herein, none of TPG, TPG Advisors III or
T3 Advisors have any plans or proposals which would relate to or result in any
of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
Item 5. Interest in Securities of the Issuer.
(a), (b) As of the date hereof, none of TPG, TPG Advisors III
or T3 Advisors holds of record any shares of common stock or other securities of
the Company. However, by virtue of the execution of the Securities Purchase
Agreement, TPG Advisors III, as the general partner of the general partner of
TPG Partners III and of the sole member of TPG Convergent I LLC, and T3 Advisors
III, as the general partner of the general partner of T3 Partners, may be deemed
to own beneficially up to 13,138,461 shares of Common Stock, representing in the
aggregate 31.23% of the outstanding shares of common stock of the Company (based
on the number of shares of common stock represented by the Company to be
outstanding as of April 4, 2000).
(c) Except as described herein, no transactions in shares of
common stock of the Company were effected during the past 60 days by TPG
Advisors III or T3 Advisors or to the best of their knowledge, any of the
individuals identified in Item 2.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understanding or Relationships with
Respect to Securities of the Issuer.
Except as set forth in this statement, to the best knowledge
of TPG Advisors III and T3 Advisors, there are no other contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named in
Item 2 and between such persons and any person with respect to any securities of
the Company, including but not limited to, transfer or voting of any of the
securities of the Company, joint ventures, loan or options arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies, or a pledge or contingency the occurrence of which would
give another person voting power over the securities of the Company.
Item 7. Material to be Filed as Exhibits
Exhibit1 Securities Purchase Agreement, dated as of April 4, 2000,
by and between Convergent Communications, Inc., TPG
Convergent I,
Page 11 of 13
<PAGE>
LLC, Sandler Capital Partners IV, L.P., and Sandler
Capital Partners V, L.P.
Exhibit 2 Joint Filing Agreement
Page 12 of 13
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement with respect
to TPG Advisors III, Inc. is true, complete and correct.
Dated: April 14, 2000.
TPG ADVISORS III, INC.
By: /s/ Richard A. Ekleberry
Name: Richard A. Ekleberry
Title: Vice President
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement with respect
to T3 Advisors, Inc. is true, complete and correct.
Dated: April 14, 2000.
T3 ADVISORS, INC.
By: /s/ Richard A. Ekleberry
Name: Richard A. Ekleberry
Title: Vice President
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT, dated as of April 4, 2000, between
Convergent Communications, Inc., a Colorado corporation (the "Company"), and
each of the entities named on Exhibit A hereto (each, a "Purchaser").
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
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Accredited Investor" has the meaning set forth in Regulation D
promulgated under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, Judgments,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, Liens, losses (other than investment 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
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Agreement" means this Securities Purchase Agreement, including all
exhibits and schedules hereto, 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 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 audited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 1999 included in the Financial
Statements.
"Basis" means, with respect to any specified consequence, any past or
present fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act or transaction that
reasonably could form the basis for such consequence.
"Business Day" has the meaning set forth in the Series B Articles of
Amendment in Exhibit B.
"CEO" means Joseph Zell.
"CEO Agreement" has the meaning set forth in Section 2.2(d) hereof, in
the form attached hereto as Exhibit F.
"Class I" means the class of directors of the Board of Directors with a
term expiring at the annual meeting of stockholders of the Company in 2000 and
every third annual meeting thereafter.
"Class II" means the class of directors of the Board of Directors with
a term expiring at the annual meeting of stockholders of the Company in 2001 and
every third annual meeting thereafter.
"Class III" means the class of directors of the Board of Directors with
a term expiring at the annual meeting of stockholders of the Company in 2002 and
every third annual meeting thereafter.
"Closing" has the meaning set forth in Section 2.2(b).
"Closing Date" has the meaning set forth in Section 2.2(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any
successor Governmental Authority.
"Common Stock" has the meaning set forth in the Series B Articles of
Amendment in Exhibit B.
"Company" has the meaning set forth in the preface above.
"Company Contracts" has the meaning set forth in Section 3.20.
"Company Transaction" means any (A) direct or indirect acquisition or
purchase of any equity securities of the Company or any of its Subsidiaries,
that results in any Person (other than TPG) Beneficially Owning 25% or more of
any class of equity securities of the Company or equity securities of any of its
Subsidiaries, (B) business combination, sale of all or substantially all of the
Company's assets, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, or (C) other transaction by the Company the
consummation of which would prevent or materially delay the transaction
contemplated hereby.
"Company Parties" means the Company and its Subsidiaries.
"Company's Knowledge" means the actual knowledge of the Company's
officers, after due inquiry.
"Contract" means any agreement, contract, commitment, indenture, lease,
license, instrument, note, bond, security, agreement in principle, letter of
intent, undertaking, promise, covenant, arrangement or understanding, whether
written or oral.
"Conversion Shares" has the meaning set forth in Section 2.2(a).
"Disclosure Schedule" has the meaning set forth in the preface of
Article III.
"Employee Benefit Plan" means any (i) nonqualified deferred or
incentive compensation, retirement, bonus, stock option or other equity based,
severance, termination, retention or change in control plan or arrangement, (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 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Entity" means a partnership, limited liability partnership,
corporation, limited liability company, association, joint stock company, trust,
estate, joint venture, or unincorporated organization.
"Environmental, Health, and Safety Laws" means federal, state, local,
and foreign law (including common law), statutes, regulations, ordinances,
Judgments or binding agreements with any Governmental Authority 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 Hazardous Materials 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 Hazardous Materials.
"Environmental Studies" has the meaning set forth in Section 3.14(d).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity which is treated as a single
employer with the Company for purposes of Code Section 414.
"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Financial Statements" has the meaning set forth in Section 3.9.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any Person exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Hazardous Materials" shall mean any chemical substance, including
without limitation any: pollutant; contaminant; chemical; raw material;
intermediate, product or by-product; industrial, solid, toxic or hazardous
substance, material or waste; petroleum or any fraction thereof; asbestos or
asbestos-containing-material; and polychlorinated biphenyls; including without
limitation all substances, materials or wastes; which are now regulated,
classified or considered to be hazardous, dangerous or toxic under any
Environmental, Health or Safety Law, now or hereafter enacted, promulgated, or
amended.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the regulations promulgated thereunder.
"Indemnified Party" has the meaning set forth in Section 6.4.
"Indemnifying Party" has the meaning set forth in Section 6.4.
"Indenture" means the Indenture dated April 2, 1998 between Convergent
Communications, Inc. as Issuer and Norwest Bank Colorado, N.A., as Trustee.
"Intangible Property" means all certificates of deposit, bank accounts,
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
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).
"Investor Rights Agreement" means the Investor Rights Agreement, dated
as of April [__], 2000, between the Company and the Purchasers, as it may be
amended from time to time in accordance with its terms, having the terms set
forth in the form of Investor Rights Agreement attached hereto as Exhibit G.
"Judgment" means any judgment, writ, order or decree of or by any
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 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.
"Lien" means any mortgage, pledge, lien (statutory or other),
encumbrance, 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 which results or would result in a material adverse change in or a
material adverse effect on any of (i) the financial condition, results of
operation, business, operations or regulatory status 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.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"Ordinary Course of Business" means the ordinary course of business of
the 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.
"Originally Issued Shares" means, as of any time, the aggregate number
of Conversion Shares represented by the Series B Shares issued to TPG on the
Closing Date, as such aggregate number shall have been from time to time
cumulatively adjusted as a result of the operation of Section 9 and Section 10
of the Series B Articles of Amendment through such time.
"Parties" means the Company and the Purchasers.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" means (i) mechanic's, materialmen's, and similar
Liens 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 3.26 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.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
or Code Section 4975.
"Purchasers" means each of the parties identified as such on Exhibit A
and their Affiliates and designated assignees.
"Purchaser Indemnified Parties" means the Purchasers and their
successors and Representatives.
"Purchaser Placement Fee" means $5,250,000.
"Redeemable Equity" of any Person means any equity interest of such
Person 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.
"Registrable Shares" has the meaning set forth in the Investor Rights
Agreement.
"Related Persons" means, as to any Person, (i) any Affiliate of such
Person (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, (iii) any Entity (other than a
Company 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 (iv)
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,
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.
"Regulatory Approvals" means (i) any and all certificates, permits,
licenses, franchises, concessions, grants, consents, approvals, orders,
registrations, authorizations, waivers, variances or clearances from, or filings
or registrations with, Governmental Authorities, and (ii) any and all waiting
periods imposed by applicable laws.
"Representatives" means, with respect to any Person, any of such
Person's officers, directors, employees, agents, attorneys, accountants,
consultants, equity financing partners or financial advisors or other Person
associated with, or acting on behalf of, such Person.
"Required Regulatory Approval" means a Regulatory Approval (i)
necessary under the HSR Act, or required under the Securities Act, the Exchange
Act or the securities laws of the several states of the United States, for or in
connection with the consummation by the parties thereto of the transactions
contemplated by the Transaction Documents, or (ii) consisting of the filing by
the Company of the Series B Articles of Amendment with the Secretary of State of
the State of Colorado.
"Requirement of Law" means, as to any Person, the charter and bylaws or
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,
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.
"Securities" means the collective reference to the Shares and the
Warrants.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Series A Warrants" has the meaning set forth in Section 2.2(a).
"Series B Warrants" has the meaning set forth in Section 2.2(a).
"Series B Articles of Amendment" means the Articles of Amendment to the
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 B 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 Company's
Articles of Incorporation.
"Series B Preferred Stock" means the Series B Senior Cumulative
Convertible Preferred Stock, no par value, of the Company.
"Shares" has the meaning set forth in Section 2.2(a).
"Subsidiary" means, when used with respect to any Person as of any
time, 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.
"Tax" means any federal, state, local, or foreign income, gross
receipts, 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 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.
"Termination Fee" means $5,250,000.
"Third Party Claim" has the meaning set forth in Section 6.4 below.
"TPG" means TPG Partners III, L.P. and its Affiliates.
"Transaction Documents" means this Agreement, the Investor Rights
Agreement, the Series B 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 Agreement or any of the other Transaction Documents, including the
issuance, sale and purchase of the Shares and the Warrants on the date hereof or
at the Closing, the issuance and sale of Warrant Securities upon the exercise of
any Warrants and the issuance and delivery of the Conversion Shares upon the
conversion of any Series B Preferred Stock.
"Underlying Shares" means the collective reference to the Shares of
Common Stock issuable upon conversion of the Series B Preferred Stock in
accordance with the Series B 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,
between the Company and the Purchasers, as it may be amended from time to time
in accordance with its terms, having the terms set forth in the form of Warrant
Agreement attached hereto as Exhibit E.
"Warrant Certificate" means any certificate evidencing one or more
Warrants which may at any time or from time to time be outstanding in accordance
with the terms of the Warrant Agreement.
"Warrants" means, collectively, the Series A Warrants and the Series B
Warrants.
"Warrant Securities" has the meaning set forth in the Warrant
Agreement.
1.2 Certain Rules of Construction. This Agreement is to be interpreted
in accordance with the following rules of construction:
(i) Number and Gender. All definitions of terms apply equally
to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms.
(ii) "Including," "Herein," Etc. The words "include,"
"includes" and "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 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 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 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 example is given (through the use of the words "such as,"
"for example," "e.g." or otherwise) of the meaning, intent or operation
of any provision, such example is intended to be illustrative only and
not exclusive.
(vii) Participation in Drafting. The Parties and their
respective legal counsel have participated in the drafting of this
Agreement, and this Agreement will be construed simply and according to
its fair meaning and without any presumption or prejudice for or
against any Party.
(viii) Headings. The table of contents and section headings
contained in 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
2.1 Authorization of Securities. Prior to the execution and delivery of
this Agreement, the Company has duly (i) designated, created and authorized the
Series B Preferred Stock and the issuance and sale of shares thereof pursuant to
this Agreement and (ii) authorized the Warrants and the issuance and sale
thereof pursuant to this Agreement.
2.2 Securities Purchase.
(a) Sale and Purchase. At the Closing, the Company shall issue and sell
to the Purchasers, and the Purchasers shall purchase from the Company, for an
aggregate purchase price of $175,000,000 (i) a total of 175,000 shares of Series
B Preferred Stock (the "Shares"), having the rights, preferences, privileges and
restrictions set forth in the Series B Articles of Amendment, each share
convertible at the option of the holder at any time following the Closing into
shares (the "Conversion Shares") of Common Stock in accordance with the terms of
the Series B Articles of Amendment, (ii) Series A Warrants, having the terms set
forth in the form of Warrant attached hereto as Exhibit C, to purchase an
aggregate of 700,000 shares of Common Stock (the "Series A Warrants"), and (iii)
Series B Warrants, having the terms set forth in the form of Warrant attached
hereto as Exhibit D, to purchase 1,166,667 shares of Common Stock (the Series B
Warrants"), in the case of each of (ii) and (iii) subject to adjustment in
accordance with the Warrant Agreement. The number of Shares, Series A Warrants
and Series B Warrants to be purchased at the Closing by each Purchaser, and the
portion of the aggregate purchase price to be paid by each Purchaser, are set
forth next to such Purchaser's name on Exhibit A hereto.
(b) Delivery of Securities; Payment of Purchase Price. The closing of
the purchase and sale of the Securities (the "Closing") shall take place on the
third Business Day following the satisfaction or waiver of each of the
conditions set forth in Sections 2.2(c), (d) and (e) at the offices of Gibson,
Dunn & Crutcher LLP, 1801 California Street, Suite 4100, Denver, Colorado (the
"Closing Date"), or at such other time and place as is mutually acceptable to
the Parties. Delivery of the Securities purchased by the Purchasers pursuant to
this Agreement will be made at the Closing by the Company delivering to the
Purchasers, against payment of the purchase price therefor, (i) a stock
certificate or certificates, dated the Closing Date, representing the number of
Shares purchased by the Purchasers, with each such certificate being registered
in the name of the Purchasers and (ii) Warrant Certificates, dated the Closing
Date, representing the number of Warrants purchased by the Purchasers, with each
such certificate being registered in the name of the respective Purchaser,
together with the Warrant Agreement, duly executed and delivered by the Company
and the Purchasers. Payment by the Purchasers of the agreed purchase price for
the Shares and Warrants (against which the Purchaser Placement Fee payable to
the Purchasers (which shall be allocated pro rata to the respective purchase
prices payable by them as set forth in Exhibit A) and any amounts due to the
Purchaser for expenses pursuant to Section 8.9 hereof has been netted) shall be
made by wire transfer (to the account of the Company previously designated by it
in writing) and the Company shall acknowledge receipt from the Purchasers of
payment in full.
(c) Conditions of Each Party. The obligation of the Company and the
Purchasers to consummate the sale and purchase of the 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 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.
(ii) Purchase Permitted By Applicable Laws. All Regulatory
Approvals shall have been received, and the purchase and sale of the
Securities to be purchased at the Closing by the 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.
(d) Conditions of the Purchasers. The obligation to purchase and pay
for the Securities to be purchased by the Purchasers at the Closing Date as
contemplated by this Agreement is subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in writing
by the Purchasers:
(i) Certain Documents. In addition to the stock certificates
and Warrant Certificates required by Section 2.2(b), the Purchasers
shall have received the following, each dated the 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 Closing Date and (y) that the conditions
contained in the other subdivisions of this Section 2.3(d)
and, to the knowledge of the Company, subdivision (i) of
Section 2.3(c), 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 B Articles of Amendment, each as amended
through the Closing Date, and (z) which includes a
representation by such officers that the copies of the Series
B Articles of Amendment, 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;
(C) favorable opinions of Gibson, Dunn & Crutcher
LLP, counsel to the Company, and Martin E. Freidel, General
Counsel to the Company, in form and substance satisfactory to
the Purchasers.
(ii) Representations and Warranties; No Default. The
representations and warranties of the Company contained in this
Agreement shall have been true and correct in all material respects
(except that any representation or warranty qualified by materiality or
Material Adverse Effect shall be true and correct in all respects) on
the date of this Agreement and as of the Closing Date as if made on the
Closing Date; and the Company shall have performed and complied with
all agreements, covenants, conditions and obligations contained in this
Agreement, the Series B 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 Closing.
(iii) No Material Adverse Change. Since the date hereof, 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), no Change of Control (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 B Articles of
Amendment or Article III of the Warrant Agreement.
(v) Fairness Opinion. Warburg Dillon Read LLC shall have
delivered (and not withdrawn or modified in any adverse respect) a
written opinion to the Board of Directors to the effect that the
consideration paid to the Company for the shares of Series B Preferred
Stock sold pursuant to Section 2.2, is fair, from a financial point of
view, to the Company, and a true and correct copy of such opinion shall
have been delivered to the Purchasers.
(vi) Consents. All Regulatory Approvals (including, without
limitation, the Required Regulatory Approvals) from any Governmental
Authority and all consents, waivers or approvals from any other Person
(including, without limitation, the former holders of the Series A
Preferred Convertible Stock of the Company or pursuant to the Indenture
or any of the Company's other debt or credit agreements or material
contracts) required for or in connection with the execution and
delivery of the Transaction Documents and the consummation of the
transactions contemplated thereby shall have been obtained or made on
terms reasonably satisfactory to the Purchasers, and all waiting
periods specified under applicable Law (including, without limitation,
the waiting period under the HSR Act), the expiration of which is
necessary for such consummation, shall have expired or been terminated.
(vii) Board Composition; By-laws. (i) The Board shall have
been constituted in the manner contemplated by the Investor Rights
Agreement (including that: the size of the Board shall be seven
directors (subject to increase only to the extent provided in the
Series B Articles to accommodate the Designated Directors or the
Majority Directors (each as defined in the Series B Articles of
Amendment)), and the composition of the Board shall be as specified in
Schedule 2.2(d)(vii) and, if necessary, there shall be one vacancy for
the future election of an independent director to be designated by
TPG); (ii) appropriate resolutions to effect the establishment of the
Operating Committee contemplated by the Investor Rights Agreement (the
"Operating Committee") shall have been duly adopted by the Board; (iii)
the By-laws of the Company shall have been amended, in form and
substance satisfactory to the Purchasers, to effectuate the purposes
and intentions of Sections 7 and 11 of the Series B Articles of
Amendment and the Investor Rights Agreement, including by providing:
(A) that the Board shall have seven members, subject to increase only
to the extent provided in the Series B Articles to accommodate the
Designated Directors or the Majority Directors (each as defined in the
Series B Articles of Amendment); (B) for the establishment of the
Operating Committee; (C) that directors may take action in the manner
described in Section 7.4 of the Series B Articles of Amendment; (D)
that for so long as TPG is the Beneficial Owner of at least 40% of the
Originally Issued Shares, except to the extent that the listing
requirements of the Nasdaq Stock Market's National Market would be
breached by the operation of this clause (D), at least one-third of the
members of each and every committee of the Board will be Series B
Directors (as defined in the Series B Articles of Amendment); and (E)
for the indemnification described in Section 7.5 of the Series B
Articles of Amendment; and (iv) directors' and shareholders' liability
insurance shall be available to the directors designated by the
Purchasers on terms satisfactory to the Purchasers and in an amount of
coverage at least equal to $40,000,000.
(viii) CEO and Related Matters. The CEO shall have been duly
and validly appointed Chief Executive Officer of the Company by all
necessary action of the Board of Directors, and the Company and CEO
shall have executed the employment agreement (the "CEO Agreement")
substantially in the form of Exhibit F hereto or otherwise on terms
reasonably acceptable to the Purchasers and the Company.
(ix) Agreements. Each of the Series B Articles of Amendment,
the Investor Rights Agreement and the Warrant Agreement shall have been
executed and delivered and shall be in full force and effect in
substantially the forms attached hereto, and the Series B Articles of
Amendment shall have been duly filed with and recorded by the Secretary
of State of the State of Colorado; and the Company shall have furnished
to the Purchaser evidence satisfactory to the Purchaser of such filing.
(x) Credit Facilities; Defaults. (i) The entire outstanding
principal amount of and accrued interest on the $10,000,000 credit
facility between the Company and Goldman Sachs Credit Partners, L.P.,
which amount shall be no greater than $12,000,000, shall have been paid
in full and the obligations of the Company with respect to such loan
shall be satisfied in full, in each case concurrently with the
consummation of the transactions contemplated by this Agreement, no
default shall exist (or occur upon consummation of the Transactions)
under such loan or any other material financing instrument of the
Company or any other Company Contract, and no action shall be taken to
accelerate any material indebtedness of the Company. Contemporaneously
with the Closing hereunder, the Company shall enter into a new working
capital facility with Foothill Capital (or comparable institution) on
terms and conditions reasonably acceptable to the Purchasers (the
"Foothill Facility"); and (ii) the Foothill Facility shall be in full
force and effect thereafter and the Company shall have at least
$50,000,000 in firmly committed availability thereunder.
(e) Condition of the Company. The Company's obligation to issue and
sell the Securities to be sold to and purchased by the Purchasers at the Closing
Date as contemplated by this Agreement is subject to the satisfaction of the
condition, which may be waived in writing by the Company, that the
representations and warranties contained in Article IV of this Agreement shall
be true and correct in all material respects (except that any representation or
warranty qualified by materiality or Material Adverse Effect shall be true and
correct in all respects) on and as of the Closing Date, and the Company shall
have received a certificate to that effect signed by each of the Purchasers.
2.3 Use of Proceeds. The Company shall use all proceeds of the sale of
the Securities for working capital and capital expenditures as provided in the
Company's 2000 business plan heretofore approved by the Company's Board of
Directors and furnished to the Purchasers.
ARTICLE III
COMPANY REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to and covenants and agrees with
the Purchasers as follows as of the date hereof and, after giving effect to all
of the Transactions being consummated on the Closing Date, as of the Closing
Date 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 the Purchasers 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. 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.
3.1 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) Consents; No Conflicts. Except as set forth in the Disclosure
Schedule, no regulatory approval from, or registration, disclosure, declaration
or filing with, any Governmental Authority is required to be made or obtained by
the Company or any of its Subsidiaries in connection with the execution,
delivery and performance of the Transaction Documents and the consummation of
the transactions contemplated thereby. The execution and delivery of the
Transaction Documents and the consummation of the Transactions contemplated
hereby will not constitute a "Change of Control" or "Change in Control" (or
similar concept) as such term (or concept) is defined in any material contract,
agreement, indenture, mortgage, note, lease or other instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary is bound or to which the properties of the Company or any such
Subsidiary is subject.
(c) Series B Articles of Amendment. By the Closing, all actions
necessary in order to duly and validly authorize and designate the Series B
Preferred Stock and authorize and create the Warrants, including all necessary
corporate action on the part of the Company and its stockholders, shall have
been taken and the Series B Articles of Amendment in the form attached hereto as
Exhibit B and the Warrant Agreement shall each be in full force and effect and
shall not have been amended, modified or supplemented.
(d) Financial Advisors and Brokers; Fairness Opinion. Except for
Warburg Dillon Read L.L.C., no Person has acted, directly or indirectly, as a
broker, finder or financial advisor of the Company in connection with the
Transaction Documents or the transactions contemplated thereby, and no Person is
entitled to receive any broker's, finder's or similar fee or commission in
respect thereof based in any way on any agreement, arrangement or understanding
made by or on behalf of the Company, any of its Subsidiaries or any of their
respective directors, officers or employees. Furthermore: (i) true and correct
copies of all agreements between the Company, on the one hand, and Warburg
Dillon Read L.L.C., on the other, have been delivered to the Purchasers; and
(ii) the Company has received an opinion of Warburg Dillon Read L.L.C. to the
effect that the consideration to be paid to the Company for the shares of Series
B Preferred Stock to be sold hereunder is fair, from a financial point of view,
to the Company.
(e) Offerees; Exemption from Registration. 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 Securities or other securities of the Company so as to bring the offer,
issuance or sale of the 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 sky" or securities laws
of any state or other jurisdiction. Assuming the Purchasers are all Accredited
Investors, the offering, issuance and sale of the Securities are exempt from the
registration provisions of the Securities Act.
3.2 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).
3.3 Terms, Validity, Etc. The Company has delivered to the Purchasers
true and complete copies of its Articles of Incorporation and By-Laws as in
effect on the date hereof. The Shares and the Warrants, when issued as provided
herein, and the Underlying Shares, when issued upon conversion of Series B
Shares in accordance with the Series B 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 Amended
and Restated Articles of Incorporation (including the Series B Articles of
Amendment), the Warrant Agreement and the other Transaction Documents.
3.4 Capitalization.
(a) The authorized and issued capital stock of the Company consisted
solely of (i) 100,000,000 authorized shares of Common Stock, of which 28,929,824
shares were issued and outstanding, all Persons, to the Company's Knowledge,
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 175,000 unissued shares designated
as Series B Preferred Stock. 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 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. The Company has previously furnished to the
Purchasers a true, correct and complete copy of each registration rights
agreement entered into by the Company in favor of any Person.
(b) Immediately after the Closing and after giving effect to the
issuance of the Shares and the Warrants, the statements in Section 3.4(a) shall
be true, accurate and complete in all material respects, except that the Shares
and the 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 Securities are not being, and the Underlying Shares, when issued
upon conversion of the Series B 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 15,328,206 shares of Common Stock for issuance upon
conversion, exercise or exchange of the Shares and the Warrants. None of the
issuance or sale of the Securities, any future conversion, exercise or exchange
of any Series B 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 B 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 Securities, any Warrant Securities, any convertible 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. Without limiting the generality of the foregoing, except as set forth
in the Disclosure Schedule, no conversion price or exercise price of any Right
or other security of the Company will be reduced, and the number of shares of
Common Stock underlying any Right or other security of the Company shall not be
increased, as the result of the issuance or exercise of the Securities.
3.5 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.
3.6 Compliance with Laws; Noncontravention.
(a) Compliance and 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 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.
(b) Corporate Controls. Neither the Company nor any of its
Subsidiaries: (i) are aware of or have taken any action, directly or indirectly,
that would result in a violation by such Persons of the FCPA or the Federal Law
for the Liability of Public Servants, had such laws applied, including, without
limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any
"foreign official" (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA or in violation of any Law of any Country
of Operations; or (ii) have offered, promised, authorized or made, directly or
indirectly, any unlawful payments or any payments or other inducements to any
foreign official, with the intent or purpose or result of: (A) influencing any
act or decision of such official in his official capacity, (B) inducing such
official to do or omit to do any act in violation of the lawful duty of such
official, or (C) inducing such official to use his influence with a government
or instrumentality thereof to affect or influence any act or decision of such
government or instrumentality, in each case in order to assist the Company or
any of its Subsidiaries in obtaining or retaining business for or with, or
directing business to, any Person.
3.7 Subsidiaries.
(a) 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.
(b) Except as set forth in 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.
3.8 Corporate Records. The minute books or similar records of the
Company and each of its Subsidiaries, which 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.
3.9 Financial Statements.
(a) Company Reports; Financial Statements. (a) The Company has made
available to the Purchasers a true and complete copy of (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, (ii) the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1999 and (iii)
each registration statement, report on Form 8-K, proxy statement, information
statement or other report or statement filed by the Company with the Commission
since September 30, 1999 and prior to the date hereof, in each case in the form
(including exhibits and any amendments thereto) filed with the Commission
(collectively, the "SEC Reports"). As of their respective dates, the SEC Reports
and any registration statement, report, proxy statement, information statement
or other statement filed by the Company with the Commission after the date
hereof and before the Closing Date ("Subsequent Reports") (i) was, or will be,
as the case may be, timely filed with the Commission; (ii) complied, or will
comply, as the case may be, in all material respects, with the applicable
requirements of the Exchange Act and the Securities Act, and (iii) did not, or
will not, as the case may be, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Each of the consolidated balance sheets (including, where
applicable, the related notes and schedules) included in or incorporated by
reference into the SEC Reports and any Subsequent Reports fairly presents, or
will fairly present, as the case may be, in all material respects, the
consolidated financial position of the Company and its Subsidiaries as of the
date thereof, and each of the consolidated statements of income (or statements
of results of operations), stockholders' equity and cash flows (including the
related notes and schedules) included in or incorporated by reference into the
SEC Reports and any Subsequent Reports fairly presents or will fairly present as
the case may be, in all material respects, the results of operations, retained
earnings and cash flows, as the case may be, of the Company and its Subsidiaries
(on a consolidated basis) for the periods or as of the dates, as the case may
be, set forth therein, in each case in accordance with GAAP applied on a
consistent basis throughout the periods covered (except as otherwise noted
therein) and in compliance with the rules and regulations of the Commission.
3.10 Events Subsequent to Most Recent Fiscal Period End. Except as
disclosed in the SEC Reports or the Disclosure Schedule, since December 31,
1999, 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 December 31, 1999:
(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) 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, not contemplated by the Company's current annual operating budget 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) not
contemplated by the Company's current annual operating budget and involving more
than $250,000;
(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 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 B 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;
(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 any Person,
(other than accounts receivable in the Ordinary Course of Business) or entered
into any other transaction with or for the benefit of any of the Company's
stockholders, directors, officers, or employees, in each case 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, employees or agents, except for increases in the Ordinary Course of
Business or required under the current 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, employees or agents, other than in the Ordinary Course
of Business, or made or provided under any employee welfare, pension,
retirement, profit sharing or similar payment or benefit except pursuant to
regularly scheduled payments required pursuant to the current terms of the
Employee Benefit Plans 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. (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) to the Company's
Knowledge, 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 a Material Adverse Effect on the Company
Parties. Other than as set forth on the Disclosure Schedule, there are no
contractual or other restrictions or limitations on the ability of the Company
Parties to pay any dividends or make any other distributions on, or to purchase,
redeem or otherwise acquire any of its Securities.
3.12 Legal Compliance. Each of the Company Parties has complied in all
material 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.
3.13 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. Neither the Company 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).
3.14 Real Property; Environmental Matters.
(a) The Disclosure Schedule identifies all real property as to
which the Company or any of its Subsidiaries is the fee owner, operator 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 current or
formerly owned, operated or leased 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 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 five years, and relate to the
physical or environmental condition of any of the real property currently or
formerly owned, operated, 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 or request for
information from any Governmental Authority regarding any release or threatened
release of any Hazardous Materials or any actual or alleged material violation
of Environmental, Health, and Safety Laws relating to such property or its
occupancy, operation or use by the Company or any of its Subsidiaries and
arising under Environmental, Health, and Safety Laws, which if adversely
determined to the Company, any of its Subsidiaries or such owner, as the case
may be, 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, with all Environmental,
Health, and Safety Laws and has obtained, has complied, and is currently in
compliance with, in each case in all material respects, all Licenses that are
required pursuant to Environmental, Health, and Safety Laws for the occupation
of its facilities or the operation of its businesses, in each case where
noncompliance could reasonably be expected to have a Material Adverse Effect.
(h) to the Company's Knowledge, there are no past or present
events, conditions or circumstances, including but not limited to pending
changes in any Environmental, Health and Safety Law or License, that are likely
to interfere with or otherwise affect the businesses or operations of the
Company or any of its Subsidiaries in the manner now conducted or which would
interfere substantially with compliance or continued compliance with any
Environmental, Health and Safety Law or License, in each case in a manner that
could reasonably be expected to have a Material Adverse Effect.
3.15 Intellectual Property.
(a) The Disclosure Schedule sets forth an accurate and complete
list of the material Intellectual Property owned by the Company Parties. Except
as expressly set forth in the Disclosure Schedule, the Company is the sole and
exclusive owner of all such Intellectual Property. 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 or necessary for 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) (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) to the knowledge of the Company, 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.
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.
There is not now pending any material complaint nor, to the knowledge of the
Company, 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.
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 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 current annual operating
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;
(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 or other labor representative;
(xi) bonus, pension, profit-sharing, retirement, stock purchase,
stock option or other equity based, deferred or incentive compensation,
death benefit, disability, severance, termination, retention, change in
control, insurance, medical, fringe or other 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.
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 or
similar labor 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
within the meaning of any applicable Requirement of Law. Each of the Company
Parties is in compliance in all material respects with all applicable
Requirements of Law relating to the employment, the terms and conditions of
employment and the termination of employment of their respective employees.
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 or other labor representative with respect to employees of
any Company Party.
3.23 Employee Benefits.
(a) The Disclosure Schedule lists each Employee Benefit Plan
established or maintained the Company or any of its Subsidiaries or ERISA
Affiliates or to which the Company or any of its Subsidiaries or ERISA
Affiliates contributes or is obligated to contribute (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.
(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 I or 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.
(v) None of the Company Parties nor any ERISA Affiliates has
incurred or reasonably expects to incur any material liability under or
pursuant to Title I or IV or ERISA or the penalty or excise tax
provisions of the Code relating to Employee Benefit Plans.
(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) in
respect of 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.
(f) No current or former employee of any Company Party is or may become
entitled, as a result of the consummation of the Transactions (either alone or
together with the occurrence of any other event), to (i) any accelerated or
increased payment or benefit, (ii) any accelerated or special vesting of any
payment, right or benefit or (iii) any payment or benefit that is not tax
deductible by the applicable Company Party.
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 will deliver to the Purchasers, at the 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 B Articles of
Amendment, (C) which includes a representation by such officers that the copies
of the Amended and Restated 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 Company, of each Company Party's Articles
of Incorporation or other organizational documents (including, in the case of
the Company, the Series B 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 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 or the jurisdiction of incorporation of such Company
Party.
3.26 Restrictions. Except as set forth in Section 3.26 of the
Disclosure Schedule, 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. Except as set forth on the Disclosure Schedule,
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 Suppliers; Customers.
(a) Suppliers. The Disclosure Schedule sets forth the twenty (20)
largest suppliers of the Company in terms of purchases as of December 31, 1999,
showing the approximate value of such purchases from each supplier. None of such
suppliers has notified any Company Party that it intends to terminate or change
significantly its sale of products purchased by such party or any of the
material terms thereof. To the knowledge of the Company Parties none of such
suppliers is insolvent. Except as specifically set forth in the Disclosure
Schedule, neither the Company nor any of the Company Parties has granted or
agreed to grant any unusual credit, trade-in, free return, discount or other
unusual sales terms in the acquisition of its inventory. The Company Parties
have taken all necessary action to protect their rights under applicable
warranties. There are no claims pending or threatened by any Company Party
against any of their suppliers, other than those which would not result in a
Material Adverse Effect.
(b) Customers. The Disclosure Schedule sets forth the twenty (20)
largest customers of the Company and the other Company Parties in terms of
aggregate sales as of December 31, 1999. None of such customers has any Company
Party that it intends to terminate or change significantly its purchase of
products or any of the material terms thereof. To the knowledge of the Company
none of such customers is insolvent. Except as specifically set forth in the
Disclosure Schedule neither the Company nor any of the Company Parties has
granted or agreed to grant any unusual credit, trade-in, free return, discount
or other unusual sales terms in its sales agreement. The Company and the Company
Parties have taken all necessary action to protect their rights under applicable
warranties. There are no claims pending or threatened by any customers against
the any Company Party, other than those which would not result in a Material
Adverse Effect.
3.29 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.
3.30 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 THE PURCHASERS
Each Purchaser, severally and not jointly, agrees with, and represents
and warrants, to the Company as follows:
4.1 Purchase for Investment. The Securities being acquired on the date
hereof by such Purchaser pursuant to this Agreement are being acquired for its
own account and with no intention of distributing or reselling such 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 Purchaser to
sell or otherwise dispose of all or any part of such Securities pursuant to a
registration under the Securities Act or under an exemption from such
registration available under the Securities Act, and subject, nevertheless, to
the disposition of the Purchasers' property being at all times within its
control and discretion.
4.2 Organization; Status As Accredited Investor. Such Purchaser is a
limited partnership or limited liability company duly organized under the laws
of its jurisdiction of organization and is an Accredited Investor.
4.3 Power. Such Purchaser has all requisite power and authority to
execute, deliver and perform its obligations under each of the Transaction
Documents, and to consummate the respective Transactions contemplated hereby and
thereby.
4.4 Execution and Delivery; Authorization. Each of the Transaction
Documents has been duly and validly executed and delivered by such Purchaser.
The execution, delivery and performance by such Purchaser of, and the
consummation of the Transactions contemplated by, this Agreement and each of the
other Transaction Documents have been duly and validly authorized by all
necessary partnership action on the part of such Purchaser. Each of the
Transaction Documents, when executed and delivered, will constitute a legal,
valid and binding obligation of such Purchaser, enforceable in accordance with
its terms, subject to the Remedies Exception.
4.5 Broker's Fees. Such 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, with respect to which the Company will have any
liability.
4.6 Restricted Securities. Such Purchaser understands that the
Securities being acquired by it at the 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 Securities are "restricted securities," as said term is defined in Rule 144
of the Rules and Regulations promulgated under the Securities Act.
4.7 Information.
(i) Such Purchaser has had a reasonable opportunity to ask
questions of and receive answers and documents from the Company
concerning the Company, and such Purchaser has such knowledge and
expertise in financial and business matters that it 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
(iii) Such Purchaser understands that the Securities being
acquired by it at the 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 Purchaser set forth in this Agreement in order to
determine the applicability of such exemptions and the suitability of
such Purchaser to acquire the Securities.
ARTICLE V
COVENANTS
5.1 Conduct of Business. (a) From the date hereof until the Closing
Date, except as set forth in the Disclosure Schedule hereto or as provided in
Section 5.1(b) hereof, the Company shall conduct its business and shall cause
its Subsidiaries to conduct their respective businesses in, and only in, the
Ordinary Course of Business and shall use, and shall cause its Subsidiaries to
use, their best efforts to preserve intact their respective present business
organizations, operations, goodwill and relationships with third parties
(including, without limitation, clients and providers) and to keep available the
services of the present directors, officers and key employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
without the prior written consent of the Purchasers (except as expressly
permitted or required by this Agreement):
(i) the Company shall not, and shall cause each of its
Subsidiaries not to, sell any of the assets of the Company
or its Subsidiaries (or the securities of entities holding
the same) to any Person, other than the Company or a
Wholly-Owned Subsidiary of the Company, in one transaction
or a Series of related transactions, in which the fair
value of the assets being sold, or the total consideration
(in the form of cash or property and including any
contingent consideration and any Indebtedness or other
obligations assumed) to be received by the Company and its
Subsidiaries, exceeds $2,000,000;
(ii) other than in the ordinary course of business consistent
with past practice, the Company shall not, and shall cause
each of its Subsidiaries not to, acquire any assets, in
one transaction or Series of related transactions, in
which the total consideration (in the form of cash or
property and including any contingent consideration and
any Indebtedness or other obligations assumed) to be paid
by the Company and its Subsidiaries exceeds $2,000,000;
(iii) the Company shall not, and shall cause each of its
Subsidiaries not to take any of the actions or enter into
any of the agreements, commitments or transactions
described in Section 3.10 hereof;
(iv) the Company shall not, and shall cause each of its
Subsidiaries not to, take any action that it knows or has
reason to believe would cause a representation or warranty
of the Company set forth herein to be untrue in any
material respect if made at such time, or a covenant of
the Company to fail to be satisfied as of the Closing
Date;
(v) 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 not pursuant to Section 10 of the Series B
Articles of Amendment or Article III of the Warrant
Agreement;
(vi) the Company shall not take, consummate, approve or
authorize any action or transaction which would require
the consent of the Majority Holders (as such term is
defined in the Series B Articles of Amendment) after the
issuance of the Series B Preferred Stock;
(vii) the Company shall not, and shall cause each of its
Subsidiaries not to, commit or agree to do any of the
foregoing.
5.2 Reasonable Best Efforts. Each of the parties hereto agrees to use
its reasonable best efforts promptly to take or cause to be taken all actions
and promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement in accordance with the terms of the
Agreement. Without limiting the foregoing, the Purchasers and the Company will
use their reasonable best efforts to make all filings with respect to (including
filings under the HSR Act), and to obtain, all regulatory approvals necessary
or, in the opinion of the Purchasers or the Company, advisable, in order to
permit the consummation of the Transactions contemplated hereby
5.3 Access. Prior to the Closing, the Company Parties shall grant to
the Purchasers, or cause to be granted to the Purchasers and their respective
representatives, employees, counsel and accountants reasonable access, during
normal business hours and upon reasonable notice, to the personnel, properties,
books and records of the Company and each of the Company Parties.
5.4 Publicity. Except as required by Law or by obligations pursuant to
any listing agreement with or requirement of any national securities exchange or
national quotation system on which the Common Stock is listed, admitted to
trading or quoted, neither the Company (nor any of its Affiliates), nor any
Purchaser (nor any of its Affiliates) shall, without the prior written consent
of each other party hereto, which consent shall not be unreasonably withheld or
delayed, make any public announcement or issue any press release with respect to
the transactions contemplated by this Agreement. Prior to making any public
disclosure required by applicable Law or pursuant to any listing agreement with
or requirement of any relevant national exchange or national quotation system,
the disclosing party shall consult with the other parties hereto, to the extent
feasible, as to the content and timing of such public announcement or press
release.
5.5 Status of Dividends. The Company agrees to treat the Series B
Preferred Stock as equity for all Tax purposes. The Company shall take no action
(other than as required by Law) that would jeopardize the availability of the
dividends received deduction under Section 243(a)(1) of the Code for the
distributions on the Series B Preferred Stock that are paid out of current or
accumulated earnings and profits, if any.
5.6 Exclusivity. (a) The Company shall immediately cease and terminate
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any Persons conducted heretofore by the Company, or any of its
Subsidiaries with respect to any proposed, potential or contemplated Company
Transaction.
(b) From the date hereof until the earlier of (i) the Closing Date and
(ii) the termination of this Agreement (the "Exclusivity Period"), the Company
shall not, and shall not permit any of its Subsidiaries or Affiliates or any of
its or their directors, officers or Representatives to, directly or indirectly,
(A) solicit or initiate, or encourage the submission of, any offer, (B)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate
any inquiries or the making of any offer that constitutes, or may reasonably be
expected to lead to, any proposal or Company Transaction, other than a
transaction with TPG, or (C) authorize, engage in, or enter into any agreement
or understanding with respect to, any Company Transaction; provided that the
Company may, in response to an unsolicited written proposal from a third party,
engage in the activities specified in clause (B) and (C) of this Section 5.6(b),
if (x) in the opinion of the Company's outside legal counsel, such action is
required for the Board of Directors to comply with its fiduciary duties under
Colorado law, (y) the Company shall have notified the Purchasers not later than
24 hours after having received the relevant proposal for a Company Transaction
(which notice shall identify the Person making the proposal and set forth the
material terms thereof) and (z) the Company shall have refrained from taking any
action specified in clause (C) of this Section 5.6(b) until the third day
following the receipt by the Purchasers of the notification referred to in
clause (y) of this Section 5.6(b). The Company will keep the Purchasers fully
informed of the status and details of any such proposal or request and any
related discussions or negotiations. The Company will promptly notify the
Purchasers of any proposal (which notice shall identify the Person making the
proposal and set forth the material terms thereof) that the Company, any of its
Subsidiaries or Affiliates or any of its or their directors, officers or
representatives may receive during the Exclusivity Period.
5.7 Notifications. At all times prior to the Closing Date, the
Purchasers shall promptly notify the Company and the Company shall promptly
notify the Purchasers in writing of any fact, change, condition, circumstance or
occurrence or nonoccurrence of any event which will or is reasonably likely to
result in the failure to satisfy the conditions to be complied with or satisfied
by it hereunder, provided, however, that the delivery of any notice pursuant to
this Section 5.7 shall not limit or otherwise affect the remedies available
hereunder to any party receiving such notice.
5.8. Listing; Reservation. (a) So long as there are shares of Series B
Preferred Stock, Conversion Shares, Warrants or Warrant Shares outstanding, the
Company shall use its reasonable best efforts to ensure that the Common Stock
continues to be quoted on the Nasdaq Stock Market's National Market.
(b) From and after the Closing, the Company shall at all times reserve
and keep available, out of its authorized and unissued Common Stock, solely for
the purpose of issuing Common Stock upon the exercise of Warrants, such number
of shares of Common Stock free of preemptive rights as shall be sufficient to
issue Common Stock upon the exercise of all outstanding Warrants.
ARTICLE VI
INDEMNIFICATION
6.1 Survival of Representations and Warranties. All of the
representations and warranties contained in this Agreement shall survive the
Closing hereunder and continue in full force and effect until the second
anniversary of the Closing. To be effective, any claim for indemnification for a
breach of a representation or warranty must be made prior to such second
anniversary.
6.2 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;
(iii) any liability or obligation arising as a result of any Person claiming a
commission, finder's fee or other payment for services rendered as a broker or
finder on behalf of any Company Party in connection with any of the
Transactions; or (iv) 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; provided that
unless and until a final and non-appealable judicial determination shall be made
that such Indemnified Party is not entitled to indemnification under clause (ii)
above, each such Indemnified Party shall be reimbursed for all indemnified
losses under clause (ii) above as they are incurred; provided, further, that if
a final and non-appealable judicial determination shall be made that such
Indemnified Party is not entitled to be indemnified for losses under clause (ii)
above, such Indemnified Party shall repay to the Company the amount of such
Losses for which the Company shall have reimbursed such Indemnified Party.
6.3 Indemnification Provisions for Benefit of the Company. In the event
that any Purchaser breaches any of its representations, warranties, and
covenants contained herein, the Purchaser shall protect, defend, hold harmless
and indemnify the Company against, from and for the entirety of any Adverse
Consequences the Company may suffer 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, including all Adverse Consequences arising out of the enforcement of
this Section 6.3.
6.4 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 6.4(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 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 6.4(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 VI.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. Subject to Section 7.2 hereof, this
Agreement may be terminated by notice in writing at any time prior to the
Closing by:
(a) the Purchasers or the Company, if the Closing shall not have
occurred on or before May 31, 2000; provided, however, that the right to
terminate this Agreement under this Section 7.1(a) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date;
(b) the Purchasers or the Company, if any Governmental Entity of
competent jurisdiction shall have issued any judgment, injunction, order, ruling
or decree or taken any other action restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by the Transaction
Documents and such judgment, injunction, order, ruling, decree or other action
becomes final and nonappealable; provided that the party seeking to terminate
this Agreement pursuant to this clause (b) shall have used its best efforts to
have such judgment, injunction, order, ruling or decree lifted, vacated or
denied;
(c) the Purchasers, if the Company shall have taken any action
described in clause (B) or (C) of Section 5.6(b) hereof;
(d) TPG, if any Person (other than TPG) acquires, or the Company
accepts or recommends a fully financed offer made by any Person (other than TPG)
to acquire, more than twenty-five percent (25%) of the Common Stock or otherwise
to effect a Change in Control (as defined in Exhibit B); or
(e) the Purchasers or the Company, if the Purchasers and the Company so
mutually agree in writing.
7.2 Effect of Termination. (a) If this Agreement is terminated in
accordance with Section 7.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become null and void and of no further
force and effect except that (i) the terms and provisions of this Section 7.2
and Articles VI and VIII hereof shall remain in full force and effect and (ii)
any termination of this Agreement shall not relieve any party hereto from any
liability for any breach of its obligations hereunder.
(b) If (i) this Agreement is terminated in accordance with Section
7.1(a) hereof and as of the date set forth in Section 7.1(a) hereof the
conditions set forth in Section 2.2 hereof shall not have been satisfied, and
(ii) a proposal is made to the Company or any of its Representatives with
respect to a Company Transaction (whether or not the same Company Transaction as
is ultimately consummated or as to which a written agreement, letter of intent,
agreement in principle, memorandum of understanding or similar writing is
ultimately entered into) prior to the Cut-Off Date (as defined below) or a
proposal with respect to a Company Transaction is publicly announced by the
Person contemplating such transaction or a Representative of such Person prior
to the Cut-Off Date, the Company shall pay each Purchaser the Termination Fee
pro rata in accordance with the shares of Series B Preferred Stock to be
purchased by it hereunder on the date on which a Company Transaction is
consummated. The term "Cut-Off Date" shall mean the date of termination of this
Agreement.
(c) If this Agreement is terminated in accordance with Section 7.1(c)
hereof, the Company shall pay each Purchaser the Termination Fee pro rata in
accordance with the shares of Series B Preferred Stock to be purchased by it
hereunder on the second Business Day following such termination.
ARTICLE VIII
MISCELLANEOUS
8.1 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.
8.2 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.
8.3 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 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;
provided further, that a Purchaser shall be permitted to assign its rights
hereunder to an Affiliate thereof, it being understood that no such assignment
shall relieve such Purchaser of its obligations hereunder.
8.4 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.
8.5 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.
400 Inverness Drive South, Suite 400
Englewood, Colorado 80112
Attn: General Counsel
Telephone: (303) 749-3000
Telecopy: (303) 749-3113
with a copy to: Richard M. Russo, Esq.
Gibson, Dunn & Crutcher LLP
1801 California Street, Suite 4100
Denver, Colorado 80202
Telephone: (303) 298-5715
Telecopy: (303) 296-5310
If to TPG, to TPG at TPG's address supplied from time to time in writing to the
Company, with a copy to:
Paul J. Shim, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Telephone: (212) 225-2930
Telecopy: (212) 225-3999
If to Sandler Capital, to Sandler Capital at Sandler Capital's address supplied
from time to time in writing to the Company.
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 communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
8.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
8.7 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.
8.8 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.
8.9 Fees and Expenses. (a) The Company shall be responsible for the
payment of all expenses incurred by the Company in connection with the
Transaction Documents and the transactions contemplated thereby, regardless of
whether such transactions are consummated, including, without limitation, all
fees and expenses of the Company's legal counsel, all third-party consultants
engaged by the Company to assist in such transactions, all fees and expenses
incurred in connection with any filings to be made with any governmental agency.
The Company also agrees to reimburse the Purchasers for all out-of-pocket
expenses reasonably incurred by the Purchasers in connection with the
Transaction Documents and the transactions contemplated thereby, regardless of
whether or not the transactions are consummated, including, without limitation,
all fees and expenses of the Purchasers' legal counsel, financial advisors,
accountants, actuaries, and all third-party consultants engaged by the
Purchasers to assist in such transactions (including, without limitation,
McKinsey & Company) and all fees and expenses, including fees and expenses of
legal counsel, incurred in connection with enforcing the provisions of, and
collecting amounts payable pursuant to, this Agreement. Such reimbursements
shall be due to the Purchasers at the Closing, or promptly following any earlier
termination of this Agreement for any reason or, in the case of fees and
expenses incurred thereafter, promptly upon demand therefor.
(b) All amounts payable under this Agreement shall be paid in
immediately available funds to an account or accounts designated by the
recipient of such amounts.
8.10 Accuracy of Information. The obligations of the Purchasers
hereunder are subject to the accuracy, on and as of the date hereof, of the
representations and warranties of the Company, and to the accuracy and
completeness of the information provided by the Company to the Purchasers under
the Transaction Documents.
8.11 Specific Performance. The parties hereto specifically acknowledge
that monetary damages are not an adequate remedy for violations of this
Agreement, and that any party hereto may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable law and to the extent the party seeking such relief would be entitled
on the merits to obtain such relief, each party waives any objection to the
imposition of such relief.
8.12 Purchaser Obligations Several, Not Joint. The obligations of the
Purchasers under this Agreement are several and not joint.
8.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof to the extent expressly referred to herein.
8.14 Legends. Each stock certificate or other instrument evidencing the
Series B Shares, the Warrants, any Conversion Stock or any Warrant Stock shall
bear a legend in substantially the form described in Section 9.01 of the
Investor Rights Agreement.
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:
---------------------------------
Name:
Title:
TPG CONVERGENT I, L.L.C.
By:
---------------------------------
Name:
Title:
SANDLER CAPITAL PARTNERS V, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By:
------------------------
Edward G. Grinacoff
President
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By:
------------------------
Edward G. Grinacoff
President
<PAGE>
EXHIBIT A
<TABLE>
Number of Number of
Number Series A Series B Aggregate
Purchasers of Shares Warrants Warrants Purchase Price
- ---------- --------- -------- -------- --------------
<S> <C> <C> <C> <C>
TPG Convergent I, L.L.C. 150,000 600,000 1,000,000 $150,000,000
Sandler Capital Partners IV, L.P. 10,000 40,000 66,667 $10,000,000
Sandler Capital Partners V, L.P. 15,000 60,000 100,000 $15,000,000
-------- -------- --------- -------------
Totals: 175,000 700,000 1,166,667 $175,000,000
</TABLE>
<PAGE>
EXHIBIT B
ARTICLES OF AMENDMENT
TO
THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CONVERGENT COMMUNICATIONS, INC.
Pursuant to the Provisions of
Section 7-106-102 of the Business Corporation Act
of the State of Colorado
CONVERGENT COMMUNICATIONS, INC., a corporation organized and
existing under the laws of the State of Colorado, hereby certifies that,
pursuant to authority contained in its Amended and Restated Articles of
Incorporation and in accordance with Section 7-106-102 of the Business
Corporation Act of the State of Colorado, the Board of Directors of the
Corporation on April [ ], 2000, duly adopted the following resolution without
shareholder action, such shareholder action not being required:
RESOLVED, that pursuant to authority expressly granted by the
Amended and Restated Articles of Incorporation of Convergent Communications,
Inc., a Colorado corporation (the "Corporation"), the Board of Directors hereby
creates and authorizes the issuance of a series of the preferred stock, no par
value, of the Corporation, to consist of one hundred seventy-five thousand
(175,000) shares, and hereby fixes the designation, dividend rights, voting
powers, rights on liquidation or dissolution and other preferences and relative,
participating, optional or other rights, and the qualifications, limitations or
restrictions of the shares of such series (in addition to any thereof set forth
in the Corporation's Amended and Restated Articles of Incorporation that are
applicable to the Corporation's preferred stock of all series) as follows:
Section 1. Designation; Original Issuance; Status of Reacquired or
Converted Shares.
1.1 The designation of the series of the preferred stock, no
par value, of the Corporation authorized hereby is "Series B Senior Cumulative
Convertible Preferred Stock" (the "Series B Preferred Stock"), the stated value
(the "Stated Value") per share shall be $1,000 and the number of shares
constituting such series shall be one hundred seventy five thousand (175,000).
The dividend rights, voting powers, rights on liquidation or dissolution and
other preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions of the shares of such series are as
set forth in these Articles.
1.2 Shares of the Series B Preferred Stock shall be originally
issued pursuant to the Purchase Agreement (as defined in Section 2 below) and,
thereafter, no additional shares of Series B Stock shall be issued by the
Corporation other than with the prior written consent of the Majority Holders
(as defined in Section 2 below).
1.3 All shares of Series B Preferred Stock received by the
Corporation upon conversion or redeemed, retired, purchased or otherwise
acquired by the Corporation or any of its Subsidiaries shall be retired and
shall be restored to the status of authorized, undesignated and unissued shares
of preferred stock of the Corporation and, subject to the restrictions contained
in these Articles, may be reissued as part of another series of the preferred
stock of the Corporation, but such shares shall not be reissued as Series B
Preferred Stock.
Section 2. Certain Definitions.
The terms defined in this Section 2 shall have the meanings
herein specified:
"Accumulated Arrearage" means, with respect to any Series B
Share as of any date of determination the aggregate amount of all accumulated
and unpaid dividends, whether or not earned or declared, which shall have become
Arrearages in respect of such Series B Share from and after the date of original
issuance thereof to such date of determination, without any reduction for
payments subsequently made by the Company in respect thereof.
"Adjustment Date" has the meaning set forth in Section
10.3(d).
"Additional Shares of Common Stock" means any shares of Common
Stock issued or deemed to be issued by the Corporation after the Closing Time
(other than shares issued upon conversion of any Series B Share or exercise of
any Warrant).
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act. The term "affiliated" (whether
or not capitalized) shall have a correlative meaning. For purposes hereof,
neither the Corporation nor any Subsidiary shall be deemed to be an Affiliate of
any Purchaser and no Purchaser nor any of its Affiliates shall be deemed to be
an Affiliate of the Corporation.
"Arrearage" has the meaning set forth in Section 4.1(b).
"Bankruptcy Code" means Title 11 of the United States Code.
"Beneficial Owner" means a beneficial owner within the meaning
of Rules 13d-3 and 13d-5 under the Exchange Act, as interpreted by the
Commission, provided that a Person shall be deemed to have beneficial ownership
of all securities that such Person has a right to acquire without regard to the
60 day limitation in subdivision (d)(i) of such Rule 13d-3. The terms (whether
or not capitalized) "beneficially own" and "owned beneficially" shall have
correlative meanings.
"Board" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in either New York, New York, or the city
and state in which the principal executive offices of the Corporation within the
United States are located are authorized or obligated by law or executive order
to close.
"capital stock" when used with respect to any corporation
means (unless the context otherwise indicates) any and all shares of capital
stock (however designated) of such corporation, including each class and series
of common stock and preferred stock of such corporation, any class or series,
any and all stock appreciation rights and any and all equivalents of any of the
foregoing, and including any security or interest convertible into or warrant,
option or other right (absolute or contingent) to subscribe for, purchase or
otherwise acquire any of the foregoing, in each case whether or not evidenced by
any certificate, instrument or other document and whether voting or nonvoting.
"Change of Control" means the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), excluding the Permitted Holders
and, when such term is used in determining the availability of the Holders'
redemption rights under Section 6.2 or Section 6.3, TPG, is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act,
except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total Voting Stock of the Company; (b) the
Company consolidates with, or merges with or into, another person or sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any person, or any person consolidates with,
or merges with or into, the Company, in any such event pursuant to a transaction
in which the outstanding Voting Stock of the Company is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of the Company is converted
into or exchanged for (1) Voting Stock (other than Disqualified Stock) of the
surviving or transferee corporation or its parent corporation and/or (2) cash,
securities and other property in an amount which could be paid by the Company as
a Restricted Payment under the Indenture and (ii) immediately after such
transaction no "person" or "group" (as such terms are used in clause (a)),
excluding Permitted Holders, is the "beneficial owner" (as such term is used in
clause (a)), directly or indirectly, of more than 50% of the total Voting Stock
of the surviving or transferee corporation or its parent corporation, as
applicable; or (c) during any consecutive two-year period, individuals who at
the beginning of such period constituted the Board (together with any new
directors whose election by the Board or whose nomination for election by the
stockholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board then in
office.
"Closing Date" means the date of the closing of the
consummation of the issuance of Series B Shares to the Purchasers pursuant to
the Purchase Agreement.
"Closing Time" means 10:00 A.M., New York City time, on the
Closing Date.
"Commission" means the Securities and Exchange Commission or
any successor federal agency administering the Securities Act.
"Common Stock" means the Common Stock, no par value, of the
Corporation as constituted on the Closing Date, and any capital stock into which
such Common Stock may thereafter be changed, and (except where the context
otherwise requires) shall also include (i) capital stock of the Corporation of
each and every other class or series (regardless of how denominated) which is
also not preferred as to dividends or assets on liquidation over any other class
or series of stock of the Corporation and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring Entity (as defined in
Section 10.16) received by or distributed to the holders of Common Stock of the
Corporation in the circumstances contemplated by such Section.
"Conversion Price" means, as of any time and with respect to
any Series B Share, the initial price of Thirteen Dollars ($13.00), as such
initial price shall have from time to time been cumulatively adjusted pursuant
to Section 10 through such time.
"Conversion Rate" means, as of any time and with respect to
any Series B Share, (x) the number of shares of Common Stock obtained by
dividing (i) the sum of (A) the Stated Value, (B) the Accumulated Arrearages and
(C) the aggregate amount of all other accumulated and unpaid dividends, in each
case in respect of such Series B Share at such time by (ii) the Conversion Price
in effect at such time, determined in accordance with Section 9 and Section 10
after giving cumulative effect to all adjustments pursuant to Section 10 through
such time, together with (y) the kind, number and amount of any other securities
and other property made part of the Conversion Rate as the result of adjustments
to Section 4.2(a) or Section 10, if applicable.
"Conversion Securities" means, with respect to any Series B
Share at any time, each class and series of Conversion Stock, each class, series
and issue of any other securities, and any Rights with respect to any of such
Conversion Stock or other securities, any shares, number or other amount of
which at such time are deliverable upon conversion of any Series B Share.
"Conversion Stock" means, with respect to any Series B Share
at any time, the Common Stock, each other class or series of capital stock and
any Rights with respect to any of the foregoing shares, the number or other
amount of which at such time is deliverable upon conversion of any Series B
Share.
"Convertible Securities" means evidences of indebtedness,
shares of stock or other securities or obligations (except the Series B
Preferred Stock and the Warrants) that are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for any
Common Stock, 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.
"Current Market Price" means, in respect of any share of
Common Stock as of any date, the average of the reported last sales prices for
the ten consecutive Trading Days commencing twenty Trading Days before the date
in question. The reported last sales price for each Trading Day shall be the
reported last sales price, regular way, as reported on the National Market tier
of The Nasdaq Stock Market (or, if the Common Stock shall be traded principally
through the facilities of a national securities exchange other than Nasdaq Stock
Market, such national securities exchange). As used herein, the term "Trading
Day" means a day on which The Nasdaq Stock Market (or such other national
securities exchange) is open for business, provided that if no sales of the
Common Stock take place on such day on the relevant exchange or stock market
determined under the immediately preceding sentence, such day shall not be a
Trading Day. In case any event that would require an adjustment to the
Conversion Price pursuant to Section 10 occurs with an "ex" date or an effective
date occurring during the foregoing ten consecutive Trading Day period, the last
sales prices used in determining the Current Market Price shall be appropriately
adjusted to take such event into account.
"Designated Director" has the meaning set forth in Section
7.1.
"Dividend Rate" means the rate of eight percent (8%) per
annum.
"Election Form" has the meaning set forth in Section
3.7(a)(iii).
"Employee Option" means any option to purchase Common Stock
for cash, which is granted by or with the approval of the Board to any director,
officer, employee or consultant of the Corporation or any subsidiary of the
Corporation pursuant to (i) the Corporation's stock option plans disclosed in a
schedule to the Purchase Agreement and as in effect on the Closing Date or (ii)
any other option plan adopted by the Corporation after the Closing Date with the
approval of the Majority Holders or the Series B Directors (collectively, the
"Stock Option Plans").
"Entity" means any corporation, limited liability company,
general or limited partnership, joint venture, association, joint stock company,
trust, other unincorporated business or organization or other Person which is
not either a natural person or a governmental authority or agency.
An "equity interest" in or of any Entity includes any capital
stock or other equity security issued by such Entity, any partnership (general
or limited) or joint venture interest in such Entity, any other equity,
ownership, participating or beneficial interest in such Entity, any stock
appreciation or other equity appreciation right with respect to such Entity, and
any equivalent of any of the foregoing, regardless of how denominated and
whether voting or non-voting, and any security or interest convertible into or
warrant, option or other right (absolute or contingent) to subscribe for,
purchase or otherwise acquire, any of the foregoing, in each case whether or not
evidenced by any certificate, instrument or other document and whether voting or
nonvoting.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Rights" means all Rights (including stock options
issued pursuant to the Corporation's Stock Option Plans) and Convertible
Securities, not including any Series B Shares or Warrants, which were
outstanding, or which the Corporation had agreed to issue, at the Closing Time
and disclosed on a schedule to the Purchase Agreement.
"Fair Market Value" means, in respect of any security, asset
or other property, the price at which a willing seller would sell and a willing
buyer would buy such security, asset or other property having full knowledge of
the facts, in an arm's-length transaction without time constraints, and without
being under any compulsion to buy or sell. The Fair Market Value of a share of
Common Stock as of any time shall be equal to the Current Market Price in effect
at the time of determination. The Fair Market Value of the Corporation shall be
determined on a going concern basis, and on the basis that the management and
other key employees of the Corporation and its subsidiaries will continue to be
employed indefinitely and without treating as liabilities the amount, if any,
payable or which may be payable by the Corporation pursuant to the
indemnification provisions of the Purchase Agreement.
"Guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"Holder" means (whether or not capitalized) a Person in whose
name any Series B Share is registered on the books of the Corporation maintained
for such purpose.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indenture" means the Indenture, dated as of April 2, 1998,
between the Corporation and Norwest Bank Colorado, N.A., a national banking
association, as Trustee (the "Trustee"), as in effect at the date hereof,
regardless of any subsequent amendment, modification, termination or expiration
thereof.
"Indebtedness" means, with respect to any Person, without
duplication, (i) all obligations of such Person for money borrowed, (ii) all
obligations of such Person evidenced by bonds, debentures, notes, or other
similar instruments, (iii) all obligations of such Person upon which interest
charges are customarily paid, (iv) all obligations of such Person under
conditional sale or other title retention agreements relating to property or
assets purchased by such Person, (v) all obligations of such Person issued or
assumed as the deferred purchase price of property or services (excluding (x)
trade accounts payable and accrued obligations incurred in the ordinary course
of business and (y) deferred earn-out and other performance-based payment
obligations incurred in connection with any Permitted Acquisition (as such term
is defined in the Indenture as in effect on the date of the Purchase
Agreement)), (vi) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (vii) all Guarantees by
such Person of Indebtedness of others, (viii) all capital lease obligations of
such Person, (ix) all obligations (determined on the basis of actual, not
notional, obligations) of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other interest or exchange
rate hedging arrangements and (x) all obligations of such Person as an account
party in respect of letters of credit and bankers' acceptances issued in support
of obligations that constitute Indebtedness under any other clause of this
definition (unless such obligations are fully cash collateralized).
"Insolvency Law" means the Bankruptcy Code and any other law,
foreign, federal or state, relating to bankruptcy, receivership, reorganization,
insolvency, adjustment, compromise or extension of debt or other relief of a
debtor from creditors.
"Investor Rights Agreement" means the Investor Rights
Agreement, dated as of the Closing Date, among the Corporation and the
Purchasers, as it may be further amended from time to time in accordance with
its terms.
"Junior Stock" means (i) each class or series of Common Stock,
(ii) any other class or series of capital stock of the Corporation hereafter
created, other than (A) any class or series of Parity Stock (except to the
extent provided under clause (iii) of this sentence) and (B) any class or series
of Senior Stock (except to the extent provided under clause (iii) of this
sentence), and (iii) any class or series of Parity Stock or Senior Stock to the
extent that it ranks junior to the Series B Preferred Stock as to dividend
rights, rights of redemption or rights on liquidation, as the case may be. For
purposes of clause (iii) above, a class or series of Parity Stock or Senior
Stock shall rank junior to the Series B Preferred Stock as to dividend rights,
rights of redemption or rights on liquidation if the holders of shares of Series
B Preferred Stock shall be entitled to dividend payments, payments on redemption
or payments of amounts distributable upon dissolution, liquidation or winding up
of the Corporation, as the case may be, in preference or priority to the holders
of shares of such class or series.
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind. A Person shall be deemed to own subject to a Lien any property
which such Person has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement.
"Liquidation Price" means, with respect to any share of Series
B Preferred Stock as of any date of determination, the amount equal to the
Stated Value of such share, plus the aggregate amount of all other accumulated
and unpaid dividends on such share, including any Arrearage (whether or not
earned or declared and whether or not there are unrestricted funds of the
Corporation legally available for the payment of dividends), if any, as of such
date of determination.
"Majority Holders" means, as of any time, the holder or
holders of record of more than fifty percent (50%) of the Series B Shares then
outstanding.
"Make-Whole Premium" means, with respect to the Series B
Shares at any Redemption Date, the aggregate present value of all required
interest payments due on such Series B Shares through the Scheduled Redemption
Date, computed using a discount rate equal to the Treasury Rate plus 100 basis
points.
"Notes" means the Corporation's 13% Series B Senior Notes due
2008 issued under the Indenture.
"Originally Issued Shares" means, as of any time, the
aggregate number of Conversion Securities represented by the Series B Shares
issued to TPG on the Closing Date, as such aggregate number shall have from time
to time been cumulatively adjusted as a result of the operation of Section 9 and
Section 10 through such time.
"Outstanding Common Shares" means, as of any time, all issued
and outstanding shares of Common Stock as of such time, except shares then owned
or held by or for the account of the Corporation or any subsidiary thereof.
Outstanding Common Shares shall not include any shares issuable upon exercise,
conversion or exchange of any Rights or Convertible Securities or the Series B
Preferred Stock or issuable in payment of any dividend or other distribution
which has been declared but not actually paid, nor any other shares which have
not actually been issued.
"Parity Stock" means each class or series of capital stock of
the Corporation, if any, hereafter created with the approval of the Majority
Holders and ranking on a parity basis with the Series B Preferred Stock as to
any of dividends, rights of redemption or rights on liquidation. Capital stock
of any class or series shall rank on a parity as to dividends, rights of
redemption or rights on liquidation with shares of Series B Preferred Stock,
whether or not the dividend rates, dividend payment dates, redemption or
liquidation prices per share or sinking fund provisions, if any, are different
from those of the Series B Preferred Stock if the holders of such stock shall be
entitled to the receipt of dividends, amounts distributable upon dissolution,
liquidation or winding up of the Corporation or redemption payments, as the case
may be, in proportion to their respective dividend rates, liquidation prices or
redemption prices, respectively, without preference or priority, one over the
other, as between the holders of such stock and the holders of shares of the
Series B Preferred Stock. No class or series of capital stock that ranks junior
to the Series B Preferred Stock as to rights on liquidation shall rank or be
deemed to rank on a parity basis with the Series B Preferred Stock as to
dividend rights or rights of redemption, unless the instrument creating or
evidencing such class or series of capital stock otherwise expressly provides.
"Permitted Holders" means (i) John R. Evans, Keith V. Burge
and Philip G. Allen and their spouses, issue or other members of their immediate
families (the "Evans Family," the "Burge Family" and the "Allen Family,"
respectively), (ii) trusts or other entities created for the benefit of any
member of the Evans Family, the Burge Family or the Allen Family, (iii) entities
controlled by any of the Evans Family, the Burge Family or the Allen Family and
(iv) in the event of the death of any member of the Evans Family, the Burge
Family or the Allen Family, the heirs or testamentary legatees of such member of
the Evans Family, the Burge Family or the Allen Family.
"Person" means any individual, corporation, limited liability
company, general or limited partnership, joint venture, association, joint stock
company, trust, unincorporated business or organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
"Preferred Interest" as applied to the equity interests of any
Person means equity interests of any class or classes (however designated) which
are preferred as to the payments of dividends or distributions, as to rights of
redemption or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over equity interests of any other
class of such Person.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of April 4, 2000, between the Corporation and the Purchasers, as the
same may be amended from time to time in accordance with its or their respective
terms and with the prior written consent of the Majority Holders.
"Purchasers" mean TPG, Sandler Capital and any of their
respective Affiliates, successors or permitted assignees under the Purchase
Agreement.
"Rate of Return" shall, for any Purchaser, mean a rate of
return of the applicable percentage per annum on the aggregate purchase price
paid for the Series B Shares purchased by such Purchaser, compounded monthly,
taking into account the timing and amounts of all distributions attributable to
such Series B Shares. For purposes of calculating such Rate of Return, any
distributions received by such Purchaser during any month shall be deemed to
have been received on the last day of such month.
"Redeemable Stock" has the meaning set forth in Section
10.2(b).
"Redemption Agent" has the meaning set forth in Section 6.7.
"Redemption Date" as to any share of Series B Preferred Stock
shall mean:
(i) in the case of a redemption pursuant to Section 6.1,
the Scheduled Redemption Date;
(ii) in the case of a redemption pursuant to Section 6.2
or Section 6.3, the date determined pursuant to such Section; or
(iii) in the case of a redemption pursuant to Section
6.4, the date after the fifth anniversary of the Closing Date specified in the
notice of redemption given in accordance with Section 6.6;
provided that, for purposes of all provisions of these Articles, including any
provision under which any Series B Share is stated to cease to be outstanding or
convertible on or as of the Redemption Date or any date determined by reference
to the Redemption Date, in none of the foregoing cases shall such date be a
Redemption Date unless (A) the applicable Redemption Price is actually
indefeasibly paid in full on such date or (B) such date is a Business Day and
the consideration sufficient for the payment thereof, and for no other purpose,
has been indefeasibly deposited in a trust fund with the Redemption Agent, with
irrevocable instructions and authority to the Redemption Agent to pay the
Redemption Price, all in accordance with Section 6.7, and if the Redemption
Price is not so indefeasibly paid in full or the consideration sufficient
therefor is not so indefeasibly deposited, then the Redemption Date will be the
date on which such Redemption Price is indefeasibly and fully paid or the first
Business Day on which the consideration sufficient for the payment thereof, and
for no other purpose, has been so indefeasibly deposited, except that this
proviso is not intended to eliminate, qualify, modify or limit the rights of the
holders of the Series B Preferred Stock under any provision of these Articles,
or any other rights or remedies which such holders may have at law, in equity or
by contract in the event of the failure of the Corporation to redeem shares of
Series B Preferred Stock as and when required by these Articles.
"Redemption Price" means, as to any share of Series B
Preferred Stock that is to be redeemed on any redemption date pursuant to
Section 6.1, Section 6.2, Section 6.3 or Section 6.4, the Redemption Price of
such share determined pursuant to such Section.
"Reference Price" means, as of any time, the higher of (x) the
Conversion Price then in effect or (y) the Current Market Price per share of the
Common Stock determined as of such time.
A "Reorganization Event" shall be deemed to have occurred upon
the happening of any of the following:
(i) the appointment of a receiver or trustee to
administer all or a substantial portion of the Corporation or any material
Subsidiary's assets which shall remain in effect for 60 days;
(ii) the filing by the Corporation or any material
Subsidiary of a voluntary petition for relief under any Insolvency Law or of a
pleading in any court of record admitting in writing its inability to pay its
debts as they become due;
(iii) the making by the Corporation or any material
Subsidiary of a general assignment for the benefit of creditors;
(iv) the filing by the Corporation or any material
Subsidiary of an answer admitting the material allegations of, or its consenting
to or defaulting in answering, a petition for relief filed against it in any
proceeding under any Insolvency Law; or
(v) the entry of an order, judgment or decree by any
court of competent jurisdiction granting relief against the Corporation or any
material Subsidiary in an involuntary proceeding under any Insolvency Law and
the continuance of any such decree or order for relief unstayed and in effect
for a period of 60 consecutive days.
"Restricted Subsidiary" means any Subsidiary of the Company
that has not been designated by the Board, by a Board Resolution delivered to
the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with
Section 1017 of the Indenture. Any such Designation may be revoked by a Board
Resolution delivered to the Trustee, subject to the provisions of such covenant.
"Rights" means any options, warrants or other rights (except
Convertible Securities and the Series B Preferred Stock), however denominated,
to subscribe for, purchase or otherwise acquire any Common Stock or Convertible
Securities, 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.
"Sale of the Company" means any of the following:
(i) any Change of Control; or
(ii) the Corporation, in one or more transactions, sells,
assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets to any Person or Persons; or
(iii) the Corporation consolidates with, or merges with
or into, another Person, sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of its assets directly or indirectly to any
Person, or any person consolidates with, or merges with or into, the
Corporation, in any such event pursuant to a transaction in which the
outstanding Common Stock of the Corporation is converted into or exchanged for
cash, securities, equity interests or other property and immediately after such
transaction the Persons who were the Beneficial Owners of the outstanding Common
Stock of the Corporation immediately prior to such transaction are not the
Beneficial Owners, directly or indirectly, of more than 50% of the combined
voting power represented by all then outstanding common stock of the surviving
or transferee Person; or
(iv) any Reorganization Event.
"Sandler Capital" means Sandler Capital Partners IV, L.P. and
its Affiliates.
"Scheduled Redemption Date" means the tenth anniversary of the
Closing Date.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Senior Stock" means each class or series of capital stock of
the Corporation, if any, hereafter created with the approval of the Majority
Holders and ranking prior to the Series B Preferred Stock as to dividends,
rights of redemption or rights on liquidation, as the case may be. Capital stock
of any class or series shall rank prior to the Series B Preferred Stock as to
dividends, upon redemption or upon liquidation if the holders of such class or
series shall be entitled to the receipt of dividends, payments on redemption or
payments of amounts distributable upon the dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or priority to the
holders of shares of Series B Preferred Stock. No class or series of capital
stock that ranks junior to or on parity with the Series B Preferred Stock as to
rights on liquidation shall rank or be deemed to rank as senior to the Series B
Preferred Stock as to dividend rights or rights of redemption, unless the
instrument creating or evidencing such class or series of capital stock
otherwise expressly provides.
"Series B Articles of Amendment" means the Articles of
Amendment to the Amended and Restated Articles of Incorporation of the
Corporation setting forth the resolution of the Board creating and authorizing
the issuance of the Series B Preferred Stock and filed with the Colorado
Secretary of State pursuant to the Colorado Business Corporation Act or any
successor provisions of the Corporation's Articles of Incorporation, as the same
may have been amended prior to or concurrently with the Closing Time and
thereafter may be amended.
"Series B Director" means each director of the Corporation (i)
designated by TPG as a "Series B Director" under the Investor Rights Agreement
or (ii) who is a Designated Director.
"Series B Preferred Stock" has the meaning set forth in
Section 1.1.
"Series B Share" means any issued and outstanding share of
Series B Preferred Stock. In no event shall shares of Series B Preferred Stock
owned or held by or for the account of the Corporation or any Subsidiary be
deemed to be issued and outstanding for any purpose.
"Stated Value" means, with respect to each share of Series B
Preferred Stock, the amount of One Thousand Dollars.
"Stock Option Plans" has the meaning given to such term within
the definition of Employee Option, as set forth above.
"Subsidiary" means, as of any time, each Entity as to which
any of the following statements is true as of such time:
(i) such Entity is an Affiliate of the Corporation which
is controlled by the Corporation, or
(ii) the Corporation owns or controls, directly or
indirectly through one or more intermediaries, 50% or more of the outstanding
equity interests in such Entity having ordinary voting power to elect a majority
of the members of the Board 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
Entity, or
(iii) the Corporation, directly or indirectly through one
or more intermediaries, is entitled under ordinary circumstances to 50% or more
of the profits or losses of such Entity or to receive upon dissolution and
liquidation of such Entity 50% or more of the assets available for distribution
to the holders of equity interests in such Entity, or
(iv) such Entity is a partnership (general or limited) or
other unincorporated Entity and the Corporation or another Subsidiary (i) is a
general partner thereof or acts in a similar capacity with respect thereto or
(ii) has liability for the debts and obligations thereof over and above its
investment therein.
"TPG" means TPG Partners III, L.P. and its Affiliates and
designated assignees under the Purchase Agreement.
"Treasury Rate" means the yield to maturity at the time of
computation of United States Treasury securities with a constant maturity (as
compiled and published in the most recent Federal Reserve Statistical Release
H.15 (519) which has become publicly available at least two business days prior
to the Redemption Date (or, if such Statistical Release is no longer published,
any publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date through the Scheduled Redemption Date; provided,
however, that if the period from the Redemption Date to the Scheduled Redemption
Date is not equal to the constant maturity of a United States Treasury security
for which a weekly average yield is given, the Treasury Rate shall be obtained
by linear interpolation (calculated to the nearest one-twelfth of a year) from
the weekly average yields of United States Treasury securities for which such
yields are given, except that if the period from the Redemption Date through the
Scheduled Redemption Date is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Warrant Agreement" means the Warrant Agreement, dated as of
the Closing Date, between the Corporation and the Purchasers, as it may be
amended from time to time in accordance with its terms.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon exercise of the Warrants.
"Warrants" means the Warrants to purchase shares of Common
Stock issued and sold by the Corporation to, and purchased by, the Purchasers
pursuant to the Purchase Agreement and the Warrant Agreement.
"Wholly Owned Subsidiary" means an Entity all of the equity
interests of which at the time are owned beneficially and of record by the
Corporation, one or more Wholly Owned Subsidiaries of the Corporation or the
Corporation and one or more Wholly Owned Subsidiaries of the Corporation.
Section 3. Rank; Certain Restrictions; Fractional Shares; Certain Notices
to be Given; Actions to Facilitate Redemption.
3.1 Rank. The Series B Preferred Stock shall, with respect to
dividend rights, rights on liquidation, winding up and dissolution and rights
upon redemption, rank prior to (i) the Common Stock and (ii) any other class or
series of capital stock of the Corporation, whether now existing or hereafter
created, except (in the case of this clause (ii) only) any class or series of
Parity Stock or Senior Stock hereafter created and issued with the prior
approval of the Majority Holders, to the extent otherwise provided for by the
terms of such other class or series of Parity Stock or Senior Stock set forth in
the instrument creating and authorizing such Parity Stock or Senior Stock,
provided that such terms shall have been furnished in writing to and approved by
the Majority Holders.
3.2 Certain Restrictions on Payments in Respect of Capital
Stock. Except if and to the extent expressly authorized by or provided in
Section 3.4 or Section 3.5 or with the prior approval of the Majority Holders so
long as any Series B Preferred Stock is outstanding, the Corporation shall not,
directly or indirectly through any Subsidiary:
(i) declare or pay dividends on, or declare or make any
other distribution, whether in cash, property, securities or any other form of
consideration, to the holders of or otherwise with respect to, the Common Stock
or any other class or series of capital stock of the Corporation now existing or
hereafter created other than the Series B Preferred Stock;
(ii) redeem, purchase or otherwise acquire for cash,
property, securities or any other form of consideration any outstanding shares
of Common Stock or any other class or series of capital stock of the Corporation
now existing or hereafter created other than the Series B Preferred Stock;
(iii) redeem, purchase or otherwise acquire for cash,
property, securities or any other form of consideration any Series B Shares
otherwise than in accordance with the terms of these Articles, but conversion of
any Series B Shares in accordance with the terms of these Articles shall not be
deemed to be a redemption, purchase or other acquisition subject to this clause;
or
(iv) set aside, pursuant to a sinking fund or otherwise,
any cash, property, securities or other form of consideration for any of the
foregoing purposes.
3.3 Pro Rata Redemptions and Purchases. If any date or event
shall occur that requires the Corporation to redeem any Series B Shares and the
Corporation has insufficient legally available funds to redeem all Series B
Shares required to be redeemed, then: (i) the Corporation shall give written
notice to such effect to the holders of Series B Shares as soon as practicable
(and in any event not later than ten Business Days) prior to the applicable
redemption date; and (ii) subject to the third sentence of this subsection, (A)
the funds legally available for such purpose shall be applied to redeem the
Series B Shares then required to be redeemed ratably in proportion to the
respective full amounts to which the holders of the Series B Shares would be
entitled if the Corporation had sufficient legally available funds to redeem all
Series B Shares then required to be redeemed and (B) as and when the Corporation
has additional legally available funds, it shall apply such funds to redeem the
balance of the Series B Shares so required to be redeemed proportionately as
provided above in this sentence. In the event of any such partial redemption,
the Series B Shares to be redeemed shall be selected on a pro rata basis from
among all holders of the Series B Shares. At any time after a notice from the
Corporation is given pursuant to the first sentence of this subsection and
before the applicable redemption date, the Majority Holders may notify the
Corporation in writing that such Majority Holders object to partial redemptions
as provided in the first sentence of this subsection. If such a written
objection is given, the Corporation shall not make any such redemption of any
Series B Shares unless or until it is otherwise instructed in writing by the
Majority Holders. Nothing contained in this Section 3.3 is intended to
eliminate, qualify, modify or limit the rights of the holders of any Series B
Shares under any provision of these Articles, including Section 3.8, at law, in
equity, by contract or otherwise in the event of the failure of the Corporation
to redeem any Series B Shares as and at the times that would be required but for
the provisions of this Section 3.3.
3.4 Restriction on Dividends, Redemptions, Etc. by
Subsidiaries. So long as any shares of Series B Preferred Stock shall be
outstanding, without the prior approval of the Majority Holders, the Corporation
will not permit any Subsidiary to declare or pay any dividend on or declare or
make any other distribution to any holder or holders of or otherwise with
respect to any equity interest in such Subsidiary (whether in cash, property,
securities or any other form of consideration) nor redeem, purchase or otherwise
acquire for cash, property or any other form of consideration any equity
interest in such Subsidiary. Neither this Section 3.4 nor Section 3.2 hereof
shall (i) restrict investments by any Restricted Subsidiary in the Corporation
or another Restricted Subsidiary or (ii) restrict the payment by any Restricted
Subsidiary of dividends and other distributions solely in respect of, and
redemptions, purchases and other acquisitions solely of, equity interests in
such Restricted Subsidiary owned by the Corporation or any other Restricted
Subsidiary or (iii) so long as any Notes are outstanding, impose upon any
Restricted Subsidiary any restriction prohibited by Section 1016 of the
Indenture. The Corporation will not, without the prior approval of the Majority
Holders, permit any of the Subsidiaries to issue any Preferred Interest other
than issuances by a Restricted Subsidiary to the Corporation or another
Restricted Subsidiary.
3.5 Certain Exceptions.
(a) Senior and Parity Stock Created with Consent of Series B
Directors. If, after the Closing Date, the Corporation, with the prior approval
of the Series B Directors, creates and issues any class or series of Parity
Stock or Senior Stock, the restrictions contained in Section 3.2 shall be
subject to such exceptions, if any, expressly provided for by the terms of such
Parity Stock or Senior Stock set forth in the instrument creating and
authorizing such Parity Stock or Senior Stock.
(b) Certain Payments on Junior Stock. (i) The Corporation may
pay cash in lieu of fractional shares of Common Stock pursuant to the Warrants
or the terms of Existing Rights as in effect on the Closing Date; (ii) the
Corporation may repurchase shares of capital stock in connection with cashless
exercises of Convertible Securities (provided that such repurchase does not
result in any actual payment of cash, securities or other property to the
holders of such Convertible Securities (other than issuance of the Junior Stock
deliverable by virtue of such exercise)); and (iii) provided that the
Corporation is in compliance with all of its obligations under these Articles,
the Corporation may repurchase or otherwise acquire for value shares of Common
Stock of the Corporation or any options or rights to acquire Common Stock of the
Corporation owned by any director, officer or employee of the Corporation or its
Subsidiaries pursuant to any management equity subscription agreement or similar
agreement, or otherwise upon the death, disability, retirement or termination of
employment or departure from the Board, provided, that for purposes of this
clause (iii), the aggregate price paid for all such repurchased, redeemed,
acquired or retired Common Stock of the Corporation or options shall not exceed
in the aggregate $500,000 in any calendar year.
3.6 Fractional Shares. Fractional shares of Series B Preferred
Stock may be issued, either upon original issuance pursuant to the Purchase
Agreement or otherwise as permitted by Section 1.2, or from time to time
thereafter upon transfers, exchanges or partial conversions or redemptions of
outstanding shares (or fractional shares) thereof or certificates therefor. Each
fractional share of Series B Preferred Stock, if any, outstanding shall be
entitled to ratably proportionate rights, powers, privileges, benefits and
preferences, and be subject to the same qualifications, limitations and
restrictions, as a whole share of the Series B Preferred Stock, including
conversion rights.
3.7 Certain Notices and Other Obligations Relating to Change
of Control or Sale of the Company.
(a) Notices.
(i) If the Corporation agrees or the Board passes a resolution
authorizing the Corporation to voluntarily consummate or take, or assist any one
or more of the holders of its Common Stock in consummating or taking, any
transaction or action which would, if consummated, result in a Change of Control
or Sale of the Company, or if the Corporation receives formal written notice
that any Person has engaged or is proposing to engage in any such transaction
which would, if consummated, result in a Change of Control or Sale of the
Company, then it shall send to each holder of Series B Preferred Stock, at least
30 days prior to the scheduled or anticipated closing of such transaction or the
taking of such action (or, in the case where the Corporation receives formal
written notice of such transaction, immediately upon receiving such formal
written notice if such notice is received less than 30 days prior to the
scheduled or anticipated closing of such transaction), a written notice which
will summarize the material terms of such transaction or action, and if any of
such terms change in any material respect prior to such closing, the Corporation
shall promptly notify the holders of the Series B Preferred Stock in writing.
(ii) If any Change of Control or Sale of the Company occurs,
the Corporation shall give the holders of the Series B Preferred Stock written
notice thereof promptly, and in any event not later than the fifth Business Day
after the Corporation has knowledge of such occurrence, and such notice shall
summarize the material facts relating to such event or transaction.
(iii) If Section 6.2 applies, each notice given by the
Corporation pursuant to Section 3.7(a)(ii) shall be accompanied by an
appropriate form (an "Election Form") by which the holders of the Series B
Preferred Stock may elect whether or not to require the Corporation to redeem
their shares of the Series B Preferred Stock in accordance with the terms of
Section 6.2.
(b) Redemption Election. If Section 6.2 applies, and, at any
time within a period of 30 days after Election Forms are mailed, the Corporation
shall have received completed Election Forms from the Majority Holders electing
to require the Corporation to redeem the Series B Shares held by them, the
Corporation shall upon the consummation of such transaction redeem from all
holders of Series B Preferred Stock, in accordance with Section 6.2 and the
other applicable provisions of these Articles, all outstanding shares of Series
B Preferred Stock; provided, however, that the Corporation shall not, at any
time that no Notes are outstanding, voluntarily consummate, or assist any of the
holders of its Common Stock in consummating, any transaction which would result
in a Change of Control unless (i) prior to the date such transaction is
consummated, the procedures specified in this Section 3.7 shall have been
followed and the period of 30 days referred to in this sentence shall have
expired; (ii) if the Corporation would be required to redeem all shares of
Series B Preferred Stock by virtue of such Change of Control, the Corporation
shall have deposited with a Redemption Agent funds sufficient to redeem on the
applicable redemption date all Series B Shares required to be redeemed at the
applicable Redemption Price; and (iii) the Corporation shall have given written
notice of its compliance with clause (ii) of this sentence to each holder of
Series B Preferred Stock.
(c) Successive Events. The provisions of this Section 3.7
shall apply successively to each Change of Control or Sale of the Company which
may occur.
3.8 Actions to Facilitate Required Redemptions.
(a) Company Obligations. If, at any time that any redemption
of any shares of Series B Preferred Stock is, or with the passage of time after
any notice will be, required by any provision of these Articles, the Corporation
is in material violation or breach of the terms of any material indebtedness of
the Corporation or a default or event of default with respect to or under any
material indebtedness of the Corporation exists and has not been waived or
cured, if the Corporation is insolvent under applicable law, or if the
Corporation's capital is impaired under the law of the jurisdiction of
incorporation, or if any such violation, breach, default, event of default,
insolvency or impairment of capital or any material violation of law would
result from such redemption, then the Corporation shall (i) promptly give
written notice to such effect to the holders of the Series B Preferred Stock and
(ii) subject to the terms of the Indenture, take all reasonable lawful actions
to cure or avoid such violation, breach, default or event of default, to restore
or preserve its solvency or to cure or avoid such impairment of capital, in each
case as necessary to enable the Corporation to make such redemption to the
fullest extent possible.
(b) Other Rights of Holders. Nothing contained in this Section
3.8 is intended to eliminate, qualify, modify or limit the rights of the holders
of the Series B Preferred Stock under any provision of these Articles, or any
other rights or remedies which such holders may have at law, in equity or by
contract in the event of the failure of the Corporation to redeem shares of
Series B Preferred Stock as and when required by these Articles.
Section 4. Dividends.
4.1 Fixed Rate Dividends.
(a) Dividend Rate; Compounding of Dividends. The holders of
the Series B Preferred Stock shall be entitled to receive, when, as and if
declared by the Board, out of funds legally available therefor, cumulative cash
dividends, in preference and priority to dividends on any Junior Stock, that
shall accrue on the Stated Value of each share of the Series B Preferred Stock
at the Dividend Rate from time to time in effect, from and including the Closing
Date of such share to and including the date on which such share ceases to be
outstanding in accordance with the terms of these Articles. Dividends shall be
payable in four equal quarterly installments on the last day of March, June,
September and December of each year, or if any such date is not a Business Day,
on the Business Day next preceding such day (each such date, regardless of
whether any dividends have been paid or declared and set aside for payment on
such date, a "Dividend Payment Date"), to holders of record as they appear on
the stock record books of the Corporation on the fifteenth day prior to the
relevant Dividend Payment Date; provided, however, that the Corporation may
elect not to declare or make any dividend payment due hereunder on any Dividend
Payment Date (other than as required in connection with any redemption of shares
of Series B Preferred Stock or any liquidation, dissolution or winding up of the
Corporation), and any such amount then due in respect of dividends shall
constitute an Arrearage (as defined below). Dividends shall be paid only when,
as and if declared by the Board out of funds at the time legally available for
the payment of dividends. Dividends shall begin to accumulate on outstanding
shares of Series B Preferred Stock from the date of issuance and shall be deemed
to accumulate from day to day whether or not earned or declared until paid.
Dividends shall accumulate on the basis of a 360-day year consisting of twelve
30-day months (four 90-day quarters) and the actual number of days elapsed in
the period for which payable.
(b) Compounding of Fixed Rate Dividends. Dividends on the
Series B Preferred Stock shall be cumulative, and from and after any Dividend
Payment Date on which any dividend that has accumulated or been deemed to have
accumulated through such date, whether or not declared, has not been paid in
full or any payment date set for a redemption on which such redemption payment
has not been paid in full, additional dividends shall accumulate in respect of
the amount of such unpaid dividends or unpaid redemption payment (such amount,
the "Arrearage") at the Dividend Rate (or such lesser rate as may be the maximum
rate that is then permitted by applicable law). Such additional dividends in
respect of any Arrearage shall be deemed to accumulate from day to day whether
or not earned or declared until the Arrearage is paid, shall be calculated as of
such successive Dividend Payment Date and shall constitute an additional
Arrearage from and after any Dividend Payment Date to the extent not paid on
such Dividend Payment Date. References in any Article herein to dividends that
have accumulated or that have been deemed to have accumulated with respect to
the Series B Preferred Stock shall include the amount, if any, of any Arrearage
together with any dividends accumulated or deemed to have accumulated on such
Arrearage pursuant to the immediately preceding two sentences.
(c) Payment and Record Dates. Dividends paid on the shares of
Series B Preferred Stock in an amount less than the total amount of such
dividends at the time accumulated and payable on all outstanding shares of
Series B Preferred Stock shall be allocated pro rata on a share-by-share basis
among all such shares then outstanding. Dividends that are declared and paid in
an amount less than the full amount of dividends accumulated on the Series B
Preferred Stock (and on any Arrearage) shall be applied first to any current
dividend which shall not have become an Arrearage. All cash payments of
dividends on the shares of Series B Preferred Stock shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
4.2 Participating Dividend Rights.
(a) Right to Participating Dividends. Subject to the prior
preferences and other rights of any Senior Stock ranking prior to the Series B
Preferred Stock with respect to dividends and the provisions of Section 3 and
Section 4.2(b), if the Corporation shall at any time or from time to time
declare or pay any dividend or declare or make any distribution, whether payable
in cash or in assets, securities (whether issued by the Corporation or another
Person, but other than Common Stock) or any other form of property or
consideration other than cash, on the Common Stock of any class or series into
which the Series B Preferred Stock is then convertible, the holders of Series B
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board and from assets of the Corporation legally available therefor, a dividend
or distribution per Series B Share in like kind and equal to the amount of such
cash or such assets, securities or any other form of property or consideration
(as the case may be) declared, paid or made with respect to a number of shares
of such class or series of Common Stock equal to the number of shares of such
class or series into which a share of Series B Preferred Stock may be converted
as of the date such dividend on the Series B Preferred Stock is paid. If, in
connection with any such dividend or distribution declared or paid or made on
any such class or series of Common Stock, the holders of such class or series
are given any election with respect to the form of consideration to be received,
the same right of election shall be given to the holders of the Series B
Preferred Stock with respect to the corresponding dividend or distribution on
the Series B Preferred Stock. The Board shall declare a dividend or distribution
on the Series B Preferred Stock as contemplated by this Section 4.2(a)
immediately prior to the time it declares a dividend or distribution on the
Common Stock.
(b) Coordination With Conversion Right. To the extent that
Section 10 provides for an adjustment to the Conversion Price by reason of any
dividend or distribution of cash or property other than Common Stock on any
class or series of Common Stock referred to in Section 4.2(a), the Majority
Holders shall have the right to elect either (i) to require the corresponding
dividend or distribution on the Series B Preferred Stock contemplated by Section
4.2(a) to be declared and paid or made as provided herein, in which case such
adjustment to the Conversion Price shall not be made to such extent or (ii) to
require such adjustment to the Conversion Price to be made, in which case such
corresponding dividend or distribution on the Series B Preferred Stock shall not
be declared or paid or made to such extent. The election of the Majority Holders
shall bind all holders of Series B Shares. In declaring, making and paying
dividends and distributions on the Common Stock as to which such right of
election exists, the Corporation shall provide the holders of the Series B
Shares with reasonable advance notice and forms of election, and shall otherwise
act in good faith, so that such holders may effectively exercise all rights of
election provided for in this Section on a timely basis.
(c) Record and Payment Dates. The Board may fix a record date
for the determination of holders of Series B Preferred Stock entitled to receive
a dividend or distribution pursuant to Section 4.2(a), which date shall be the
same as the record date for the corresponding dividend or distribution on the
Common Stock. The payment date for any such dividend or distribution shall be on
or before the payment date for the corresponding dividend or distribution on the
Common Stock.
(d) Dividends Are Preferred and Fully Cumulative. Dividends on
the Series B Preferred Stock provided for in Section 4.2(a) shall be payable
prior and in preference to any dividends or distributions to the holders of any
Junior Stock, and shall be fully cumulative, whether or not declared.
4.3 No Offset; Accrued Dividends. None of the accrual,
declaration or payment of dividends provided for in Section 4.1 shall reduce or
otherwise affect the amount, or the accrual or payment, of dividends to which
the holders of the Series B Preferred Stock shall from time to time be or become
entitled under Section 4.2. Similarly, none of the accrual, declaration or
payment of dividends provided for in Section 4.2 shall reduce or otherwise
affect the amount, or the accrual or payment, of dividends to which the holders
of the Series B Preferred Stock shall from time to time be or become entitled
under Section 4.1. The amount of dividends "accrued (or accumulated) and unpaid"
with respect to any share of Series B Preferred Stock as of any date shall
include (i) all dividends and dividends on dividends provided for in Section 4.1
(whether or not declared) that have accrued on such share as provided in such
Section to and including such date of determination that have not been paid as
of such date and (ii) all dividends on such share provided for in Section 4.2
that have been declared but not been paid as of such date.
Section 5. Distributions Upon Liquidation, Dissolution or Winding Up.
5.1 Payment of Preference Amount.
(a) Liquidation Preference. Subject to the prior preferences
and other rights of any Senior Stock ranking prior to the Series B Preferred
Stock with respect to rights upon liquidation, dissolution or winding up of the
Corporation, in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of shares of the
Series B Preferred Stock shall be entitled to receive from the assets of the
Corporation available for distribution to stockholders after payment of all
other debts and obligations of the Corporation, before any payment or
distribution on any Junior Stock is declared, made or provided for or any cash,
property or other consideration shall be set aside for such purpose, cash in an
amount per share of Series B Preferred Stock equal to the Liquidation Price of
such share determined as of the Determination Time (as defined below in this
Section). The "Determination Time" shall be immediately prior to the record date
for such distribution to the holders of such class or series of Common Stock or,
if no such record date is fixed, immediately prior to any other time as of which
the holders of such class or series of Common Stock entitled to receive such
distribution is determined. In connection with any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, after payment
in full to the holders of the Series B Preferred Stock and the holders of all
other classes or series of Parity Stock, if any, which rank on a parity basis
with the Series B Preferred Stock with respect to distributions upon such
liquidation, dissolution or winding up of the respective preferential amounts to
which they are entitled, the Corporation shall distribute its remaining assets
and properties available for distribution to the holders of Common Stock and the
Series B Preferred Stock, with the distribution to holders of the Series B
Preferred Stock being in like kind and equal to the amount of assets and
property distributed with respect to a number of shares of Common Stock equal to
the number of shares of Common Stock into which a share of Series B Preferred
Stock may be converted.
(b) Elections. If, in connection with any distribution with
respect to any class or series of Common Stock referred to in the last sentence
of Section 5.1(a), the holders of such class or series are given any election
with respect to the form of consideration to be received, the same right of
election shall be given to the holders of the Series B Preferred Stock with
respect to the corresponding distribution to the holders of the Series B
Preferred Stock. The Corporation shall provide the holders of the Series B
Shares with reasonable advance notice and forms of election, and shall otherwise
act in good faith, so that such holders may effectively exercise all such rights
of election on a timely basis.
5.2 Pro Rata Distributions to Parity Stock Holders. If, upon
distribution of the Corporation's assets in liquidation, dissolution or winding
up, the assets of the Corporation available for distribution to its stockholders
shall be insufficient to permit payment in full to the holders of the Series B
Preferred Stock and the holders of all other classes or series of Parity Stock,
if any, which rank on a parity basis with the Series B Preferred Stock with
respect to distributions upon such liquidation, dissolution or winding up of the
respective full preferential amounts to which they are entitled, then the entire
assets of the Corporation available for distribution to stockholders (after full
distribution on Senior Stock, if any) shall be distributed ratably to such
holders in proportion to the respective full preferential amounts to which the
shares of Series B Preferred Stock and all such other classes and series of
Parity Stock would otherwise be entitled.
5.3 Record Date and Notice. Unless the Majority Holders
otherwise agree in writing, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary:
(i) Any distribution to the holders of capital stock of the
Corporation of any class or series of assets of the Corporation available for
distribution to its stockholders will be made to the holders of record of such
class or series as of a record date that is not less than 10 days nor more than
30 days prior to the date such distribution is proposed to be made (each, a
"Distribution Date"). Each Distribution Date for any distribution to the holders
of the Series B Shares shall not in any event be later than the date of any
related or contemporaneous distribution to the holders of any Parity Stock or
Junior Stock.
(ii) The Corporation shall give to each holder of Series B
Preferred Stock at least 20 days' prior written notice of the record date to be
fixed for any payment or distribution to any of the holders of any capital stock
of the Corporation of any class or series. In addition to any other information
required by these Articles, any contract or applicable law, such notice shall
describe in reasonable detail each payment or distribution proposed to be made,
identify all classes and series of capital stock that will participate in such
payment or distribution and the relative participations of the holders of each
such class or series and state the record date and Distribution Date for such
payment or distribution. Such notice shall be accompanied by a statement, in
reasonable detail, showing the amount, kind and value of all assets of the
Corporation available for payment or distribution to its stockholders. After any
such notice is given, the Corporation shall promptly furnish to each holder of
Series B Preferred Stock any information that such holder may reasonably request
relating to the liquidation, dissolution or winding up of the Corporation and
its assets and liabilities, including any information reasonably requested and
in the possession of the Corporation in order to assist such holder in
determining whether to exercise any right to convert any or all of such holder's
shares of Series B Preferred Stock pursuant to Section 9.
(iii) The Series B Shares shall continue to be convertible
into Common Stock in accordance with the terms of these Articles unless and
until such holders have received payment of the full preferential amounts to
which they are entitled pursuant to Section 5.1.
Section 6. Redemption.
6.1 Mandatory Redemption. On the Scheduled Redemption Date,
the Corporation shall redeem all shares of Series B Preferred Stock then
outstanding at a Redemption Price per share equal to the greater of (i) the
Liquidation Price of such share and (ii) sixty percent (60%) of the Current
Market Price of the Conversion Securities and other assets or property, if any,
into which one Series B Share is then convertible, in each case determined as of
such date.
6.2 Redemption Upon Change of Control That Occurs When No
Notes Are Outstanding.
(a) Redemption Right When Notes Are Not Outstanding. The
provisions of this Section 6.2 shall be suspended, and shall not have any force
or effect so long as any Notes continue to be outstanding, but shall
automatically become effective and enforceable in accordance with their terms to
any Change of Control that occurs at any time after the first time as of which
no Notes are outstanding.
(b) Redemption at Option of Holders. Upon the occurrence of a
Change of Control to which this Section 6.2, on the Redemption Date determined
pursuant to this Section 6.2, is applicable, the Majority Holders shall have the
right to require the Corporation to redeem, on the Redemption Date determined
pursuant to this Section 6.2, all of the Series B Shares outstanding on the date
of the occurrence of such Change of Control at the Redemption Price per share
equal to 101% of the Liquidation Price thereof, determined as of the Redemption
Date. Such right may be exercised by one or more Election Forms or any other
written notices to such effect which, collectively, have been signed by the
Majority Holders and given to the Corporation at any time after the date of
occurrence of such Change of Control and prior to the expiration of the period
of 30 days after Election Forms are delivered to the holders of the Series B
Preferred Stock pursuant to Section 3.7. If such right is so exercised, the
Redemption Date shall be a Business Day selected by the Majority Holders that is
not sooner than the tenth day after and not later than the twentieth day after
the Election Forms or other written notices referred to in the second sentence
of this Section are submitted to the Corporation.
6.3 Redemption Upon Change of Control That Occurs When Notes
Are Outstanding.
(a) Redemption Right When Notes Are Outstanding. The
provisions of this Section 6.3 shall apply to any Change of Control that occurs
while any Notes are outstanding, but shall not apply to any Change of Control
that occurs after the first time as of which no Notes are outstanding.
(b) Redemption at the Option of the Holders. Upon the
occurrence of a Change of Control to which this Section 6.3 is applicable, the
Majority Holders shall have the right to require the Corporation to redeem, on
the Redemption Date determined pursuant to this Section 6.3, all of the Series B
Shares outstanding on the date of the occurrence of such Change of Control at
the Redemption Price per share equal to 101% of the Liquidation Price thereof,
determined as of the Redemption Date. The Corporation shall give written notice
of such redemption to each Holder of Series B Shares by telegram, telex,
facsimile transmission or first-class mail, postage prepaid. Such notice shall
be given to the holders of the Series B Shares not less than twenty-five days
nor more than forty-five days before the Redemption Date and in no event later
than the date the related notice required by Section 1014(a) of the Indenture is
given to holders of Notes. If the Corporation shall have insufficient legally
available funds to redeem all Series B Shares, the Series B Shares to be
redeemed shall be selected as provided in Section 3.3. The Majority Holders
shall have the right to revoke any redemption pursuant to this Section 6.3 in
the manner described in Section 6.3(c)(v).
(c) Additional Procedures. The Corporation's notice given
pursuant to Section 6.3(b) shall, in addition to containing or being accompanied
by any other information required by these Articles or applicable law, state the
following: (i) the Redemption Price and the Redemption Date, which shall be a
Business Day no earlier than twenty-five days nor later than forty-five days
from the date such notice is mailed, or such later date as is necessary to
comply with any applicable securities laws or regulations, but in no event later
than the first Business Day after the "Change of Control Payment Date"
established pursuant to Section 1014(b) of the Indenture; (ii) that all Series B
Shares to be redeemed will continue to accrue dividends, continue to be
convertible and continue to be outstanding for all purposes until the Redemption
Price thereof is paid as provided herein; (iii) that, unless the Corporation
defaults in the payment of the Redemption Price, any Series B Shares redeemed as
provided herein shall cease to accrue dividends after the Redemption Date; (iv)
that, in order to receive payment of the Redemption Price therefor, holders of
Series B Shares to be redeemed shall be required to surrender the stock
certificates evidencing such Series B Shares to the Redemption Agent at the
address specified in the notice prior to the close of business on the fifth
Business Day preceding the Redemption Date; (v) that the Majority Holders shall
be entitled to elect to waive and revoke the redemption of Series B Shares
pursuant to this Section 6.3 if the Corporation or the Redemption Agent
receives, not later than the close of business on the second Business Day
preceding the Redemption Date, a telegram, telex, facsimile transmission or
letter specifically to that effect, and that such election shall bind all
holders of Series B Shares, in which case the provisions of this Section 6.3
shall cease to be applicable to such Change of Control; and (vi) the
circumstances and relevant facts regarding such Change of Control.
(d) Deposit With Redemption Agent; Redemption. Unless the
Majority Holders make the election referred to in clause (v) of Section 6.3(c),
on the Redemption Date the Corporation shall, subject to Section 6.3(e), deposit
with the Redemption Agent money, in immediately available funds, sufficient to
pay the Redemption Price of all Series B Shares to be redeemed. The Redemption
Agent will promptly mail or deliver to the holders of the Series B Shares to be
redeemed payment in an amount equal to the aggregate Redemption Price for such
Series B Shares and the Corporation shall promptly issue, execute and mail or
deliver to each holder who delivered to the Corporation or the Redemption Agent
any stock certificate evidencing more Series B Shares than are redeemed a
replacement stock certificate evidencing the Series B Shares not redeemed. If
any of the Series B Shares evidenced by any stock certificate are not redeemed
for any reason when required, the Corporation shall cause the Redemption Agent
to promptly mail or deliver such certificate to the holder of such Series B
Shares.
(e) Sections 1009 and 1014 of Indenture. If any Notes are
outstanding at the Redemption Date for a redemption required by Section 6.3(b)
and any Notes are required to be repurchased pursuant to Section 1014 of the
Indenture, the Corporation shall not be required to redeem any Series B Shares
pursuant to this Section 6.3 prior to the time of the Corporation's repurchase
of all such Notes so required to be repurchased and the Redemption Date
otherwise determined pursuant to this sentence shall be deferred until the date
such repurchase is completed. The redemption of any Series B Shares pursuant to
this Section 6.3 shall, at all times while any Notes are outstanding, be subject
to the Corporation's compliance with Section 1009 of the Indenture. If, by
reason of the restrictions contained in Section 1009 of the Indenture, the
Corporation is unable, without default under the Indenture, to pay, on the
Redemption Date established pursuant to this Section 6.3 the full Redemption
Price for one hundred percent of all Series B Shares outstanding on the date of
the occurrence of such Change of Control pursuant to such Redemption Date, then
(i) the Corporation shall promptly give, by telegram, telex or
facsimile transmission, a written notice to that effect to each holder of Series
B Shares, with such notice also stating (A) the relevant facts establishing that
such payment would result in a violation of the Indenture, and (B) the maximum
amount of funds available to the Corporation for such redemption of Series B
Shares under Section 1009 of the Indenture and the maximum number of Series B
Shares that the Corporation could redeem using those funds and the percentage of
all outstanding Series B Shares represented by such number of Series B Shares
that could be so redeemed; and
(ii) the Majority Holders may elect, by written notice given
to the Corporation by telegram, telex or facsimile transmission within ten
Business Days after the notice for the Corporation is given, to either
(A) require the Corporation to promptly apply to the
redemption (in accordance with the provisions of this Section 6.3) of the Series
B Shares required to be redeemed the maximum amount of funds available to the
Corporation under Section 1009 of the Indenture, and thereafter (x) promptly
apply all funds that thereafter become available for use for such purpose by the
Corporation without violation of the Indenture to redeem Series B Shares and (y)
if any Series B Shares continue to be outstanding on the first date as of which
no Notes are outstanding, promptly redeem all such Series B Shares as
hereinafter provided in this Section, or
(B) waive the requirement that the Corporation redeem any
Series B Shares pursuant to this Section 6.3 until the first day after the final
maturity of the Notes, in which case the provisions of this Section 6.3 shall
cease to be applicable to such Change of Control.
If the Majority Holders make the election under subclause (ii)(B) of the
immediately preceding sentence, then the Corporation shall, on the first day
after the final maturity date of the Notes, promptly redeem all Series B Shares
then outstanding in accordance with this Section 6.3 and the other applicable
provisions of this Section 6 as though it were assumed that such day were the
date of the occurrence of a Change of Control, with such redemption to be made
on the Redemption Date and at the Redemption Price determined pursuant to this
Section 6.3 based on such assumption (but ignoring any qualifications or
limitations that are attributable to the Notes and the Indenture). If the
Majority Holders make the election under subclause (ii)(A) of the second
preceding sentence, then each redemption required by subclause (ii)(A)(x) or
(ii)(A)(y) of such sentence shall be made in accordance with the following:
(i) the Redemption Price per share for all Series B Shares to
be redeemed shall be equal to 101% of the Liquidation Price as of the date the
Redemption Price is actually paid to the holders of the Series B Shares
redeemed;
(ii) the Redemption Date shall be a Business Day no earlier
than twenty-five days nor later than forty-five days from the date that funds
for such redemption became available under Section 1009 of the Indenture or, in
the case of subclause (ii)(A)(y), the first date as of which no Notes shall be
outstanding;
(iii) the Corporation shall give written notice of such
redemption to each holder of Series B Shares by telegram, telex, facsimile
transmission or first-class mail, postage prepaid, with such notice to be given
to the holders of the Series B Shares not less than twenty-five days nor more
than forty-five days before the applicable Redemption Date, and
(iv) Sections 6.7, 3.3 and 3.8 shall apply.
(f) Selection of Shares to be Redeemed; Shares Remain
Outstanding Until Paid For. Section 3.3 hereof shall govern the selection of the
Series B Shares to be redeemed in the case of any partial redemption pursuant to
this Section. Notwithstanding any other provision of these Series B Articles of
Amendment, no Series B Share required to be redeemed or delivered for redemption
pursuant to this Section 6.3 shall cease to be, or shall be deemed to cease to
be, outstanding for any purpose unless or until the applicable Redemption Price
therefor is actually paid in cash to the holder thereof or deposited with the
Redemption Agent as provided in Section 6.7.
6.4 At Corporation's Option. At any time after the fifth
anniversary of the Closing Date, all but not less than all of the Series B
Shares then outstanding may be redeemed at the option of the Corporation at the
per share redemption price equal to the sum of (i) the greater of (A) the
Liquidation Price of such share determined as of the Redemption Date and (B) the
Current Market Price of the Conversion Securities and other assets or property,
if any, into which one Series B Share is convertible on the Redemption Date,
plus (ii) the Make-Whole Premium. Unless otherwise approved by the Majority
Holders, the Corporation shall not exercise its right of redemption pursuant to
this Section 6.4 unless such redemption does not and shall not result in
impairment of the Corporation's capital, otherwise result in a violation of
applicable law or result in a material breach, violation, default or event of
default under any agreement or instrument to which the Corporation is a party or
by or to which it or its assets are bound or subject and unless the Corporation
is not then insolvent and would not be rendered insolvent as a result of such
redemption.
6.5 Form and Source of Redemption Payments. The Redemption
Price for all shares redeemed pursuant to Section 6.1, Section 6.2, Section 6.3
or Section 6.4 shall be paid in cash from unrestricted funds legally available
for such purpose.
6.6 Notice of Redemption. Notice of any redemption by the
Corporation pursuant to Section 6.1 or Section 6.4 shall be given to the holders
of record of the shares of Series B Preferred Stock to be redeemed, at their
respective addresses as the same appear upon the books of the Corporation or are
supplied by them in writing to the Corporation for the purpose of such notice.
Such notice shall be given not more than 45 days nor less than 20 days prior to
the applicable redemption date. In addition to any information required by law
or by the applicable rules of any national stock exchange or national
interdealer quotation system, such notice shall set forth the Redemption Price,
the redemption date, the number of shares to be redeemed and the place at which
the shares called for redemption will, upon presentation and surrender of the
stock certificates evidencing such shares, be redeemed, and shall state the name
and address of the Redemption Agent appointed in accordance with Section 6.7.
6.7 Deposit of Redemption Price. If any shares of Series B
Preferred Stock are to be redeemed pursuant to Section 6.1, Section 6.2, Section
6.3 or Section 6.4, then on or before the applicable Redemption Date the
Corporation shall deposit, in an irrevocable trust fund for the sole purpose of
redeeming the shares of Series B Preferred Stock to be redeemed on such
Redemption Date, with any bank or trust company organized under the laws of the
United States of America or any state thereof having capital, undivided profits
and surplus aggregating at least $250,000,000 or having capital, undivided
profits and surplus aggregating at least $250,000,000 on a consolidated basis
with such bank's or trust company's parent; provided, however, that, in such
case, such parent has guaranteed all of the existing and future obligations of
such bank or trust company (a "Redemption Agent"), immediately available
unrestricted funds legally available for such purpose sufficient to redeem all
outstanding Series B Shares for the applicable Redemption Price on such
Redemption Date, with irrevocable instructions and authority to the Redemption
Agent, on behalf and at the expense of the Corporation, to pay, commencing on
such Redemption Date or prior thereto, the Redemption Price of the Series B
Shares to their respective holders upon the surrender of their share
certificates and, from and after the later of the date of such deposit and such
Redemption Date, such shares shall be deemed to be no longer outstanding and the
holders thereof shall cease to be stockholders with respect to such shares and
shall have no rights with respect thereto, except the right to receive payment,
as provided in these Articles, of the Redemption Price of such shares,
calculated through such Redemption Date, upon surrender of the certificates
therefor. Until such date, the Series B Shares shall, continue to be convertible
into Common Stock in accordance with Section 9 and shall continue to be issued
and outstanding for all other purposes. Any funds so deposited with the
Redemption Agent by the Corporation and unclaimed for six months from the
Redemption Date shall (unless an applicable escheat or abandoned property law
designates another Person) be paid to the Corporation, after which repayment the
holders of such shares of Series B Preferred Stock shall look to the Corporation
for the payment of the Redemption Price therefor, without interest. If, in the
case of a redemption pursuant to Section 6.3, there is a conflict between the
provisions of Section 6.3 and this Section 6.7, the provisions of Section 6.3
shall govern to the extent of the conflict.
Section 7 Board Representation.
7.1 Right to Elect Three Directors. For so long as TPG is the
Beneficial Owner of at least forty percent (40%) of the Originally Issued
Shares, in the event that TPG shall have voted its shares of capital stock of
the Corporation in accordance with Section 8.02 of the Investor Rights Agreement
and, notwithstanding such vote, the Board shall not include at least two
designees of TPG as contemplated by the Investor Rights Agreement, the number of
directors constituting the Board shall, in accordance with the resolution
adopted by the Board on April [__], 2000, be increased by three (3), and the
Holders shall have, in addition to the other voting rights set forth herein and
under Colorado law, the exclusive right, voting as a separate class, to elect
three directors of the Corporation, provided that such right shall terminate
upon the redemption of all of the Series B Shares completed in accordance with
Section 6.1, Section 6.2, Section 6.3 or Section 6.4. The directors whom, at any
time and from time to time, the holders of the Series B Preferred Stock elect or
are entitled to elect voting as a separate class are sometimes herein referred
to as the "Designated Directors". Subject to earlier death, resignation or
removal pursuant to Section 7.3, each Designated Director elected or appointed
at any time as provided herein shall serve until his or her term shall have
expired and his or her successor shall have been elected as provided herein. At
their option and in their sole discretion and for any one or more periods of any
length of time, the Holders at any time and from time to time may choose not to
exercise their right to elect the Designated Directors or to fill any vacancy
existing in the office of a Designated Director, without prejudice to any
subsequent exercise of such right.
7.2 Manner of Election. Subject to the last sentence of this
Section 7.2, each Designated Director shall be elected (and if such directors
previously have been elected and any vacancy shall exist, such vacancy shall be
filled) either (i) by written consent of the Majority Holders given in
accordance with Section 8.1; or (ii) by vote of the Majority Holders voting as a
separate class and in accordance with Section 8.2, at (A) annual meetings of the
shareholders of this Corporation, or (B) a special meeting of the holders of
Series B Preferred Stock for the purpose of electing such directors (or filling
any such vacancy), to be called by the Secretary of this Corporation upon the
written request of the holders of record of 25% or more of the number of shares
of Series B Preferred Stock then outstanding; provided, however, that if the
Secretary of this Corporation shall fail to call any such special meeting within
10 days after any such request, such meeting may be called by any holder or
holders of 25% or more of the number of shares of Series B Preferred Stock then
outstanding. Notwithstanding the foregoing, the Secretary shall not be required
to call any such special meeting in the case of any such request received by
this Corporation less than 45 days before the date fixed for any annual meeting
of shareholders, and if in such case such special meeting is not called, the
holders of Series B Preferred Stock shall be entitled to vote (as a class) at
such annual meeting to elect the Designated Director (or to fill any such
vacancy).
7.3 Removal. Any Designated Director may at any time and from
time to time be removed, with or without cause, by and only by the Holders. Any
vacancy in the office of a Designated Director resulting from death, resignation
or removal or existing for any other reason whatsoever may be filled only by the
Holders. Any director elected to fill a vacancy shall serve the same remaining
term as that of his or her predecessor and until his or her successor has been
elected.
7.4 Certain Procedural Matters. So long as the Holders of the
Series B Preferred Stock shall have the right to elect a Designated Director:
(i) any one or more members of the Board or any committee
thereof may participate in meetings of the Board by conference telephone;
(ii) each member of the Board or any committee thereof shall
be given not less than three Business Days' prior written notice of each meeting
of the Board or such committee (or one day's prior written notice in case of
meetings to consider emergency matters), specifying the time and place of such
meeting and the matters to be discussed thereat, unless such member signs
(either before or after such meeting) a written waiver of his right to be given
such notice, or attends such meeting without protesting (prior thereto or at the
commencement thereof) the failure to be given such notice;
(iii) each member of the Board or any committee thereof shall
be given not less than three Business Days' prior written notice of any action
proposed to be taken by the Board or such committee without a meeting (or one
day's prior written notice in case of proposed actions involving emergency
matters), unless such member signs (either before or after such action is taken)
a written waiver of his right to be given such notice, or gives his written
consent to such action without protesting the failure to be given such notice;
and
(iv) no executive committee of the Board, and no other
committee of the Board which is authorized to exercise any powers of the Board,
shall be created except (i) as provided in Section 7.6 or (ii) otherwise with
the concurrence of the Holders; and at any meeting of the Board or any committee
thereof, a quorum for the purpose of taking any action shall require the
presence in person or participation by conference telephone or similar
communications equipment of a number of directors equal to at least a majority
of the entire Board or the entire committee, respectively.
7.5 Indemnification. The Corporation shall (i) to the fullest
extent permitted by applicable law, indemnify the holders of the Series B
Preferred Stock and each current and former Series B Director who is made a
party or threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such Person is or was a shareholder or
director of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such Person in connection with such action,
suit or proceeding and (ii) pay in advance, or advance to each such shareholder,
director and former director for payment of, expenses incurred in defending any
such action, suit or proceeding to the maximum extent permitted by applicable
law. The rights conferred on any Person by this Section 7.5 shall not be
exclusive of any other rights which such Person may have or acquire under any
statute, under the Corporation's Amended and Restated Articles of Incorporation,
under the Corporation's By-laws, under any agreement, vote of stockholders or
disinterested directors or otherwise.
7.6 Committees. For so long as TPG is the Beneficial Owner of
at least forty percent (40%) of the Originally Issued Shares, at least one-third
of the members of each and every committee of the Board shall be comprised of
Series B Directors unless compliance with this Section 7.6 would result in a
breach by the Company of the listing requirements of The Nasdaq Stock Market.
Section 8 Actions by Holders Generally; Consistent Charter and By-law
Provisions.
8.1 Actions by Written Consent or at Meetings. With respect to
action by the Holders of the Series B Preferred Stock upon any matter on which
such Holders are entitled to vote as a separate series or class, such action may
be taken either at a meeting of such Holders or without a stockholder meeting by
the written consent of Holders of shares of Series B Preferred Stock having
voting power to cast not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares of
Series B Preferred Stock entitled to vote were present and voted. Notice shall
be given in accordance with the applicable provisions of the Colorado Business
Corporation Act of the taking of corporate action without a meeting by less than
unanimous written consent to those Holders of Series B Preferred Stock whose
shares were not represented on the written consent.
8.2 Meetings. At any meeting having as a purpose either the
election of a Series B Director or any action upon any other matter on which the
Holders of the Series B Preferred Stock are entitled to vote as a separate
series or class, the presence, in person or by proxy, of the Holders of record
of at least a majority of the Series B Shares then outstanding shall be required
and be sufficient to constitute a quorum of such series or class for any such
purpose, and the affirmative vote of the Holders of a majority of the shares of
Series B Preferred Stock then present at and entitled to vote at such meeting
shall be the act of the Series B Preferred Stock, except where these Articles
require a greater affirmative vote, in which case such greater voting
requirement shall apply. At any such meeting or adjournment thereof, (i) the
absence of a quorum of such Holders of Series B Preferred Stock shall not
prevent the election of the directors to be elected by the Holders of shares
other than the Series B Preferred Stock or the taking of any other action which
they are entitled to take, and the absence of a quorum of Holders of shares
other than the Series B Preferred Stock shall not prevent the election of any
director to be elected by the Holders of the Series B Preferred Stock or the
taking of any other action which they are entitled to take and (ii) in the
absence of such quorum, either of Holders of the Series B Preferred Stock or of
shares other than the Series B Preferred Stock (or both), a majority of the
Holders, present in person or by proxy, of the series, class or classes of stock
which lack a quorum shall have power to adjourn the meeting for the election of
directors which they are entitled to elect or the taking of any other action
which they are entitled to take, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
8.3 Consistent By-laws and Charter. The Amended and Restated
Articles of Incorporation and the By-laws of the Corporation shall at all times
contain provisions consistent with the provisions, purposes and intent of
Sections 3 through 11, inclusive, and the other provisions of these Articles,
and in the event of any conflict between the provisions of these Articles and
such other instruments, the provisions of these Articles shall prevail.
Section 9 Conversion Right Generally.
9.1 Conversion Right. Unless previously redeemed in accordance
with Section 6, each share of Series B Preferred Stock may be converted at the
option of the holder thereof, in whole or in part, at any time into the number
of fully paid and nonassessable shares of Common Stock equal to the Conversion
Rate in effect at the time of conversion and in the manner and on the terms and
conditions hereinafter provided in this Section 9 and Section 10. The Conversion
Rate, the Conversion Price and the kind, number and amount of securities and
other property deliverable upon conversion of any Series B Share shall be
subject to adjustment from time to time as set forth in Section 10. In the event
that cash, property or securities other than Common Stock shall be payable,
deliverable or issuable upon conversion, then all references to Common Stock in
this Section 9 and in Section 10 shall be deemed to apply, so far as appropriate
and as nearly as may be, to such cash, property or other securities.
9.2 Mechanics of Conversion.
(a) Conversion Notice. In order to convert any Series B Share,
the holder thereof shall deliver to the Corporation at its principal executive
offices within the United States or at another office or agency designated by
the Corporation pursuant to Section 10.14, the certificate(s) evidencing the
Series B Share(s) to be converted, which certificate(s), if the Corporation
shall so request, shall be duly endorsed to the Corporation or in blank or
accompanied by proper instruments of transfer to the Corporation or in blank
(such endorsements or instruments of transfer to be in form reasonably
satisfactory to the Corporation), and shall give written notice to the
Corporation at said office that such holder elects to convert all or a part of
the Series B Share(s) represented by said certificate(s) in accordance with the
terms of this Section 9, and shall state in writing therein the name or names
and denomination or denominations in which such Holder wishes certificate(s) for
Common Stock to be issued.
(b) Subscription. Subject to Section 9.2(d), every such notice
of election to convert shall constitute a contract between the holder of such
Series B Share(s) and the Corporation, whereby the holder of such Series B
Share(s) shall be deemed to subscribe for the amount of Common Stock which such
holder shall be entitled to receive upon conversion of the number of shares of
Series B Preferred Stock to be converted, and, in satisfaction of such
subscription, to deliver the shares of Series B Preferred Stock to be converted,
and whereby the Corporation shall be deemed to agree that the surrender of the
shares of Series B Preferred Stock to be converted shall constitute full payment
of such subscription for such Common Stock to be issued upon such conversion.
(c) Issuance of Conversion Securities. The Corporation will as
soon as practicable after such deposit of a certificate or certificates for
Series B Preferred Stock to be converted, accompanied by the written notice
above prescribed, issue and deliver at such offices of the Corporation or at
such other office or agency to the Person for whose account such Series B
Preferred Stock was so surrendered, or to his nominee(s) or, subject to
compliance with applicable law, transferee(s), a certificate or certificates for
the number of whole shares of Common Stock to which such holder shall be
entitled. Subject to Section 9.2(d), such conversion shall be deemed to have
been made as of the date of such surrender of the Series B Preferred Stock to be
converted, and the Person or Persons entitled to receive the Common Stock
issuable upon conversion of such Series B Preferred Stock shall be treated for
all purposes as the record holder or holders of such Common Stock on such date.
Simultaneously with the delivery of such certificate(s) for such Common Stock,
the Corporation also shall duly deliver to such holder all cash, other
securities and other property, if any, to which he is entitled by virtue of the
conversion of such Series B Preferred Stock. If fewer than all of the Series B
Shares evidenced by any stock certificate delivered to the Corporation in
connection with a conversion are to be converted, the Corporation shall also
deliver to such holder, at the time of delivery of the certificate(s)
representing such Common Stock, a new stock certificate, dated as of the Closing
Date, evidencing the number of Series B Shares remaining unconverted and
otherwise identical to the stock certificate for Series B Shares so delivered by
such holder.
(d) Conversions Associated With Public Offerings.
Notwithstanding the foregoing, if any notice of conversion given by any Holder
states that such conversion is in connection with an offering of securities
registered or to be registered pursuant to the Securities Act, then such
conversion may, at the option of such Holder, be conditioned upon and deferred
until the closing of the sale of such securities pursuant to such offering or
another date designated by such Holder, in which event the Series B Share(s)
covered by such notice shall not be deemed to have been converted until
immediately prior to the closing of such sale or such other date (as the case
may be) and the Corporation shall, unless otherwise instructed by such Holder,
deliver the stock certificate(s) and any cash, securities or other property to
which such Holder shall be entitled at such time or times as such Holder shall
reasonably request.
9.3 Expenses and Taxes. The Corporation shall pay all expenses
in connection with, and all stamp, transfer and other similar taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
of the shares of Common Stock and cash, property or other securities which any
Holder is entitled to receive upon conversion of any Series B Share(s). The
Corporation shall not be required, however, to pay any stamp, stock transfer or
other similar tax or other governmental charge required to be paid solely by
virtue of any transfer involved in the issue of shares of Common Stock in any
name other than that of the Holder of the Series B Share(s) converted at the
order of such Holder, and if any such transfer is involved, the Corporation
shall not be required to issue or deliver the shares of Common Stock as to which
such tax or charge is applicable until such tax or other charge shall have been
paid or it has been established to the Corporation's reasonable satisfaction
that no such tax or other charge is due.
9.4 Fractional Shares of Common Stock. If the number of shares
of Common Stock issuable on the conversion of Series B Share(s) is not a whole
number, the Corporation shall not be required to issue any fraction of a share
of Common Stock and such number of shares issuable shall be rounded up to the
next highest whole number. If a certificate or certificates evidencing more than
one Series B Share shall be surrendered for conversion at one time by the same
Holder, the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate number of Series B
Shares so surrendered for conversion. Notwithstanding the provisions of this
Section 9.4, in computing adjustments to the Conversion Rate pursuant to Section
10, fractional shares of Common Stock shall be taken into account as provided in
Section 10.8(c) and any outstanding Series B Share may at any time represent the
right to receive upon conversion less than one share of Common Stock or some
other number of shares of Common Stock which is not a whole number.
9.5 Covenant to Reserve Shares for Issuance on Conversion. The
Corporation shall at all times reserve and keep available out of the authorized
but unissued shares of Common Stock, solely for the purpose of issuance upon
conversion of Series B Shares, the full number of shares of Common Stock
issuable if all outstanding Series B Shares were to be converted in full. All
shares of Common Stock which shall be issuable upon conversion of any Series B
Share shall be newly issued, duly authorized, validly issued, fully paid and
nonassessable and without any personal liability attaching to the ownership
thereof, and the issuance thereof shall not give rise or otherwise be subject to
preemptive or similar purchase rights on the part of any Person or Persons, and
the Corporation shall take any corporate and other actions that may, in the
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue fully paid and nonassessable all shares of Common Stock and
all shares of the Corporation's capital stock of any other class or series
issuable upon conversion of the Series B Preferred Stock. The Corporation hereby
authorizes and directs its current and future transfer agents, if any, for the
Common Stock and for any shares of the Corporation's capital stock of any other
class or series issuable upon the conversion of the Series B Preferred Stock at
all times to reserve such number of authorized shares as shall be required for
such purpose. The Corporation shall supply such transfer agents with duly
executed stock certificates for such purposes.
9.6 Compliance with Governmental Requirements; Listing of
Shares.
(a) General. If issuance of any Conversion Securities issuable
upon conversion of any Series B Share(s) require, under any applicable federal,
state, local or foreign law, rule or regulation or any applicable requirement of
any national securities exchange or inter-dealer quotation system, any
registration, qualification, listing or approval before such shares may be
issued upon conversion, the Corporation shall in good faith, as promptly as
practicable and at its expense, diligently endeavor to cause such shares to be
duly registered, qualified, approved or listed, as the case may be, and the
conversion of such Series B Share(s) shall be suspended for the period during
which such registration, qualification, approval or listing is being diligently
pursued or sought by the Corporation.
(b) Listing. During all periods during which shares of Common
Stock or any other capital stock or securities of the same class, series or
issue as are issuable upon conversion of any Series B Share are listed,
qualified or otherwise eligible for trading or quotation on any national
securities exchange or The Nasdaq Stock Market, the National Association of
Securities Dealers, Inc. Automated Quotation System or any similar quotation
system, the Corporation shall cause all shares of Common Stock, and all such
other capital stock and securities, issuable upon conversion of such Series B
Share to be listed, qualified or eligible for trading or quotation thereon upon
issuance thereof.
(c) HSR Act, Etc. If any Holder's intended conversion of any
Series B Shares would or might be subject to the HSR Act, the Corporation shall
promptly comply with any applicable requirements under the HSR Act relating to
filing and furnishing of information to the Federal Trade Commission and the
Antitrust Division of the Department of Justice and shall cooperate, and cause
all Persons which are part of the same "person" (as defined for purposes of the
HSR Act) as the Corporation to cooperate and assist in such filing and
compliance. If any Holder is advised by its legal counsel that its intended
conversion of any Series B Share(s) would or might be subject to any other law,
rule or regulation which requires any filing with or review or approval by any
governmental authority or agency, the Corporation shall promptly comply with any
requirements of such law, rule or regulation applicable to it and shall
cooperate with such Holder in such Holder's efforts to comply with the
requirements of such law, rule or regulation applicable to it on a timely basis.
(d) Expenses. Each of the Corporation and such Holder shall
bear and pay any costs or expenses that it incurs in complying with this Section
9.6, except that each shall pay one half of any filing fee payable to the FTC or
the Department of Justice pursuant to this Section 9.6 and the HSR Act.
Section 10. Conversion Adjustments.
10.1 Adjustment Generally. The Conversion Price and the
Conversion Rate shall be subject to adjustment from time to time as hereinafter
set forth. Adjustments of the Conversion Price and the Conversion Rate shall be
cumulative and shall be made successively on each and every occasion that any
event requiring any such adjustment shall occur. The form of the stock
certificate(s) evidencing the Series B Shares need not be changed because of any
adjustment made pursuant hereto.
10.2 Stock Dividends, Subdivisions, Combinations and
Recapitalizations. If the Corporation shall at any time (i) declare or pay a
dividend or declare, pay or make any other distribution on the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each and every such event
the Conversion Price in effect immediately prior to (x) in the case of a
dividend or distribution, the record date for the determination of stockholders
entitled to receive such dividend or distribution (or, if no such record date is
fixed, immediately prior to any other time as of which the stockholders entitled
to participate in such dividend or distribution is determined) or (y) in the
case of a subdivision, combination or reclassification, the effectiveness of
such subdivision, combination or reclassification shall be adjusted to a price
obtained by multiplying such Conversion Price by a fraction of which (1) the
numerator shall be the number of shares of Common Stock outstanding immediately
prior to such record date or effective time referred to in clause (x) or (y) of
the immediately preceding sentence and (2) the denominator shall be the sum of
such number of shares of Common Stock outstanding and the total number of shares
of Common Stock constituting such dividend or distribution.
An adjustment made pursuant to this Section 10.2 shall become
effective immediately after such record date (or other applicable date referred
to in clause (x) of the immediately preceding sentence) in the case of a
dividend or distribution, subject to Section 10.8(d), and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
10.3 Certain Other Distributions.
(a) Adjustment Formula. Subject to Section 10.3(b) and Section
10.3(c), if the Corporation shall at any time declare or make any distribution,
by dividend or otherwise, to all holders of outstanding shares of Common Stock
of any cash or other assets or property of any nature whatsoever, any debt
securities or other evidences of its indebtedness, any capital stock, any other
securities of any nature whatsoever or any warrants, options or other Rights to
subscribe for, purchase or otherwise acquire any assets, property, capital
stock, debt or other securities or evidences of indebtedness (excluding
dividends, distributions or issuances covered by Section 10.2, Rights covered by
Section 10.5 and Convertible Securities covered by Section 10.6), or shall take
a record of such holders for the purpose of entitling them to receive such a
distribution, then the Conversion Price shall be adjusted to equal the product
of
(i) the Conversion Price determined as of immediately
prior to the applicable Adjustment Date determined pursuant to Section 10.3(d)
multiplied by
(ii) a fraction, the numerator of which shall be the
excess of (x) the Current Market Price per share of the Outstanding Common
Shares immediately before such Adjustment Date over (y) the amount allocable to
one share of the Outstanding Common Shares as of such Adjustment Date of the sum
of (A) any such cash so distributable and (B) the Fair Market Value (as
determined as of such date in good faith by the Board) of any and all such
evidences of indebtedness, shares of capital stock, debt securities, other
securities, property, assets or Rights so distributable, and the denominator of
which shall be such Current Market Price per share of the Outstanding Common
Shares immediately before the Adjustment Date.
(b) When Adjustment Is Not to be Made. No adjustment pursuant
to the provisions of Section 10.3(a) shall be made if such adjustment would
result in a Conversion Price that is greater than the Conversion Price in effect
prior to such adjustment. In addition, at the election of the Majority Holders
made within 30 days of receipt of the notice with respect to such adjustment
issued pursuant to Section 10.10, in lieu of the adjustment to the Conversion
Price pursuant to the provisions of Section 10.3(a), but subject to Section
10.3(c), the Conversion Rate determined as of immediately prior to the effective
date for such adjustment specified in the last sentence of this Section 10.3
shall be adjusted so that the Holder of any Series B Share thereafter
surrendered for conversion shall be entitled to receive the kind and number or
amount of shares of Common Stock (or other capital stock of the Corporation),
other Conversion Securities and other property or assets which such Holder would
have received (after giving effect to all adjustments required by this Section
10) had such Series B Share been converted immediately prior to
(i) the record date for the determination of the
stockholders entitled to receive such distribution, or
(ii) if no such record date is fixed, as of any other
time as of which the holders of Common Stock entitled to participate in such
distribution was determined,
plus the kind and amount of cash, other assets or property, debt securities,
other evidences of indebtedness, other securities or Rights which such Holder
would have been entitled to receive by virtue of being the record holder, as of
such record date or other time, of such kind and number or amount of shares of
Common Stock or other Conversion Securities. For such purpose, it shall be
assumed that such holder of Common Stock or other Conversion Securities failed
to exercise rights of election, if any, as to the kind or amount of shares or
stock, other securities or property receivable in such distribution, provided
that if the kind or amount of shares of stock, other securities or property
receivable in such distribution is not the same for each non-electing share,
then the kind and amount of shares of stock, other securities or property
receivable upon consummation of such transaction for each non-electing share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the non-electing shares. If after an adjustment a Holder upon conversion of a
Series B Share may receive shares of two or more classes of capital stock of the
Company, the Board shall determine, in good faith, the allocation of the
adjusted Conversion Price between the classes of capital stock. After such
allocation, the conversion privilege and the Conversion Price shall thereafter
be subject to adjustment on terms comparable to those applicable to Common Stock
in this Section 10.
(c) Special Rule for Distributions of Redeemable Stock. If by
virtue of the applicability of Section 10.3(b) in any one or more events, the
Conversion Securities issuable upon conversion of any Series B Share consist of
or include any shares of Redeemable Stock and if the Corporation redeems all or
any part of the outstanding shares of such Redeemable Stock prior to the date on
which such Series B Share is converted, then upon conversion of such Series B
Share the Holder thereof shall be entitled to receive, in lieu of such shares of
Redeemable Stock or, in the event of such a partial redemption, a pro rata
portion of such shares, the kind and amount of cash or other assets, securities
or other property or consideration paid by the Corporation with respect to its
redemption of an equal number of shares of such Redeemable Stock. If the
consideration so paid upon the Corporation's redemption of any such Redeemable
Stock consists of or includes any other class or series of Redeemable Stock
which is also redeemed before conversion of any Series B Share, then the
provisions of the first sentence of this Section 10.3(c) (and of this sentence)
shall apply to successively to the shares of such other class or series of
Redeemable Stock.
(d) Adjustment Date. The "Adjustment Date" for any
distribution in respect of which an adjustment is required by this Section 10.3
shall be either (i) the date of taking of a record of holders of Common Stock
for the purpose of entitling them to receive such distribution or, if no record
is taken, at the date as of which the holders of Common Stock entitled to
participate in such distribution were determined or (ii) the date of such
distribution, whichever date yields the largest decrease in the Conversion Price
or the largest increase in the Conversion Rate, as the case may be, in applying
the formula contained in the first sentence of this Section 10.3.
(e) Adjustment Effective Date. An adjustment made pursuant to
this Section 10.3 shall become effective, subject to Section 10.8(d),
immediately after such record date or, if no such record date is fixed,
immediately after the time as of which holders of Common Stock entitled to
participate in such distribution were determined or, if no such time is fixed,
as of the date of such distribution.
10.4 Issuance of Additional Shares of Common Stock.
(a) Adjustment Formula. Subject to Section 10.4(b), if at any
time the Corporation shall issue, or pursuant to Section 10.5, Section 10.6,
Section 10.7 or Section 10.8 be deemed to issue, any Additional Shares of Common
Stock in exchange for consideration in an amount, determined in accordance with
Section 10.8(a) and Section 10.8(e), per Additional Share of Common Stock less
than the Reference Price as of the applicable time of determination specified in
the last sentence of this Section 10.4(a), then the Conversion Price shall be
adjusted to equal the product obtained by multiplying the Conversion Price in
effect immediately prior to such time of determination by a fraction (i) the
numerator of which shall be the number of Outstanding Common Shares immediately
before such issuance or deemed issuance plus the number of shares which the
aggregate amount of consideration, if any, received by the Corporation upon such
issuance or deemed issuance of all the Additional Shares of Common Stock so
issued or deemed to be issued would purchase at the Reference Price determined
as of such time and (ii) the denominator of which shall be the number of
Outstanding Common Shares immediately before such issuance or deemed issuance
plus such number of Additional Shares of Common Stock so issued or deemed to be
issued. The applicable time of determination shall be:
(i) if the event requiring the adjustment is the taking
of a record date for any dividend or distribution referred to in Section 10.5 or
Section 10.6, as of either the close of business on such record date or the date
such dividend or distribution is paid, whichever produces the highest Reference
Price, or
(ii) in the case of any other issuance or deemed
issuance, immediately prior to the time of such issuance or deemed issuance.
(b) When Adjustment is Not Required. The provisions of Section
10.4(a) shall not apply to any issuance of Additional Shares of Common Stock for
which an adjustment is made under Section 10.2 or Section 10.3. Subject to
Section 10.7, no adjustment of the Conversion Price shall be made under this
Section 10.4 upon the issuance of any Additional Shares of Common Stock which
are or are deemed to be issued pursuant to (i) the exercise of any Existing
Rights in accordance with the terms thereof in effect of the Closing Date or
(ii) the exercise of any other Rights or the exercise of any conversion or
exchange rights in any other Convertible Securities if, in the case of any such
Rights or Convertible Securities referred to in this clause (ii) any such
adjustment shall previously have been made, or no such adjustment shall have
been required to be made, upon the issuance of such Rights or upon the issuance
of such Convertible Securities (or upon the issuance of any Rights therefor)
pursuant to Section 10.5 or Section 10.6.
(c) Effective Date. Each adjustment pursuant to this Section
10.4 by reason of any issuance or deemed issuance of any Additional Shares of
Common Stock shall be effective as of the date of such issuance or deemed
issuance.
10.5 Issuance of Rights.
(a) Adjustment. If at any time the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution of, or shall in any manner (whether
directly or indirectly by assumption in a consolidation or in a merger in which
the Corporation is the surviving corporation or otherwise) issue to any Person
or Persons, any Rights to subscribe for, purchase or otherwise acquire any
Additional Shares of Common Stock or any Convertible Securities, in any case
whether or not such Rights or the right to exchange or convert such Convertible
Securities is immediately exercisable, and the consideration per share for which
Common Stock is issuable upon the exercise of such Rights or upon conversion or
exchange of such Convertible Securities, determined pursuant to Section 10.8(a)
and Section 10.8(e), shall be less than the Reference Price determined as of the
applicable time of determination specified in the last sentence of this Section
10.5(a), then the maximum number of shares of Common Stock issuable upon the
exercise of such Rights or, in the case of Rights for Convertible Securities,
upon the conversion or exchange of such Convertible Securities determined as of
such applicable time shall be deemed to be Additional Shares of Common Stock
issued as of such applicable time for such consideration per share and the
Conversion Price shall be adjusted as provided in Section 10.4. The applicable
time of determination shall be:
(i) if the event requiring the adjustment is the taking
of a record date for any dividend or distribution of Rights referred to in this
Section 10.5(a), as of either the close of business on such record date or the
date such dividend or distribution is paid, whichever produces the highest
Reference Price, or
(ii) in the case of any other issuance of Rights,
immediately prior to the time of such issuance.
(b) No Further Adjustment on Exercise. Subject to Section
10.7, no further adjustments of the Conversion Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon
exercise of such Rights or upon the actual issuance of such Common Stock upon
such conversion or exchange of such Convertible Securities for which an
adjustment pursuant to this Section 10.5 previously had been made or was not
required to be made. Subject to Section 10.7, no adjustment under this Section
10.5 shall be required by reason of the grant of Employee Options that have an
exercise price per share of Common Stock at least equal to the Current Market
Price at the time of grant.
10.6 Issuance of Convertible Securities.
(a) Adjustment. If at any time the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution of, or shall in any manner (whether
directly or indirectly by assumption in a consolidation or in a merger in which
the Corporation is the surviving corporation or otherwise) issue to any Person
or Persons, any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the consideration per share
for which Common Stock is issuable upon such conversion or exchange, determined
pursuant to Section 10.8(a) and Section 10.8(e), shall be less than the
Reference Price determined as of the applicable time of determination specified
in the last sentence of this Section 10.6(a), then the maximum number of shares
of Common Stock issuable upon the conversion or exchange of such Convertible
Securities determined as of such time of determination shall be deemed to be
Additional Shares of Common Stock issued as of such time of determination for
such consideration per share and the Conversion Price shall be adjusted as
provided in Section 10.4. If the terms of any Convertible Securities provide for
any issuance of additional Convertible Securities (whether in payment of
dividends or interest or otherwise), then each occasion on which any such
additional Convertible Securities are issued shall be deemed a new issuance of
Convertible Securities for which an adjustment pursuant to this Section 10.6
shall be made. The applicable time of determination shall be:
(i) if the event requiring the adjustment is the taking
of a record date for any dividend or distribution of Rights referred to in this
Section 10.6(a), as of either the close of business on such record date or the
date such dividend or distribution is paid, whichever produces the highest
Reference Price, or
(ii) in the case of any other issuance of Rights,
immediately prior to the time of such issuance.
(b) No Further Adjustment Upon Conversion. Subject to Section
10.7, no further adjustment of the Conversion Price shall be made under this
Section 10.6 upon the issuance of any Convertible Securities which are issued
pursuant to the exercise of any Rights therefor if any such adjustment shall
previously have been made upon the issuance of such Rights pursuant to Section
10.5. Subject to Section 10.7, no further adjustments of the Conversion Price
shall be made upon the actual issuance of such Common Stock upon conversion or
exchange of Convertible Securities for which an adjustment pursuant to this
Section 10.6 previously had been made or was not required.
10.7 Superseding Adjustment.
(a) Readjustment if Adjustment Previously Made. If, at any
time after any adjustment of the Conversion Price shall have been made pursuant
to Section 10.5 or Section 10.6 in respect of any Rights or any Convertible
Securities:
(i) the consideration paid or payable to the
Corporation, or the number of shares of Common Stock issued or issuable, upon
the exercise, conversion or exchange of the Rights or Convertible Securities in
respect of which such adjustment was made is increased or decreased by virtue of
provisions contained therein for an automatic increase or decrease (as the case
may be) upon the occurrence of a specified date or event, any amendment or
modification of or departure from the terms thereof previously in effect or
otherwise (other than under or by reason of an event resulting in a change
pursuant to the provisions set forth in the documents governing such Rights or
Convertible Securities designed to protect against dilution, which event also
results in an adjustment pursuant to this Section 10), the adjustments to the
Conversion Price computed upon the original grant, issuance or sale thereof or
upon the taking of a record date with respect thereto (as the case may be), and
any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be readjusted to the Conversion Price which would
then be in effect had such adjustment originally been made on the basis that
such increased or decreased consideration paid or payable or such increased or
decreased number of shares of Common Stock issued or issuable was the
consideration paid or payable or the number of shares issued or issuable in
respect of such Rights or Convertible Securities which are actually outstanding
immediately prior to the effective time of such increase or decrease (but no
such readjustment shall be made with respect to any Rights or Convertible
Securities which for any reason no longer are outstanding as of such time); or
(ii) any Rights or any rights of conversion or exchange
under Convertible Securities in respect of which such adjustment was made shall
expire without having been fully exercised, the adjustments to the Conversion
Price computed upon the original grant, issuance or sale thereof or upon the
taking of a record date with respect thereto (as the case may be), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(1) in the case of such Rights or Convertible
Securities, the only Additional Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Rights or the
conversion or exchange of such Convertible Securities and the consideration
received for such Additional Shares of Common Stock was, in the case of Rights,
the consideration actually received by the Corporation for the grant, issuance
or sale of all such Rights, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or, in the case of
Convertible Securities, the consideration actually received by the Corporation
for the issuance or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange; and
(2) in the case of any such Rights exercisable for
Convertible Securities, only the Convertible Securities, if any, actually issued
or sold upon the exercise thereof were issued at the time of grant, issuance or
sale of such Rights, and the consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been then issued was the
consideration actually received by the Corporation for the grant, issuance or
sale of all such Rights, whether or not exercised, plus the additional
consideration, if any, actually received by the Corporation upon the issuance or
sale of the Convertible Securities with respect to which such Rights were
actually exercised.
(b) When Readjustment is Not to be Made. No readjustment
pursuant to this Section 10.7 shall have the effect of (i) decreasing the number
of shares of Common Stock or the amounts of other Conversion Securities, cash or
other property into which any Series B Share is convertible below the number of
such shares and the amounts of such other Conversion Securities, cash and
property into which such Series B Share would have been convertible if the
original adjustment had not been made but all subsequent adjustments, if any,
required by this Section 10 had been made or (ii) requiring any surrender,
return or redelivery of any shares of Common Stock, other Conversion Securities,
cash or other property delivered upon any conversion of any Series B Share prior
to the time such readjustment is made, requiring that the converting Holder or
any subsequent holder of any such shares of Common Stock, Conversion Securities
or other property make any payment to the Corporation or otherwise affecting
such shares of Common Stock, other Conversion Securities or other property or
the rights or obligations of the converting Holder or any such subsequent holder
with respect thereto. From and after any adjustment or adjustments provided for
in this Section 10.7, the Conversion Price shall continue to be subject to
further adjustment as provided in this Section 10.
(c) Adjustment When No Adjustment Was Previously Made. If, at
any time after any grant, sale or other issuance of any Rights or Convertible
Securities for which an adjustment of the Conversion Price shall not have been
required to be made pursuant to the provisions of Section 10.5 or Section 10.6
(as the case may be), the consideration paid or payable to the Corporation upon
the exercise of such Rights or Convertible Securities is decreased, or the
number of shares of Common Stock issued or issuable upon the exercise of such
Rights or Convertible Securities is increased, in either case by virtue of
provisions contained therein for an automatic decrease or increase (as the case
may be) upon the occurrence of a specified date or event, any amendment or
modification of or departure from the terms thereof previously in effect or
otherwise (other than under or by reason of an event resulting in a change
pursuant to the provisions set forth in the documents governing such Rights or
Convertible Securities designed to protect against dilution, which event also
results in an adjustment pursuant to this Section 10), then such event shall,
for purposes of Section 10.5 (in the case of such Rights) or Section 10.6 (in
the case of such Convertible Securities) be deemed to be a new issuance, as of
the date of the effectiveness of such decrease or increase (as the case may be)
of Rights or Convertible Securities having terms reflecting such changes.
(d) Adjustment for Events Affecting Existing Rights. If the
number of shares of Common Stock issued or issuable upon exercise of any
Existing Right is increased as a direct or indirect result of any amendment or
modification of or departure from the terms thereof previously in effect (other
than as a result of the issuance of the Series B Shares, the conversion of the
Series B Shares, the issuance of the Warrants or the exercise of the Warrants),
then such increased number of shares of Common Stock issued or issuable upon
exercise thereof shall be deemed to be Additional Shares of Common Stock issued
as of the effective date of such increase for the additional consideration, if
any, payable to acquire such increased number of shares upon exercise of such
Existing Right, and the Conversion Price shall be adjusted as provided in
Section 10.4. If the consideration payable for shares of Common Stock issued or
issuable upon exercise of any Existing Right is decreased as a direct or
indirect result of any amendment or modification of or departure from the terms
thereof previously in effect, then such event shall be deemed to be the
issuance, as of the effective date of such decrease, of a number of Additional
Shares of Common Stock equal to the excess of (i) the maximum number of shares
of Common Stock issuable upon exercise of such Existing Right over (ii) the
number of shares of Common Stock determined by dividing the total consideration,
if any, that would be payable to the Corporation upon the exercise in full of
such Existing Right after giving effect to such decrease by the amount of
consideration per share of Common Stock issuable upon exercise of such Existing
Right that would have been payable to the Corporation absent such decrease. The
provisions of this Section 10.7(d) are in addition to (and not exclusive of) any
other rights or remedies of such holders in the event that any such amendment,
modification or departure occurs without any required approval of the holders of
Series B Shares.
10.8 Other Provisions Applicable to Adjustments. The following
provisions shall be applicable to the making of adjustments provided for in this
Section 10:
(a) Computation of Consideration.
Subject to Section 10.8(e) and the last sentence of this
Section 10.8(a):
(i) To the extent that any Additional Shares of Common Stock,
any Convertible Securities or any Rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall be issued
or deemed to be issued for cash consideration, the consideration received or
deemed to be received by the Corporation therefor shall be the net amount of the
cash received or deemed to be received by the Corporation therefor (in any such
case subtracting any amounts received in respect of accrued interest, accrued
dividends or other similar amounts which the Corporation may be obligated to pay
to the holders thereof in the future and any compensation, discounts or expenses
paid or incurred by the Corporation in connection with the issuance thereof).
(ii) To the extent that such issuance or deemed issuance shall
be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
Fair Market Value of such consideration at the time of such issuance or deemed
issuance as determined in good faith by the Board.
(iii) In case any Additional Shares of Common Stock, any
Convertible Securities or any Rights to subscribe for, purchase or otherwise
acquire Additional Shares of Common Stock or Convertible Securities shall be
issued or deemed to be issued in connection with any merger, consolidation,
share exchange or similar transaction, the amount of consideration therefor
shall be deemed to be the Fair Market Value, as determined in good faith by the
Board, of such portion of the assets and business of the nonsurviving
corporation as the Board in good faith shall determine to be attributable to
such Additional Shares of Common Stock, Convertible Securities, or Rights, as
the case may be.
(iv) In case any Additional Shares of Common Stock, any
Convertible Securities or any Rights to subscribe for, purchase or otherwise
acquire Additional Shares of Common Stock or Convertible Securities are issued
or deemed to be issued in combination with each other or with any other
securities or property in connection with any transaction in which the
Corporation receives cash, securities, property or other consideration, or any
combination of the foregoing, then the amount of consideration therefor shall be
deemed to be such portion of the cash, securities, property and other
consideration received by the Corporation as the Board in good faith shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities or Rights, as the case may be, with any noncash
consideration being valued at its Fair Market Value as determined by the Board
in good faith. The consideration for any Additional Shares of Common Stock
issuable or deemed to be issuable pursuant to any Rights to subscribe for,
purchase or otherwise acquire the same shall be the consideration received or
deemed to be received by the Corporation for issuing such Rights plus the
minimum additional consideration, if any, paid or payable to the Corporation
upon the exercise or deemed exercise of such Rights.
(v) The consideration for any Additional Shares of Common
Stock issued or issuable pursuant to the terms of any Convertible Securities
covered by any Rights to subscribe for, purchase or otherwise acquire such
Convertible Securities shall be the consideration received or deemed to be
received by the Corporation for issuing such Rights, plus the minimum additional
consideration, if any, paid or payable to the Corporation in respect of the
subscription for, purchase or other acquisition of such Convertible Securities,
plus the minimum additional consideration, if any, paid or payable to the
Corporation upon the exercise or deemed exercise of the right of conversion or
exchange in such Convertible Securities.
(vi) The consideration for any Additional Shares of Common
Stock issuable or deemed to be issuable pursuant to the terms of any Convertible
Securities, other than any covered by any Rights to subscribe for, purchase or
acquire the same, shall be the consideration received or deemed to be received
by the Corporation for issuing such Convertible Securities plus the minimum
additional consideration, if any, paid or payable to the Corporation upon the
exercise of the right of conversion or exchange in such Convertible Securities.
(vii) For all purposes of this Section 10, all Rights or
Convertible Securities issued or deemed to be issued to directors, officers,
employees or consultants of the Corporation or any Subsidiary shall be deemed to
be issued for no consideration except to the extent the Corporation receives in
exchange for the issuance thereof consideration other than services rendered or
to be rendered.
(b) When Adjustments to Be Made. The adjustments required by
this Section 10 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common Stock into which a Series B Share is convertible that would
otherwise be required may be postponed (except in the case of a subdivision or
combination of shares of the Common Stock) up to, but not beyond the date of
conversion if such adjustment either by itself or with other adjustments not
previously made adds or subtracts less than 1% of the shares of Common Stock
into which a Series B Share is convertible immediately prior to the making of
such adjustment. Any adjustment representing a change of less than such minimum
amount (except as aforesaid) which is postponed shall be carried forward and
made as soon as such adjustment, together with other adjustments required by
this Section 10 and not previously made by virtue of this Section 10.8(b), would
result in a minimum adjustment or on the date of conversion or, if earlier, upon
conversion. For the purpose of any adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Section 10, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
(d) Delivery of Due Bills. If, after the taking of any record
of the holders of any class or series of capital stock of the Corporation for
the purpose of entitling them to receive a dividend or distribution for or in
connection with any other event which an adjustment pursuant to this Section 10
is required, but prior to the occurrence of the event for which such record is
taken, any Series B Share is converted, the Corporation shall deliver to the
converting Holder a due bill or other appropriate instrument evidencing such
Holder's right to receive the additional shares of Common Stock, other
securities, cash and other property receivable upon conversion by reason of an
adjustment pursuant to this Section 10 that would have been required by reason
of such dividend, distribution or other event if the Series B Shares had
continued to be outstanding immediately after the occurrence of the event
requiring such adjustment.
(e) Certain Determinations. Any determination of the Current
Market Price of any share of Common Stock or the Fair Market Value of any other
security, asset, property or consideration which may be required to be made by
the Board pursuant to or in connection with the application of any provision of
these Articles may be disputed in good faith by the Holders and any such dispute
shall be resolved by an independent investment banking firm of recognized
national standing jointly selected by the Holders and the Corporation (and whose
fees and expenses shall be paid by the Corporation), whose decision with respect
to such dispute shall be final and conclusive and binding on the Corporation and
all holders of Series B Shares. Any determination by the Board pursuant to
Section 10.9(b) or Section 10.16 may be disputed in good faith by the Holders,
and any such dispute shall be resolved in accordance with Section 10.15.
(f) Other Action Affecting Common Stock. In case at any time
or from time to time the Corporation shall take any action in respect of its
Common Stock which is not one described in any other provision of Section 10 as
requiring an adjustment, then, unless such action will not have an adverse
effect upon the rights and intended benefits of the holders of Series B Shares,
the number of shares of Common Stock and the kind and amount of other securities
and property into which each Series B Share is convertible shall be increased in
such manner as may be equitable in the circumstances.
10.9 Multiple Classes of Common Stock.
(a) Election Right. If, at any time while any Series B Shares
are outstanding, the Corporation's authorized capital stock shall include two or
more classes or series of Common Stock, then each Holder shall have the right,
upon each conversion of any of such Holder's Series B Share(s), to elect to
receive such number of shares of each such class or series as such Holder
desires, provided that the total number of shares of all classes and series
selected by such Holder shall not exceed the aggregate number of shares of
Common Stock issuable upon conversion of such Series B Share(s).
(b) Adjustment Rights Apply. If, as a result of any adjustment
made pursuant to Section 10, by virtue of the existence of Section 10.9(a), as a
result of any event referred to in Section 10.16, or otherwise, the Holder of a
Series B Share would, upon conversion thereof, become the holder of more than
one class or series of capital stock of the Corporation, then the Conversion
Rate and the Conversion Price shall be subject to adjustment in respect of each
such class and series of capital stock in a manner and on terms as nearly as
equivalent as practicable to all the provisions set forth in this Section 10,
which manner and terms shall be determined by the Board promptly after each such
adjustment, each such action by the Corporation and each other event which has
or might have such result. Promptly after the Board makes any such
determination, the Corporation shall deliver to each Holder a written notice
which shall describe in reasonable detail the manner and terms so determined.
10.10 Notices to Holders.
(a) Notice of Adjustments. Whenever the Conversion Price or
the Conversion Rate shall be adjusted pursuant to Section 10, the Corporation at
its expense shall forthwith prepare a certificate to be executed by the chief
financial officer of the Corporation setting forth, in reasonable detail, the
event requiring the adjustment, the nature and amount of such adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination required by any provision of
Section 10), the date as of which such adjustment was or will be effective as
provided herein, the Conversion Price and the Conversion Rate immediately prior
to such event and the Conversion Price and the Conversion Rate immediately after
such adjustment and all other relevant information. The Corporation shall
promptly cause to be delivered to each Holder a signed copy of such certificate.
The Corporation shall, upon the written request at any time of any Holder,
furnish or cause to be furnished to such Holder a like certificate setting forth
the Conversion Price and the Conversion Rate at the time in effect and showing
how such Conversion Price and Conversion Rate were calculated.
(b) Notice of Corporate Action. If at any time:
(i) the Corporation shall take a record of the
holders of any class, series or issue of its capital stock or other securities
for the purpose of entitling them to receive a dividend or other distribution,
or any right to subscribe for, purchase or otherwise acquire any evidences of
its indebtedness, any shares of capital stock of any class or series, any cash
or any other securities or property, or to receive any other right, interest or
benefit, or
(ii) there shall be any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation or any consolidation or merger or binding share exchange of the
Corporation with, or any sale, transfer or other disposition of all or
substantially all the property, assets or business of the Corporation to,
another Person or any other event referred to in Section 10.16 or within the
definition of the term "Sale of the Company" shall occur or be proposed, or
(iii) there shall be any tender offer or exchange
offer for Conversion Securities of any class, series or issue, or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation,
then the Corporation shall (x) give to each Holder at least 20 days' prior
written notice of the date on which a record date shall be fixed for such
dividend, distribution or right or for determining rights to vote in respect of
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up, (y) promptly
after learning of any such tender or exchange offer, deliver to each Holder
notice thereof, a copy of all written offering material which the Corporation
possesses or reasonably can obtain or if no such materials exist or are
possessed or can reasonably be obtained by the Corporation, a written summary of
all material terms and conditions of and other material facts relating thereto
known to the Corporation and (z) give each Holder at least 20 days' prior
written notice of the scheduled, planned or anticipated date when any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation, winding up or other event shall take
place. Such notice in accordance with clause (x) of the immediately preceding
sentence also shall specify (i) the date on which any such record is to be taken
for the purpose of the event covered by the notice or any related event, and
(ii) the date on which such event or related event is to take place and, if
applicable, the time, if any such time is to be fixed, as of which the holders
of Common Stock shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable as a result of such event or
related event.
(c) Notices To Stockholders. In addition to the foregoing,
each Holder shall be given the same notices of corporate action or proposed
corporate action as any holder of Common Stock.
10.11 No Impairment. The Corporation shall not by or through
amending its Articles of Incorporation, any reorganization, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of these Articles, but will at all times in good
faith carry out and assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights and intended benefits of the holders of the Series B Shares against
impairment. Without limiting the generality of the foregoing, the Corporation
(i) will not directly or indirectly increase the par value of any shares of
Common Stock or other capital stock receivable upon the conversion of any Series
B Share above the Conversion Price immediately prior to such increase in par
value, (ii) will not take any action that results in any adjustment to the
Conversion Rate pursuant to Section 10 if after such adjustment the total number
of shares of Common Stock or shares of any other class or series of Conversion
Stock issuable upon the conversion of all of the outstanding Series B Shares
would exceed the total number of shares of Common Stock or such other Conversion
Stock, respectively, then authorized by the Corporation's Articles of
Incorporation and available and reserved for the purpose of issuance upon such
conversion, (iii) will not enter into any transaction or take any action which,
by reason of any resulting adjustment hereunder, would cause the Conversion
Price to be less than the par value per share of Common Stock and (iv) will take
all such action as may be necessary or appropriate in order that the Corporation
may validly and legally issue shares of each class and series of Conversion
Stock and other Conversion Securities upon the conversion of any Series B Share
which in each case are fully paid, non-assessable and without personal liability
attaching to the ownership thereof and not subject to preemptive and similar
purchase rights. Upon the request of any Holder, at any time, the Corporation
will acknowledge in writing, in form satisfactory to such Holder, the continuing
validity of each certificate for any Series B Share(s) then held by such Holder
and the obligations of the Corporation with respect thereto and thereunder.
10.12 Taking of Record; Stock Transfer Books. In the case of
all dividends or other distributions by the Corporation to the holders of its
Common Stock with respect to which any provision of Section 10 refers to the
taking of a record of such holders, in each such case the Corporation will not
declare, pay or make any such dividend or distribution unless it shall take such
a record and the Corporation shall take each such record as of the close of
business on a Business Day. The Corporation shall not be required to convert any
shares of Series B Preferred Stock, and no surrender of Series B Preferred Stock
shall be effective for that purpose, while the stock transfer books of the
Corporation are closed for any proper purpose; but the surrender of Series B
Preferred Stock for conversion during any period while such books are so closed
shall become effective for conversion immediately upon the reopening of such
books, as if the conversion had been made on the date such Series B Preferred
Stock was surrendered for conversion. The Corporation will not at any time
voluntarily close its stock transfer books so as to result in preventing or
delaying the conversion or transfer of any Series B Share.
10.13 Each Holder May Enforce Rights. Notwithstanding any of
the provisions hereof, any Holder, without the consent of any other Holder, or
any holder of any Conversion Securities may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation suitable to enforce, or otherwise in respect of, his
rights with respect to his Series B Shares or Conversion Securities.
10.14 Office of the Corporation. As long as any of the Series
B Shares are outstanding, the Corporation shall maintain one or more offices or
agencies where the Series B Shares may be presented for conversion and Series B
Shares and Conversion Securities may be presented for registration of transfer,
division or combination. Series B Shares and Conversion Securities may, in any
event, be presented for such purposes at the principal executive offices of the
Corporation in the United States.
10.15 Resolution of Certain Disputes.
(a) Consultation. If there shall arise any dispute between the
Corporation and the Majority Holders concerning the interpretation, application
or operation of the adjustment provisions of Section 10 (other than any such
dispute referred to in the first sentence of Section 10.8(e), which shall be
resolved as stated therein), the Corporation and the Majority Holders will
promptly attempt to settle such dispute through consultation and negotiation in
good faith and in a spirit of mutual cooperation. If agreement is reached
concerning the resolution of such dispute, then such agreement shall be final,
conclusive and binding on the Corporation and all holders of Series B Shares.
(b) Arbitration. If, on or before the thirtieth day after
written notice of such dispute is given by the Corporation to the holders of the
Series B Shares or the Majority Holders to the Corporation, such dispute has not
been resolved by the agreement of the Corporation and the Majority Holders, such
dispute shall be settled by an expedited arbitration proceeding conducted in
accordance with the then current Commercial Arbitration rules of the American
Arbitration Association in New York, New York by a single arbitrator who
satisfies the requirements of Section 10.15(e) and who is mutually acceptable to
the Corporation and the Majority Holders or, in the event such Persons fail to
agree upon such arbitrator within ten Business Days after such written notice of
dispute is given, an arbitrator who satisfies such requirements appointed by the
American Arbitration Association upon application of either the Corporation or
the Majority Holders. Neither the Corporation nor the Majority Holders shall
unreasonably withhold its approval of the selection of an arbitrator satisfying
the requirements of Section 10.15(e).
(c) Certain Provisions Applicable to Arbitration. The
Corporation and the Majority Holders shall provide such arbitrator with such
information as may be reasonably requested in connection with the arbitration of
such dispute and shall otherwise cooperate with each other and such arbitrator
in good faith and with the goal of resolving such dispute as promptly as
reasonably practicable. The arbitrator shall not have authority to award
damages, but shall have only the authority to determine disputes regarding the
matters set forth in the first sentence of Section 10.15(a). Subject to the
immediately preceding sentence and to Section 10.15(f), the arbitrator's
decision based on written conclusions of law and fact with respect to the
dispute referred to such arbitration shall be final and binding and may be
entered in any court with jurisdiction, and the Corporation and the holders of
the Series B Shares shall abide by such decision. Each party shall bear its own
costs and expenses, including attorney's fees, incurred in connection with any
arbitration proceeding, except that the Corporation and the holders of the
Series B Shares (as a group) each shall pay one-half of all fees, costs and
disbursements of the arbitrator and of or charged by the American Arbitration
Association.
(d) Other Remedies. The provisions of this Section 10.15 shall
not in any way limit or otherwise affect (i) the right of any Holder to seek,
with regard to the matter in dispute, specific performance or other injunctive
relief in any court of competent jurisdiction or (ii) the rights or remedies of
any Holder with respect to any claim, controversy or dispute not submitted to
and decided by an arbitrator pursuant to this Section 10.15.
(e) Arbitrators. Each arbitrator appointed pursuant to Section
10.15(a) shall be an attorney who practices law in New York City, who has
substantial experience in sophisticated corporate and securities transactions
generally and in negotiating and drafting "antidilution" provisions of warrants
and convertible securities in particular and who has not, and who is not a
member or employee of any firm which has, rendered legal services to any of the
parties to the dispute or any of their respective Affiliates within the
preceding two years and who has no interest (other than the receipt of customary
fees for his services as an arbitrator) in the matter in dispute.
(f) Other Rights Unaffected. Nothing contained in this Section
10.15 or any other provision hereof is intended to or shall preclude any holder
of any Series B Share or Conversion Securities from exercising or pursuing or
otherwise limiting or affecting the rights or remedies which such holder may
have pursuant to the Purchase Agreement, at law, in equity or otherwise by
reason of any matter which is the subject of or basis for any dispute referred
to in Section 10.15(a) (or any other matter), and the dispute resolution
mechanisms provided for in this Section 10.15 are intended solely as a means of
resolving bona fide disputes concerning the interpretation, application or
operation of the adjustment provisions of Section 10 (other than any such
dispute referred to in the first sentence of Section 10.8(e), which shall be
resolved as stated therein) or bona fide disputes which the last sentence of
Section 10.8(e) provides will be resolved pursuant to this Section 10.15, and
not for the purpose of determining the rights of holders of Series B Shares or
Conversion Securities or the liabilities or obligations of the Corporation, for
the purpose of resolving or settling any claim by any such holder of any breach
or inaccuracy of any representation or warranty of, or any breach or failure to
perform any covenant, agreement or obligation, of the Corporation contained
herein or in the Purchase Agreement or any other Transaction Document (as
defined in the Purchase Agreement) or any other purpose. Without limiting the
generality of the immediately preceding sentence, no decision of any arbitrator
appointed pursuant to this Section 10.15 shall have or be given any res judicata
or similar effect in any action, suit or proceeding in which any claim by any
holder of any Series B Share or Conversion Securities of any breach or
inaccuracy of any representation or warranty of, or any breach or failure to
perform any covenant, agreement or obligation, of the Corporation contained
herein or in the Purchase Agreement or any other agreement or instrument is to
be adjudicated.
10.16 Reclassification, Consolidation, Merger or Sale,
Conveyance or Lease or Assets.
(a) Adjustments. Unless, as a result of such event, the Series
B Shares are redeemed in accordance with Section 6.2 by reason of the election
of the Majority Holders in accordance with such Section, if any of the following
shall occur while any Series B Shares are outstanding:
(i) any consolidation, merger, binding share exchange
or reorganization to which the Corporation is party (other than a consolidation,
merger, share exchange or reorganization in which the Corporation is the
continuing corporation and which does not result in any reclassification of or
change in the outstanding shares of Conversion Securities of any class or series
issuable upon conversion of the Series B Preferred Stock); or
(ii) any sale, conveyance, transfer or lease to
another Entity of the properties and assets of the Corporation as an entirety or
substantially as an entirety,
then the Corporation or the successor or acquiring Entity, as the case may be,
shall thereupon make appropriate provision, reasonably satisfactory to the
Majority Holders, so that the holders of the Series B Shares then outstanding
shall have the right at any time thereafter, upon conversion of the Series B
Shares, to receive the kind and amount of shares of common stock of such
successor or acquiring Entity, other capital stock or equity interests, other
securities and property receivable or purchasable (as the case may be) upon such
reclassification, change, consolidation, merger, sale, conveyance, transfer or
lease as would be received by a holder of the number of shares of Common Stock,
the number of shares of each other class or series of Conversion Stock and the
kind and amount of all other Conversion Securities issuable upon conversion of
such Series B Shares immediately prior to such consolidation, merger, sale,
conveyance, transfer or lease (after giving effect to all adjustments required
by this Section 10). If the holders of the Common Stock, any other shares of
Conversion Stock or any other Conversion Securities of any class or series have
rights of election as to the kind or amount of capital stock or other equity
interests, other securities or other property receivable upon consummation of
any such transaction, then the same right of election shall be given to the
holders of the Series B Preferred Stock. For purposes of this Section 10.16,
"common stock of the successor or acquiring Entity" shall include capital stock
(or other equity interests if such Entity is not a corporation) of such Entity
of any class which is not preferred as to dividends or assets on liquidation
over any other class or series of stock of such corporation (or other equity
interests of a non-corporate Entity) and which is not subject to redemption and
shall also include any evidences of indebtedness, shares of capital stock,
equity interests or other securities which are convertible into or exchangeable
for any such capital stock (or other equity interests), either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such capital stock
(or other equity interests).
(b) Express Assumption by Successor or Acquiring Corporation.
In case of any such merger, consolidation, share exchange, reorganization, or
disposition of assets, the successor or acquiring corporation shall expressly
assume the due and punctual observance and performance of each and every
covenant and condition of these Articles to be performed and observed by the
Corporation and all the obligations and liabilities thereunder or otherwise with
respect thereto, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board) in order to provide for adjustments of
shares of the capital stock, other securities or other property into which
Series B Shares are convertible which shall be as nearly equivalent as
practicable to the adjustments provided for in Section 10. Promptly after the
Board makes any such determination, the Corporation shall deliver to each Holder
a written notice which shall describe in reasonable detail the manner and terms
so determined.
(c) Provisions Apply Successively. The foregoing provisions of
this Section 10.16 shall similarly apply to successive reorganizations, mergers,
consolidations or disposition of assets.
Section 11. Voting Rights. (a) The Series B Shares shall not carry voting
rights except as provided in these Articles and except for any voting rights to
which the holders thereof may be or become entitled under the Business
Corporation Act of the State of Colorado as in effect from time to time (or any
successor statutory provisions) or other applicable law. The foregoing shall not
prevent the Corporation from granting, by contract or otherwise, to any holder
or holders of any Series B Shares any consent or approval, veto or similar
rights of any nature whatsoever. So long as any shares of the Series B Preferred
Stock are outstanding, each share of Series B Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by holders of Common Stock, and
the shares of Series B Preferred Stock shall vote together with shares of Common
Stock as a single class. With respect to any such vote, each share of Series B
Preferred Stock shall entitle its holder to a number of votes equal to the
number of shares of Common Stock into which such share of Series B Preferred
Stock is convertible at the time of the record date with respect to such vote
(assuming all conditions precedent to such conversion have been satisfied and
that such conversion had occurred as of the record date for such vote).
(b) If on any date (i) the Corporation shall have failed to
satisfy its obligation to redeem shares of Series B Preferred Stock pursuant to
the terms of these Articles or (ii) any default or event of default has occurred
and is continuing under any Indebtedness of the Corporation or any of its
Subsidiaries, the outstanding principal amount of which is in excess of
$5,000,000, and as a result of such default or event of default the holders
thereof have accelerated or have the right to accelerate the maturity thereof,
and such default, event of default or event is not cured or waived within 30
days after the Majority Holders shall have furnished to the Corporation notice
of their intention to exercise the rights set forth in this Section 11(b), then
the number of members constituting the Board shall be increased to eleven (as
provided in the resolution adopted by the Board on April [__], 2000) so as to
enable the holders of the Series B Preferred Stock to designate a majority of
the Board of Directors (including the Series B Directors), and the Holders,
voting together as a separate class, shall have, in addition to the other voting
rights set forth herein, the exclusive right to elect that number of directors
(such additional directors, the "Majority Directors") of the Corporation
necessary to fill such newly-created directorships. Majority Directors shall
continue as directors and such additional voting right shall continue until such
time as such failure, default, event of default or event is cured, at which time
such Majority Directors (other than the Series B Directors) shall cease to be
directors and such additional voting rights of the Series B Preferred Stock
shall terminate subject to revesting in the event of each and every subsequent
event of the character indicated above.
(c) The foregoing rights of holders of shares of Series B
Preferred Stock to take any action as provided in this Section 11 may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action. So long as such right to vote continues (and unless such right has
been exercised by written consent of the minimum number of shares required to
take such action), the Chairman of the Board may call, and upon the written
request of holders of record of 25% of the outstanding shares of Series B
Preferred Stock, addressed to the Secretary of the Corporation at the principal
office of the Corporation, shall call, a special meeting of the holders of
shares entitled to vote as provided herein. Such meeting shall be held as soon
as reasonably practicable after delivery of such request to the Secretary, at
the place and upon the notice provided by law and in the By-laws for the holding
of meetings of stockholders.
(d) Each director elected pursuant to subsection (b) hereof
shall serve until the next annual meeting or until his or her successor shall be
elected and shall qualify, unless the director's term of office shall have
terminated pursuant to the provisions of subsection (b) hereof, as the case may
be. In case any vacancy shall occur among the directors elected pursuant to
subsection (b) hereof, such vacancy shall be filled for the unexpired portion of
the term by vote of the remaining director or directors theretofore elected
pursuant to the same subsection (or such director's or directors' successor in
office), if any. If any such vacancy is not so filled within 20 days after the
creation thereof or if all of the directors so elected shall cease to serve as
directors before their term shall expire, the holders of the shares of Series B
Preferred Stock then outstanding and entitled to vote for such director pursuant
to the provisions of subsection (b) hereof, as the case may be, may elect
successors to hold office for the unexpired terms of any vacant directorships,
by written consent as provided herein, or at a special meeting of such holders
called as provided herein. The holders of a majority of the shares entitled to
vote for directors pursuant to subsection (b) hereof, as the case may be, shall
have the right to remove with or without cause at any time and replace any
directors such holders have elected pursuant to such section, by written consent
as herein provided, or at a special meeting of such holders called as provided
herein.
(d) For so long as TPG is the Beneficial Owner of at least
forty percent (40%) of the Originally Issued Shares, without the consent of the
Majority Holders:
(i) the Corporation shall not amend, alter, repeal or
waive (whether by amendment, merger, consolidation or otherwise) any of the
provisions of its Amended and Restated Articles of Incorporation, these Series B
Articles of Amendment or its By-laws, or any resolution of the Board or any
other instrument establishing and designating any capital stock of the
Corporation and determining the relative rights, privileges, powers or
preferences thereof;
(ii) the Corporation shall not, and shall cause each
Subsidiary not to, (A) authorize, create or designate any new class or series of
capital stock, or (B) issue or sell any shares of capital stock or derivative
securities, except as already authorized, or (C) combine, subdivide or
recapitalize the Series B Preferred Stock;
(iii) the Corporation shall not, and shall cause each
Subsidiary not to, engage or participate in, or agree to engage or participate
in, a Sale of the Company, except in the event that such Sale of the Company
would result in Purchasers receiving at least the greater of (A) two times the
Liquidation Price, and (B) a thirty percent (30%) Rate of Return on the per
share purchase price of $1,000 for each Series B Share paid pursuant to the
Purchase Agreement, in which case the consent of the Majority Holders to such
Sale of the Company shall not be required;
(iv) appoint or terminate the Chief Executive Officer
or any other member of senior management of the Company; or
(v) alter the number of directors comprising the
Board.
(e) The Corporation shall not enter into any agreement, amend
or modify any existing agreement or obligation or issue any security that
prohibits, conflicts or is inconsistent with, or would be breached by, the
Corporation's performance of its obligations hereunder.
(f) Solely for the purposes of this Section 11, the consent of
the Majority Holders shall be deemed to have been given with respect to any
matter if the Series B Directors shall have unanimously consented thereto.
Section 12. Headings. The headings of the various sections and
subsections hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
Section 13. Terms Generally. References herein to "these Articles" are to
the Series B Articles of Amendment as the same may be amended from time to time
in accordance with Section 19. The definitions of terms contained herein shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The words "herein", "hereof" and "hereunder" and words of similar import refer
to these Articles in its entirety and not to any part hereof, unless the context
shall otherwise require. All references herein to Sections shall be deemed
references to Sections of these Articles, unless the context shall otherwise
require. Unless the context shall otherwise require, any references to any
agreement or other instrument or to any statute or regulation or any specific
section or other provision thereof are to it as amended and supplemented from
time to time (and, in the case of a statute or regulation or specific section or
other provision thereof, to any successor to such statute, regulation, section
or other provision). Unless otherwise expressly provided herein or unless the
context shall otherwise require, any provision of this Agreement using a defined
term (such as "Subsidiary" or "Wholly Owned Subsidiary") which is based on a
specified relationship between one Person and one or more other Persons shall,
as of any time, refer to such Persons who have the specified relationship as of
that particular time. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. Unless the context
clearly indicates otherwise, "or" shall not be exclusive and means "and/or."
When used with reference to any Right or Convertible Security, the term
"exercise" means to exercise the right to subscribe for, purchase or otherwise
acquire shares of Common Stock represented by such Right or the right to
exchange or convert such Convertible Security for or into shares of Common Stock
represented by such Convertible Security, and variants of such word (including
"exercised" and "exercisable") shall have correlative meanings. Whenever used
with respect to any Additional Share of Common Stock or any other share of
Common Stock, the word "issue" includes any issuance, sale or other method of
transfer or delivery of such share, whether such share is newly issued or is a
treasury share and variants of such word (including "issued", "issuance" or
"issuable") used with respect to any Additional Share of Common Stock or any
other share of Common Stock shall have correlative meanings; therefore, any
provision of these Articles which is stated to be applicable if the Corporation
issues or shall issue any share is applicable both to a newly issued share and
to a treasury share sold or otherwise transferred or delivered. The word
"property" shall include assets or property of any kind, real, personal,
tangible or intangible.
Section 14. Actions on Non-Business 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 shall be deferred until, and may be
taken or given on, the next Business Day.
Section 15. Severability. If any provision of these Articles shall be
illegal, invalid or unenforceable by reason of any rule of law or public policy,
that provision will be enforced to the maximum extent permissible so as to
effect the intent thereof and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby. In
any such case, if requested by the Majority Holders, the Corporation will
negotiate in good faith to amend these Articles to replace the illegal, invalid
or unenforceable language with legal, valid and enforceable language which as
closely as possible reflects such intent.
Section 16. Waivers. Any provision of these Articles that prohibits,
limits or restricts actions by the Corporation, or imposes obligations on the
Corporation, may be waived in whole or in part, or the application of all or any
part of such provision in any particular circumstance or generally may be
waived, in each case with the consent of the Majority Holders, either in writing
or by vote at a meeting called for such purpose at which the holders of Series B
Preferred Stock shall vote as a separate class, unless a greater vote or consent
is required under Colorado law, in which event such greater vote or consent
requirement shall apply.
Section 17. Defects in Notices. No failure on the part of the Corporation
to give any notice required by any provision of these Articles, nor any delay or
defect in any such notice which is given or in the giving thereof, shall
adversely affect the rights which the holders of the Series B Preferred Stock
would have if such notice had been duly given on a timely basis, and such
holders shall be entitled to exercise such rights from and at any time after
they acquire actual knowledge of the matters required to be set forth in such
notice.
Section 18. Specific Performance; Injunctive Relief. In addition to any
other rights or remedies which may be available at law, in equity or by
contract, any holder from time to time of shares of Series B Preferred Stock
shall be entitled to obtain in any court of competent jurisdiction specific
performance of, or an injunction or other order restraining any act or proposed
act by the Corporation which would result in a violation of, any of the terms or
provisions of these Articles.
Section 19. Amendment. The Series B Articles of Amendment may be amended
from time to time by the Board with the affirmative vote at a meeting duly
called and held or written consent of the Majority Holders, unless a greater
vote or consent is required under Colorado law, in which event such greater vote
or consent requirement shall apply. Unless otherwise required by mandatory
provisions of applicable law, no vote or consent of the holders of any other
class or series of the Corporation's stock shall be necessary.
Section 20. Decisions by Holders Generally. Unless otherwise expressly
provided herein, all decisions and determinations required or permitted to be
made hereunder by the holders collectively or as a class (including any decision
as to whether to give any consent or approval) shall be made by the Majority
Holders. To the maximum extent permitted by law, each Person who is or shall
become a holder of any Series B Share waives all fiduciary duties to such
Person, if any, that the Majority Holders or any other holder otherwise would or
might have in its or their capacities as such.
Dated: April [ ], 2000
CONVERGENT COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT C
SERIES A WARRANT CERTIFICATE
CONVERGENT COMMUNICATIONS, INC.
(THE "CORPORATION")
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES THAT MAY BE PURCHASED UPON EXERCISE HEREOF ("WARRANT SECURITIES")
(COLLECTIVELY, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") OR OTHER SECURITIES LAWS. THEY ARE `RESTRICTED SECURITIES'
WITH THE MEANING OF SEC RULE 144. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND SUCH LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
SATISFACTION OF THE CORPORATION.
No. __________ ____ Warrants exercisable for
a total of ____ shares of
Common Stock
This Warrant Certificate certifies that _______________, or
registered assigns, is the registered holder of _______ Warrants to acquire
shares of common stock, no par value per share (the "Common Stock") of
Convergent Communications, Inc., a Colorado corporation (the "Corporation").
Each Warrant initially entitles the holder to purchase from the Corporation at
any time from the date hereof one fully paid and nonassessable share of Common
Stock (a "Share," which may also include any other securities or property
purchasable upon exercise of a Warrant, such adjustment and inclusion each as
provided in the Warrant Agreement) at the initial exercise price (the "Warrant
Price") of $20.00 upon surrender of this Warrant Certificate and payment of the
Warrant Price at the office of the Corporation, subject to the conditions set
forth herein and in the Warrant Agreement dated April [_], 2000 between the
Corporation and each of the entities named on Exhibit A thereto (the "Warrant
Agreement"). The Warrant Price shall be payable in cash, by bank wire transfer
or by check payable to the Corporation in the lawful currency of the United
States of America which as of the time of payment is legal tender for payment of
public or private debts. Unless the holder of the Warrant Certificate is a
Purchaser (as defined in the Warrant Agreement), payment of the Warrant Price
made by check shall be by certified or official bank check. The Warrant Price
and the number of Shares issuable upon exercise of Warrants (the "Exercise
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Warrant Agreement.
Reference is hereby made to the further provisions on the
following pages of this Warrant Certificate which provisions shall for all
purposes have the same effect as though fully set forth in this place.
This Warrant Certificate and the rights of the holder hereof
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any other jurisdiction other than the State
of New York.
WITNESS the seal of the Corporation and the signatures of its
duly authorized officers.
Dated: CONVERGENT COMMUNICATIONS, INC.
By
-------------------------
Name:
Title:
Attest:
By
-----------------------
Name:
Title:
CONVERGENT COMMUNICATIONS, INC.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants each of which represents the right to
acquire at any time on or prior to such date one share of Common Stock subject
to adjustment as set forth in the Warrant Agreement. The Warrants are issued
pursuant to a Warrant Agreement dated April [__], 2000 (the "Warrant
Agreement"), duly executed and delivered by the Corporation to each of the
entities named on Exhibit A thereto (each, a "Purchaser") which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Corporation, the
Purchasers and the holders (the word "holders" or "holder" meaning the
registered holders or registered holder of the Warrants).
Subject to the provisions of the Warrant Agreement, the holder
of each Warrant shall have the right to exercise such Warrant, in whole or in
part, at any time during the period stated in Section 3.1 of the Warrant
Agreement. Warrants may be exercised by (i) surrendering at the principal
executive offices within the United States or at another office or agency
designated by the Corporation pursuant to Section 4.3 of the Warrant Agreement,
this Warrant Certificate with the form of Election to Purchase set forth hereon
duly completed and executed and (ii) paying in full the Warrant Price for each
such Warrant exercised and any other amounts required to be paid pursuant to the
Warrant Agreement.
Any holder of this Warrant Certificate may convert any Warrant
represented hereby into shares of Common Stock, all in accordance with the
provisions of the Warrant Agreement. This conversion right may be exercised in
whole or in part and at any time and from time to time while any Warrant or any
portion of any Warrant is outstanding. The conversion may be exercised by any
holder of a Warrant in whole or in part upon delivery to the Corporation, at its
principal executive offices within the United States or at another office or
agency designated by the Corporation pursuant to Section 4.3 of the Warrant
Agreement, of the Warrant Certificate(s) evidencing the Warrant(s) to be
converted, together with the form of election to convert (the "Election to
Convert") set forth hereon duly completed and signed by the holder of such
Warrant(s) or such holder's duly authorized legal representative or
attorney-in-fact.
If all of the items referred to in the last sentence of the
preceding paragraph, or of the next-preceding paragraph, as applicable, are
received by the Corporation at or prior to the close of business on a business
day, the exercise of the Warrant to which such items relate will be effective as
of the close of business on such business day. If all of such items are received
after the close of business on a business day, the exercise of the Warrants to
which such items relate will be effective the next business day.
As soon as practicable after the exercise of any Warrant or
Warrants, any in any event within five business days thereafter, the Corporation
shall issue or cause to be issued, to or upon the written order of the holder of
this Warrant Certificate, a certificate or certificates evidencing the Warrant
Securities to which such holder is entitled, in fully registered form,
registered in such name or names as such holder may designate in the form of
Election to Purchase, or Election to Convert, as applicable, set forth hereon.
Such certificate or certificates evidencing Warrant Securities shall be deemed
to have been issued and any persons who are designated to be named therein shall
be deemed to have become the holder of record of such Warrant Securities as of
the close of business on the effective date of the exercise of such Warrant or
Warrants.
The Corporation will not be required to issue fractional
Warrant Securities upon the exercise of Warrants, and such number of fractional
Warrant Securities issuable shall be rounded up to the next highest whole
number. If more than one Warrant shall be presented for exercise at the same
time by the same holder, the number of full Warrant Securities that shall be
issuable upon the exercise thereof shall be computed on the basis of the
aggregate number of Warrant Securities purchasable on the exercise of the
Warrants so presented. Notwithstanding the foregoing, in computing adjustments
to the Warrant Price in accordance with the provisions of the Warrant Agreement,
fractional shares of Common Stock shall be taken into account and any
outstanding Warrant may at any time represent the right to receive upon exercise
less than one share of Common Stock or some other number of shares of Common
Stock which is not a whole number.
Warrant Certificates, when surrendered at the principal
executive office of the Corporation by the holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged for a
new Warrant Certificate or new Warrant Certificates evidencing a like number of
Warrants, in the manner and subject to the limitations provided in the Warrant
Agreement.
The term "business day" means any day other than a Saturday,
Sunday or a day on which banking institutions in either New York, New York or
the State in which the principal executive offices of the Corporation within the
United States are located are authorized or obligated by law or executive order
to close.
The terms of the Warrants include those stated in the Warrant
Agreement. The terms of the Warrants are subject to all such terms, and Warrant
holders are referred to the Warrant Agreement for a statement of those terms. In
the event of any conflict or inconsistency between this Warrant Certificate and
the Warrant Agreement, the Warrant Agreement shall prevail and govern.
<PAGE>
ELECTION TO PURCHASE
(To be executed upon exercise of purchase right in Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _______ shares of
Common Stock and herewith tenders in payment for such shares of Common Stock
payment therefor in full, all in accordance with the terms of this Warrant
Certificate. The undersigned requests that a certificate for such shares of
Common Stock (and any other securities and property issuable upon such exercise)
be issued and delivered as set forth below under the heading "Issue to." If said
number of shares of Common Stock is less than all of the shares of Common Stock
issuable as provided in this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the right to purchase the remaining
balance of the shares of Common Stock be issued as provided in this Warrant
Certificate and delivered as set forth below under "Deliver to."
Issue to: Deliver to:
- ----------------------------------- ------------------------------------
(Name) (Name)
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
(Address, including zip code) (Address, including zip code)
Dated:
----------------------
Signature:
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________ (name and address of assignee
must be printed or typewritten) the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint _______________________ Attorney-in-fact, to transfer said Warrant
Certificate on the books of the Corporation with full power of substitution in
the premises.
Dated:
----------------------
Signature:
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
ELECTION TO CONVERT
(To be executed upon exercise conversion right in Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to convert __ Warrants evidenced
hereby into _______ shares of Common Stock and hereby requests such conversion,
all in accordance with the terms of this Warrant Certificate. The undersigned
requests that a certificate for such shares of Common Stock (and any other
securities and property issuable upon such exercise) be issued and delivered as
set forth below under the heading "Issue to." If said number of shares of Common
Stock is less than all of the shares of Common Stock issuable upon conversion of
Warrants as provided in this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the remaining balance of Warrants
evidenced hereby, and unexercised as of the date hereof, be issued as provided
in this Warrant Certificate and delivered as set forth below under "Deliver to."
Issue to: Deliver to:
- ----------------------------------- ------------------------------------
(Name) (Name)
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
(Address, including zip code) (Address, including zip code)
Dated:
----------------------
Signature:
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
EXHIBIT D
SERIES B WARRANT CERTIFICATE
CONVERGENT COMMUNICATIONS, INC.
(THE "CORPORATION")
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR THE
SHARES THAT MAY BE PURCHASED UPON EXERCISE HEREOF ("WARRANT SECURITIES")
(COLLECTIVELY, THE "SECURITIES") HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") OR OTHER SECURITIES LAWS. THEY ARE `RESTRICTED SECURITIES'
WITH THE MEANING OF SEC RULE 144. THE SECURITIES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
AND SUCH LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
SUCH LAWS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE REASONABLE
SATISFACTION OF THE CORPORATION.
No. __________ ____ Warrants exercisable for
a total of ____ shares of
Common Stock
This Warrant Certificate certifies that _______________, or
registered assigns, is the registered holder of _______ Warrants to acquire
shares of common stock, no par value per share (the "Common Stock") of
Convergent Communications, Inc., a Colorado corporation (the "Corporation").
Each Warrant initially entitles the holder to purchase from the Corporation at
any time from the date hereof one fully paid and nonassessable share of Common
Stock (a "Share," which may also include any other securities or property
purchasable upon exercise of a Warrant, such adjustment and inclusion each as
provided in the Warrant Agreement) at the initial exercise price (the "Warrant
Price") of $25.00 upon surrender of this Warrant Certificate and payment of the
Warrant Price at the office of the Corporation, subject to the conditions set
forth herein and in the Warrant Agreement dated April [__], 2000 between the
Corporation and each of the entities named on Exhibit A thereto (the "Warrant
Agreement"). The Warrant Price shall be payable in cash, by bank wire transfer
or by check payable to the Corporation in the lawful currency of the United
States of America which as of the time of payment is legal tender for payment of
public or private debts. Unless the holder of the Warrant Certificate is a
Purchaser (as defined in the Warrant Agreement), payment of the Warrant Price
made by check shall be by certified or official bank check. The Warrant Price
and the number of Shares issuable upon exercise of Warrants (the "Exercise
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Warrant Agreement.
Reference is hereby made to the further provisions on the
following pages of this Warrant Certificate which provisions shall for all
purposes have the same effect as though fully set forth in this place.
This Warrant Certificate and the rights of the holder hereof
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any other jurisdiction other than the State
of New York.
WITNESS the seal of the Corporation and the signatures of its
duly authorized officers.
Dated: CONVERGENT COMMUNICATIONS, INC.
By
-------------------------
Name:
Title:
Attest:
By
-----------------------
Name:
Title:
CONVERGENT COMMUNICATIONS, INC.
The Warrants evidenced by this Warrant Certificate are part of
a duly authorized issue of Warrants each of which represents the right to
acquire at any time on or prior to such date one share of Common Stock subject
to adjustment as set forth in the Warrant Agreement. The Warrants are issued
pursuant to a Warrant Agreement dated April [__], 2000 (the "Warrant
Agreement"), duly executed and delivered by the Corporation to each of the
entities named on Exhibit A thereto (each, a "Purchaser") which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Corporation, the
Purchasers and the holders (the word "holders" or "holder" meaning the
registered holders or registered holder of the Warrants).
Subject to the provisions of the Warrant Agreement, the holder
of each Warrant shall have the right to exercise such Warrant, in whole or in
part, at any time during the period stated in Section 3.1 of the Warrant
Agreement. Warrants may be exercised by (i) surrendering at the principal
executive offices within the United States or at another office or agency
designated by the Corporation pursuant to Section 4.3 of the Warrant Agreement,
this Warrant Certificate with the form of Election to Purchase set forth hereon
duly completed and executed and (ii) paying in full the Warrant Price for each
such Warrant exercised and any other amounts required to be paid pursuant to the
Warrant Agreement.
Any holder of this Warrant Certificate may convert any Warrant
represented hereby into shares of Common Stock, all in accordance with the
provisions of the Warrant Agreement. This conversion right may be exercised in
whole or in part and at any time and from time to time while any Warrant or any
portion of any Warrant is outstanding. The conversion may be exercised by any
holder of a Warrant in whole or in part upon delivery to the Corporation, at its
principal executive offices within the United States or at another office or
agency designated by the Corporation pursuant to Section 4.3 of the Warrant
Agreement, of the Warrant Certificate(s) evidencing the Warrant(s) to be
converted, together with the form of election to convert (the "Election to
Convert") set forth hereon duly completed and signed by the holder of such
Warrant(s) or such holder's duly authorized legal representative or
attorney-in-fact.
If all of the items referred to in the last sentence of the
preceding paragraph, or of the next-preceding paragraph, as applicable, are
received by the Corporation at or prior to the close of business on a business
day, the exercise of the Warrant to which such items relate will be effective as
of the close of business on such business day. If all of such items are received
after the close of business on a business day, the exercise of the Warrants to
which such items relate will be effective the next business day.
As soon as practicable after the exercise of any Warrant or
Warrants, any in any event within five business days thereafter, the Corporation
shall issue or cause to be issued, to or upon the written order of the holder of
this Warrant Certificate, a certificate or certificates evidencing the Warrant
Securities to which such holder is entitled, in fully registered form,
registered in such name or names as such holder may designate in the form of
Election to Purchase, or Election to Convert, as applicable, set forth hereon.
Such certificate or certificates evidencing Warrant Securities shall be deemed
to have been issued and any persons who are designated to be named therein shall
be deemed to have become the holder of record of such Warrant Securities as of
the close of business on the effective date of the exercise of such Warrant or
Warrants.
The Corporation will not be required to issue fractional
Warrant Securities upon the exercise of Warrants, and such number of fractional
Warrant Securities issuable shall be rounded up to the next highest whole
number. If more than one Warrant shall be presented for exercise at the same
time by the same holder, the number of full Warrant Securities that shall be
issuable upon the exercise thereof shall be computed on the basis of the
aggregate number of Warrant Securities purchasable on the exercise of the
Warrants so presented. Notwithstanding the foregoing, in computing adjustments
to the Warrant Price in accordance with the provisions of the Warrant Agreement,
fractional shares of Common Stock shall be taken into account and any
outstanding Warrant may at any time represent the right to receive upon exercise
less than one share of Common Stock or some other number of shares of Common
Stock which is not a whole number.
Warrant Certificates, when surrendered at the principal
executive office of the Corporation by the holder thereof in person or by legal
representative or attorney duly authorized in writing, may be exchanged for a
new Warrant Certificate or new Warrant Certificates evidencing a like number of
Warrants, in the manner and subject to the limitations provided in the Warrant
Agreement.
The term "business day" means any day other than a Saturday,
Sunday or a day on which banking institutions in either New York, New York or
the State in which the principal executive offices of the Corporation within the
United States are located are authorized or obligated by law or executive order
to close.
The terms of the Warrants include those stated in the Warrant
Agreement. The terms of the Warrants are subject to all such terms, and Warrant
holders are referred to the Warrant Agreement for a statement of those terms. In
the event of any conflict or inconsistency between this Warrant Certificate and
the Warrant Agreement, the Warrant Agreement shall prevail and govern.
<PAGE>
ELECTION TO PURCHASE
(To be executed upon exercise of purchase right in Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to purchase _______ shares of
Common Stock and herewith tenders in payment for such shares of Common Stock
payment therefor in full, all in accordance with the terms of this Warrant
Certificate. The undersigned requests that a certificate for such shares of
Common Stock (and any other securities and property issuable upon such exercise)
be issued and delivered as set forth below under the heading "Issue to." If said
number of shares of Common Stock is less than all of the shares of Common Stock
issuable as provided in this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the right to purchase the remaining
balance of the shares of Common Stock be issued as provided in this Warrant
Certificate and delivered as set forth below under "Deliver to."
Issue to: Deliver to:
- ----------------------------------- ------------------------------------
(Name) (Name)
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
(Address, including zip code) (Address, including zip code)
Dated:
----------------------
Signature:
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of the Warrant Certificate)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto _________________________________ (name and address of assignee
must be printed or typewritten) the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint _______________________ Attorney-in-fact, to transfer said Warrant
Certificate on the books of the Corporation with full power of substitution in
the premises.
Dated:
----------------------
Signature:
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
ELECTION TO CONVERT
(To be executed upon exercise conversion right in Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to convert __ Warrants evidenced
hereby into _______ shares of Common Stock and hereby requests such conversion,
all in accordance with the terms of this Warrant Certificate. The undersigned
requests that a certificate for such shares of Common Stock (and any other
securities and property issuable upon such exercise) be issued and delivered as
set forth below under the heading "Issue to." If said number of shares of Common
Stock is less than all of the shares of Common Stock issuable upon conversion of
Warrants as provided in this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the remaining balance of Warrants
evidenced hereby, and unexercised as of the date hereof, be issued as provided
in this Warrant Certificate and delivered as set forth below under "Deliver to."
Issue to: Deliver to:
- ----------------------------------- ------------------------------------
(Name) (Name)
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
(Address, including zip code) (Address, including zip code)
Dated:
----------------------
Signature:
----------------------------
----------------------------
----------------------------
----------------------------
<PAGE>
EXHIBIT E
WARRANT AGREEMENT
WARRANT AGREEMENT, dated April [ ], 2000, between Convergent
Communications, Inc., a Colorado corporation (the "Corporation"), and each of
the entities named on Exhibit A hereto (each, a "Purchaser" and collectively,
the "Purchasers").
The Corporation and the Purchasers have entered into a certain
Securities Purchase Agreement, dated as of April 4, 2000, pursuant to which each
Purchaser is purchasing from the Corporation certain warrants issued by the
Corporation in two series, the Series A Warrants and the Series B Warrants, that
are convertible into or exercisable for shares of the Corporation's common
stock. The Corporation and the Purchasers intend for this document to set forth
the terms of such warrants.
In consideration of the premises and the covenants and agreement herein
contained, in order to induce the Purchasers to enter into such Securities
Purchase Agreement and consummate the transactions contemplated thereby 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
Section 1.1 As used in this Agreement, the following terms have the
meanings indicated:
"Additional Shares of Common Stock" means any shares of Common Stock
issued or deemed to be issued by the Corporation after the Closing Time (other
than shares issued upon conversion of any Series B Share or exercise of any
Warrant).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act. The term "affiliated" (whether or not
capitalized) shall have a correlative meaning. For purposes hereof, neither the
Corporation nor any Subsidiary shall be deemed to be an Affiliate of any
Purchaser and no Purchaser nor any Affiliate of any Purchaser shall be deemed to
be an Affiliate of the Corporation.
"Agreement" means this Warrant Agreement, as amended from time to time
in accordance with the terms hereof.
"Beneficial Owner" means a beneficial owner within the meaning of Rules
13d-3 and 13d-5 under the Exchange Act, as interpreted by the Commission,
provided that a Person shall be deemed to have beneficial ownership of all
securities that such Person has a right to acquire without regard to the 60 day
limitation in subdivision (d)(i) of such Rule 13d-3. The terms (whether or not
capitalized) "beneficially own" and "owned beneficially" shall have correlative
meanings.
"Board" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in either New York, New York, or the city and
state in which the principal executive offices of the Corporation within the
United States are located are authorized or obligated by law or executive order
to close.
"capital stock" when used with respect to any corporation means (unless
the context otherwise indicates) any and all shares of capital stock (however
designated) of such corporation, including each class and series of common stock
and preferred stock of such corporation, any class or series, any and all stock
appreciation rights and any and all equivalents of any of the foregoing, and
including any security or interest convertible into or warrant, option or other
right (absolute or contingent) to subscribe for, purchase or otherwise acquire
any of the foregoing, in each case whether or not evidenced by any certificate,
instrument or other document and whether voting or nonvoting.
"Change of Control" has the meaning set forth in Section 101 of the
Indenture. The definition of such term, together with the definitions of all
capitalized terms used therein that are also defined in the Indenture, are
hereby incorporated herein by reference.
"Closing Date" means the date of the closing of the consummation of the
issuance of Series B Shares to the Purchasers pursuant to the Purchase
Agreement.
"Closing Time" means 10:00 A.M., New York City time, on the Closing
Date.
"Commission" means the Securities and Exchange Commission or any
successor federal agency administering the Securities Act.
"Common Stock" means the Common Stock, no par value, of the Corporation
as constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and (except where the context otherwise
requires) shall also include (i) capital stock of the Corporation of each and
every other class or series (regardless of how denominated) which is also not
preferred as to dividends or assets on liquidation over any other class or
series of stock of the Corporation and which is not subject to redemption and
(ii) shares of common stock of any successor or acquiring corporation (as
defined in Section 3.13) received by or distributed to the holders of Common
Stock of the Corporation in the circumstances contemplated by Section 3.13.
"Convertible Securities" means evidences of indebtedness, shares of
stock or other securities or obligations (except the Series B Preferred Stock
and the Warrants) that are convertible into or exchangeable, with or without
payment of additional consideration in cash or property, for any Common Stock,
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.
"Corporation Parties" means the Corporation and its Subsidiaries.
"Current Market Price" means, in respect of any share of Common Stock
as of any date, the average of the reported last sales prices for the ten
consecutive Trading Days commencing twenty Trading Days before the date in
question. The reported last sales price for each Trading Day shall be the
reported last sales price, regular way, as reported on the National Market tier
of The Nasdaq Stock Market (or, if the Common Stock shall be traded principally
through the facilities of a national securities exchange other than The Nasdaq
Stock Market, such national securities exchange). As used herein, the term
"Trading Day" means a day on which The Nasdaq Stock Market (or such other
national securities exchange) is open for business, provided that if no sales of
the Common Stock take place on such day on the relevant exchange or stock market
determined under the immediately preceding sentence, such day shall not be a
Trading Day. In case any event that would require an adjustment to the Warrant
Price pursuant to Article III occurs with an "ex" date or an effective date
occurring during the foregoing ten Trading Day period, the last sales prices
used in determining the Current Market Price shall be appropriately adjusted to
take such event into account.
"Election to Convert" is defined in Section 2.3.
"Election to Exercise" is defined in Section 2.2.
"Employee Option" means any option to purchase Common Stock for cash
which is granted by or with the approval of the Board to any director, officer,
employee or consultant of the Corporation or any subsidiary of the Corporation
pursuant to (i) the Corporation's stock option plans disclosed in a schedule to
the Purchase Agreement and as in effect on the Closing Date or (ii) any other
option plan adopted by the Corporation after the Closing Date with the prior
approval of the Majority Holders or the Series B Directors (collectively, the
"Stock Option Plans").
"Entity" means any corporation, limited liability company, general or
limited partnership, joint venture, association, joint stock company, trust,
other unincorporated business or organization or other Person which is not
either a natural person or a governmental authority or agency.
An "equity interest" in or of any Entity includes any capital stock or
other equity security issued by such Entity, any partnership (general or
limited) or joint venture interest in such Entity, any other equity, ownership,
participating or beneficial interest in such Entity, any stock appreciation or
other equity appreciation right with respect to such Entity, and any equivalent
of any of the foregoing, regardless of how denominated and whether voting or
non-voting, and any security or interest convertible into or warrant, option or
other right (absolute or contingent) to subscribe for, purchase or otherwise
acquire, any of the foregoing, in each case whether or not evidenced by any
certificate, instrument or other document and whether voting or nonvoting.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Rights" means all Rights (including stock options issued
pursuant to the Corporation's Stock Option Plans) and Convertible Securities,
not including any Series B Shares or Warrants, which were outstanding, or which
the Corporation had agreed to issue, at the Closing Time and disclosed on a
schedule to the Purchase Agreement.
"Fair Market Value" means, in respect of any security, asset or other
property, the price at which a willing seller would sell and a willing buyer
would buy such security, asset or other property having full knowledge of the
facts, in an arm's-length transaction without time constraints, and without
being under any compulsion to buy or sell. The Fair Market Value of a share of
Common Stock as of any time shall be equal to the Current Market Price in effect
at the time of determination. The Fair Market Value of the Corporation shall be
determined on a going concern basis, and on the basis that the management and
other key employees of the Corporation and its subsidiaries will continue to be
employed indefinitely and without treating as liabilities the amount, if any,
payable or which may be payable by the Corporation pursuant to the
indemnification provisions of the Purchase Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indenture" means the Indenture, dated as of April 2, 1998, between the
Corporation and Norwest Bank Colorado, N.A., a national banking association, as
Trustee, as in effect at the Closing Time, regardless of any subsequent
amendment, modification, termination or expiration thereof.
"Investor Rights Agreement" means the Investor Rights Agreement, dated
as of the Closing Date, among the Corporation and the Purchasers, as it may be
further amended from time to time in accordance with its terms.
"Majority Holders" means, as of any time, the holders of a majority of
the Warrants then outstanding.
"Outstanding Common Shares" means, as of any time, all issued and
outstanding shares of Common Stock as of such time, except shares then owned or
held by or for the account of the Corporation or any subsidiary thereof.
Outstanding Common Shares shall not include any shares issuable upon exercise,
conversion or exchange of any Rights or Convertible Securities or issuable in
payment of any dividend or other distribution which has been declared but not
actually paid, nor any other shares which have not actually been issued.
"Permitted Holders" has the meaning set forth in Section 101 of the
Indenture. The definition of such term, together with the definitions of all
capitalized terms used therein that are also defined in the Indenture are hereby
incorporated herein by reference.
"Person" means any individual, corporation, limited liability company,
general or limited partnership, joint venture, association, joint stock company,
trust, unincorporated business or organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
"Purchase Agreement" means the Securities Purchase Agreement, dated as
of April 4, 2000, between the Corporation and the Purchasers, as the same may be
amended from time to time in accordance with its terms and with the prior
written consent of the Majority Holders.
"Purchaser" means each of TPG, Sandler Capital and their respective
Affiliates and permitted assignees under the Purchase Agreement.
"Redeemable Stock" has the meaning set forth in Section 3.2(b).
"Reference Price" means, as of any time, the higher of (x) one-half of
the Warrant Price then in effect or (y) the Current Market Price per share of
the Common Stock determined as of such time.
"Reorganization Event" has the meaning assigned to it in the Series B
Articles of Amendment.
"Rights" means (i) any Convertible Securities and (ii) any options,
warrants or other rights (except Convertible Securities, the Series B Preferred
Stock and the Warrants), however denominated, to subscribe for, purchase or
otherwise acquire any Common Stock or Convertible Securities, 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.
"Sale of the Company" means any of the following:
(i) any Change of Control; or
(ii) the Corporation consolidates with, or merges with
or into, another Person, directly or indirectly sells, assigns, conveys,
transfers, leases or otherwise disposes of all or substantially all of its
assets to any Person, or any Person consolidates with, or merges with or into,
the Corporation or any Subsidiary of the Corporation, in any such event pursuant
to a transaction in which the outstanding Common Stock of the Corporation is
converted into or exchanged for cash, securities, equity interests or other
property and immediately after such transaction the Persons who were the
Beneficial Owners of the outstanding Common Stock of the Corporation immediately
prior to such transaction are not the beneficial owners, directly or indirectly,
of more than 50% of the combined voting power represented by all then
outstanding common stock of the surviving or transferee Person; or
(iii) the Corporation or any of its Subsidiaries
purchase, lease or otherwise acquire assets of any Person or Persons, in one or
a series of related transactions, for consideration consisting in whole or in
part of Common Stock, Convertible Securities or Rights and the number of shares
of Common Stock issued by the Corporation (including all shares issuable or
purchasable upon exercise of all such Convertible Securities and Rights) in such
transaction is equal to 50% or more of the number of fully diluted shares of
Common Stock outstanding immediately prior to such transaction (or the first of
such series of transactions); or
(iv) any Reorganization Event.
"Sandler Capital" means Sandler Capital Partners IV, L.P. and its
Affiliates.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Series B Articles of Amendment" means the Articles of Amendment to the
Amended and Restated Articles of Incorporation of the Corporation setting forth
the resolution of the Board creating and authorizing the issuance of the Series
B Preferred Stock and filed with the Colorado Secretary of State pursuant to the
Colorado Business Corporation Act or any successor provisions of the
Corporation's Articles of Incorporation, as the same may have been amended prior
to or concurrently with the Closing Time and thereafter may be amended.
"Series B Director" has the meaning assigned to it in the Series B
Articles of Amendment.
"Series B Preferred Stock" means the Series B Senior Cumulative
Convertible Preferred Stock, no par value, of the Corporation as constituted on
the Closing Date, and any capital stock into which such Preferred Stock may
thereafter be changed (otherwise than upon conversion thereof).
"Series B Share" means any issued and outstanding share of Series B
Preferred Stock. In no event shall shares of Series B Preferred Stock owned or
held by or for the account of the Corporation or any subsidiary thereof be
deemed to be issued and outstanding for any purpose.
"TPG" means TPG Partners III, L.P. and its Affiliates.
"Warrant Certificate" means a certificate, substantially in the form
attached hereto, evidencing one or more Warrants.
"Warrant Price" means, as of any time and with respect to any Warrant,
the price payable upon exercise of such Warrant, in whole or in part, for one
share of Common Stock, which price shall be: (i) for the Series A Warrants, the
initial price of Twenty Dollars ($20) per share of Common Stock; and (ii) for
the Series B Warrants, the initial price of Twenty-Five Dollars ($25) per share
of Common Stock, in each case as such initial prices shall have from time to
time been cumulatively adjusted pursuant to Article III through such time.
"Warrant Securities" means, with respect to any Warrant at any time,
each class and series of Warrant Stock, each class, series and issue of any
other securities, and any Rights with respect to any of such Warrant Stock or
other securities, any shares, number or other amount of which at such time are
deliverable to a holder of any Warrant upon exercise of such Warrant.
"Warrant Stock" means, with respect to any Warrant at any time, the
Common Stock, each other class or series of capital stock and any Rights or
Convertible Securities with respect to any of the foregoing any shares, number
or other amount of which at such time is deliverable to a holder of any Warrant
upon exercise of such Warrant.
"Warrants" means collectively, the Series A Warrants and the Series B
Warrants.
"Warrantholder" means the holder of any Warrant or Warrants.
Section 1.2 Terms Generally; Certain Rules of Construction. This
Agreement is to be interpreted in accordance with the following rules of
construction:
(i) Number and Gender. All definitions of terms apply equally to
both the singular and plural forms of the terms defined.
Whenever the text may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
(ii) "Including," "Herein," Etc. The words "include," "includes" and
"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
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. Except as expressly provided
herein, all references to (x) any other agreement or instrument
or (y) any law, statute, rule, regulation, permit, license or
similar item are to it as amended and supplemented from time to
time (and, in the case of a law, statute, rule or regulation, to
any corresponding provisions of successor laws, statutes, rules
or regulations).
(v) References to Days. Any reference in this Agreement 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 this Agreement, any example is
given (through the use of the words "such as," "for example,"
"e.g." or otherwise) of the meaning, intent or operation of any
provision, such example is intended to be illustrative only and
not exclusive or limiting.
(vii) Participation in Drafting. The parties and their respective
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 this Agreement are inserted for convenience only and shall
not affect in any way the meaning or interpretation of this
Agreement.
(ix) "Exercise". When used with reference to any Series B Share,
Warrant, Convertible Security or Right, the term "exercise"
shall mean the exercise of the right to exchange or convert such
Series B Share, Warrant, Convertible Security or Right for or
into, subscribe for, purchase or otherwise acquire shares of
Common Stock or other underlying securities represented by such
Series B Share, Warrant, Convertible Security or Right,
including an exercise, conversion or exchange of a Warrant
pursuant to Section 2.2, 2.3 or 2.4. Variants of such word
(including "exercised" and "exercisable") shall have correlative
meanings.
(x) "Issue" and "Property". Whenever used with respect to any
Additional Share of Common Stock or any other share of Common
Stock, the word "issue" includes any issuance, sale or other
method of transfer or delivery of such share, whether such share
is newly issued or is a treasury share and variants of such word
(including "issued", "issuance" or "issuable") used with respect
to any Additional Share of Common Stock or any other share of
Common Stock shall have correlative meanings; therefore, any
provision of this Agreement which is stated to be applicable if
the Corporation issues or shall issue any share is applicable
both to a newly issued share and to a treasury share sold or
otherwise transferred or delivered. The word "property" shall
include assets or property of any kind, real, personal, tangible
or intangible.
ARTICLE II
EXERCISE OF WARRANTS
Section 2.1 Exercise of Warrants. Any Warrant or Warrants may be
exercised, in whole or in part, as provided in this Article II at any time and
from time to time during the period of five consecutive years beginning on the
Closing Date.
Section 2.2 Mechanics of Exercise. Subject to Section 2.3 and Section
2.4, any Warrant or Warrants may be exercised by any Warrantholder, at any time
and from time to time and in whole or in part, upon delivery to the Corporation
at its principal executive offices within the United States or at another office
or agency designated by the Corporation pursuant to Section 4.3, of the Warrant
Certificate(s) evidencing the Warrant(s) to be exercised, together with the form
of election to purchase (the "Election to Purchase") substantially in the form
annexed to this Agreement duly completed and signed by such Warrantholder or by
such Warrantholder's duly appointed legal representative or attorney-in-fact,
and payment in full to the Corporation of the aggregate Warrant Price with
respect to each Warrant exercised. Payment of the aggregate Warrant Price for
the Warrant(s) exercised shall be made in cash, by bank wire transfer or by
check payable to the order of the Corporation. Unless such Warrantholder is a
Purchaser, if such payment is made by check, such check shall be certified or an
official bank check. Subject to Section 2.7, any Warrant (or portion thereof)
exercised shall be deemed to have been exercised immediately prior to the close
of business on the day of delivery of the last to be delivered of such items.
Section 2.3 Conversion In Lieu of Exercise. Any Warrantholder, in its
sole discretion may elect, in lieu of the exercise of any Warrant held by such
Warrantholder or any portion thereof in accordance with Section 2.2, to convert
such Warrant or portion thereof into
(i) the nearest whole number of shares of Common Stock equal to the
quotient obtained by dividing "A" by "B" where
"A" is the product of (x) the number of shares of Common Stock
then issuable if such Warrant (or portion thereof) were
exercised on the date of conversion and (y) the excess, if any,
of (1) the Current Market Price per share of Common Stock as of
the date of conversion over (2) the Warrant Price in effect on
the date of conversion, and
"B" is the Current Market Price per share of Common Stock as of
the date of conversion, and
(ii) the kind and amount of cash, other securities and other
property, if any, to which such Warrantholder would be entitled
upon an exercise of such Warrant or portion thereof.
The conversion right provided for in this Section 2.3 may be exercised in whole
or in part and at any time and from time to time while any Warrant or any
portion of any Warrant is outstanding. The conversion right may be exercised by
any Warrantholder in whole or in part upon delivery to the Corporation at its
principal executive offices within the United States or at another office or
agency designated by the Corporation pursuant to Section 4.3 of the Warrant
Certificate(s) evidencing the Warrant(s) to be converted, together with a form
of election to convert (the "Election to Convert") substantially in the form
attached to this Agreement duly completed and signed by such Warrantholder or by
such Warrantholder's duly appointed legal representative or attorney-in-fact.
Any Warrant (or portion thereof) converted shall be deemed to have been
converted immediately prior to the close of business on the day of surrender of
such Warrant for conversion in accordance with the foregoing.
Section 2.4 Exchange of Warrants In a Recapitalization. The
Corporation, with the prior written consent of the holders of a majority of the
Warrants then outstanding, may elect to effect a partial recapitalization of the
Corporation pursuant to which all or a portion of the Warrants then outstanding
are exchanged, on a per Warrant basis, into the number of shares of Common Stock
and the kind and amount of cash, other securities and other property, if any,
into which a Warrant could be converted pursuant to Section 2.3 as of the date
of such recapitalization. Any such exchange of less than all outstanding
Warrants will be made on a pro rata basis, and shall be effective (subject to
Section 2.7) on such date as may be determined by the Corporation with the
consent of the Majority Holders.
Section 2.5 Delivery of Warrant Securities. As promptly as practicable
after exercise, conversion or exchange of any Warrant (or portion thereof) as
provided in Section 2.2, 2.3 or 2.4, and in any event within five Business Days
thereafter, the Corporation shall issue and deliver to the holder, or to his
nominee(s) or, subject to compliance with the Securities Act, transferee(s), a
certificate or certificates for the number of whole shares of Common Stock to
which such holder shall be entitled, registered in such name or names as such
Warrantholder may designate in writing. Subject to Section 2.7, each such
certificate shall be dated as of the effective date of exercise as determined
pursuant to Section 2.2, Section 2.3 or Section 2.4, as applicable, and such
Warrantholder shall be deemed to have become a holder of record of such Common
Stock for all purposes as of such date. Simultaneously with the delivery of such
certificate(s) for such Common Stock, the Corporation also shall deliver to such
holder all cash, other securities and other property, if any, to which he is
entitled by virtue of the Warrants exercised. If fewer than all of the Warrants
evidenced by any Warrant Certificate delivered to the Corporation for exercise,
conversion or exchange are exercised, converted or exchanged, the Corporation
shall also deliver to the Warrantholder, at the time of delivery of the
certificate(s) representing such Common Stock, a new Warrant Certificate, dated
as of the Closing Date, evidencing the number of Warrants remaining unexercised
and otherwise identical to the Warrant Certificate so delivered, or if requested
in writing by the holder, in lieu of issuing such new Warrant Certificate, the
Corporation shall make an appropriate notation on such Warrant Certificate so
delivered for exercise indicating the number of Warrants evidenced thereby which
remain unexercised and shall return such Warrant Certificate to the holder.
Section 2.6 Expenses and Taxes. The Corporation shall pay all expenses
in connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery of the Warrant Securities and
other property which any holder is entitled to receive upon exercise of any
Warrant or Warrants pursuant to Section 2.2, Section 2.3 or Section 2.4. The
Corporation shall not be required, however, to pay any stamp, stock transfer or
other similar tax or other governmental charge required to be paid solely by
virtue of any transfer involved in the issue of Warrant Securities in any name
other than that of the holder of the Warrant(s) exercised at the order of such
Holder, and if any such transfer is involved, the Corporation shall not be
required to issue or deliver the Warrant Securities as to which such tax or
charge is applicable until such tax or other charge shall have been paid or it
has been established to the Corporation's reasonable satisfaction that no such
tax or other charge is due.
Section 2.7 Exercise Associated With Public Offerings or Requiring
Governmental Action. Any Warrantholder may, by a letter or other written notice
to the Corporation accompanying such Warrantholder's Notice of Election to
Exercise or Election to Convert state that the exercise or conversion by such
Warrantholder of any Warrant or portion thereof (i) is in connection with an
offering of securities registered or to be registered pursuant to the Securities
Act and is conditioned upon, and subject to withdrawal or revocation (in whole
or in part) at the election of such Warrantholder at any time prior to, the
closing of the sale of such securities pursuant to such offering or (ii) is
subject to one or more filings with, reviews or approvals by or other
requirements of any governmental authority or agency and is conditioned upon,
and is subject to withdrawal or revocation (in whole or in part) at the election
of such Warrantholder at any time prior to, the completion of such filings or
reviews, the receipt of such approvals or the satisfaction of such other
requirements. In such event, if such exercise or conversion is not so withdrawn
or revoked, the delivery to or upon the order of the exercising or converting
Warrantholder of the certificate(s) or instrument(s) representing or evidencing
the Warrant Shares deliverable by reason of such exercise or conversion shall be
at such time or times as such Warrantholder shall specify in a written notice to
the Corporation. During any period following delivery of the Election to
Exercise or the Election to Convert until such time or times (or such withdrawal
or revocation) such Warrant or portion thereof shall continue to be outstanding
for all purposes, including for purposes of adjustments pursuant to Article III.
The Majority Holders shall have similar rights in the event of any exchange
pursuant to Section 2.4.
Section 2.8 Fractional Shares of Common Stock. If the number of shares
of Common Stock issuable on the exercise of any Warrant is not a whole number,
the Corporation shall not be required to issue any fraction of a share of Common
Stock and such number of shares issuable shall be rounded up to the next highest
whole number. If more than one Warrant shall be surrendered for conversion at
one time by the same holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of Warrants so surrendered for conversion. Notwithstanding the provisions of
this Section 2.8, in computing adjustments to the Exercise Price pursuant to
Article III, fractional shares of Common Stock shall be taken into account and
any outstanding Warrant may at any time represent the right to receive upon
conversion less than one share of Common Stock or some other number of shares of
Common Stock which is not a whole number.
Section 2.9 Covenant to Reserve Shares for Issuance on Exercise. The
Corporation shall at all times reserve and keep available out of the authorized
but unissued shares of Common Stock, solely for the purpose of issue upon
exercise of the Warrants, the full number of shares of Common Stock issuable if
all outstanding Warrants were to be converted in full. All shares of Common
Stock which shall be issuable upon exercise of any Warrant (or portion thereof)
shall be newly issued, duly authorized, validly issued, fully paid and
nonassessable and without any personal liability attaching to the ownership
thereof, and the issuance thereof shall not give rise or otherwise be subject to
preemptive or similar purchase rights on the part of any Person or Persons, and
the Corporation shall take any corporate and other actions that may, in the
opinion of its counsel, be necessary in order that the Corporation may comply
with the foregoing. The Corporation hereby irrevocably authorizes and directs
its current and future transfer agents, if any, for the Common Stock and for any
shares of the Corporation's capital stock of any other class or series issuable
upon the conversion of the exercise of the Warrants at all times to reserve such
number of authorized shares as shall be requisite for such purpose. The
Corporation shall supply such transfer agents with duly executed stock
certificates for such purposes.
Section 2.10 Compliance with Governmental Requirements; Listing of
Shares.
(a) General. If issuance of any Warrant Securities issuable
upon exercise of any Warrant(s) require, under any applicable federal, state,
local or foreign law, rule or regulation or any applicable requirement of any
national securities exchange or inter-dealer quotation system, any registration,
qualification, listing or approval before such shares may be issued upon
conversion, the Corporation shall in good faith, as promptly as practicable and
at its expense, diligently endeavor to cause such shares to be duly registered,
qualified, approved or listed, as the case may be and Section 2.7 shall apply.
(b) Listing. Without limiting the generality of Section
2.10(a), if any shares of Common Stock or other capital stock or securities
required to be reserved for issuance upon exercise of any Warrant(s) require
registration or qualification with any governmental authority under any federal
or state law before such shares may be so issued, the Corporation will in good
faith and as expeditiously as possible and at its expense endeavor to cause such
shares to be duly registered. During all periods during which shares of Common
Stock or any other capital stock or securities of the same class, series or
issue as are issuable upon exercise of any Warrant are listed, qualified or
otherwise eligible for trading or quotation on any national securities exchange
or The Nasdaq Stock Market or any similar quotation system, the Corporation
shall cause all shares of Common Stock, and all such other capital stock and
securities, issuable upon conversion of such Warrant to be listed, qualified or
eligible for trading or quotation thereon upon issuance thereof.
(c) HSR Act, Etc. Without limiting the generality of Section
2.10(a), if any holder's intended exercise of any Warrant (alone or with other
proposed acquisitions of Common Stock or other securities of the Corporation)
would or might be subject to the HSR Act, the Corporation shall promptly comply
with any applicable requirements under the HSR Act relating to filing and
furnishing of information to the Federal Trade Commission and the Antitrust
Division of the Department of Justice and shall cooperate, and cause all Persons
which are part of the same "person" (as defined for purposes of the HSR Act) as
the Corporation to cooperate and assist in such filing and compliance. If any
holder is advised by its legal counsel that its intended exercise of Warrant(s)
would or might be subject to any other law, rule or regulation which requires
any filing with or review or approval by any governmental authority or agency,
the Corporation shall promptly comply with any requirements of such law, rule or
regulation applicable to it and shall cooperate with such holder in such
holder's efforts to comply with the requirements of such law, rule or regulation
applicable to it on a timely basis.
(d) Expenses. Each of the Corporation and such holder shall
bear and pay any costs or expenses that it incurs in complying with this Section
2.10, except that each shall pay one half of any filing fee payable to the FTC
or the Department of Justice pursuant to Section 2.10(c) and the HSR Act.
ARTICLE III
ADJUSTMENT OF WARRANT PRICE AND
WARRANT SECURITIES PURCHASABLE
Section 3.1 Adjustment Generally. Initially as of the Closing Time,
each Warrant issued on the Issue Date shall represent the right to purchase one
share of Common Stock for an initial Warrant Price of: (i) Twenty Dollars ($20)
per share for Series A Warrants; and (ii) Twenty-Five Dollars ($25) per share
for Series B Warrants. The Warrant Price payable and the type and number and
amount of securities and other property deliverable upon exercise of a Series A
Warrant or a Series B Warrant shall be subject to adjustment from time to time
as set forth in this Article III. Such adjustments shall be cumulative and shall
be made successively on each and every occasion that any event requiring any
such adjustment shall occur. The form of Warrant Certificate need not be changed
because of any adjustment made pursuant to this Article III, and Warrant
Certificates outstanding at the time of such adjustment or issued after such
adjustment may state the same Warrant Price and the same number of shares of
Common Stock as are stated in the Warrant Certificates prior to such adjustment.
Section 3.2 Stock Dividends, Subdivisions, Combinations and
Recapitalizations. If the Corporation shall at any time (i) declare or pay a
dividend or declare, pay or make any other distribution on the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each and every such event,
the number of shares of Common Stock purchasable upon exercise of each Warrant
shall be adjusted so that the holder of any Warrant thereafter surrendered for
exercise shall be entitled to receive the aggregate number of shares of Common
Stock or other capital stock of the Corporation which such holder would have
owned and would have been entitled to receive by virtue of the happening of any
of the events described above had such Warrant been exercised (x) in the case of
a dividend or distribution, immediately prior to the record date for the
determination of the stockholders entitled to receive such dividend or
distribution (or, if no such record date is fixed, immediately prior to any
other time as of which the holders of Common Stock entitled to participate in
such distribution was determined) or (y) in the case of a subdivision,
combination or reclassification, on the effective date of such subdivision,
combination or reclassification. Upon such adjustment, the Warrant Price shall
be adjusted to be the Warrant Price in effect immediately prior to the
effectiveness of such adjustment multiplied by the quotient obtained by dividing
the number of shares of Common Stock for which a Warrant was exercisable
immediately prior to effectiveness by the number of shares of Common Stock for
which a Warrant shall be exercisable immediately after such effectiveness. An
adjustment made pursuant to this Section 3.2 shall become effective immediately
after such record date (or other applicable date referred to in subclause (A)(x)
of the immediately preceding sentence) in the case of a dividend or
distribution, subject to Section 3.9(d) and 3.9(e), and shall become effective
immediately after the effective date in the case of a subdivision, combination
or reclassification.
Section 3.3 Certain Other Distributions.
(a) Other Distributions. Subject to Section 3.3(b) and Section
3.3(c), if the Corporation shall at any time declare or make any distribution,
by dividend or otherwise, to all holders of outstanding shares of Common Stock
of any cash or other assets or property of any nature whatsoever, any debt
securities or other evidences of its indebtedness, any capital stock, any other
securities of any nature whatsoever or any warrants, options or other Rights to
subscribe for, purchase or otherwise acquire any assets, property, capital
stock, debt or other securities or evidences of indebtedness (excluding
dividends or distributions referred to in Section 3.2, Rights referred to in
Section 3.5 and Convertible Securities referred to in Section 3.6), or shall
take a record of such holders for the purpose of entitling them to receive such
a distribution, then (i) the number of shares of Common Stock for which each
Warrant is exercisable shall be adjusted to equal the product of the number of
shares of Common Stock for which such Warrant is exercisable immediately prior
to the applicable Adjustment Date determined pursuant to Section 3.3(d),
multiplied by a fraction, the numerator of which shall be the Current Market
Price per share of the Outstanding Common Shares immediately before such
Adjustment Date and the denominator of which shall be the excess of (x) such
Current Market Price per share of the Outstanding Common Shares as of the
Adjustment Date over (y) the amount allocable to one share of the Outstanding
Common Shares as of such Adjustment Date of any such cash so distributable and
of the Fair Market Value (as determined as of such date in good faith by the
Board) of any and all such evidences of indebtedness, shares of capital stock,
debt securities, other securities, property, assets or Rights so distributable
and (ii) the Warrant Price shall be adjusted to equal (A) the Warrant Price in
effect immediately prior to such adjustment multiplied by the quotient obtained
by dividing the number of shares of Common Stock for which a single Warrant is
exercisable immediately prior to the adjustment by (B) the number of shares of
Common Stock for which a single Warrant is exercisable immediately after such
adjustment.
(b) When Adjustment Is Not To Be Made. No adjustment pursuant
to the provisions of Section 3.3(a) shall be made if such adjustment would
result in the number of shares of Common Stock for which each Warrant is
exercisable being lower, or a Warrant Price that is higher, than was the case
immediately prior to such adjustment. In addition, at the election of the
Majority Holders made within 30 days of receipt of the notice with respect to
such adjustment issued pursuant to Section 3.10, in lieu of the adjustment
pursuant to Section 3.3(a), but subject to Section 3.3(c), the type and number
and amount of securities and other property deliverable upon exercise of any
Warrant determined as of immediately prior to the effective date for such
adjustment specified in Section 3.3(c) shall be adjusted so that the holder of
any such Warrant thereafter surrendered for conversion shall be entitled to
receive the kind and number or amount of shares of Common Stock (or other
capital stock of the Corporation), other Warrant Securities and other property
which such holder would have received (after giving effect to all adjustments
required by this Article III) had such Warrant been exercised immediately prior
to
(i) the record date for the determination of the stockholders
entitled to receive such distribution, or
(ii) if no such record date is fixed, as of any other time as
of which the holders of Common Stock entitled to participate in such
distribution was determined,
plus the kind and amount of cash, other assets or property, debt securities,
other evidences of indebtedness, other securities or Rights which such holder
would have been entitled to receive by virtue of being the record holder, as of
such record date or other time, of such kind and number or amount of shares of
Common Stock or other Conversion Securities. For such purpose, it shall be
assumed that such holder of Common Stock or other Conversion Securities failed
to exercise rights of election, if any, as to the kind or amount of shares or
stock, other securities or property receivable in such distribution, provided
that if the kind or amount of shares of stock, other securities or property
receivable in such distribution is not the same for each non-electing share,
then the kind and amount of shares of stock, other securities or property
receivable upon consummation of such transaction for each non-electing share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the non-electing shares. If after an adjustment a holder of a Warrant upon
exercise may receive shares of two or more classes of capital stock of the
Company, the Board shall determine, in good faith, the allocation of the
adjusted Warrant Price between the classes of capital stock. After such
allocation, the exercise privilege and the exercise price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Article.
(c) Special Rule for Distributions of Redeemable Stock. If by
virtue of the applicability of Sections 3.2(b) and 3.3(b) in any one or more
events, the Warrant Securities issuable upon conversion of any Warrant consist
of or include any shares of Redeemable Stock and if the Corporation redeems all
or any part of the outstanding shares of such Redeemable Stock prior to the date
on which such Warrant is exercised, then upon exercise of such Warrant the
holder thereof shall be entitled to receive, in lieu of such shares of
Redeemable Stock or, in the event of such a partial redemption, a pro rata
portion of such shares, the kind and amount of cash or other assets, securities
or other property or consideration paid by the Corporation with respect to its
redemption of an equal number of shares of such Redeemable Stock. If the
consideration so paid upon the Corporation's redemption of any such Redeemable
Stock consists of or includes any other class or series of Redeemable Stock
which is also redeemed before exercise of any Warrant, then the provisions of
the first sentence of this Section 3.3(c) (and of this sentence) shall apply to
successively to the shares of such other class or series of Redeemable Stock.
(d) Adjustment Date. The "Adjustment Date" for any
distribution in respect of which an adjustment is required by this Section 3.3
shall be either (i) the date of taking of a record of holders of Common Stock
for the purpose of entitling them to receive such distribution or, if no record
is taken, at the date as of which the holders of Common Stock entitled to
participate in such distribution were determined or (ii) the date of such
distribution, whichever date yields the largest increase in the number of shares
of Common Stock issuable upon exercise of a Warrant in applying the formula
contained in the first sentence of Section 3.3(a).
(e) Adjustment Effective Date. An adjustment made pursuant to
this Section 3.3 shall become effective, subject to Section 3.8(d), immediately
after such record date or, if no such record date is fixed, immediately after
the time as of which holders of Common Stock entitled to participate in such
distribution were determined or, if no such time is fixed, as of the date of
such distribution.
Section 3.4 Issuance of Additional Shares of Common Stock.
(a) Adjustment Formula. Subject to Section 3.4(b), if at any
time the Corporation shall issue, or pursuant to Section 3.5, Section 3.6, or
Section 3.7 be deemed to issue, any Additional Shares of Common Stock in
exchange for consideration in an amount, determined in accordance with Section
3.8(a) and Section 3.8(e), per Additional Share of Common Stock less than the
Reference Price as of the applicable time of determination specified in the last
sentence of this Section 3.4(a), then (i) the number of shares of Common Stock
for which each Warrant is exercisable shall be adjusted to equal the product
obtained by multiplying the number of shares of Common Stock for which such
Warrant was exercisable immediately prior to such time of determination by a
fraction (x) the numerator of which shall be the number of Outstanding Common
Shares immediately before such issuance or deemed issuance plus the number of
Additional Shares of Common Stock so issued or deemed to be issued and (y) the
denominator of which shall be the number of Outstanding Common Shares
immediately before such issuance or deemed issuance plus the number of shares
which the aggregate amount of consideration, if any, received by the Corporation
upon such issuance or deemed issuance of all such Additional Shares of Common
Stock would purchase at the Reference Price determined as of such time and (ii)
the Warrant Price shall be adjusted to equal the Warrant Price immediately prior
to such adjustment multiplied by the quotient obtained by dividing the number of
shares of Common Stock for which such Warrant was exercisable immediately prior
to the adjustment under clause (i) by the number of shares of Common Stock for
which such Warrant is exercisable immediately after the adjustment under clause
(i). The applicable time of determination shall be:
(i) if the event requiring the adjustment is the taking of a
record date for any dividend or distribution referred to in
Section 3.5 or Section 3.6, as of either the close of business
on such record date or the date such dividend or distribution
is paid, whichever produces the highest Reference Price, or
(ii) in the case of any other issuance or deemed issuance,
immediately prior to the time of such issuance or deemed
issuance.
(b) When Adjustment is Not Required. The provisions of Section
3.4(a) shall not apply to any issuance of Additional Shares of Common Stock for
which an adjustment is made under Section 3.2 or Section 3.3. Subject to Section
3.7, no adjustment of the Warrants or the Warrant Price shall be made under this
Section 3.4 upon the issuance of any Additional Shares of Common Stock which are
or are deemed to be issued pursuant to (i) the exercise of any Existing Rights
in accordance with the terms thereof in effect on the Closing Date or (ii) the
exercise of any other Rights or the exercise of any conversion or exchange
rights in any other Convertible Securities if, in the case of any such Rights or
Convertible Securities referred to in this clause (ii) any such adjustment shall
previously have been made, or no such adjustment shall have been required to be
made, upon the issuance of such Rights or upon the issuance of such Convertible
Securities (or upon the issuance of any Rights therefor) pursuant to Section 3.5
or Section 3.6.
(c) Effective Date. Each adjustment pursuant to this Section
3.4 by reason of any issuance or deemed issuance of any Additional Shares of
Common Stock shall be effective as of the date of such issuance or deemed
issuance.
Section 3.5 Issuance of Rights.
(a) Adjustment. If at any time the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution of, or shall in any manner (whether
directly or indirectly by assumption in a consolidation or in a merger in which
the Corporation is the surviving corporation or otherwise) issue to any Person
or Persons, any Rights to subscribe for, purchase or otherwise acquire any
Additional Shares of Common Stock or any Convertible Securities, in any case
whether or not such Rights or the right to exchange or convert such Convertible
Securities are immediately exercisable, and the consideration per share for
which Common Stock is issuable upon the exercise of such Rights or upon
conversion or exchange of such Convertible Securities determined pursuant to
Section 3.8(a) and Section 3.8(e) shall be less than the Reference Price
determined as of the applicable time of determination specified in the last
sentence of this Section 3.5(a), then the maximum number of shares of Common
Stock issuable upon the exercise of such Rights or, in the case of Rights for
Convertible Securities, upon the conversion or exchange of such Convertible
Securities determined as of such applicable time shall be deemed to be
Additional Shares of Common Stock issued as of such applicable time for such
consideration per share and the number of shares of Common Stock for which each
Warrant is exercisable and the Warrant Price shall be adjusted as provided in
Section 3.4(a). The applicable time of determination shall be
(i) if the event requiring the adjustment is the taking of a
record date for any dividend or distribution of Rights
referred to in this Section 3.5(a), as of either the
close of business on such record date or the date such
dividend or distribution is paid, whichever produces the
highest Reference Price, or
(ii) in the case of any other issuance of Rights, immediately
prior to the time of such issuance.
(b) No Further Adjustment on Exercise. Subject to Section 3.7,
no further adjustments of the Warrants or the Warrant Price shall be made upon
the actual issuance of such Common Stock or of such Convertible Securities upon
exercise of such Rights or upon the actual issuance of such Common Stock upon
such conversion or exchange of such Convertible Securities for which an
adjustment pursuant to this Section 3.5 previously had been made or was not
required to be made. Subject to Section 3.7, no adjustment under this Section
3.5 shall be required by reason of the grant of Employee Options that have an
exercise price per share of Common Stock, at least equal to the Current Market
Price at the time of grant.
Section 3.6 Issuance of Convertible Securities.
(a) Adjustment. If at any time the Corporation shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution of, or shall in any manner (whether
directly or indirectly by assumption in a consolidation or in a merger in which
the Corporation is the surviving corporation or otherwise) issue, to any Person
or Persons, any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or exchange determined
pursuant to Section 3.8(a) and Section 3.8(e) shall be less than the Reference
Price determined as of the applicable time of determination specified in the
last sentence of this Section 3.6(a), then the maximum number of shares of
Common Stock issuable upon the conversion or exchange of such Convertible
Securities determined as of such applicable time shall be deemed to be
Additional Shares of Common Stock issued as of such applicable time for such
consideration per share and the number of shares of Common Stock for which each
Warrant is exercisable and the Warrant Price shall be adjusted as provided in
Section 3.4. If the terms of any Convertible Securities provide for any issuance
of additional Convertible Securities (whether in payment of dividends or
interest or otherwise), then each occasion on which any such additional
Convertible Securities are issued shall be deemed a new issuance of Convertible
Securities for which an adjustment pursuant to this Section 3.6 shall be made.
The applicable time of determination shall be:
(i) if the event requiring the adjustment is the taking of a record
date for any dividend or distribution of Rights referred to in this
Section 3.6(a), as of either the close of business on such record date
or the date such dividend or distribution is paid, whichever produces
the highest Reference Price, or
(ii) in the case of any other issuance of Rights, immediately prior to
the time of such issuance.
(b) No Further Adjustment Upon Conversion. Subject to Section
3.7, no further adjustment of the Warrants or the Warrant Price shall be made
under this Section 3.6 upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any Rights therefor if any such adjustment
shall previously have been made upon the issuance of such Rights pursuant to
Section 3.5. Subject to Section 3.7, no further adjustments of the Warrants or
the Warrant Price shall be made upon the actual issuance of such Common Stock
upon conversion or exchange of Convertible Securities for which an adjustment
pursuant to this Section 3.6 previously had been made or was not required.
Section 3.7 Superseding Adjustment.
(a) Readjustment if Adjustment Previously Made. If, at any
time after any adjustment of the number of shares of Common Stock for which each
Warrant is exercisable and the Warrant Price shall have been made pursuant to
Section 3.5 or Section 3.6:
(i) the consideration paid or payable to the Corporation,
or the number of shares of Common Stock issuable, upon the exercise, conversion
or exchange of the Rights or Convertible Securities in respect of which such
adjustment was made is increased, in the case of such consideration, or
decreased in the case of such number of shares, by virtue of provisions
contained therein for an automatic increase or decrease (as the case may be)
upon the occurrence of a specified date or event, any amendment or modification
of or departure from the terms thereof previously in effect or otherwise (other
than under or by reason of an event resulting in a change pursuant to the
provisions set forth in the documents governing such Rights or Convertible
Securities designed to protect against dilution, which event also results in an
adjustment pursuant to this Article III), the adjustments to the Warrant Price
and the number of shares of Common Stock issuable upon exercise of each Warrant
computed upon the original issuance thereof (or upon the taking of a record date
with respect thereto), and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be readjusted to the Warrant
Price and number of shares issuable upon exercise of a single Warrant which
would then be in effect had such adjustment originally been made on the basis
that such increased or decreased consideration payable or such increased or
decreased number of shares of Common Stock issued or issuable was the
consideration payable or the number of shares issued or issuable in respect of
such outstanding Rights or Convertible Securities which are actually outstanding
on the effective time of such increase or decrease (but no such readjustment
shall be made with respect to any Rights or Convertible Securities which for any
reason no longer are outstanding as of such time); or
(ii) any Rights or any rights of conversion or exchange
under Convertible Securities in respect of which such adjustment was made shall
expire without having been fully exercised, the Warrant Price computed upon the
original grant, issuance or sale thereof or upon the taking of a record date
with respect thereto (as the case may be), and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if:
(A) in the case of such Rights or Convertible
Securities, the only Additional Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Rights or the
conversion or exchange of such Convertible Securities and the consideration
received for such Additional Shares of Common Stock was, in the case of Rights,
the consideration actually received by the Corporation for the grant, issuance
or sale of all such Rights, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or, in the case of
Convertible Securities, the consideration actually received by the Corporation
for the issuance or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange; and
(B) in the case of any such Rights exercisable for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issuance or sale of such
Rights, and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the grant, issuance or sale of all such
Rights, whether or not exercised, plus the additional consideration, if any,
actually received by the Corporation upon the issuance or sale of the
Convertible Securities with respect to which such Rights were actually
exercised.
(b) When Readjustment is Not to be Made. No readjustment
pursuant to this Section 3.7 shall have the effect of (i) decreasing the number
of shares of Common Stock or the amounts of other Warrant Securities, cash or
other property for which any Warrant is exercisable below the number of such
shares and the amounts of such other Warrant Securities, cash and property for
which such Warrant would have been exercisable if the original adjustment had
not been made, but all subsequent adjustments, if any, required by this Article
III had been made or (ii) requiring any surrender, return or redelivery of any
shares of Common Stock, other Conversion Securities, cash or other property
delivered upon any exercise of any Warrant prior to the time such readjustment
is made, requiring that the exercising holder or any subsequent holder of any
such shares of Common Stock, Warrant Securities or other property make any
payment to the Corporation or otherwise affecting such shares of Common Stock,
other Warrant Securities or other property or the rights or obligations of the
exercising Holder or any such subsequent holder with respect thereto. From and
after any adjustment or adjustments provided for in this Section 3.7, the
Warrants and the Warrant Price shall continue to be subject to further
adjustment as provided in this Article III.
(c) Adjustment When No Adjustment Was Previously Made. If, at
any time after any grant, sale or other issuance of any Rights or Convertible
Securities for which an adjustment of the Conversion Rate shall not have been
required to be made pursuant to the provisions of Section 3.5 or Section 3.6 (as
the case may be), the consideration paid or payable to the Corporation upon the
exercise of such Rights or Convertible Securities is decreased, or the number of
shares of Common Stock issued or issuable upon the exercise of such Rights or
Convertible Securities is increased, in either case by virtue of provisions
contained therein for an automatic decrease or increase (as the case may be)
upon the occurrence of a specified date or event, any amendment or modification
of or departure from the terms thereof previously in effect or otherwise (other
than under or by reason of an event resulting in a change pursuant to the
provisions set forth in the documents governing such Rights or Convertible
Securities designed to protect against dilution, which event also results in an
adjustment pursuant to this Article III), then such event shall, for purposes of
Section 3.5 (in the case of such Rights) or Section 3.6 (in the case of such
Convertible Securities) be deemed to be a new issuance, as of the date of the
effectiveness of such decrease or increase (as the case may be) of Rights or
Convertible Securities having terms reflecting such changes.
(d) Adjustment for Events Affecting Existing Rights. If the
number of shares of Common Stock issued or issuable upon exercise of any
Existing Right is increased as a direct or indirect result of any amendment or
modification of or departure from the terms thereof previously in effect (other
than as a result of the issuance of the Series B Shares, the conversion of the
Series B Shares, the issuance of the Warrants or the exercise of the Warrants),
then such increased number of shares of Common Stock issued or issuable upon
exercise thereof shall be deemed to be Additional Shares of Common Stock issued
as of the effective date of such increase for the additional consideration, if
any, payable to acquire such increased number of shares upon exercise of such
Existing Right, and the number of shares of Common Stock for which each Warrant
is exercisable and the Warrant Price shall be adjusted as provided in Section
3.4. If the consideration payable for shares of Common Stock issued or issuable
upon exercise of any Existing Right is decreased as a direct or indirect result
of any amendment or modification of or departure from the terms thereof
previously in effect, then such event shall be deemed to be the issuance, as of
the effective date of such decrease, of a number of Additional Shares of Common
Stock equal to the excess of (i) the maximum number of shares of Common Stock
issuable upon exercise of such Existing Right over (ii) the number of shares of
Common Stock determined by dividing the total consideration, if any, that would
be payable to the Corporation upon the exercise in full of such Existing Right
after giving effect to such decrease by the amount of consideration per share of
Common Stock issuable upon exercise of such Existing Right that would have been
payable to the Corporation absent such decrease. The provisions of this Section
3.7(d) are in addition to (and not exclusive of) any other rights or remedies of
Warrantholders in the event that any such amendment, modification or departure
occurs without any required approval of Warrantholders.
Section 3.8 Other Provisions Applicable to Adjustments. The following
provisions shall be applicable to the making of adjustments provided for in this
Article III:
(a) Computation of Consideration.
Subject to Section 3.8(e):
(i) To the extent that any Additional Shares of Common
Stock, any Convertible Securities or any Rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall be issued
or deemed to be for cash consideration, the consideration received or deemed to
be received by the Corporation therefor shall be the net amount of the cash
received or deemed to be received by the Corporation therefor (in any such case
subtracting any amounts received in respect of accrued interest, accrued
dividends or other similar amounts which the Corporation may be obligated to pay
to the holders thereof in the future and any compensation, discounts or expenses
paid or incurred by the Corporation in connection with the issuance thereof).
(ii) To the extent that such issuance or deemed issuance
shall be for a consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed to be the
Fair Market Value of such consideration at the time of such issuance or deemed
issuance as determined in good faith by the Board.
(iii) In case any Additional Shares of Common Stock, any
Convertible Securities or any Rights to subscribe for, purchase or otherwise
acquire Additional Shares of Common Stock or Convertible Securities shall be
issued or deemed to be issued in connection with any merger, consolidation,
share exchange or similar transaction, the amount of consideration therefor
shall be deemed to be the Fair Market Value, as determined in good faith by the
Board, of such portion of the assets and business of the nonsurviving
corporation as the Board in good faith shall determine to be attributable to
such Additional Shares of Common Stock, Convertible Securities, or Rights, as
the case may be.
(iv) In case any Additional Shares of Common Stock, any
Convertible Securities or any Rights to subscribe for, purchase or otherwise
acquire Additional Shares of Common Stock or Convertible Securities are issued
or deemed to be issued in combination with each other or with any other
securities or property in connection with any transaction in which the
Corporation receives cash, securities, property or other consideration, or any
combination of the foregoing, then the amount of consideration therefor shall be
deemed to be such portion of the cash, securities, property and other
consideration received by the Corporation as the Board in good faith shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities or Rights, as the case may be, with any noncash
consideration being valued at its Fair Market Value as determined by the Board
in good faith. The consideration for any Additional Shares of Common Stock
issuable or deemed to be issuable pursuant to any Rights to subscribe for,
purchase or otherwise acquire the same shall be the consideration received or
deemed to be received by the Corporation for issuing such Rights plus the
minimum additional consideration, if any, paid or payable to the Corporation
upon the exercise or deemed exercise of such Rights.
(v) The consideration for any Additional Shares of Common
Stock issued or issuable pursuant to the terms of any Convertible Securities
covered by any Rights to subscribe for, purchase or otherwise acquire such
Convertible Securities shall be the consideration received or deemed to be
received by the Corporation for issuing such Rights, plus the minimum additional
consideration, if any, paid or payable to the Corporation in respect of the
subscription for, purchase or other acquisition of such Convertible Securities,
plus the minimum additional consideration, if any, paid or payable to the
Corporation upon the exercise or deemed exercise of the right of conversion or
exchange in such Convertible Securities.
(vi) The consideration for any Additional Shares of Common
Stock issuable or deemed to be issuable pursuant to the terms of any Convertible
Securities, other than any covered by any Rights to subscribe for, purchase or
acquire the same, shall be the consideration received or deemed to be received
by the Corporation for issuing such Convertible Securities plus the minimum
additional consideration, if any, paid or payable to the Corporation upon the
exercise of the right of conversion or exchange in such Convertible Securities.
(vii) For all purposes of this Article III, all Rights or
Convertible Securities issued or deemed to be issued to directors, officers,
employees or consultants of the Corporation or any Subsidiary shall be deemed to
be issued for no consideration except to the extent the Corporation receives in
exchange for the issuance thereof consideration other than services rendered or
to be rendered.
(b) When Adjustments to Be Made. The adjustments required by
this Article III shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment of the number of
shares of Common Stock for which a Warrant is exercisable that would otherwise
be required may be postponed (except in the case of a subdivision or combination
of shares of the Common Stock) up to, but not beyond the date of conversion if
such adjustment either by itself or with other adjustments not previously made
adds or subtracts less than 1% of the shares of Common Stock for which a Warrant
is exercisable immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Article III and not
previously made by virtue of this Section 3.8(b), would result in a minimum
adjustment or on the date of conversion. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(c) Fractional Interests. In computing adjustments under this
Article III, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
(d) Delivery of Due Bills. If, after the taking of any record
of the holders of any class or series of capital stock of the Corporation for
the purpose of entitling them to receive a dividend or distribution for or in
connection with any other event in respect of which an adjustment pursuant to
this Article III is required, but prior to the occurrence of the event for which
such record is taken, any Warrant is exercised, the Corporation shall deliver to
the exercising Warrantholder a due bill or other appropriate instrument
evidencing such holder's right to receive the additional shares of Common Stock,
other securities, cash and other property receivable upon conversion by reason
of an adjustment pursuant to this Article III that would have been required by
reason of such dividend, distribution or other event if the Warrant had
continued to be outstanding immediately after the occurrence of the event
requiring such adjustment.
(e) Certain Determinations. Any determination of the Current
Market Price of any share of Common Stock or the Fair Market Value of any other
security, asset, property or consideration which may be required to be made by
the Board pursuant to or in connection with the application of any provision of
this resolution may be disputed in good faith by the Majority Holders and any
such dispute shall be resolved by an independent investment banking firm of
recognized national standing mutually selected by the Majority Holders and the
Corporation (and whose fees and expenses shall be paid by the Corporation),
whose decision with respect to such dispute shall be final and conclusive and
binding on the Corporation and all holders of Series B Shares. Any determination
by the Board pursuant to Section 3.9(b) or Section 3.13 may be disputed in good
faith by the Majority Holders, and any such dispute shall be resolved in
accordance with Section 3.12.
(f) Other Action Affecting Common Stock. In case at any time
or from time to time the Corporation shall take any action in respect of its
Common Stock which is not one described in any other provision of Article III as
requiring an adjustment, then, unless such action will not have an adverse
effect upon the rights and intended benefits of the holders of Warrants, the
number of shares of Common Stock and the kind and amount of other securities and
property for which each Warrant is exercisable shall be increased in such manner
as may be equitable in the circumstances.
Section 3.9 Multiple Classes of Common Stock.
(a) Election Right. If, at any time while any Warrants are
outstanding, the Corporation's authorized capital stock shall include two or
more classes or series of Common Stock, then each Warrantholder shall have the
right, upon each exercise of any of such holder's Warrant(s), to elect to
receive such number of shares of each such class or series as such holder
desires, provided that the total number of shares of all classes and series
selected by such holder shall not exceed the aggregate number of shares of
Common Stock issuable upon exercise of such Warrants(s).
(b) Adjustment Rights Apply. If, as a result of any adjustment
made pursuant to Article III, by virtue of the existence of Section 3.9(a), as a
result of any event referred to in Section 3.13, or otherwise, the holder of a
Warrant would, upon exercise thereof, become the holder of more than one class
or series of capital stock of the Corporation, then (i) the Warrant Price shall
be allocated among such classes or series in such manner as the Board shall
determine in good faith and (ii) number, amount and type of shares of Common
Stock and other securities and property for which any Warrant may be exercised
and the Warrant Price shall be subject to adjustment in respect of each such
class and series of capital stock in a manner and on terms as nearly as
equivalent as practicable to the provisions set forth in this Article III, which
manner and terms shall be determined by the Board promptly after each such
adjustment, each such action by the Corporation and each other event which has
or might have such result. Promptly after the Board makes any such
determination, the Corporation shall deliver to each Warrantholder a written
notice which shall describe in reasonable detail the manner and terms so
determined.
Section 3.10 Notices to Warrant Holders.
(a) Notice of Adjustments. Whenever the Warrant Price or the
number of shares of Common Stock or the kind or amount of other securities or
property for which any Warrant is exercisable shall be adjusted pursuant to
Article III, the Corporation at its expense shall forthwith prepare a
certificate to be executed by the chief financial officer of the Corporation
setting forth, in reasonable detail, the event requiring the adjustment, the
nature and amount of such adjustment, the method by which such adjustment was
calculated (including a description of the basis on which the Board made any
determination required by any provision of Article III), the date as of which
such adjustment was or will be effective as provided herein, the number of
shares of Common Stock and the kinds and amounts, other securities, cash and
other property for which and the Warrant Price at which each Warrant was
exercisable immediately prior to such event and for and at which such Warrant is
exercisable immediately after such adjustment and all other relevant
information. The Corporation shall promptly cause to be delivered to each
Warrantholder a signed copy of such certificate. The Corporation shall, upon the
written request at any time of any Warrantholder, furnish or cause to be
furnished to such Warrantholder a like certificate setting forth (i) the Warrant
Price at the time in effect and showing how such Warrant Price was calculated,
and (ii) the number of shares of each class or series of Warrant Stock and the
kind and amount, if any, of other Warrant Securities, cash and other property
which at the time would be received upon the exercise of a Warrant at the time
and showing how the same were calculated.
(b) Notice of Corporate Action. If at any time
(i) the Corporation shall take a record of the holders of
any class, series or issue of its capital stock or other securities for the
purpose of entitling them to receive a dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any evidences of its
indebtedness, any shares of capital stock of any class or series, any cash or
any other securities or property, or to receive any other right, interest or
benefit, or
(ii) there shall be any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation or any Sale of the Company or any other event referred to in
Section 3.2 or 3.13 shall occur or be proposed, or
(iii) there shall be any tender offer or exchange offer
for Warrant Securities of any class, series or issue, or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation,
then the Corporation shall (x) give to each Warrantholder at least 20 days'
prior written notice of the date on which a record date shall be fixed for such
dividend, distribution or right or for determining rights to vote in respect of
any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up, (y) promptly
after learning of any such tender or exchange offer, deliver to each
Warrantholder notice thereof, a copy of all written offering material which the
Corporation possesses or reasonably can obtain or if no such materials exist or
are possessed or can reasonably be obtained by the Corporation, a written
summary of all material terms and conditions of and other material facts
relating thereto known to the Corporation and (z) give each Warrantholder at
least 20 days' prior written notice of the scheduled, planned or anticipated
date when any such reorganization, reclassification, Sale of the Company,
merger, consolidation, sale, transfer, dissolution, liquidation, winding up or
other event shall take place. Such notice in accordance with clause (x) of the
immediately preceding sentence also shall specify (i) the date on which any such
record is to be taken for the purpose of the event covered by the notice or any
related event, and (ii) the date on which such event or related event is to take
place and, if applicable, the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable as a result of such
event.
(c) Notices To Stockholders. In addition to the foregoing,
each Warrantholder shall be given the same notices of corporate action or
proposed corporate action as any holder of Common Stock.
Section 3.11 No Impairment. The Corporation shall not by or through
amending its certificate of incorporation, any reorganization, transfer of
assets, consolidation, merger, share exchange, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of any Warrant or Warrant Certificate, but
will at all times in good faith carry out and assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights and intended benefits of the Warrantholders
against impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not directly or indirectly increase the par value of any
shares of Common Stock or other capital stock receivable upon the exercise of
any Warrant above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (ii) will not take any action that results
in any adjustment to the Warrant Price if after such adjustment the total number
of shares of Common Stock or shares of any other class or series of Warrant
Stock issuable upon the exercise of all of the outstanding Warrants would exceed
the total number of shares of Common Stock or such other Warrant Stock,
respectively, then authorized by the Corporation's Certificate of Incorporation
and available and reserved for the purpose of issuance upon such exercise, and
(iii) will take all such action as may be necessary or appropriate in order that
the Corporation may validly and legally issue shares of each class and series of
Warrant Stock and other Warrant Securities upon the exercise of any Warrant
which in each case are fully paid, non-assessable and without personal liability
attaching to the ownership thereof and not subject to preemptive and similar
purchase rights. Upon the request of any Warrantholder, at any time, the
Corporation will acknowledge in writing, in form satisfactory to such
Warrantholder, the continuing validity of each Warrant and Warrant Certificate
then held by such Warrantholder and the obligations of the Corporation with
respect thereto and thereunder.
Section 3.12 Resolution of Certain Disputes.
(a) Consultation. If there shall arise any dispute between the
Corporation and the Majority Holders concerning the interpretation, application
or operation of the adjustment provisions of Article III (other than any such
dispute referred to in the first sentence of Section 3.8(e), which shall be
resolved as stated therein), the Corporation and the Majority Holders will
promptly attempt to settle such dispute through consultation and negotiation in
good faith and in a spirit of mutual cooperation. If agreement is reached
concerning the resolution of such dispute, then such agreement shall be final,
conclusive and binding on the Corporation and all Warrantholders.
(b) Arbitration. If, on or before the thirtieth day after
written notice of such dispute is given by the Corporation to the Warrantholders
or the Majority Holders to the Corporation, such dispute has not been resolved
by the agreement of the Corporation and the Majority Holders, such dispute shall
be settled by an expedited arbitration proceeding conducted in accordance with
the then current Commercial Arbitration rules of the American Arbitration
Association in New York, New York by a single arbitrator who satisfies the
requirements of Section 3.12(e) and who is mutually acceptable to the
Corporation and the Majority Holders or, in the event such Persons fail to agree
upon such arbitrator within ten Business Days after such written notice of
dispute is given, an arbitrator who satisfies such requirements appointed by the
American Arbitration Association upon application of either the Corporation or
the Majority Holders. Neither the Corporation nor the Majority Holders shall
unreasonably withhold its approval of the selection of an arbitrator satisfying
the requirements of Section 3.12(e).
(c) Certain Provisions Applicable to Arbitration. The
Corporation and the Majority Holders shall provide such arbitrator with such
information as may be reasonably requested in connection with the arbitration of
such dispute and shall otherwise cooperate with each other and such arbitrator
in good faith and with the goal of resolving such dispute as promptly as
reasonably practicable. The arbitrator shall not have authority to award
damages, but shall have only the authority to determine disputes regarding the
matters set forth in the first sentence of Section 3.12(a). Subject to the
immediately preceding sentence and to Section 3.12(f), the arbitrator's decision
with respect to the dispute referred to such arbitration shall be final and
binding and may be entered in any court with jurisdiction, and the Corporation
and the Warrantholders shall abide by such decision and award. Each party shall
bear its own costs and expenses, including attorney's fees, incurred in
connection with any arbitration proceeding, except that the Corporation and the
Warrantholders (as a group) each shall pay one-half of all fees, costs and
disbursements of the arbitrator and of or charged by the American Arbitration
Association.
(d) Other Remedies. The provisions of this Section 3.12 shall
not in any way limit or otherwise affect (i) the right of any Warrantholder to
seek, with regard to the matter in dispute, specific performance or other
injunctive relief in any court of competent jurisdiction or (ii) the rights or
remedies of any Warrantholder with respect to any claim, controversy or dispute
not submitted to and decided by or within the authority of an arbitrator
pursuant to this Section 3.12.
(e) Arbitrators. Each arbitrator appointed pursuant to Section
3.12(a) shall be an attorney who practices law in New York City, who has
substantial experience in sophisticated corporate and securities transactions
generally and in negotiating and drafting "antidilution" provisions of warrants
and convertible securities in particular and who has not, and who is not a
member or employee of any firm which has, rendered legal services to any of the
parties to the dispute or any of their respective Affiliates within the
preceding two years and who has no interest (other than the receipt of customary
fees for his services as an arbitrator) in the matter in dispute.
(f) Other Rights Unaffected. Nothing contained in this Section
3.12 or any other provision hereof is intended to or shall preclude any holder
of any Warrant or Warrant Stock from exercising or pursuing or otherwise
limiting or affecting the rights or remedies which such holder may have pursuant
to the Purchase Agreement, at law, in equity or otherwise by reason of any
matter which is the subject of or basis for any dispute referred to in Section
3.12(a) (or any other matter), and the dispute resolution mechanisms provided
for in this Section 3.12 are intended solely as a means of resolving bona fide
disputes concerning the interpretation, application or operation of the
adjustment provisions of Article III (other than any such dispute referred to in
the first sentence of Section 3.8(e), which shall be resolved as stated therein)
or bona fide disputes which the last sentence of Section 3.8(e) provides will be
resolved pursuant to this Section 3.12, and not for the purpose of determining
the rights of holders of Warrants or Warrant Stocks or the liabilities or
obligations of the Corporation, for the purpose of resolving or settling any
claim by any such holder of any breach or inaccuracy of any representation or
warranty of, or any breach or failure to perform any covenant, agreement or
obligation, of the Corporation contained herein or in the Purchase Agreement or
any other Transaction Agreement (as defined in the Purchase Agreement) or any
other purpose. Without limiting the generality of the immediately preceding
sentence, no decision of any arbitrator appointed pursuant to this Section 3.12
shall have or be given any res judicata or similar effect in any action, suit or
proceeding in which any claim by any holder of any Warrant or Warrant Stock of
any breach or inaccuracy of any representation or warranty of, or any breach or
failure to perform any covenant, agreement or obligation, of the Corporation
contained herein or in the Purchase Agreement or any other agreement or
instrument is to be adjudicated.
Section 3.13 Reclassification, Consolidation, Merger or Sale,
Conveyance or Lease or Assets.
(a) Adjustments. If any of the following shall occur while any
Warrants are outstanding:
(i) any consolidation, merger, binding share exchange or
reorganization to which the Corporation is party (other
than a consolidation, merger, share exchange or
reorganization in which the Corporation is the
continuing corporation and which does not result in any
reclassification of or change in the outstanding shares
of Warrant Securities issuable upon exercise of the
Warrants); or
(ii) any sale, conveyance, transfer or lease to another
Entity of the properties and assets of the Corporation
as an entirety or substantially as an entirety,
then the Corporation or the successor or acquiring Entity, as the case may be,
shall thereupon make appropriate provision, reasonably satisfactory to the
Majority Holders, so that the holders of the Warrants then outstanding shall
have the right at any time thereafter, upon exercise of the Warrants, to
purchase the kind and amount of shares of common stock of such successor or
acquiring Entity, other capital stock or equity interests, other securities and
property receivable or purchasable (as the case may be) upon such
reclassification, change, consolidation, merger, sale, conveyance, transfer or
lease as would be received by a holder of the number of shares of Common Stock,
the number of shares of each other class or series of Warrant Stock and the kind
and amount of all other Warrant Securities issuable upon exercise of such
Warrant immediately prior to such consolidation, merger, sale, conveyance,
transfer or lease (after giving effect to all adjustments required by this
Article III. If the holders of the Common Stock or any other shares of Warrant
Stock of any class or series have rights of election as to the kind or amount of
capital stock or other equity interests, other securities or other property
receivable upon consummation of any such transaction, then the same right of
election shall be given to the holders of the Warrants. For purposes of this
Section 3.13, "common stock of the successor or acquiring Entity" shall include
capital stock (or other equity interests if such Entity is not a corporation) of
such Entity of any class which is not preferred as to dividends or assets on
liquidation over any other class or series of stock of such corporation (or
other equity interests of a non-corporate Entity) and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
capital stock, equity interests or other securities which are convertible into
or exchangeable for any such capital stock (or other equity interests), either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such capital stock (or other equity interests).
(b) Express Assumption by Successor or Acquiring Corporation.
In case of any such merger, consolidation, share exchange, reorganization, or
disposition of assets, the successor or acquiring Entity shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of this resolution to be performed and observed by the Corporation and
all the obligations and liabilities thereunder or otherwise with respect
thereto, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board) in order to provide for adjustments of
shares of the capital stock, other securities or other property for which
Warrants may be exercised which shall be as nearly equivalent as practicable to
the adjustments provided for in Article III. Promptly after the Board makes any
such determination, the Corporation shall deliver to each Warrantholder a
written notice which shall describe in reasonable detail the manner and terms so
determined.
(c) Provisions Apply Successively. The foregoing provisions of
this Section 3.13 shall similarly apply to successive reorganizations, mergers,
consolidations or disposition of assets.
Section 3.14 Taking of Record; Stock and Warrant Transfer Books. In the
case of all dividends or other distributions by the Corporation to the holders
of its Common Stock with respect to which any provision of Article III refers to
the taking of a record of such holders, in each such case the Corporation will
not declare, pay or make any such dividend or distribution unless it shall take
such a record and the Corporation take each such record as of the close of
business on a Business Day. The Corporation will not at any time, except upon
dissolution, liquidation or winding up of the Corporation, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS
OF HOLDERS OF WARRANTS
Section 4.1 No Rights or Obligations as Warrant Securityholder
Conferred by Warrants or Warrant Certificates. Except as otherwise provided
herein, no Warrant Certificate or Warrant evidenced thereby shall, prior to
exercise thereof, entitle the holder thereof to any of the rights of a holder of
Warrant Securities, including the right to vote at or to receive notice of any
meeting of stockholders of the Corporation or any consent action or other
proceeding of the Corporation. Neither the ownership of any Warrants or Warrant
Certificate nor any provision of any Warrant Certificate shall give rise to any
liability of the holder thereof for the purchase price of any Warrant Security
or as a holder of any Warrant Security, whether such liability is asserted by or
on behalf of the Corporation, creditors of the Corporation or any other Person.
Section 4.2 Holder of Warrant Certificate May Enforce Rights.
Notwithstanding any of the provisions of any Warrant Certificate, any holder of
a Warrant or a Warrant Certificate, without the consent of the holder of any
Warrant Securities or the holder of any other Warrant or Warrant Certificate
may, on his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Corporation suitable to
enforce, or otherwise in respect of, his rights under his Warrant Certificate(s)
or otherwise with respect to his Warrant(s).
Section 4.3 Office of the Corporation. As long as any of the Warrants
remain outstanding, the Corporation shall maintain one or more offices or
agencies where the Warrants may be presented for exercise and Warrants and
Warrant Securities may be presented for registration of transfer, division or
combination. Warrants and Warrant Securities may, in any event, be presented for
such purposes at the principal executive offices of the Corporation in the
United States.
Section 4.4 Uniform Terms. The substantive terms, conditions and other
provisions of all Warrants and Warrant Certificates shall at all times be
uniform and identical within each class (except, in the case of Warrant
Certificates, as to the number of Warrants evidenced thereby). The Corporation
shall not issue any Warrants except pursuant to the Purchase Agreement. All
Warrants outstanding from time to time shall be deemed to have been issued on
the Issue Date, and all Warrant Certificates, whenever issued, shall be deemed
to have been issued, and shall be dated, as of the Issue Date.
ARTICLE V
TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
Section 5.1 Exchange and Transfer. Transfer of Warrants shall be
registered on the books of the Corporation to be maintained for such purpose,
upon surrender of the Warrant Certificate representing the Warrant or Warrants
to be transferred at any office or agency designated by the Corporation pursuant
to Section 4.3, together with a written Assignment Form substantially in the
form annexed to this Agreement duly executed by the holder thereof or his duly
appointed legal representative or attorney-in-fact. Upon such surrender, the
Corporation shall, at its expense, execute and deliver a new Warrant Certificate
or Warrant Certificates in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant Certificate evidencing the Warrants
not so assigned. Warrants, if properly assigned in compliance herewith, may be
exercised by a new holder thereof without having a new Warrant Certificate
issued. At the option of any Warrantholder (i) a Warrant Certificate may be
exchanged for other Warrant Certificates representing, in the aggregate, the
same number of Warrants as the Warrant Certificate exchanged or (ii) two or more
Warrant Certificates may be exchanged for a single Warrant Certificate
representing, or some other number of Warrant Certificates representing in the
aggregate, the same number of Warrants as the Warrant Certificates exchanged, in
each case upon surrender of the Warrant Certificate(s) to be exchanged at the
office of the Corporation referred to in Section 2.1 or another office or agency
designated by the Corporation pursuant to Section 4.3. Whenever any Warrant
Certificate is so surrendered for exchange, the Corporation shall, at its
expense, execute and deliver the Warrant Certificate(s) which the Warrantholder
making the exchange is entitled to receive. Upon receipt by the Corporation of
any mutilated Warrant Certificate, or of evidence reasonably satisfactory to it
of the loss, theft or destruction of any Warrant Certificate and, in the case of
loss, theft or destruction, of indemnity reasonably satisfactory to it, the
Corporation will make and deliver a new Warrant Certificate of identical tenor
and representing the same number of Warrants as such mutilated, lost, stolen or
destroyed Warrant Certificate. Any Warrant Certificate issued in exchange for
any Warrant Certificate, in replacement of any mutilated, lost, stolen or
destroyed Warrant Certificate or upon transfer of any Warrant shall be dated the
Issue Date and shall represent an additional contractual obligation of the
Corporation, whether or not the mutilated, lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
rights and benefits equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder.
Section 5.2 Supplying Information. The Corporation shall cooperate with
each Warrantholder and each holder of Warrant Securities in supplying such
information as may be reasonably necessary for such Warrantholder or holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from registration under the Securities Act for the sale or other transfer of any
Warrant or Warrant Securities. Without limiting the generality of the
immediately preceding sentence, Warrantholders and prospective purchasers of
Warrants designated by such holders will have the right to obtain from the
Corporation upon request by such holders or prospective purchasers, during any
period in which the Corporation is not subject to Section 13 or 15(d) of the
Exchange Act, the information required by paragraph (d)(4)(i) of Rule 144A in
connection with any transfer or proposed transfer of Warrants.
Section 5.3 Expenses. No service or other charge shall be made for any
exchange, substitution, replacement or registration of transfer of Warrants or
Warrant Certificates and the Corporation shall bear its own costs and expenses
in connection therewith, but the Corporation may require payment of a sum
sufficient to cover any stamp, stock transfer or other similar tax or
governmental charge that is required to be paid by the Corporation solely by
virtue of any transfer. All Warrant Certificates issued upon any exchange,
substitution, replacement or registration of transfer of Warrant Certificates
shall be the valid obligations of the Corporation, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrant Certificate surrendered for such exchange, substitution, replacement or
registration of transfer.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Reacquired Warrants. All Warrants received by the
Corporation upon exercise or redeemed, retired, purchased or otherwise lawfully
acquired by the Corporation or any of its Subsidiaries shall be retired and
canceled and shall not be deemed outstanding for any purpose or reissued.
Section 6.2 Amendment. The terms, conditions and other provisions of
the Warrants and Warrant Certificates which, as indicated hereinabove, are
intended to be uniform may be amended only with the written consent of the
Corporation and the Majority Holders. Any such amendment which is so consented
to shall be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
Section 6.3 Determinations Generally. Unless otherwise expressly
provided herein, all decisions and determinations required or permitted to be
made hereunder by any Purchaser (including any decision as to whether to give
any consent or approval) shall be made by such Person in its sole discretion.
Section 6.4 Binding Effect; Successors and Assigns; Entire Agreement.
Except as expressly provided in this Agreement, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon or give any
creditor, stockholder or Affiliate of the Corporation or any other Person except
the parties and the Persons who from time to time are holders of Warrants any
remedy or claim under or by reason of this Agreement or any term, covenant or
condition hereof, all of which shall be for the sole and exclusive benefit of
the parties. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and the Persons who from time to
time are holders of Warrants and their respective successors and permitted
assigns. Except as otherwise specifically permitted or contemplated by this
Agreement, neither this Agreement nor any of the rights, interests or
obligations of the Corporation hereunder shall be assigned or delegated without
the prior written consent of the Majority Holders. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter herein
and supersede all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the specific subject matter
hereof.
Section 6.5 No Implied Waivers. No action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party or beneficiary, shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any agreements, covenants,
obligations or commitments contained herein or made pursuant hereto. The waiver
by any party of a breach or benefit of any provision of this Agreement shall not
operate or be construed as a waiver of any preceding or succeeding breach and no
failure by any party or beneficiary to exercise any right, privilege or remedy
hereunder shall be deemed a waiver of such party's or beneficiary's rights,
privileges or remedies hereunder or shall be deemed a waiver of such party's or
beneficiary's rights to exercise the same at any subsequent time.
Section 6.6 Further Assurances. Each party shall cooperate and take
such actions as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 6.7 Counterparts. This Agreement 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 may be
executed by facsimile signatures and may be delivered by the exchange of
counterparts of signature pages by means of telecopier transmission.
Section 6.8 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 Corporation: Convergent Communications, Inc.
400 Inverness Drive South, Suite 400
Englewood, Colorado 80112
Attn: General Counsel
Telephone: (303) 749-3000
Telecopy: (303) 749-3113
with a copy to: Richard M. Russo, Esq.
Gibson, Dunn & Crutcher LLP
1801 California Street, Suite 4100
Denver, Colorado 80202
Telephone: (303) 298-5715
Telecopy: (303) 296-5310
If to any Warrantholder, to such Warrantholder at its address or
supplied by such Warrantholder form time to time in writing to the Corporation,
with copies to:
Paul J. Shim, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Telephone: (212) 225-2930
Telecopy: (212) 225-3999
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 communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
Section 6.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
Section 6.10 Severability. If any provision of this Agreement 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.
Section 6.11 Specific Performance. Without intending to limit the
remedies available to any of the parties, each of the parties acknowledges and
agrees that a violation, breach or threatened by the other of any term of this
Agreement will cause such party irreparable injury for which an adequate remedy
at law is not available. The parties agree that each party shall have the right
of specific performance and, accordingly, shall be entitled to an injunction,
restraining order or other form of equitable relief, in addition to any and all
other rights and remedies at law, from any court of competent jurisdiction
restraining any other party from committing any breach or threatened breach of,
or otherwise specifically to enforce, any provision of this Agreement and all
such rights will be cumulative. The parties further agree that any defense in
any action for specific performance that a remedy at law would be adequate is
waived.
(Signatures continued on the next page)
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as
of the date first written above.
CONVERGENT COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
TPG CONVERGENT I, LLC
By:
-------------------------------
Name:
Title:
SANDLER CAPITAL PARTNERS V, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By:
------------------------
Edward G. Grinacoff
President
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By:
------------------------
Edward G. Grinacoff
President
<PAGE>
EXHIBIT F
CONVERGENT COMMUNICATIONS(TM) PROPRIETARY INFORMATION
- --------------------------------------------------------------------------------
EMPLOYMENT SERVICES AGREEMENT
- --------------------------------------------------------------------------------
Employee Information
Joseph R. Zell 1275 East Kistler Court
------------------------------------- -------------------------------
(Name) Highlands Ranch, CO 80126
-------------------------------
Effective Date: April , 2000 (Address)
-------------------------------------
1. Employment. The Company agrees to employ Employee and Employee hereby agrees
to be employed by the Company and/or such of its subsidiaries and affiliate
corporations as determined by the Company on a full-time basis, for the period
and upon the terms and conditions hereinafter set forth, provided that this
Agreement shall not be effective unless and until the Company has executed a
definitive Securities Purchase Agreement with one or more investors whereby the
Company will receive a minimum of $150 million in gross proceeds pursuant to the
sale of certain securities.
2. Capacity and Duties. Employee shall be employed in the following capacity
for the Company or any of its affiliates in such capacity of equal or greater
responsibility. During his employment, Employee shall perform the duties and
bear the responsibilities commensurate with his position and shall devote his
full working time, energy and attention to the performance of his duties and
responsibilities hereunder and shall faithfully and diligently endeavor to
promote the business and best interests of the Company and its affiliates.
During his employment, Employee may not, without the prior written consent of
the Company, operate, participate in the management, operations or control of,
or act as an employee, officer, consultant, agent or representative of, any type
of business or service (other than as an employee of the Company), provided that
it shall not be a violation of the foregoing for Employee to (i) act or serve as
a director, trustee or committee member of any civic or charitable organization
and (ii) manage his personal, financial and legal affairs, so long as such
activities (described in clauses (i) and (ii)) do not interfere with the
performance of his duties and responsibilities to the Company as provided
hereunder.
- --------------------------------------------------------------------------------
Title: Chief Executive Officer and President
- --------------------------------------------------------------------------------
3. Compensation and Benefits.
3.1 The Company shall pay Employee during the Term of this Agreement an
annual base salary, payable semi-monthly as follows. The annual base salary may
be adjusted from time to time for merit increases in the sole discretion of the
Company.
- --------------------------------------------------------------------------------
Annual Base Salary: Five Hundred Thousand Dollars ($500,000)
- --------------------------------------------------------------------------------
3.2 In addition to his Annual Base Salary, during the Term of this
Agreement, Employee shall be eligible to receive a performance bonus (the
"Performance Bonus") for each fiscal year of the Company, payable after the end
of the fiscal year, if certain performance objectives to be determined by the
Board of Directors of the Company are achieved. The target Performance Bonus
will be a percentage of Employee's annual base salary.
- --------------------------------------------------------------------------------
Target Performance Bonus: One Hundred Percent (100%) of Annual Base Salary
- --------------------------------------------------------------------------------
3.3 Throughout the Term of this Agreement, the Company shall provide
Employee a monthly car allowance as shall be determined in accordance with the
Company's policies.
3.4 In addition to the compensation as provided above, the Company shall
provide Employee during the Term of this Agreement, with the benefits of such
insurance plans, hospitalization plans, stock plans, retirement plans and other
employee fringe benefits (including sick leave and four (4) weeks annual
vacation time) as shall be generally provided to the other executives of the
Company and for which Employee may be eligible under the terms and conditions
thereof. The Company reserves the right to modify, delete or change its benefits
at any time provided that any such changes applied to Employee shall also apply
to the same extent to the Company's other executive officers.
3.5 Throughout the Term of this Agreement, the Company shall reimburse
Employee for all reasonable out-of-pocket expenses incurred by Employee in
connection with the business of the Company and in performance of his duties
under this Agreement, upon presentation to the Company by Employee of an
itemized accounting of such expenses with reasonable supporting data.
This Employment Services Agreement is further subject to the Employment
Agreement Terms ("Agreement Terms") attached hereto, and, if this box is marked,
[x] Addendum A attached hereto (collectively the "Agreement"). Employee has read
and understands the Agreement Terms and agrees to be bound by those conditions.
Acceptance of this Agreement is contingent upon acceptance by a representative
of the Company duly authorized to execute this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the last date
shown below.
CONVERGENT COMMUNICATIONS, INC. JOSEPH R. ZELL
(Company) (Employee)
By:
---------------------------------- -----------------------------
Title:
-------------------------------
<PAGE>
Employment Agreement Terms
The following Employment Agreement Terms are in addition to the terms
and conditions contained in the Employment Services Agreement cover sheet:
4. Term. The initial term of this Agreement shall commence on the Effective
Date of this Agreement and shall continue until the third anniversary of the
Effective Date, unless sooner terminated by either party pursuant to Section 5
below ("Term"). The applicable provisions of Sections 6, 7, 8, 9 and 10 shall
remain in full force and effect as provided and for the time periods specified
in such Sections notwithstanding the termination of this Agreement; all other
obligations of either party to the other under this Agreement shall terminate at
the end of the Term.
5. Termination.
5.1 If, during the Term of this Agreement, Employee dies or is prevented
from performing his duties by reason of illness or incapacity for one hundred
forty (140) days in any one hundred eighty (180) day period, the Company may
terminate this Agreement, upon thirty (30) days prior notice thereof to Employee
or his duly appointed legal representative.
5.2 The Company or the Employee may terminate this Agreement upon at
least thirty (30) days prior notice to Employee upon the happening of any of the
following events ("Change of Control Event"):
5.2.1 The sale by the Company of substantially all of its assets to a
single purchaser or associated group of purchasers who are not affiliates of the
Company. For the purposes of this Agreement, the term "affiliate" means a
person, firm or corporation that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with the
Company or with the Texas Pacific Group or any of its affiliates.
5.2.2 The sale, exchange or other disposition in one transaction of
eighty percent (80%) or more of the outstanding voting stock of the Company to
or with a person, firm or corporation not then an affiliate of the Company.
5.2.3 The merger or consolidation of the Company in a transaction not
involving an affiliate of the Company in which the shareholders of the Company
receive less than fifty percent (50%) of the outstanding voting stock of the new
continuing corporation.
5.2.4 A bona fide decision by the Company to terminate its business
and liquidate its assets (but only if such liquidation is not part of a plan to
carry on the Company's business through its shareholders).
5.2.5 If Employee's employment is terminated prior to the date on
which a Change of Control Event occurs, and such termination was at the request
of a third party who has taken steps to effect a Change of Control Event or was
otherwise caused by the Change of Control Event, then for all purposes of this
Agreement, a Change of Control Event shall be deemed to have occurred prior to
such termination.
5.3 The Company may terminate this Agreement at any time for gross
negligence or willful non-performance by Employee of any duty as an employee of
the Company which continues for a period of thirty (30) days after written
notice specifying such negligence or non-performance.
5.4 The Company may terminate this Agreement immediately upon a material
breach of any obligation or covenant created by or under this Agreement that is
not cured by Employee within thirty (30) days of his receipt of written notice
of said breach, or upon Employee's intentional commission of a violation of any
federal law, rule or regulation, or any theft, fraud, embezzlement or similar
crime involving the commission of any felony.
5.5 Company or Employee may terminate this Agreement without cause upon
at least thirty (30) days prior notice.
5.6 Termination Fees. In the event that this Agreement is terminated
pursuant to this Section 5, Company shall pay Employee a Termination Fee as
described below, provided that such Termination Fee shall be conditioned upon
and subject to Employee executing a valid release and waiver waiving all claims
that Employee may have against the Company, its affiliates and their respective
assigns, successors, employees, directors, officers, shareholders and agents,
and upon Employee's compliance with the restrictive covenants provided in
Sections 6 and 7 hereof.
5.6.1 If this Agreement is terminated by (a) the Company under
subsections 5.1, 5.2 or 5.5 above, or (b) by the Employee for any or no reason
more than three (3) months following a Change of Control Event; or (c) by the
Initials: Date:
------- ------- ---------
<PAGE>
Employment Agreement Terms
Employee (i) for Good Reason during the three (3) months following a Change of
Control Event as described in subsection 5.2 above or such shorter period as the
parties may mutually agree is required to effectuate an orderly transition of
Employee's responsibilities, or (ii) at any time for Good Reason (as defined
below), then: (1) the Company shall continue to pay Employee's monthly base
salary, as shall be in effect on the termination date, for a period of
twenty-four (24) months following the date of termination; (2) the Company shall
provide Employee with the following benefits coverage: life, medical, dental and
vision, for a period of twenty-four (24) months following the date of
termination; (3) two times the amount of the incentive bonus, if any, earned by
Employee in the fiscal year ending prior to the date of termination pursuant to
Section 3.2 and (4) vesting of Employee's stock options, if any, shall be
accelerated such that all stock options granted to Employee will vest as of the
date of termination; provided that Employee shall not receive any Termination
Fee if he terminates this Agreement without Good Reason during the three (3)
months following a Change of Control Event as described in subsection 5.2 above
or such shorter period as the parties may mutually agree is required to
effectuate an orderly transition of Employee's responsibilities.
5.6.2 For purposes of this Agreement, "Good Reason" shall mean,
without the Employee's express written consent, the occurrence of any of the
following circumstances, unless in the case of clauses (i), (v), or (vi), such
circumstances are fully corrected within thirty (30) days following notice to
the Company:
(i).The material diminution of Employee's authority, duties and
reporting relationships, or a substantial adverse alteration in the nature or
status of the Employee's responsibilities from those in effect immediately after
the commencement of his employment;
(ii). A reduction by the Company in the Employee's annual base
salary as then in effect;
(iii). A new Company requirement is instituted which requires
the Employee to change his work location to a location greater than fifty (50)
miles from Employee's work location immediately prior to the institution of the
requirement, but not including a requirement that the Employee travel on the
Company's business to an extent substantially consistent with his present
business travel obligations;
(iv). The failure by the Company, without the Employee's
consent, to pay to the Employee any portion of any base salary, bonus, other
material cash compensation, Common Stock or stock options payable in
consideration of Employee's employment with the Company, or to pay to the
Employee any portion of an installment of deferred compensation under any
deferred compensation program of the Company within seven (7) days of the date
such compensation is due, unless such failure to pay is reasonably in dispute by
the Company;
(v).The failure by the Company to continue in effect any
compensation plan in which the Employee participates that is material to the
Employee's total compensation, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to such plan
, or the failure by the Company to continue the Employee's participation
therein; provided that this subsection shall not apply in the event of a change
in any compensation plan that applies generally to all of the Company's
executive officers;
(vi). following a Change of Control Event only: the failure by
the Company to continue to provide the Employee with benefits substantially
similar to those enjoyed by the Employee under any of the Company's pension,
life insurance, medical, health and accident, or disability plan in which the
Employee was participating immediately after the commencement of his employment;
the taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Employee of any material
fringe benefit enjoyed by the Employee immediately after the commencement of his
employment; or the failure by the Company to provide the Employee with the
number of paid vacation days to which the Employee is entitled pursuant to the
greater of (a) this Agreement or (b) the basis of years of service with the
Company in accordance with the Company's normal vacation policy in effect
immediately after the commencement of his employment.
The Employee's right to terminate his employment pursuant to this
subsection shall not be affected by his incapacity due to physical or mental
illness. The Employee's continued employment shall not constitute consent to, or
a waiver of rights with respect to, any circumstance constituting Good Reason
hereunder.
5.6.3 No Termination Fee shall be paid to Employee in the event that
this Agreement is terminated for any other reason, including, without
limitation, pursuant to subsections 5.3 and 5.4 herein or by
Initials: Date:
------- ------- ---------
<PAGE>
Employment Agreement Terms
Employee pursuant to Section 5.5.
5.6.4 Employee shall not be required to mitigate the amount of any
payment provided for in Section 5.6 of this Agreement by seeking other
employment or otherwise.
5.7 In the event that this Agreement is terminated pursuant to subsection
5.2 or by the Company pursuant to subsection 5.5, Employee shall have a period
of twelve (12) months from the date of termination in which to exercise
Employee's vested stock options.
5.8 Any termination of Employee's employment by Company (other than
termination pursuant to Section 5.1) shall be communicated by a written notice
(the "Notice of Termination"), which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Employee's employment under the provision so indicated. Any purported
termination pursuant to Section 5.3 and 5.4 that is disputed and finally
determined not to have been proper shall be a termination by Company in breach
of this Agreement.
5.9 Notwithstanding any other provision of this Agreement, Employee shall
not be deemed to have been terminated in conformity with section 5.3 and/or 5.4
of this Agreement unless Employee has first received: (A) reasonable notice to
Employee setting forth the reasons for Company's intention to terminate for
Cause; and (B) an opportunity, with his counsel, to appear before and be heard
by the Board at the earliest reasonable date; and (C) delivery of a Notice of
Termination from the Board finding that, in the good faith opinion of the Board,
Cause as specified in the notice required by clause 5.9(A), above, exists, and
specifying the particulars thereof in detail.
6. Covenant Not to Compete.
6.1 During the term of this Agreement, Employee shall not directly or
indirectly, own, manage, operate, control, be employed by, or participate in the
ownership, management, operation or control of a business that is a Direct
Competitor of the Company within a Relevant Area. For the purposes of this
Section 6, including all subsections of this Section 6, a "Direct Competitor" is
a company engaged in providing integrated communications services and/or
equipment to small and medium-sized business enterprises, and the "Relevant
Area" shall be defined as any area located within, or within fifty (50) miles
of, the legal boundaries or limits of any city within which the Company or any
parent, subsidiary or affiliate thereof is providing services, has commenced the
acquisition of any authorizations, rights of way or facilities or has commenced
the construction of facilities for the purpose of providing services, or the
Company has publicly announced or privately disclosed in writing to Employee
that it plans to provide Services.
6.2 If, after the termination of this Agreement, Employee directly or
indirectly, owns, manages, operates, controls, becomes employed by, or
participates in the ownership, management, operation or control of a business
that is a Direct Competitor of the Company within a Relevant Area, then the
Company shall thereafter be relieved of its obligation, if any, to continue the
payment of any Termination Fee to Employee; provided that this section 6.2 shall
not apply if Employee terminates this Agreement for Good Reason, or following a
Change of Control Event.
6.3 During the Term of this Agreement (or, if longer, during the term of
Employee's employment with the Company or any of its affiliates) and for a
period of twenty-four (24) months after termination of this Agreement (or, if
longer, termination of Employee's employment with the Company or any of its
affiliates), Employee shall not (i) directly or indirectly cause or attempt to
cause any employee of the Company or any of its affiliates to leave the employ
of the Company or any affiliate, (ii) in any way interfere with the relationship
between the Company and any employee or between an affiliate and any employee of
the affiliate, (iii) directly or indirectly hire any employee of the Company or
any affiliate to work for any organization of which Employee is an officer,
director, employee, consultant, independent contractor or owner of an equity or
other financial interest, or (iv) interfere or attempt to interfere with any
transaction in which the Company or any of its affiliates was involved during
the Term of this Agreement or Employee's employment, which ever is longer.
6.3 Employee agrees that, because of the nature and sensitivity of the
information to which he will be privy and because of the nature and national and
international scope of the Company's business, the restrictions in this Section
6 are fair and reasonable.
7. Confidential Information.
7.1 The relationship between the Company and Employee is one of
confidence and trust.
7.2 As used in this Agreement (i) "Confidential Information" means
information disclosed to or acquired
Initials: Date:
------- ------- ---------
<PAGE>
Employment Agreement Terms
by Employee about the Company's plans, products, processes and services
including the Services and any Relevant Area, including information relating to
research, development, inventions, manufacturing, purchasing, accounting,
engineering, marketing, merchandising, selling, pricing and tariffed or
contractual terms, customer lists and prospect lists or other market
information, with respect to any of the Company's then current business
activities; and (ii) "Inventions" means any inventions, discoveries, concepts
and ideas, whether patentable or not, including, without limitation, processes,
methods, formulas, and techniques (as well as related improvements and
knowledge) that are based on or related to Confidential Information, that
pertain in any manner to the Company's then currently used technology, expertise
or business and that are made or conceived by Employee, either solely or jointly
with others, and while employed by the Company or within six (6) months
thereafter, whether or not made or conceived during working hours or with the
use of the Company's facilities, materials or personnel.
7.3 Employee agrees that he shall at no time during the term of his
employment or at any time thereafter disclose any Confidential Information,
Inventions or component thereof to any person, firm or corporation to any extent
or for any reason or purpose or use any Confidential Information or component
thereof for any purpose other than the conduct of the Company's business
7.4 Any Confidential Information, Invention or component thereof that is
directly or indirectly originated, developed or perfected to any degree by
Employee during the term of his employment by the Company shall be and remain
the sole property of the Company and shall be deemed trade secrets of the
Company.
7.5 Upon termination of Employee's employment pursuant to any of the
provisions herein, Employee or his legal representative shall deliver to the
Company all originals and all duplicates and/or copies of all documents,
records, notebooks, and similar repositories of or containing Confidential
Information or subject matter then in his possession, whether prepared by him or
not.
7.6 Employee agrees that the covenants and agreements contained in this
Section 7 are fair and reasonable and that no waiver or modification of this
Section or any covenant or condition set forth herein shall be valid unless set
forth in writing and duly executed by the parties hereto. Employee agrees to
execute such separate and further confidentiality agreements embodying and
enlarging upon the provisions of this Section 7 as the Company may reasonably
request.
8. Injunctive Relief. Upon a breach or threatened breach by Employee of any of
the provisions of Sections 6 and 7 of this Agreement, the Company shall be
entitled to an injunction restraining Employee from such breach if the Company
satisfies the requirements of Rule 65, Colorado Rules of Civil Procedure, and
Colorado decisional law applying Rule 65. Nothing herein shall be construed as
prohibiting the Company from pursuing any other remedies for such breach or
threatened breach, including recovery of damages from Employee.
9. No Waiver. A waiver by the Company of a breach of any provision of this
Agreement by Employee shall not operate or be construed as a waiver of any
subsequent or other breach by Employee.
10. Severability. It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision or portion of
this Agreement shall be adjudicated to be invalid or unenforceable, this
Agreement shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to apply only with
respect to the operation of such Section in the particular jurisdiction in which
such adjudication is made.
11. Notices. All communications, requests, consents and other notices provided
for in this Agreement shall be in writing and shall be deemed given if mailed by
first class mail, postage prepaid, certified or return receipt requested to the
addresses set forth herein, or last known address and received by the intended
party. If the mailing is returned to the sender due to an incorrect address, the
correct address must be obtained in order for the communication to be received
and completed.
12. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado.
13. Assignment. The Company may assign its rights and obligations under this
Agreement to any affiliate of the Company or, subject to the provisions of
Section 5, to any acquirer of substantially all of the business of the Company,
and all covenants and agreements hereunder shall inure to the benefit of and be
enforceable by or
Initials: Date:
------- ------- ---------
<PAGE>
Employment Agreement Terms
against any such assignee. Neither this Agreement nor any rights or duties
hereunder may be assigned or delegated by Employee.
14. Amendments. No provision of this Agreement shall be altered, amended,
revoked or waived except by an instrument in writing, signed by each party to
this Agreement.
15. Binding Effect. Except as otherwise provided herein, this Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective legal representatives, heirs, successors and assigns.
16. Execution in Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
17. Entire Agreement. This Agreement (and the Company's arbitration procedures
described below) sets forth the entire agreement and understanding of the
parties and supersedes all prior understandings, agreements or representations
by or between the parties, whether written or oral, which relate in any way to
the subject matter hereof, including, without limitation, any previously
executed employment agreements or amendments thereto.
18. Indemnification
18.1 To the greatest extent allowable under applicable law, the Company
shall indemnify and defend Employee from and against all claims, demands and
liabilities arising from or relating to Employee's employment or other
relationships with the Company ("Indemnified Claims"), and advance to Employee
all costs and attorneys' fees incurred by him or on his behalf in connection
with any Indemnified Claim; provided that in no circumstances shall the
indemnification and/or cost advance requirements of this paragraph exceed the
scope of the indemnification and cost advance rights extended by the Company's
bylaws to the Company's executive officers.
18.2 Employee represents and warrants that he is not in breach of his
obligations to any former employer under any agreement limiting his ability or
right to solicit or hire any individual, and agrees that he shall not during the
term of this Agreement knowingly and intentionally violate any such obligation.
Provided that Employee has not knowingly and intentionally violated any
obligations described in the previous sentence, the Company shall fully
indemnify Employee concerning and defend him against any claim or demand by, or
liability by Employee to, Employee's former employer (including, without
limitation, any demand for repayment of cash, stock or stock options, or any
effort to cancel stock options or otherwise avoid any obligation relating
thereto) arising from or relating to any contractual or other legal limitation
on or prohibition of the solicitation or hiring of any person, as an employee,
contractor or otherwise, by the Company or any affiliate thereof.
19. Arbitration. Any dispute arising out of this Agreement, the Employee's
application for employment, the Employee's relationship with the Company, or the
Employee's employment or separation from employment shall be subject to
arbitration pursuant to the Company's arbitration procedures. The Employee
acknowledges that a copy of the procedures has been delivered to and read by the
Employee prior to the time he/she executed this Agreement. It is understood that
all sections of the Arbitration Procedures apply, except those sections
pertaining to at-will employment, which are superseded by this Employment
Agreement. In his or her final award, the arbitrator shall award the party
substantially prevailing all costs incurred by that party in connection with the
arbitration, including reasonable attorneys' fees and that party's share, if
any, of the fees charged by the arbitrator, and all filing and/or arbitration
administration fees incurred by that party in connection with the arbitration.
Initials: Date:
------- ------- ---------
<PAGE>
CONVERGENT COMMUNICATIONS(TM) PROPRIETARY INFORMATION
- --------------------------------------------------------------------------------
ADDENDUM A TO EMPLOYMENT SERVICES AGREEMENT
- --------------------------------------------------------------------------------
1. Additional Provisions. The Company and Employee agree to the following
additions, changes and amendments to the Employment Services Agreement and the
Agreement Terms:
- --------------------------------------------------------------------------------
Section Reference Additions, Changes or Amendments
- --------------------------------------------------------------------------------
3.2 Employee's Performance Bonus described in Section 3.2
(addendum) shall be guaranteed to be a minimum of $250,000 for the
first fiscal year of Employee's employment which amount
shall be offset by any actual Performance Bonus earned
in such year.
- --------------------------------------------------------------------------------
3.3 Employee's monthly car allowance shall be $1,200
(addendum) payable semi-monthly.
- --------------------------------------------------------------------------------
3.4 The Company hereby represents and warrants that all
(addendum) stock option grants contemplated or required by this
Agreement are authorized by and permissible under its
various stock option plans and programs, and that it
shall exercise its best efforts to obtain all board
and/or shareholder approvals, if any, required to allow
such stock option grants to be made to Employee as,
when and on the terms specified hereunder. Employee
shall receive an option to purchase 1,500,000 shares of
Company common stock at an exercise price of $13.00 per
share. 25% of the shares underlying the option shall be
immediately vested upon grant. The remaining 75% of the
shares underlying the option shall vest in three equal
installments on each of the succeeding three
anniversaries of the date of grant, provided that
Employee is still employed by the Company on each such
anniversary. The terms and conditions of the Company's
Stock Incentive Plan shall govern all other aspects of
the stock option grant; provided that in the event of
any conflict between any term of this Agreement and any
term of the Plan or any Option Certificate issued
thereunder, the terms of this Agreement shall control.
{Rest of Page Intentionally Blank}
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Initials: Date:
------- ------- ---------
<PAGE>
- --------------------------------------------------------------------------------
3.6 3.6.1 The Company shall pay Employee a signing bonus
(new) comprised of a combination of cash and Common Stock
with a total value of $20 million ("Signing Bonus"),
which shall be payable in two equal installments as
follows: (i) $10 million in cash or Common Stock in a
combination designated by Employee as provided in
section 3.6.2, below, on the later of (a) 31 days after
the Company receives Employee's designation or (b) the
date by which the Company has executed definitive
Securities Purchase Agreements with one or more
investors whereby the Company will receive a minimum of
$150 million in gross proceeds pursuant to the sale of
certain securities ("Initial Installment"), and (ii)
$10 million in cash or Common Stock in a combination
designated by Employee as provided in section 3.6.2, on
the earlier to occur of (a) the closing of the merger
of US West Communications, Inc. and Qwest
Communications, Inc., and (b) December 31, 2000 ("Final
Installment").
3.6.2 On or before March 29, 2000, Employee shall
deliver to the company a written designation (the
"Designation") specifying the combination of cash and
Common Stock that shall together comprise the Initial
Installment and the Final Installment (which may be
comprised of different combinations of cash and Common
Stock). To the extent that Employee elects to receive
any portion of Signing Bonus payable in the Initial
Installment in the form of Common Stock, the number of
shares of Common Stock to be so granted shall be
determined by dividing the number of dollars of the
Signing Bonus designated by Employee to be payable in
Common Stock by $13.00 To the extent that Employee
elects to receive any portion of Signing Bonus payable
in the Final Installment in the form of Common Stock,
the number of shares of Common Stock to be so granted
shall be determined by dividing the number of dollars
of the Signing Bonus designated by Employee to be
payable in Common Stock by the volume-weighted average
closing price of the Common Stock on the NASDAQ
National Market for the twenty trading days immediately
preceding the date of the grant. Employee shall have
the right, before his first date of active employment
under this Agreement, to defer any cash payment
received as a result of a designation under this
section 3.6.2 into a deferred compensation plan
established by the Company. Upon Employee's request,
the Company shall establish a deferred compensation
plan as of Employee's first day of active employment
under this Agreement giving effect to Employee's
deferral election. Employee and the Company shall
cooperate concerning the terms and conditions of such a
plan
- --------------------------------------------------------------------------------
3.6.3 In the event that Employee's employment is
terminated prior to the earlier to occur of (i) the
closing of the merger of US West Communications, Inc.
and Qwest communications, Inc., and (ii) December 31,
2000 and is (A) voluntarily terminated by Employee
without Good Reason or (B) terminated by the Company
pursuant to Section 5.4 of this Agreement, then
Employee hereby agrees and acknowledges that he shall,
only with respect to the Initial Installment of the
Signing Bonus, repay the net cash portion (after taxes
withheld) of the Signing Bonus and return any shares of
Common Stock received by Employee as the Common Stock
portion of the Signing Bonus to the Company within
twenty (20) days after such termination of employment.
3.6.4 In the event that, after Employee receives the
Final Installment, Employee's employment is (A)
voluntarily terminated by Employee without Good Reason
or (B) terminated by the Company pursuant to Section
5.4 of this Agreement, then Employee hereby agrees and
acknowledges that he shall, only with respect to the
Final Installment of the Signing Bonus, repay the net
cash portion (after taxes withheld) of the Signing
Bonus and return any shares of Common Stock received by
Employee as the Common Stock portion of the Signing
Bonus to the Company within twenty (20) days after such
termination of employment in accordance with the
following schedule:
- --------------------------------------------------------------------------------
Initials: Date:
------- ------- ---------
<PAGE>
- --------------------------------------------------------------------------------
Date of Termination of | Cash, Common Stock Portion of
Employment (based upon the | Final Installment of Signing
applicable period of time | Bonus to be Returned to Company
following Employee's receipt of |
the Final Installment of the |
Signing Bonus) |
- ---------------------------------------------|----------------------------------
During the 1st through 3rd month | 80%
- ---------------------------------------------|----------------------------------
During the 4th through 6th month | 60%
- ---------------------------------------------|----------------------------------
During the 7th through 9th month | 40%
- ---------------------------------------------|----------------------------------
During the 10th through 12th month | 20%
- ---------------------------------------------|----------------------------------
| 3.6.5 The Company shall have the right to offset and/or withhold any
| amounts accrued or owed to Employee in order to satisfy all or any
| portion of Employee's obligations under this Section 3.6.
- --------
2. Part of Agreement. This Addendum is a part of the Employment Services
Agreement executed on the same date as this Addendum.
3. Other Terms and Conditions. All other terms and conditions of the Agreement
shall remain in full force and effect, as if fully stated herein.
4. Capitalized Terms. Capitalized terms, and other defined terms, shall have
the same meaning as that accorded to them in the Agreement, unless the context
requires otherwise.
5. Conflict. If there are any conflicting terms or conditions between the
terms and conditions of this Addendum and the terms and conditions of the
Agreement, the terms and conditions of this Addendum shall control.
- --------------------------------------------------------------------------------
Initials: Date:
------- ------- ---------
<PAGE>
EXHIBIT G
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT, dated April [__], 2000, between
Convergent Communications, Inc., a Colorado corporation (the "Company"), and
each of the entities named on Exhibit A hereto (each, an "Initial Investor" and,
collectively, the "Initial Investors").
The Company and the Initial Investors have entered into that
certain Securities Purchase Agreement, dated as of the date hereof, pursuant to
which the Investor is purchasing from the Company, simultaneously with the
execution and delivery of this Agreement on the date hereof, certain securities
of the Company that are convertible into or exercisable for shares of the
Company's common stock. The Company has agreed to grant the Initial Investors
certain rights with respect to such securities and the underlying common stock
of the Company.
In consideration of the premises and the covenants and
agreement herein contained, in order to induce the Initial Investors to enter
into such Securities Purchase Agreement and consummate the transactions
contemplated thereby 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
Section 1.01. As used in this Agreement, the following terms
have the meanings indicated:
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act. The term "affiliated" (whether
or not capitalized) shall have a correlative meaning. For purposes hereof, the
Company shall not be deemed to be an Affiliate of any Investor or any Affiliate
of any Investor.
"Agreement" means this Investor Rights Agreement, as amended
from time to time in accordance with the terms hereof.
"Beneficial Ownership" shall mean the power, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, to (i) vote, or to direct the voting of, a security, and (ii)
dispose, or to direct the disposition of, such security.
"Beneficially Owns" shall mean having Beneficial Ownership.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in either New York, New York, or the city
and state in which the principal executive offices of the Company within the
United States are located are authorized or obligated by law or executive order
to close.
"Closing Date" has the meaning given to such term in the
Purchase Agreement.
"Commencement Date" means the 120th day following the Closing
Date.
"Commission" means the Securities and Exchange Commission or
any other federal agency then administering the Securities Act.
"Common Stock" means the Common Stock, no par value, of the
Company and any capital stock into which such Common Stock may be reclassified
or otherwise changed, and, unless the context otherwise requires, such term
shall also include all securities of the Company or any other issuer issued to
the holders of shares of Common Stock as a dividend or other distribution on, in
exchange for, in replacement of or upon the exercise of any conversion, purchase
or subscription right associated with any shares of Common Stock.
"Common Stock Rights" shall mean any Rights to subscribe for,
purchase or otherwise acquire any share or shares of Common Stock.
"Company Indemnified Parties" has the meaning set forth in
Section 6.02.
"Convertible Securities" means evidences of indebtedness,
shares of capital stock or other securities or obligations that are convertible
into or exchangeable, with or without payment of additional consideration in
cash or property, for any Common Stock, 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.
"Demand Registration" has the meaning set forth in Section
2.01.
"Disadvantageous Effect" has the meaning set forth in Section
2.07.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and (unless the context otherwise
indicates) the rules and regulations of the Commission promulgated thereunder,
as they each may, from time to time, be in effect.
"Existing Registration Rights" mean, as of any time of
determination, contractual commitments of the Company that existed as of January
1, 2000, were disclosed on a schedule to the Purchase Agreement and remain in
effect as of such time, entitling Persons to exercise piggy-back registration
rights if the Company registers any of its securities for itself or for others.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" has the meaning set forth in Section 6.03.
"Indemnifying Party" has the meaning set forth in Section
6.03.
"Initial Investor" has the meaning set forth in the
introductory paragraph.
"Initiating Investor" has the meaning set forth in Section
2.02.
"Investors" means:
(i) the Initial Investors,
(ii) each other Person, other than the Company or an
Affiliate of the Company, who at any time acquires any
Registrable Shares directly or indirectly from any
Initial Investor or other Investor in a transaction or
chain of transactions not involving a public offering
within the meaning of and registered under the
Securities Act, and who
(A) so acquires the lesser of (1) all of the
Registrable Shares held by such Investor, and (2)
10% of the original number of Registrable Shares
initially held by all Initial Investors; or
(B) is a constituent stockholder, partner or member
(including limited partners and retired partners
or members) of an Investor to whom Registrable
Shares are distributed as part of a distribution
by such Investor to its constituent stockholders,
partners or members generally, or is a liquidating
trust established in connection with the
dissolution or winding up of any Investor; and
(iii) any Investor's successors, Affiliates and, in the case
of any Investor who is a natural person, such
individual's spouse, ancestors, lineal descendants,
siblings, executors, administrators and heirs of who
acquire Registrable Shares by gift, will or intestate
succession,
in each of the foregoing cases, if such Person (if not an Initial Investor)
agrees in writing to be bound by this Agreement as an Investor and for so long
as such Person continues to hold any Registrable Shares.
"Losses" has the meaning set forth in Section 6.01.
"Majority Investors" means any one or more Investors who hold
a total number of Registrable Shares equal to at least a majority of the
aggregate number of Registrable Shares then held by all Investors.
"Majority Selling Investors" means, with respect to any Demand
Registration or Piggyback Registration, any one or more Selling Investors who
hold a total number of Registrable Shares equal to at least a majority of the
aggregate number of Registrable Shares which are held by all Selling Investors
and which are or are to be included in such Demand Registration or Piggyback
Registration.
"New Securities" means, subject to Section 7.04, any newly
issued shares of capital stock of the Company, including Common Stock and any
class or series of preferred stock, whether authorized or not, and Rights to
acquire shares of Common Stock or preferred stock.
"New Securities Purchaser" has the meaning set forth in the
definition of "Preissuance Notice" set forth below in this Section 1.01.
"Notes" means the Corporation's 13% Series B Senior Notes due
2008 issued under the Indenture, dated as of April 2, 1998, between the
Corporation and Norwest Bank Colorado, N.A., a national banking association, as
Trustee.
"Number of Common Shares Outstanding" has the meaning set
forth in Section 7.01.
"Originally Issued Shares" means, as of any time, the
aggregate number of Conversion Securities (as defined in the Series B Articles
of Amendment) represented by the Series B Shares issued to the Investors on the
Closing Date, as such aggregate number shall have from time to time been
cumulatively adjusted as a result of the operation of the Series B Articles of
Amendment.
"Pari Passu Registration Rightsholder" means:
(i) as used in Section 2.06 with respect to any Demand
Registration requested by the Investors, a Person (A)
who has, at the time of such request, the right, under
a then-effective written contract entered into with the
Company prior to the Closing Date and disclosed on a
schedule to the Purchase Agreement, to require shares
of Common Stock then owned by such Person to be
included in such Demand Registration and (B) who
exercises that right with respect to all or some of
those shares in accordance with the terms of such
contract, if and to the extent a breach of such
contract by the Company would result from the
reduction, in the circumstances contemplated by Section
2.06, of the number of such shares requested to be
included by such Person in such Demand Registration
before any reduction in the number of Registrable
Shares sought to be included in such Demand
Registration by the Investors; or
(ii) as used in Section 3.02(b) with respect to any
Piggyback Registration in which any Investors have
requested inclusion of Registrable Shares in accordance
with Section 3.01, a Person (A) who has, at the time of
such request, the right, under a then-effective written
contract entered into with the Company prior to the
Closing Date and disclosed on a schedule to the
Purchase Agreement or granted after the Closing Date
without violation of Section 8.03, to require shares of
Common Stock then owned by such Person to be included
in such Piggyback Registration and (B) who exercises
that right with respect to all or some of those shares
in accordance with the terms of such contract, if and
to the extent a breach of such contract by the Company
would result from the reduction, in the circumstances
contemplated by Section 3.02(b), of the number of such
shares requested to be included by such Person in such
Piggyback Registration before any reduction in the
number of Registrable Shares sought to be included in
such Piggyback Registration by the Investors.
"Person" means any individual, corporation, limited liability
company, general or limited partnership, joint venture, association, joint stock
company, trust, unincorporated business or organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
"Piggyback Registration" has the meaning set forth in Section
3.01.
"Preissuance Notice" shall be a written notice given to the
Investors pursuant to Section 7.01 no later than ten days prior to the date the
Company plans to issue New Securities. Each Preissuance Notice shall (i) specify
the kind and amount of New Securities proposed to be issued, (ii) if such New
Securities consist of or include Common Stock Rights, briefly describe the terms
of such Common Stock Rights, (iii) identify each Person to whom such New
Securities are proposed to be issued (each a "New Securities Purchaser"), if
then known by the Company, (iv) state the method or manner of issuance, (v)
state the kind(s) and amount(s) of consideration for which such New Securities
are proposed to be issued and the determination of the Company's Board of
Directors of the fair market value of any such consideration other than cash and
(vi) describe the other material terms and conditions of the proposed issuance
of New Securities.
"Purchase Agreement" means the Securities Purchase Agreement,
dated as of April 4, 2000, between the Corporation and the Investor, as the same
may be amended from time to time in accordance with its terms.
"Qualifying Rights" means, as of any time, shares of the
Series B Preferred Stock and the Warrants, and also includes all other Common
Stock Rights which, by their terms, are exercisable for shares of Common Stock
only upon the payment, conversion, surrender, exchange or delivery by the holder
of additional consideration in cash or property in an amount or having a fair
market value per share of Common Stock which, as of such time, is equal to or
less than the fair market value per share of the Common Stock determined as of
such time.
"Registrable Shares" means (i) any and all shares of Common
Stock issued or issuable upon conversion of any Series B Share or upon exercise,
conversion or exchange of any Warrant, (ii) any and all shares of Common Stock,
and any shares of Common Stock issued or issuable upon the exercise of any
Rights or other securities, acquired by or issuable to the Investors pursuant to
Article VII of this Agreement and (iii) any other shares of Common Stock issued
in respect of any such shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events); provided, however,
that shares of Common Stock which are Registrable Shares shall cease to be
Registrable Shares (x) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act, (y) upon any sale in any manner to a Person
which is not entitled to the rights provided by this Agreement or (z) with
respect to the Registrable Shares held by any specific Investor, when all such
Registrable Shares held by such Investor either (1) may be sold by such Investor
under Rule 144 under the Securities Act without limitation as to manner of sale
and without any limitation as to volume or (2) are equal to or less than the
number that may be sold by such Investor under Rule 144(e) within any
three-month period. For purposes of this Agreement, any Person shall be deemed
to hold, as of any time, (A) all issued and outstanding shares of Common Stock,
Registrable Shares or other securities then held or deemed to be held by such
Person, (B) all additional shares of Common Stock, Registrable Shares or other
securities which would then be held by such Person if it were assumed that all
shares of Series B Preferred Stock and Warrants, if any, then held or deemed to
be held by such Person had been duly and effectively exercised in full at and
effective as of such time, (C) all additional shares of Common Stock,
Registrable Shares or other securities which would then be held by such Person
if it were assumed that all Rights, if any, then held or deemed to be held by
such Person had been duly and effectively exercised in full at and effective as
of such time and (D) all additional shares of Common Stock, Registrable Shares
or other securities, if any, which such Person then has a right to purchase
pursuant to the preemptive rights granted pursuant to this Agreement by virtue
of any prior exercise of such preemptive rights, assuming, in the case of each
of clauses (B) and (C), that all adjustments to the kind, number and amount of
shares of capital stock or other securities issuable upon exercise, exchange or
conversion of any of the shares of Series B Preferred Stock, Warrants or other
Rights referred to in such clause required by reason of any event or transaction
occurring at or prior to such time had been duly and effectively made as and
when required by the terms thereof.
"Registration Expenses" shall mean, with respect to any Demand
Registration or Piggyback Registration all (i) registration, qualification and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including the reasonable fees and disbursements of counsel for any
underwriters, dealers or placement agents in connection therewith), (iii)
printing expenses (or comparable duplication expenses) and escrow fees, (iv)
internal expenses of the Company (including all salaries and expenses of
officers and employees performing legal or accounting duties), (v) fees and
disbursements of counsel for the Company, (vi) fees and expenses for independent
certified public accountants retained by the Company (including all fees and
expenses associated with special audits or the delivery by independent certified
public accountants of a "cold comfort" letter or letters), (vii) fees and
expenses of any special experts retained by the Company in connection with such
registration, (viii) fees and expenses of listing the Registrable Shares on a
securities exchange or otherwise in connection with subdivision (r) of Section
4.01, (ix) the reasonable fees and expenses of a single firm of legal counsel
for the Investors participating in such Demand Registration or Piggyback
Registration up to $75,000 in connection with a Demand Registration and $25,000
in connection with a Piggyback Registration and (x) all other reasonable fees,
costs, expenses and disbursements incurred in connection with or incident to the
Company's compliance with Article IV. Registration Expenses do not include
underwriting commissions or discounts payable in respect to Registrable Shares
of an Investor included in a Demand Registration or Piggyback Registration.
"Registration Statement" means a registration statement of the
Company under the Securities Act on any form for which the Company then
qualifies and which permits the sale thereunder of the number of Registrable
Shares (and any other securities of the Company) to be included therein in
accordance with this Agreement by the Selling Investors and, in the case of the
Registrable Shares, according to the method(s) of distribution determined in
accordance with this Agreement and in the case of any other securities covered
thereby, according to the plan(s) of distribution described therein, including
all exhibits and schedules to, all financial statements included in or otherwise
filed with, and all documents incorporated by reference in any such registration
statement, in each case as amended or supplemented as of any reference date.
"Rights" means any options, warrants, convertible or
exchangeable securities or other rights, however denominated, to subscribe for,
purchase or otherwise acquire any equity interest or other security of any class
or series, 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.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and (unless the context otherwise indicates)
the rules and regulations of the Commission promulgated thereunder, as they each
may, from time to time, be in effect.
"Selling Investors" means, with respect to any Demand
Registration or Piggyback Registration, any Investors holding any Registrable
Shares which are or are to be included in such Demand Registration or Piggyback
Registration in accordance with this Agreement.
"Series B Articles of Amendment" means the Amended and
Restated Articles of Incorporation of the Corporation setting forth the
resolution of the Board creating and authorizing the issuance of the Series B
Preferred Stock and filed with the Colorado Secretary of State or any successor
provisions of the Corporation's Articles of Incorporation, as the same may have
been amended prior to or concurrently with the Closing Time and thereafter may
be amended.
"Series B Preferred Stock" means the Series B Senior
Cumulative Convertible Preferred Stock, no par value, of the Company.
"Series B Share" means, as of any time, any share of Series B
Preferred Stock then issued and outstanding.
"Shelf Registration" has the meaning set forth in Section
2.10.
"TPG" means TPG Partners III, L.P. and its Affiliates.
"Warrant Agreement" means the Warrant Agreement, dated the
date hereof, between the Company and the Investor, as it may be amended from
time to time in accordance with its terms.
"Warrants" means the Warrants to purchase shares of Common
Stock issued and sold by the Company to, and purchased by, the Investor pursuant
to the Purchase Agreement and the Warrant Agreement.
"Warrant Stock" means, with respect to any Warrant at any
time, the Common Stock, each other class or series of capital stock and any
Rights with respect to any of the foregoing, any shares, number or other amount
of which at such time is deliverable upon exercise of such Warrant.
Section 1.02. Terms Generally; Certain Rules of Construction.
The definitions of terms contained in this Agreement shall apply equally to both
the singular and plural forms of the terms defined and words in the singular
include the plural and words in the plural include the singular.
(a) Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
(b) The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." The words
"herein", "hereof" and "hereunder" and words of similar import refer to
this Agreement in its entirety and not to any part hereof unless the
context shall otherwise require.
(c) All references herein to Sections shall be deemed
references to Sections of this Agreement unless the context shall
otherwise require.
(d) Unless otherwise expressly provided herein or unless the
context shall otherwise require, any references as of any time to any
agreement or other Contract, instrument or document or to any statute
or regulation or any specific section or other provision thereof are to
it as amended and supplemented through such time (and, in the case of a
statute or regulation or specific section or other provision thereof,
to any successor of such statute, regulation, section or other
provision).
(e) Any reference herein to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted
as 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 shall be deferred until, or may be taken or given on, the next
Business Day.
(f) Unless otherwise expressly provided herein or unless the
context shall otherwise require, any provision of this Agreement using
a defined term (by way of example and without limitation, such as
"Investors") which is based on a specified characteristic,
qualification, feature or status shall, as of any time, refer only to
such Persons who have the specified characteristic, qualification,
feature or status as of that particular time.
(g) For purposes of this Agreement, (i) any acquisition or
transfer of any Rights to subscribe for, purchase or otherwise acquire
any Registrable Shares shall also constitute an acquisition or transfer
or proposed transfer of the Registrable Shares issuable upon the
exercise, exchange or conversion thereof and (ii) any Person who holds
any Right to subscribe for, purchase or otherwise acquire any Common
Stock, Registrable Shares or other securities shall be deemed to hold
all such Common Stock, Registrable Shares or other securities which
then would be issuable if it were assumed that such Right were then
duly exercised, exchanged or converted in full. When used with
reference to any Right, the term "exercise" shall mean to exercise the
right to exchange or convert such Right for or into, subscribe for,
purchase or otherwise acquire shares of Common Stock represented by
such Right, and variants of such word (including "exercised" and
"exercisable") shall have correlative meanings.
(h) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act, and the declaration or
ordering of the effectiveness of such registration statement.
Article II
DEMAND REGISTRATION
Section 2.01. Right to Demand Registration. The Investors shall have
the right to require the Company to register Registrable Shares under the
Securities Act (a "Demand Registration"), which right shall be exercisable in
the manner set forth in this Article II at any time or from time to time on or
after the Commencement Date.
Section 2.02. Registrations. Any Investor or Investors holding in the
aggregate twenty-five percent (25%) of the Registrable Shares (the "Initiating
Investors") then held by all Investors may request, in writing, that the Company
effect a Demand Registration on any form available for such registration under
the Securities Act, of Registrable Shares constituting at least 25% of the
Registrable Shares owned by the Investors. If the Initiating Investors intend to
distribute the Registrable Shares by means of an underwritten offering, they
shall so advise the Company in their request. In the event such Demand
Registration is underwritten, the right of any other Investor to participate in
such Demand Registration shall be conditioned on such Investor's participation
in such underwriting on the same terms as the Initiating Investors. Upon receipt
of any such request, the Company shall promptly give written notice of such
proposed registration to all other Investors. Such Investors shall have the
right, by giving written notice to the Company within thirty days after the
Company provides its notice, to elect to have included in such Demand
Registration such of their Registrable Shares as such Investors may request in
such notice of election. Subject to Section 2.03, the Investors shall be
entitled in the aggregate to require the Company to effect four Demand
Registrations pursuant to this Section 2.02 (any of which may be a Shelf
Registration as provided in Section 2.10) and, except as provided in Section
5.01, a Demand Registration shall not be deemed to have been effected unless
such registration has been declared or ordered effective and the securities
offered pursuant to such registration have been sold.
Section 2.03. Continuing Demand Registration. Subject to Sections 2.06,
2.10 and 4.04, holders of Existing Registration Rights may participate in the
Investors' Demand Registrations; provided, however, that if the number of
Registrable Shares sought to be included by the Investors in the first of their
four Demand Registrations is reduced pursuant to Section 2.06, by reason of the
inclusion in such Demand Registration of shares of Common Stock held by any
Person(s) other than Investors, by more than 25%, the registration shall not
count as a Demand Registration and if the number of Registrable Shares sought to
be included by the Investors in any subsequent Demand Registration is reduced
pursuant to Section 2.06, by reason of the inclusion in such Demand Registration
of shares of Common Stock held by any Person(s) other than Investors, by more
than 10%, the registration shall not count as a Demand Registration.
Section 2.04. Reasonable Efforts by the Company. Subject to Section
2.05, if a Demand Registration is requested pursuant to Section 2.02 the Company
shall, as soon as practicable after the period of thirty days referred to in
such Section, file with the Commission and use its reasonable efforts to cause
to become effective a Registration Statement which shall cover the Registrable
Shares requested to be registered by the Selling Investors and shall take all
other actions (including those required by Article IV) as may be necessary or
advisable to permit the Selling Investors to dispose of all such Registrable
Shares requested to be included in such Demand Registration in accordance with
the intended method(s) of distribution and in compliance with the Securities Act
and state "blue sky" and securities laws.
Section 2.05. Withdrawals. The Majority Selling Investors may, at any
time and from time to time reasonably in advance of the planned date of
consummation of the sale or other distribution of Registrable Shares pursuant to
any Demand Registration, (i) permit any Selling Investor to withdraw, in whole
or in part, from participation in such Demand Registration, (ii) permit any
Investor who was not originally a Selling Investor to become a Selling Investor
and include in such Demand Registration any or all of such Investor's
Registrable Shares or (iii) otherwise increase or decrease the number of
Registrable Shares to be included in such Demand Registration; provided,
however, that if any such decrease would result in the reduction of the number
of Registrable Shares to be registered in such Demand Registration to a number
that would not be sufficient to satisfy the condition stated in Section 2.02,
then such decrease shall not be effective unless approved by the Majority
Selling Investors and, if so approved, the Selling Investor(s) shall be deemed
to have abandoned and terminated such Demand Registration. The Majority Selling
Investors may terminate or abandon such Demand Registration upon written notice
to the Company to that effect, in which event such Demand Registration shall be
deemed not to have been requested.
Section 2.06. Methods of Distribution; Reduction in Shares to be
Registered. (a) Subject to the last sentence of this Section 2.06(a) and to the
provisions of Section 2.06(b), the Registrable Shares of any Selling Investor
included in a Demand Registration may be registered for sale by such Selling
Investor directly or through sale or placement agents or to or through one or
more underwriters designated from time to time by such Selling Investor and
approved by the Company in its reasonable discretion and for resale by any such
underwriter or broker-dealer, through broker-dealers or in any other manner, in
one or more transactions and at a fixed price or prices, which may be changed,
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at prices determined on a negotiated or competitive
bid basis or at a price or prices otherwise determined by such Selling Investor.
Notwithstanding the preference of any Selling Investor in any Demand
Registration, if the Majority Selling Investors, in their sole discretion,
determine that the offering and sale of Registrable Shares pursuant to such
Demand Registration should be pursuant to an underwriting or through a selling
or placement agent or syndicate, then such Majority Selling Investors shall have
the right to select the underwriters or managing underwriter, selling or
placement agent or managing selling or placement agent or syndicate manager for
such offering and sale and to establish, by agreement with such underwriters,
managing underwriter, selling or placement agents, managing selling or placement
agent or syndicate manager or otherwise the price or prices and other terms of
such underwriting, offering and sale, and in such event no Selling Investor who
otherwise would be entitled to include Registrable Shares in such Demand
Registration shall be entitled to have such Registrable Shares so included
unless they are included in such underwritten offering or offered and sold
through such selling or placement agent or syndicate at such price or prices and
on such terms. Any such managing underwriter, managing selling or placement
agent or syndicate manager selected by the Majority Selling Investors, shall be
subject to the Company's approval, which shall not be unreasonably withheld or
delayed.
(b) If a Demand Registration is for or includes an underwritten
offering or an offering through a sales or placement agent or syndicate, and the
managing underwriter, such sales or placement agent, or the managing sales agent
or the syndicate manager determines in good faith that inclusion in such
registration of all Registrable Shares and other securities, if any, requested
or proposed to be included in such offering exceeds the number that could be
sold without having an adverse effect on such offering, including the price at
which the Majority Selling Investors propose to sell their Registrable Shares
included in such offering, then the number of Registrable Shares to be offered
for the accounts of the Selling Investors shall be reduced or limited on such
basis in proportion to the respective numbers of Registrable Shares requested to
be included in such offering by the Selling Investors, to the extent necessary
to reduce the total number of shares to be included in such offering to the
amount recommended by such managing underwriter, agent, managing sales agent or
syndicate manager; provided, however, that if, without violation of Section
2.10, in connection with such Demand Registration securities other than
Registrable Shares held by Selling Investors are being offered (whether for the
account of the Company or any Person other than an Investor), such reduction
shall be made (i) first, from any shares proposed to be sold for the accounts of
the Company or other Persons who are neither Investors nor Pari Passu
Registration Rights Holders, allocated among the Company and such other Persons
in such manner as may be acceptable to the Company and (ii) second, from the
Registrable Shares requested to be included in such registration by the
Investors and Pari Passu Registration Rights Holders (allocated, if necessary,
pro rata among all such Investors and such Pari Passu Registration Rights
Holders on the basis of the relative numbers of shares each such Person has
requested to be included in such registration), it being understood and agreed
that the securities referred to in clause (i) above shall not be included in any
such offering unless or until all the Registrable Shares requested to be
included in such offering by the Investors are so included.
Section 2.07. Right of the Company to Suspend Registration. The Company
shall be entitled to suspend, for a reasonable period of time not in excess of
ninety days after its receipt of a request for a Demand Registration pursuant to
Section 2.02, the filing of any Registration Statement which it otherwise would
be required to file pursuant to this Article II, if (i) at any time prior to the
filing of such Registration Statement the Board of Directors of the Company
determines, in good faith and in the exercise of reasonable business judgment,
that such filing would materially interfere with or otherwise adversely affect
in any material respect any material planned financing, acquisition, corporate
reorganization or other transaction involving the Company (a "Disadvantageous
Effect") and (ii) the Company gives all Selling Investors written notice of such
suspension; provided, however, that a suspension pursuant to this Section 2.07
or pursuant to Section 4.02 by reason of the existence of one or more
Disadvantageous Effects shall be authorized only once during any twelve-month
period. In the event of any suspension pursuant to this Section 2.07, then
unless the request for the Demand Registration is withdrawn pursuant to the last
sentence of this Section 2.07, the Company shall file such Registration
Statement as soon as practicable after the first to occur of (w) the
consummation of the transaction which is the asserted basis for such
Disadvantageous Effect, (x) the abandonment or termination of such transaction
prior to consummation, (y) the determination by the Board of Directors of the
Company that such filing would not or would no longer result in such
Disadvantageous Effect and (z) the ninety-first (91st) day after the receipt of
the applicable Demand Notice. If the Company shall suspend the filing of any
Registration Statement pursuant to this Section 2.07, the Majority Selling
Investors shall have the right to withdraw the Demand Notice for such
registration by giving written notice to the Company prior to expiration of such
suspension period.
Section 2.08. Form of Registration Statement. If in connection with a
Demand Registration, the Company proposes to effect such registration through
the filing of a Registration Statement on a particular registration form
available for such registration under the Securities Act and either the
underwriters or managing underwriter, selling or placement agent or managing
selling or placement agent or syndicate manager, if any, in connection with such
Demand Registration shall advise the Company in writing of its or their
reasonable and good faith opinion that the use of another available form is of
material importance to the success of the proposed offering or sale or other
distribution contemplated, then such Demand Registration shall be effected on
such other form.
Section 2.09. No Other Participants in Demand Registration. Unless
otherwise agreed by the Majority Investors, neither the Company nor any other
Person except Investors and holders of Existing Registration Rights shall be
permitted to include any shares of Common Stock, Rights or other securities for
registration, offering, sale or distribution in any Demand Registration.
Section 2.10. Shelf Registration. (a) The Company shall use its
reasonable best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. Any request by any Investor for a Demand
Registration pursuant to Section 2.02 or Section 2.03 may, at the election of
the Initiating Investor by specification in the applicable request, include a
request that all or any of the Registrable Shares requested to be included in
such Demand Registration be registered under the Securities Act for offering and
sale on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act (a "Shelf Registration") to be made effective on or after the Commencement
Date. In the event of any such request for a Shelf Registration, the notice
given by the Initiating Investor pursuant to Section 2.02 shall state that such
request was for or included a Shelf Registration. To the extent that a request
for a Demand Registration is for or includes a Shelf Registration, no Selling
Investor participating in such Shelf Registration shall be required to provide
information with respect to the desired price range for the Registrable Shares
requested to be included therein by any Selling Investor or the intended
method(s) of disposition or distribution thereof except to the extent and at the
time or times required in order to satisfy the applicable requirements of
Regulation S-K promulgated by the Commission. The method(s) of distribution of
the Registrable Shares of any Selling Investor included in any Shelf
Registration may be any method or methods permitted by Rule 415 of the
Securities Act and any such Selling Investor may change such method or methods
of distribution at any time and from time to time while the Registration
Statement relating to such Shelf Registration is required to remain effective in
accordance with the terms of Section 2.10(b) hereof, provided that such Selling
Investor provides to the Company the information reasonably required to permit
compliance with the applicable requirements of Regulation S-K promulgated by the
Commission.
(b) The Company shall use all reasonable efforts to keep each
Registration Statement filed with respect to any Shelf Registration continuously
effective until the earlier of (i) two years from the date on which the
Commission declares such Registration Statement effective or (ii) three years
from the Closing Date. Such period shall be automatically extended by the
aggregate number of days, if any, during which any delay, deferral, postponement
or suspension is in effect with respect to such Registration Statement.
(c) The Company shall effect any Shelf Registration requested pursuant
to this Agreement on a Registration Statement of the Company under the
Securities Act on any form, including Form S-3, for which the Company then
qualifies and which permits the offering and distribution thereunder of the
number of Registrable Shares to be included therein in accordance with the
method(s) of distribution determined in accordance with this Agreement.
(d) The fact that a Registration Statement with regard to a Shelf
Registration is effective as of a particular time shall not prejudice or
otherwise affect the rights of the Selling Investors to participate in any such
Demand Registration requested by any other Investors or to participate in any
Piggyback Registration.
Article III
PIGGYBACK REGISTRATION
Section 3.01. Right to Require Piggyback Registration. (a) If at any
time or from time to time, the Company shall determine to register any of its
securities, either for its own account or the account of a security holder or
holders (other than (i) a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the SEC) or (ii) a registration statement
filed in connection with an offer of securities solely to the Company's existing
security holders) in a transaction that may be used for the registration of
Registrable Shares for distribution by any one or more of the methods permitted
by Section 3.02(a), then upon each and every such occasion the Company shall
give prior written notice of such proposed registration to each Investor of its
intention to do so promptly and in any event not later than the tenth Business
Days before the anticipated filing date of the applicable Registration
Statement. Such notice shall specify whether the proposed registration is for
the account of the Company, for the account of one or more other Persons or both
and also specify the kind and number or amount of securities proposed to be
registered on behalf of each thereof and the proposed offering price or prices
and distribution methods and arrangements. Upon the terms and subject to the
conditions and limitations set forth in this Article III, each Investor may
elect to participate in such registration by giving the Company, within ten days
after such notice has been given by the Company, a written request to register
any or all of such Investor's Registrable Shares in connection with such
registration (any such registration as to which any such request is made being
sometimes referred to as an "Piggyback Registration"); provided, however, that
if the registration is a "demand" registration made pursuant to the exercise of
Existing Registration Rights in accordance with the original terms thereof and
if, by the original terms of such Existing Registration Rights, the holders of
such warrants having such Existing Registration Rights have the right to exclude
from such demand registration securities proposed to be registered by any
Persons except holders of such warrants, then the Investors shall not be
entitled to participate in such registration unless the holders of such warrants
participating in such registration otherwise agree in writing.
(b) Any such request by an Investor shall state (i) the kind and number
of Registrable Shares to be included in such registration by such Investor (ii)
such Investor's preferred method of distribution of such Registrable Shares
permitted by Section 3.02(a) and (iii) any other information that the Company
reasonably requests in such notice given by it to the Investors. Upon receipt of
one or more of such requests, the Company shall, subject to Section 3.03, as
soon as practicable, file with the Commission and use its reasonable efforts to
cause to become effective, a Registration Statement which shall cover the
Registrable Shares requested to be registered by the requesting Investors and
shall take all such other actions (including those required by Article IV) as
may be necessary or advisable to permit the requesting Investors to dispose of
all such Registrable Shares requested to be included in such Piggyback
Registration in accordance with the permitted intended method or methods of
distribution in compliance with the Securities Act and state "blue sky" and
securities laws.
Section 3.02. Methods of Distribution; Reduction in Number of Shares to
be Registered. (a) Subject to Section 3.02(b), Section 3.02(c) and Section 4.5,
the Registrable Shares of any Investor included in a Piggyback Registration may
be registered for sale by such Investor directly or through sales or placement
agents designated from time to time or to or through one or more underwriters or
broker-dealers designated from time to time by such Investor and for resale by
any such underwriter or broker-dealer, in one or more transactions and at a
fixed price, which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at prices determined
on a negotiated or competitive bid basis or at a price otherwise determined by
such Investor.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Investors as a part of the written notice given pursuant to Section
3.01. In such event, the right of any Investor to participate in such
registration pursuant to this Article III shall be conditioned upon such
Investor's participation in such underwriting and the inclusion of Registrable
Shares in the underwriting to the extent provided herein. Subject to Section
4.04, if any Piggyback Registration is for (or includes) an underwritten
offering, the Company will permit each Investor who elects to include any of his
Registrable Shares in such Piggyback Registration to elect to include any or all
of such Registrable Shares in such underwritten offering on the same terms and
conditions as any similar securities included therein. In a registration
pursuant to Section 3.01 hereof involving an underwritten public offering, if
the managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and each Investor who requested Registrable
Shares to be included in such offering that in such underwriter's or
underwriters' reasonable opinion the total number of securities which the
Company, the Investors who requested Registrable Shares to be included in such
offering and any other Persons desiring to participate in such registration
intend to include in such offering is such as to materially and adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company will be required to include in such registration only
the amount of securities which it so advised should be included in such
registration. In such event:
(i) if the registration was initiated by any security holder(s) of
the Company exercising "demand" registration rights, securities
shall be registered in such offering in the following order of
priority (unless a different order is specified in the document
granting such holder's demand rights which is in effect prior to
the Closing Date):
(A) first, the securities, if any, which the Company proposes
to register and the securities such security holder(s)
initiating such registration propose to register,
allocated, if necessary, pro rata among the Company and
such holder(s) on the basis of the relative numbers of
shares each such Person proposes to include in the
registration, provided that if such initiating holder or
holders are Investors, the Company shall not be entitled to
include any securities in such registration without the
prior written consent of the Majority Investors and, as
among Investors there shall be no priority and Registrable
Securities sought to be included by Investors shall be
included pro rata based on the amount of securities sought
to be registered by such Persons
(B) second, provided that no securities sought to be included
by the Company or such initiating holder(s) have been
excluded from such registration, the securities which have
been requested to be included in such registration by
Investors pursuant to this Agreement (unless the initiating
holder(s) are Investors, in which case clause (i)(A) shall
govern the priority of the Investors) or by Pari Passu
Registration Rights Holders (allocated, if necessary, pro
rata among all such Investors and Pari Passu Registration
Rights Holders on the basis of the relative numbers of
shares each such Person has requested to include in
registration), and
(C) third, provided that no securities sought to be included
under clause(i)(A) or (i)(B) have been excluded, the
securities of all other Persons sought to be included in
such registration (allocated, if necessary, among such
Persons in such manner as the Company deems acceptable); or
(ii) if the registration was initiated by the Company, otherwise than
by reason of any such exercise of "demand" registration rights,
securities shall be registered in such offering in the following
order of priority:
(A) first, the securities, if any, which the Company proposes
to register,
(B) second, provided that no securities sought to be included
by the Company have been excluded from such registration,
the securities which have been requested to be included in
such registration by Investors pursuant to this Agreement
or by Pari Passu Registration Rights Holders (allocated, if
necessary, pro rata among all such Investors and Pari Passu
Registration Rights Holders on the basis of the relative
numbers of shares each such Person has requested to include
in registration), and
(C) third, provided that no securities sought to be included
under clause(ii)(A) or (ii)(B) have been excluded, the
securities of all other Persons sought to be included in
such registration (allocated, if necessary, among such
Persons in such manner as the Company deems acceptable).
(c) If, as a result of the provisions of Section 3.02(b), any Investor
shall not be entitled to include all Registrable Securities in a Piggy-Back
Registration that such Investor has requested to be included, such Investor may
elect to withdraw his request to include Registrable Securities in such
registration.
Section 3.03. Withdrawal of Registration. The Company may, without the
consent of any Investor, delay, suspend, abandon or withdraw any Piggyback
Registration and any related proposed offering or other distribution in which
any Investor has requested inclusion of Registrable Shares pursuant to this
Article III.
Article IV
OBLIGATIONS WITH RESPECT TO REGISTRATION
Section 4.01. In General. Whenever the Company is obligated by the
provisions of Article II or Article III to effect the registration of any
Registrable Shares under the Securities Act, the Company shall use its
reasonable efforts to effect the registration of all Registrable Shares which
any Investor has requested to be included therein for offering, sale and
distribution in accordance with the permitted intended methods of distribution
thereof as quickly as practicable, and in connection therewith the Company will
do the following as expeditiously as possible:
(a) prepare and file with the Commission a Registration Statement on
any form for which the Company then qualifies and which is available for the
registration of the Registrable Shares requested to be registered in accordance
with the intended methods of distribution thereof, (i) include in the
Registration Statement all Registrable Shares requested to be included pursuant
to Article II or Article III (as the case may be), and (ii) use its reasonable
efforts to cause such Registration Statement to become effective;
(b) prepare and file with the Commission such amendments and
post-effective amendments and supplements to the Registration Statement or any
prospectus as may be necessary to keep the Registration Statement effective,
current and in compliance with the provisions of the Securities Act, until the
last to occur of (i) the sale or other distribution of all of the Registrable
Shares covered by such Registration Statement in accordance with the intended
methods of distribution thereof, (ii) the expiration of all periods during which
transactions in Registrable Shares by a dealer are not exempt from the
provisions of Section 5 of the Securities Act by virtue of Section 4(3) of the
Securities Act or during which any dealer is obligated under the Securities Act
to deliver a prospectus in connection with transactions involving Registrable
Shares and (iii) the expiration of all other periods, if any, during which the
Registration Statement is required to remain effective in order to avoid a
violation of applicable law by any Investor or the Company related to the sale
or other distribution of all of the Registrable Shares covered by such
Registration Statement in accordance with the intended methods of distribution
thereof;
(c) at least three Business Days prior to filing any Registration
Statement or prospectus or any amendment or supplement thereto, furnish to each
Investor and each underwriter, if any, of the Registrable Shares covered by such
Registration Statement copies of the current draft of such Registration
Statement or prospectus (including documents to be incorporated by reference
therein), which documents will be subject to the reasonable review and comments
of such Investors (and their respective counsel) during such three Business Day
period, and if any Investor objects in writing to any statements in any such
documents with respect to such Investor or the distribution of the Registrable
Shares to be included by him in such Registration Statement, the Company shall,
subject to applicable law, promptly revise such statements to such Investor's
reasonable satisfaction;
(d) promptly notify each Investor of the effectiveness of the
Registration Statement;
(e) furnish to each Investor without charge and as soon as such
documents become available to the Company, at least one copy of the Registration
Statement and each amendment thereto, and such number of conformed copies
thereof, copies of the prospectus (including each preliminary prospectus and
each amendment or supplement thereto), in each case together with all exhibits
thereto and all documents incorporated by reference in any of such documents as
such Investor may reasonably (in light of such Investor's intended method of
distribution) request in order to facilitate the disposition of the Registrable
Shares being sold by such Investor (it being understood that the Company
consents to the use, in compliance with the Securities Act, of each preliminary
prospectus and prospectus and each amendment or supplement thereto by each
Investor, each underwriter, broker, dealer, placement agent and other securities
industry professional and each agent of each Investor in connection with the
offering, sale and distribution of the Registrable Shares covered thereby);
(f) promptly notify each Investor, at any time when a prospectus
relating to Registrable Shares of such Investor covered by the Registration
Statement is required to be delivered under the Securities Act, of the happening
of any event as a result of which the preliminary prospectus or prospectus
included in such Registration Statement or any prospectus supplement contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and the Company will, as promptly as
practicable thereafter, prepare and file with the Commission and furnish to each
Investor a supplement or amendment to such preliminary prospectus, prospectus or
prospectus supplement so that, as thereafter delivered to the prospective
purchasers of the Registrable Shares being distributed by such Investor, such
preliminary prospectus, prospectus or prospectus supplement will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(g) enter into customary agreements (including, in the case of an
underwritten offering, an underwriting agreement in customary form) and make
such representations and warranties to any underwriters, brokers, dealers,
placement agents and other Persons involved in the distribution of the
Registrable Shares included in such Registration Statement as in form, substance
and scope are customarily made by issuers in similar circumstances or which may
be reasonably requested;
(h) furnish to each underwriter, broker, dealer or placement agent
participating in any offering or sale or other distribution pursuant to such
Registration Statement a signed counterpart of (i) an opinion of counsel to the
Company addressed to such underwriter, broker, dealer or placement agent (as the
case may be) and (ii) a "cold comfort" letter or letters from the Company's
independent certified public accountants, each in customary form and covering
such matters of the type customarily covered by legal opinions or "cold comfort"
letters (as the case may be) in similar offerings, sales or distributions of
securities of similarly situated issuers and such other matters as the Majority
Selling Investors may reasonably request;
(i) prepare and file with the Commission promptly upon the request of
any such Investor, any amendments or supplements to such Registration Statement
or the applicable prospectus which, in the reasonable opinion of counsel for
such Investor, is required under the Securities Act in connection with the
distribution of Registrable Shares by such Investor;
(j) effective on or prior to the date the Registration Statement
becomes effective, use its reasonable efforts to register or qualify the
Registrable Shares covered by a Registration Statement under the securities or
blue sky laws of such jurisdictions in the United States as the Majority Selling
Investors or any underwriter, broker, dealer or placement agent participating in
the offering or sale or other distribution of the Registrable Shares covered
thereby shall reasonably request, and do any and all other acts and things which
may be reasonably necessary to enable each Selling Investor to consummate the
offering and disposition of such Registrable Shares in such jurisdictions of
such Registrable Shares in accordance with the permitted methods of distribution
described in such Registration Statement; provided, however, that the Company
shall in no event be required to qualify generally to do business as a foreign
corporation in any jurisdiction where it is not otherwise required to be so
qualified or, to conform its capitalization or the composition of its assets at
the time to the securities or blue sky laws of such jurisdiction;
(k) make generally available to the Company's security-holders earnings
statements satisfying the provisions of the last sentence of Section 11(a) of
the Securities Act no later than forty-five days after the end of the
twelve-month period beginning with the first month of the first fiscal quarter
commencing after the effective date of the Registration Statement, which
earnings statements shall cover said twelve-month period;
(l) promptly notify each Selling Investor and each underwriter, broker,
dealer and placement agent participating in any offering or sale or other
distribution of securities covered by such Registration Statement of the
issuance or threatened issuance of any stop order or other order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of any preliminary prospectus, prospectus or prospectus supplement; use
reasonable efforts to prevent the issuance of any such threatened stop order or
other order, and if any such order is issued, use its best efforts to obtain the
lifting or withdrawal of such order at the earliest possible moment and promptly
notify each Selling Investor and each such underwriter, broker, dealer and
placement agent of any such lifting or withdrawal;
(m) as promptly as practicable after filing with the Commission of any
document which is incorporated by reference into a Registration Statement,
notify each Selling Investor of such filing and deliver a copy of such document
to each Selling Investor;
(n) cooperate with each Selling Investor and the underwriters, brokers,
dealers and placement agents participating in any offering or sale or other
distribution of securities covered by such Registration Statement to facilitate
the timely preparation and delivery of certificates, not bearing any restrictive
legends, unless otherwise required by such Investor, representing the securities
covered by such Registration Statement, and enable all Registrable Shares of
such Selling Investor covered thereby to be in such denominations and registered
in such names as such Selling Investor may request;
(o) use its reasonable efforts to cause the Registrable Shares covered
by the Registration Statement to be registered with or approved by such other
governmental authorities within the United States and its territories as may be
necessary to enable the Selling Investors to consummate the disposition of such
securities in accordance with the intended methods of disposition;
(p) cooperate with the Selling Investors and the underwriters, brokers,
dealers and placement agents participating in any offering or sale or other
distribution of securities covered by such Registration Statement in making any
filings or submissions required to be made, and in furnishing all appropriate
information in connection therewith, with the National Association of Securities
Dealers, Inc., any national securities exchange, any other "self-regulatory
organization" (as defined in the Exchange Act) or with any governmental
authority;
(q) promptly notify each Selling Investor and each underwriter, broker,
dealer and placement agent participating in any offering or sale or other
distribution of securities covered by such Registration Statement of the
issuance or threatened issuance of any order suspending the registration or
qualification of any Registrable Shares covered by such Registration Statement
for disposition in any jurisdiction; use its reasonable efforts to prevent the
issuance of any such threatened order and; if any such order is issued, use its
reasonable best efforts to obtain the lifting or withdrawal of such order at the
earliest possible moment and promptly notify each Selling Investor and each such
underwriter, broker, dealer and placement agent of any such lifting or
withdrawal;
(r) if any shares of Common Stock or any other capital stock or
securities of the same class, series, issue or other type as any Registrable
Shares covered by such Registration Statement are or upon consummation of all
sales and other distributions covered by such Registration Statement will be
listed, qualified or otherwise eligible for trading or quotation on a national
securities exchange or The Nasdaq Stock Market, use its reasonable best efforts
to cause, by the date of the first sale of any Registrable Shares pursuant to
such Registration Statement, all Registrable Shares covered by such Registration
Statement to be listed, qualified or eligible for trading or quotation on each
such exchange or quotation system;
(s) take, and use its reasonable efforts to cause each of the
respective Affiliates of the Company to take, all action necessary to effect
each registration, offering, sale and distribution of the Registrable Shares
contemplated hereby, including preparing and filing any required financial or
other information;
(t) make available to each registrar, transfer agent, trustee or
similar agent or fiduciary for each class, series, issue or other type of
Registrable Shares a supply of certificates or other instruments evidencing or
constituting such Registrable Shares which shall be in a form complying with the
requirements of such registrar, transfer agent, trustee or similar agent or
fiduciary promptly after the registration of such Registrable Shares;
(u) in the case of an underwritten offering, use its reasonable best
efforts to cause the senior executive officers of the Company to participate in
the customary "road show" presentations that may be reasonably requested by the
managing underwriter or underwriters in any such underwritten offering and
otherwise to facilitate, cooperate with, and participate in each proposed
offering contemplated herein and customary selling efforts related thereto; and
(v) take all other actions which are reasonably necessary or which may
be reasonably requested by the Majority Selling Investors or the Majority
Investors or any underwriter, broker, dealer or placement agent participating in
any offering or sale or other distribution of securities covered by such
Registration Statement to effect the registration and qualification of the
Registrable Shares covered by such Registration Statement and to facilitate the
disposition thereof in accordance with the respective plans of distribution of
the Selling Investors.
Section 4.02. Suspension of Registration Proceedings. Notwithstanding
anything to the contrary contained herein, if at any time after the filing of a
Registration Statement in a Demand Registration but before it is declared
effective by the Commission the Company determines, in its reasonable business
judgment, that such offering, sale or other distribution covered thereby would
result in a Disadvantageous Effect, then the Company may suspend the offering,
sale or distribution of any of the Registrable Shares pursuant to such
Registration Statement by giving written notice to such effect to each Selling
Investor; provided, however, that (i) the Company may not require such
suspension unless such suspension is also required on the part of each and every
Person (including the Company) who proposes to offer, sell or otherwise
distribute any securities pursuant to such Registration Statement and (ii) a
suspension pursuant to this Section 4.02 or pursuant to Section 2.07 by reason
of the existence of one or more Disadvantageous Effects shall be authorized only
once during any twelve-month period. Any such suspension pursuant to this
Section 4.02 shall terminate upon the first to occur of (i) the consummation of
the transaction which is the asserted basis for such Disadvantageous Effect,
(ii) the abandonment or termination of such transaction prior to consummation,
(iii) the determination by the Board of Directors of the Company that such
offering, sale or other distribution would not or would no longer result in such
Disadvantageous Effect and (iv) the ninety-first day after the written notice of
such suspension is given in accordance with this Section.
Section 4.03. Procedures if Stop Order Issued. Each Selling Investor,
upon receipt of any written notice from the Company of the happening of any
event of the kind described in Section 4.01(f), will forthwith discontinue
disposition of Registrable Shares pursuant to the applicable Registration
Statement until such Selling Investor's receipt of the copies of the
supplemented or amended preliminary prospectus, prospectus or prospectus
supplement contemplated by Section 4.01(f), and, if so directed by the Company,
such Selling Investor will deliver to the Company all copies in its possession
of the most recent preliminary prospectus, prospectus or prospectus supplement
covering such Registrable Shares at the time of receipt of such notice. In the
event the Company shall give any such notice after a Registration Statement has
become effective, the Company shall extend the period during which the
effectiveness of such Registration Statement shall be maintained pursuant to
Section 4.01(b) hereof by the number of days during the period from and
including the date of the giving of notice pursuant to Section 4.01(f) to the
date when the Company shall make available to each Selling Investor the copies
of the supplemented or amended preliminary prospectus, prospectus or prospectus
supplement contemplated by Section 4.01(f).
Section 4.04. Participation in Underwritten Offers. No Investor or
other Person who otherwise has a right to participate in any underwritten
offering in connection with a Demand Registration or a Piggyback Registration
shall be entitled to so participate unless such Person (i) agrees to sell its
securities on the basis provided in any underwriting arrangements applicable to
all stockholders who participate therein (including so-called "lock-up"
arrangements) and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and this Agreement;
provided, that in the case of any Demand Registration, the Majority Selling
Investors shall have the right to determine those arrangements by agreement with
the managing underwriter(s) as provided in Section 2.06(a).
Section 4.05. Restriction on Other Sales. If, in the case of either (or
each) of the first two underwritten offerings that consist of or include
offerings of Common Stock for the account of the Company registered pursuant to
Section 5 of the Securities Act, the managing underwriter(s) for such offering
determine in good faith that public sales of Common Stock by the Investors
otherwise than as part of such offering would adversely affect the success of
such offering, and if the Investors, collectively, then own Registrable Shares
constituting 5% or more of the fully diluted shares of Common Stock then
outstanding (after giving effect to all sales, including any by Investors, and
issuances of Common Stock or Rights to acquire Common Stock pursuant to the
Registration Statement covering such offering), then to the extent requested by
such managing underwriter(s), no Investor shall effect any sale or distribution
into the public market of any Common Stock owned by such Investor, other than as
part of such underwritten offering (to the extent that such Investor has the
right or is otherwise allowed to participate therein), for such period after the
effective date of the Registration Statement covering such offering as such
managing underwriter(s) shall specify, provided that (i) such period shall not
exceed ninety days and (ii) each of the executive officers and the directors of
the Company who beneficially own Common Stock or Rights to acquire Common Stock,
and each Person who holds a number of shares of Common Stock (including shares
issuable upon exercise of Rights but excluding shares acquired in a public
market) equal to or greater than the number of Registrable Shares held (after
giving effect to any sales pursuant to such Registration Statement) by the
Investors, collectively, also agree to be subject to the same restrictions for
the same period and any waiver or release from such restriction granted to any
such officer, director or Person is also granted to each of the Investors with
respect to the same number of shares. Any contract or agreement entered into on
or after the date hereof pursuant to which the Company issues any securities or
becomes or may become obligated to register or to permit the participation in
the registration of any securities of the Company shall contain restrictions
upon the holders of such securities equivalent to those imposed upon the
Investors under this Section. The provisions of this Section 4.05 shall not
prevent the conversion, exchange or exercise of any securities pursuant to their
respective terms into or for other securities of the Company or any public sale
or other distribution by any of the Investors with the prior consent of the
Company, and are supplemental to any similar requirements imposed by the
Securities Act.
Article V
EXPENSES OF REGISTRATION
Section 5.01. Expenses. Except as provided in the last sentence of this
Section 5.01, all Registration Expenses incurred in connection with or otherwise
incident to any Demand Registration or Piggyback Registration and the offering
or sale or other distribution of any Registrable Shares in connection therewith
shall be borne by the Company, whether or not any Registration Statement filed
in connection therewith ever becomes effective or any such sale or other
distribution ever is consummated. Underwriting discounts and selling commissions
attributable to the Registrable Shares included in such registration shall be
borne by the holders of such Registrable Shares pro rata on the basis of the
respective numbers of such included Registrable Shares. Subject to the last
sentence of this Section 5.01, the Company shall not be required to pay the
Registration Expenses of any Demand Registration begun pursuant to Section 2.02
that is withdrawn at the request of the Majority Selling Investors, unless the
Majority Investors elect in writing to have such registration counted as a
Demand Registration. In any such case, (i) the Holders of Registrable Shares to
have been registered shall bear all such Registration Expenses pro rata on the
basis of the number of shares to have been registered, and (ii) the Company
shall not be deemed to have effected a Demand Registration for purposes of the
last sentence of Section 2.02. Notwithstanding the foregoing, however, the
Company shall pay such Registration Expenses (and shall not be deemed to have
effected a Demand Registration for purposes of the last sentence of Section
2.02) if the withdrawal is pursuant to Section 2.07 or Section 3.02.
Article VI
INDEMNIFICATION AND CONTRIBUTION
Section 6.01. Indemnification by the Company. The Company shall
indemnify and hold harmless each Investor, each former Investor, each Person (if
any) who controls such Investor or former Investor within the meaning of the
Securities Act or the Exchange Act and each of their respective Affiliates,
partners, directors, officers, employees and agents (collectively, the "Investor
Indemnified Parties") from and against any liabilities, obligations, losses,
damages, assessments, fines and penalties of any kind or nature, including all
amounts paid or agreed to be paid in settlement of any claim, action, suit,
hearing, proceeding or investigation (collectively, "Losses"), whether direct,
indirect, joint or several, and subject to Section 6.03, also shall indemnify
and reimburse each Investor Indemnified Party for all reasonable fees, costs and
expenses (including reasonable fees and disbursements of counsel) in connection
with preparing for, defending against or settling, prosecuting any appeal of any
judgment entered in, or otherwise as a result of, any claim, action, suit,
hearing, proceeding or investigation, in each case which in any manner results
from, arises out of, or is based upon or related or attributable to (i) any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement as originally filed or in any amendment thereof, or
in any preliminary, final or summary prospectus, or in any amendment thereof or
supplement thereto, or any omission or alleged omission to state in any thereof
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) any violation by the Company of any
federal or state law, rule or regulation or common law applicable to the Company
and relating to action required of or inaction by the Company in connection with
any Demand Registration or Piggyback Registration; provided, however, that, in
the case of clause (i), the Company shall not be obligated to indemnify any
Investor or any of its controlling Persons, Affiliates, partners, directors,
officers, employees or agents for any Loss to the extent (and only to the
extent) that such Loss arises from any such untrue statement made in or omission
from the Registration Statement or any amendment thereof, or any related
preliminary, final or summary prospectus or any amendment thereof or supplement
thereto, which statement or omission related to information about such Investor
or its proposed plan of distribution of the Registrable Shares of such Investor
covered by such Registration Statement and was made or omitted in reliance upon
and in conformity with the latest information about such Investor or its
proposed plan of distribution of the Registrable Shares of such Investor covered
by such Registration Statement which was provided to the Company by such
Investor in writing and stated in writing to be specifically for use in such
Registration Statement (or amendment thereto) or such prospectus (or amendment
thereof or supplement thereto). The Company will also indemnify each
underwriter, selling broker, dealer manager, placement agent and similar
securities industry professional participating in the distribution of
Registrable Shares, its officers and directors and each Person who controls such
Person (within the meaning of the Securities Act) to the extent required by such
underwriter; provided, however, that if the Company and any such underwriter,
selling broker, dealer manager or similar industry professional enters into an
underwriting, purchase or other agreement relating to such distribution which
contains provisions relating to indemnification and contribution between the
Company and such Person, such provisions shall be deemed to govern
indemnification and contribution as between the Company and such Person.
Section 6.02. Indemnification by Each Investor. Each Investor,
individually and not jointly, shall indemnify and hold harmless the Company and
each Person, if any, who controls the Company within the meaning of the
Securities Act and the Exchange Act (the "Company Indemnified Parties") and the
Investor Indemnified Parties (other than such indemnifying Investor and its
controlling Persons, Affiliates, partners, directors, officers, employees and
agents) from and against any Loss to which such Company Indemnified Parties
and/or Investor Indemnified Parties may become subject, and subject to Section
6.03, also shall indemnify and reimburse each Company Indemnified Party for all
reasonable fees, costs and expenses (including reasonable fees and disbursements
of counsel) in connection with preparing for, defending against or settling,
prosecuting any appeal of any Judgment entered in, or otherwise as a result of
any claim, action, suit, hearing, proceeding or investigation, in each case
insofar and to the extent (and only insofar and to the extent) as such Loss or
such claim, action, suit, hearing, proceeding or investigation arises out of or
is based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement pursuant to which any Registrable
Shares of such Investor were offered and sold or in any related preliminary,
final or summary prospectus, or in any amendment thereof or supplement thereto,
or any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if the statement or
omission related to information about such Investor or its proposed plan of
distribution of the Registrable Shares of such Investor covered by such
Registration Statement and was made or omitted in reliance upon and in
conformity with the latest information about such Investor or its proposed plan
of distribution of the Registrable Shares of such Investor covered by such
Registration Statement which was provided by such Investor in writing and stated
in writing to be specifically for inclusion therein; provided, however, that
such Investor will not indemnify or hold harmless any Company Indemnified Party
and/or Investor Indemnified Party from or against any such Loss, fee, cost or
expense if the untrue statement, omission or alleged untrue statement or
omission upon which such Losses or expenses are based was contained in or
omitted from (as the case may be) any preliminary prospectus, prospectus or
summary prospectus, or any amendment thereof or supplement thereto, used after
such time as the Company was advised by or on behalf of such Investor or the
Company had knowledge that the information about such Selling Investor contained
therein needs to be corrected, revised or supplemented.
Section 6.03. Procedures. Each party claiming a right to
indemnification under this Article VI (the "Indemnified Party") shall give
notice to the party from whom such indemnification is or may be sought (the
"Indemnifying Party") promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnification may be sought, and the Indemnifying
Party may participate at its own expense in the defense, or if it so elects,
assume the defense of any such claim and any action or proceeding resulting
therefrom, including the employment of counsel and the payment of all expenses.
The failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party from its obligations to indemnify such
Indemnified Party, except to the extent the Indemnified Party's failure to so
notify actually and materially prejudices the Indemnifying Party's ability to
defend against such claim, action or proceeding. In the event that the
Indemnifying Party elects to assume the defense in any action or proceeding, an
Indemnified Party shall have the right to employ separate counsel in any such
action or proceeding and to participate in the defense thereof, but such
Indemnified Party shall pay the fees and expenses of such separate counsel
unless (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
any relief other than the payment of money is sought against the Indemnified
Party or (iii) the named parties to any such action or proceeding (including any
impleaded parties) include such Indemnified Party and the Indemnifying Party,
and such Indemnified Party shall have been advised by counsel that there is a
conflict of interest between such Indemnified Party and the Indemnifying Party
in the conduct of the defense of such action (in which case, if such Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not assume the defense of such action or proceeding on such
Indemnified Party's behalf, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any time for
all Indemnified Parties, which firm shall be designated in writing by the
applicable Indemnified Parties). If the Indemnifying Party elects not to defend,
or if, after commencing or undertaking any such defense, the Indemnifying Party
fails to prosecute or withdraws from such defense or fails to appeal any
Judgment adverse or unfavorable to the Indemnified Party, the Indemnified Party
shall have the right to undertake the defense, settlement or appeal thereof (as
the case may be), at the Indemnifying Party's expense. If the Indemnified Party
assumes the defense of any such claim, investigation, action, suit, hearing or
proceeding pursuant to this Section 6.03 and proposes to settle the same prior
to a final judgment thereon or to forgo or abandon any appeal available after
final judgment thereon, then the Indemnified Party shall give the Indemnifying
Party prompt written notice thereof and the Indemnifying Party shall have the
right to participate in the settlement, assume or reassume the defense thereof
or prosecute such appeal, in each case at the Indemnifying Party's expense. The
Indemnifying Party shall not, without written consent of such Indemnified Party,
settle or compromise or consent to entry of any judgment with respect to any
such claim, investigation, action, suit, hearing or proceeding (i) in which any
relief other than the payment of money damages is or may be sought against such
Indemnified Party or (ii) which does not include as an unconditional term
thereof the giving by the claimant, Person conducting such investigation or
initiating such hearing, plaintiff or petitioner to such Indemnified Party of a
release from all liability with respect to such claim, investigation, action,
suit or proceeding and all other claims or causes of action (known or unknown)
arising or which might arise out of the same facts.
Section 6.04. Contribution. In order to provide for just and equitable
contribution if a claim for indemnification pursuant to the indemnification
provisions of this Article VI is made but it is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification in such case or the
indemnification provided for under this Article VI, even though so provided for,
otherwise is unavailable to or insufficient to hold any Indemnified Party
harmless to the full extent provided herein with respect to any Loss (or any
fees, costs or expenses) for which such indemnification is provided for, then
the Indemnifying Party shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses (i) in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and such Indemnified Party, on the other, in connection with the
statements or omissions which resulted in such Losses or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative fault referred to
in clause (i) above but also the relative benefits received by the Indemnifying
Party, on the one hand, and such Indemnified Party, on the other, from the
subject offering or distribution, as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by (or omitted to be supplied by) the Indemnifying Party or the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The relative benefits received by the Indemnifying Party, on the one hand, and
the Indemnified Party, on the other, shall be deemed to be in the same
proportion as the net proceeds of the offering or other distribution received by
the Indemnifying Party bears to the net proceeds of the offering or other
distribution received by the Indemnified Party. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Company and the Investors agree that it would
not be just and equitable if contributions pursuant to this Section 6.04 were to
be determined by pro rata allocation (even if all Investors were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this Section
6.04.
Section 6.05. Limit on Liability of Investors. The parties agree, to
the maximum extent permitted by law, that the obligations and liability of each
Selling Investor with respect to any Demand Registration or Piggyback
Registration, whether for indemnification pursuant to Section 6.02, contribution
pursuant to Section 6.04 or otherwise, shall not in any event exceed in the
aggregate the amount of net proceeds received by such Selling Investor from the
sale of the Registrable Shares sold by such Selling Investor in such Demand
Registration or Piggyback Registration.
Article VII
RIGHT OF FIRST OFFER
Section 7.01. Issuance of New Securities. Subject to Section 7.04, if
and whenever the Company issues any New Securities, each Investor holding at
least 10% of the Originally Issued Shares will have the right, but not the
obligation, to purchase such New Securities up to an amount sufficient to permit
it to maintain its percentage common equity interest in the Company (based on
the Number of Common Shares Outstanding immediately prior to the issuance of the
New Securities). The "Number of Common Shares Outstanding" as of any time means
the sum of (i) the number of shares of Common Stock which then are actually
issued and outstanding, plus (ii) the total number of additional shares of
Common Stock which would then be issued and outstanding if it were assumed that
all Qualifying Rights, if any, then held by the Investors and other holders of
Qualifying Rights were then duly exercised in full (whether or not then
exercisable). Within ten Business Days after the receipt of such Preissuance
Notice, each Investor may exercise its rights under this Section 7.01 by giving
written notice to that effect to the Company. Failure to give such notice within
that ten Business Days period or failure to pay at the required time the
purchase price for any New Securities as to which a right to purchase will have
been exercised will constitute a waiver of the rights granted by this Section
7.01 as to the particular issuance of New Securities specified in the Company's
Preissuance Notice. In the event that any Investor does not exercise its rights
under this Section 7.01, such Investor's pro rata share of the New Securities
shall be re-offered to those Investors, if any, who did exercise their rights
under this Section 7.01. Within ten Business Days after the receipt of written
notice of such re-offering (the "Subsequent Notice"), each such Investor may
exercise its further rights by giving written notice to that effect to the
Company.
Section 7.02. Per Share Price; Valuations. The per share purchase price
to be paid upon exercise of the rights granted under this Article VII will be
equal to the lowest per share consideration at which the New Securities are
offered or proposed to be offered by the Company to any New Securities
Purchaser. The consideration for which New Securities are offered or proposed to
be offered will be determined as follows: (i) in case of the proposed issuance
of New Securities for cash, the consideration to be received by the Company will
be the amount of cash for which the New Securities are proposed to be issued and
(ii) in case of the proposed issuance of New Securities in whole or in part for
consideration other than cash, the value of the consideration to be received by
the Company other than cash will be the fair market value of that consideration
as reasonably determined by the Board of Directors of the Company in good faith.
If any Investor within five days of receipt of any Preissuance Notice notifies
the Company in writing that it objects to any statement of the fair market value
of any security or other property contained therein, the Company and the
Investors shall attempt in good faith to agree on the fair market value of such
security or other property. If they are unable to so agree within five Business
Days after such notice of objection was given, then within five Business Days
thereafter, the Company and the Majority Investors shall select one appraiser
and the Company and the Majority Investors shall submit to such appraiser (and
each other) a brief written statement of their position regarding the matter in
dispute and supporting arguments, and each shall be given a period of five
Business Days thereafter to submit to the other and to the appraiser a written
response to such written statement of the other. Such appraiser shall within
fifteen days of the date of its selection, resolve such dispute by choosing
either the position of the Company set forth in such written statement so
submitted by the Company or the position of the Investors set forth in such
written statement so submitted by the Majority Investors, whichever in the
opinion of the appraiser, in its sole discretion, is more consistent with the
purposes and intent of this Agreement. Decisions with respect to such
determination made pursuant to this Section 7.02 by the Majority Investors shall
be binding on all Investors. Any determination of fair market value for purposes
of this Article VII by agreement of the Company and the Majority Investors or by
an appraiser appointed as provided in this Section 7.02 shall be final and
binding on the Company, and each Investor for all purposes of this Article VII.
Promptly after any final determination of fair market value pursuant to this
Section 7.02, the Company shall give each Investor a written notice stating such
fair market value. Each appraiser shall be a nationally recognized appraiser or
investment banking firm which has substantial experience in making appraisals
similar to that being made, which is not directly or indirectly affiliated with
the Company or any other Person who is a party to or otherwise interested in the
event resulting in the need for such appraisal and which has no interest (other
than the receipt of customary fees) in such event. In the event the appraiser
agrees with the written statement submitted by the Investors, the fees and
expenses of any appraiser appointed in connection with an appraisal pursuant to
this Article VII shall be paid by the Company. In the event the appraiser agrees
with the written statement submitted by the Company, the fees and expenses of
any appraiser appointed in connection with an appraisal pursuant to this Article
VII shall be paid by the Investors.
Section 7.03. Representations, Warranties and Certain Covenants. In
connection with each issuance of New Securities to any Investor pursuant to this
Article VII, the Company shall, in the event the Company is making
representations, warranties and/or covenants to the New Securities Purchaser,
make to each Investor such representations, warranties, and covenants as are
customarily made by issuers in similar instances (but which in no event shall be
less favorable to the Investors than those contemplated by the Preissuance
Notice or otherwise made to or for the benefit of any New Securities Purchaser)
and each Investor shall be separately and independently entitled to rely on such
representations and warranties, to the benefit of such covenants and to exercise
all available rights and remedies in the event of any breach or violation of any
such representations, warranties and covenants. Any representations and
warranties made by an Investor shall consist solely of such representations and
warranties relating to (i) such Investor's authority to consummate the purchase
of the New Securities from the Company and (ii) other similar representations
and warranties as are customarily given by similarly situated purchasers of
securities similar to those being purchased by an Investor in a similar
transaction but no Investor shall be required to give any such representation or
warranty which the New Securities Purchaser does not give. The representations,
warranties, covenants and agreements of each Investor shall be several and not
joint and the representations and warranties of the Investor and of the Company
(unless, in the case of the Company, otherwise required by the New Securities
Purchasers) shall terminate upon the earlier of (i) the termination of any
representation or warranty made by the New Securities Purchaser or by the
Company and (ii) one year after closing. The right of each Investor to purchase
the full number of New Securities which such Investor is entitled to purchase
under this Article VII shall not be subject to any conditions whatsoever, other
than the payment of the purchase price therefor determined as provided herein,
and the consummation of the transaction between the Company and the New
Securities Purchaser. If any Investor shall fail for any reason to purchase any
New Securities which it has elected to purchase, the sole right, remedy and
recourse of the Company, the New Securities Purchaser, and the complying
Investors, as the case may be, shall be the right of the Company to issue to the
New Securities Purchaser and the other Investors, pro rata based on their
respective participations in the transaction as determined pursuant to Section
7.01, additional New Securities equal in kind and number or other relevant
amount to the New Securities which such Investor failed to purchase at the
closing, in which event the Majority Investors may elect to postpone the closing
for five Business Days. Unless the Company and any Investor otherwise agree, the
closing of any issuance of New Securities to any Investor pursuant to this
Article VII shall take place at the principal executive offices of the Company
at 11:00 A.M., local time, on the later of (i) the thirtieth day following the
expiration of the period of fifteen Business Days after the later of (A) the
date of the relevant Preissuance Notice was given (except if there is a relevant
Subsequent Notice, in which case the date of such Subsequent Notice) and (B) the
date all disputes as to the valuations have been resolved and (ii) the fifteenth
Business Day following the expiration of all applicable waiting periods, if any,
under the HSR Act and the receipt of all consents, approvals and authorizations
from governmental authorities or other Persons which the Majority Investors
believe to be necessary or desirable in connection with the acquisition of the
New Securities to be issued to the Investor. The Company shall execute such
documents and instruments as may be necessary or reasonably requested to
effectuate the issuance of New Securities to any Investor.
Section 7.04. Limitations. The provisions of this Article VII will not
apply to (i) shares of Common Stock issued as a stock dividend to all holders of
shares of Common Stock or upon any subdivision or combination of shares of
Common Stock, (ii) securities issued for the acquisition by the Company of
another entity or business by merger or such other transaction as would result
in the ownership by the Company of not less than a majority of the voting power
of the other entity or for the purchase of all the assets of an entity or
business, (iii) shares of Common Stock or Rights that are sold by the Company
pursuant to a bona fide public offering pursuant to a registration statement
filed under the Act, (iv) shares of Common Stock or Rights issued pursuant to
the Company's stock option plans in existence at the date of this Agreement or
other such stock option plans as approved by the Series B Directors, (v) the
shares of Series B Preferred Stock or Warrants issued pursuant to the Purchase
Agreement or any other Common Stock Rights or any shares of Common Stock issued
upon conversion or exercise thereof, (vi) shares of Common Stock issued upon
exercise of any Common Stock Rights as to which the Holders shall have been
afforded the opportunity to exercise their rights of first refusal pursuant to
this Article VII, or (vii) securities issued upon exercise of Common Stock
Rights outstanding on the Closing Date and described in the Purchase Agreement
or disclosed on a schedule to the Purchase Agreement.
Section 7.05. Terms of Payment of Purchase Price. Subject to Section
7.03 and the rest of this Section, each issuance of New Securities to each
Investor must be on terms not less favorable to such Investor than the most
favorable terms on which the Company issues or proposes to issue in the
transaction in connection with which the preemptive right is being exercised New
Securities to any New Securities Purchaser, any other Investor or any other
Person (without discrimination based on differences in the number or amount of
New Securities to be acquired). Without limiting the generality of the
immediately preceding sentence, (i) each Investor must be given the same options
and rights of election, if any, as to the kind(s) or amount(s) of consideration
to be paid or delivered for New Securities as any other purchaser is given or
was proposed to be given in the Preissuance Notice and (ii) the purchase price
to be paid by each Investor upon exercise of its rights under this Article VII
will be paid upon terms which are not less favorable than those on which the New
Securities are sold to any other purchaser, unless those terms provide for
payment in a manner which could not reasonably be duplicated by any Investor,
such as the transfer of specific property to the Company, in which event such
payment will be in cash in an amount equal to the fair market value of such
specific property as reasonably determined by the Board of Directors in good
faith. The giving of a Preissuance Notice shall constitute the representation
and warranty by the Company to each Investor that (i) the proposed issuance is
not subject to conditions, contingencies or material terms not disclosed in the
Preissuance Notice or in the accompanying documents delivered therewith; and
(ii) neither the amount or kind of consideration offered by the New Securities
Purchaser for the New Securities nor any other terms of the proposed issuance or
of any other transaction or proposed transaction with the New Securities
Purchaser or any of its Affiliates have been established for the purpose of
circumventing, increasing the cost of exercising or otherwise impairing any
Investor's right of first refusal pursuant to this Article VII or increasing the
probability that any Investor's right of first refusal will not be exercised in
full.
Section 7.06. Issuance to Others Not Permitted Absent Compliance. If
the Company does not issue and deliver, to each Investor, on or before the 120th
day after the date the applicable Preissuance Notice with respect to any
proposed issuance of New Securities is given, all New Securities which such
Investor is entitled to be issued in accordance with the provisions of this
Article VII for any reason other than the failure of such exercising Investor to
tender the purchase price therefor if and when required by this Article VII,
then the Company shall not be entitled to issue any New Securities pursuant to
the related Preissuance Notice. If, after compliance with Section 7.02, there
remains any portion of the New Securities specified in a Preissuance Notice
which have not been elected to be acquired by one or more Investors, the Company
shall be entitled to issue such remaining portion to the Persons, in the manner
and on terms and conditions not materially more favorable to the purchaser than
those specified in such Preissuance Notice, but only if such issuance is
consummated not later than the 120th day after the date such Preissuance Notice
was given. If such issuance is not so consummated within such period, then the
Company shall not be entitled to issue any such New Securities without again
complying with the provisions of this Article VII. Notwithstanding the foregoing
provisions of this Article VII, unless a binding purchase agreement entered into
pursuant to this Article VII by the Company and such Investor otherwise
provides, the Company may, without liability to any Investor, abandon the
proposed issuance of New Securities.
Section 7.07. Rights Apply to Each Issuance of New Securities. Subject
to the last sentence of Section 7.01, the provisions of this Article VII shall
apply successively to each and every issuance or proposed issuance of any New
Securities.
Article VIII
CERTAIN OTHER COVENANTS OF THE COMPANY
The Company hereby covenants and agrees as follows:
Section 8.01. Financial Information. So long as an Investor is a holder
of 10% of the Originally Issued Shares, the Company will furnish to such
Investor the following reports:
(a) Within the applicable time period required under the Exchange Act,
after the end of each fiscal year of the Company, the information required
by Form 10-K (or any successor form thereto) under the Exchange Act with
respect to such period (including a "Management's Discussion and Analysis
of Financial condition and Results of Operations" section that describes
the consolidated financial condition and results of operations of the
Company), together with a report thereon by the Company's certified
independent accountants;
(b) Within the applicable time period required under the Exchange Act
after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the information required by Form 10-Q (or any
successor from thereto) under the Exchange Act with respect to such period
(including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" section that describes the consolidated
financial condition and results of operations of the Company);
(c) Any current reports on Form 8-K (or any successor forms) required
to be filed under the Exchange Act; and
(d) As soon as practicable upon approval or adoption by the Company's
Board of Directors, the Company will furnish such Investor with the
Company's budget and operating plan (including projected balance sheets and
profit and loss and cash flow statements) for such fiscal year.
Section 8.02. (a) Board Representation. For so long as TPG is the
Beneficial Owner of at least 40% of the Originally Issued Shares held by it at
the Closing Date, the Investors shall vote all shares of capital stock of the
Company held by them and otherwise use best efforts to cause (i) the Board to
consist of seven members, of whom two members will be individuals designated by
TPG, one member will be an individual designated by Sandler Capital Partners IV,
L.P., a Delaware limited partnership, one member will be the Chief Executive
Officer of the Corporation, one member will be an independent director
acceptable to TPG in its discretion and the remaining two members will be other
individuals reasonably acceptable to TPG; and (ii) at least one-third of the
members of each committee of the Board to consist of Series B Directors. The
directors whom, at any time and from time to time, TPG is entitled to designate
under this Section 8.02(a), are sometimes herein referred to as the "Series B
Directors". As of the Closing Date, the directors of the Board shall be in the
classes of the Board specified in Exhibit A. The Parties recognize that certain
of the directors referred to in clause (i) of the immediately preceding sentence
will not be designated at the Closing Date. Accordingly, the Parties shall use
best efforts to cause to exist vacancies on the Board in respect of such
undesignated directors and to fill those vacancies with individuals satisfying
the requirements of clause (i) of the immediately preceding sentence at the
earliest practicable time.
(b) Qualifications of Independent Directors. For purposes hereof, an
"independent director" is an individual who (unless otherwise approved by the
Series B Directors or, if there is no Series B Director, by TPG) (i) has either
a significant financial investment in the Corporation or a significant strategic
position or expertise relative to the business of the Corporation and (ii) is
not (A) an officer or employee of the Corporation or any of its Subsidiaries,
(B) a director, employee, partner, manager or other member of management of any
of Affiliate of the Corporation (except a director of a Subsidiary of the
Corporation), (C) a relative of any Person described in subclause (ii)(A) or
(ii)(B) or (D) a trustee of any trust or estate in which any Person described in
subclause (ii)(A), (ii)(B) or (ii)(C) is a beneficiary and has a substantial
beneficial interest.
(c) Removal. The Parties shall vote, and otherwise shall use all
reasonable efforts to cause any director designated by an Investor to be removed
at and only at the request of such Investor. Any vacancy in the office of a
director designated by an Investor resulting from death, resignation or removal
or existing for any other reason whatsoever may be filled only by such Investor.
In addition, in the event that the holders of the Series B Shares shall have the
right to elect Majority Directors pursuant to Section 11(b) of the Series B
Articles of Amendment and such right is terminated by operation of the last
sentence of such Section 11(b), the Investors shall use best efforts to cause
any additional directors elected pursuant to such Section 11(b) to be removed as
promptly as practicable.
(d) Indemnification. The Corporation shall (i) to the fullest extent
permitted by applicable law, indemnify the holders of the Series B Preferred
Stock and each current and former Series B Director who is made a party or
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that such Person is or was a shareholder or director of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such Person in connection with such action, suit or proceeding and
(ii) pay in advance, or advance to each such shareholder, director and former
director for payment of, expenses incurred in defending any such action, suit or
proceeding to the maximum extent permitted by applicable law. The rights
conferred on any Person by this Section 8.02(d) shall not be exclusive of any
other rights which such Person may have or acquire under any statute, under the
Corporation's Articles of Incorporation, under the Corporation's By-laws, under
any agreement, vote of stockholders or disinterested directors or otherwise.
(e) Actions Prohibited Under Series B Articles of Amendment. For so
long as TPG is the Beneficial Owner of at least 40% of the Originally Issued
Shares, the Company shall not, and the Investors shall use best efforts to cause
the Company not to, take any action prohibited by Section 11(d) of the Series B
Articles of Amendment.
(f) Operating Committee. In the event that the Company shall fail to
comply with any material provision of (A) its annual budget (including, without
limitation, by falling at least fifteen percent (15%) short of any of the
revenue or EBITDA target established in any such budget (as adjusted for any
acquisitions made by the Company after the setting of such targets)) or (B) any
of the budget, restrictive or financial covenants in the Indenture or in any
other credit agreement with respect to Indebtedness in excess of $5,000,000 to
which the Company is a party (whether or not such agreement is existing as of
the date hereof), the Board shall establish and maintain an Operating Committee
consisting of five members, two of whom shall be members of the Board elected by
the Majority Holders, one of whom shall be a representative of Sandler Capital
and two of whom shall be other members of the Board. The Operating Committee
shall have the sole power and authority to direct management in the
implementation of the Company's long-term and annual operating plans and budget.
(g) Board Observer Rights. In the event that (i) any Investor declines
to designate a director of the Company which it is entitled to designate
pursuant to Section 8.02(a), or (ii) the right of the holders of the Series B
Shares to elect the Designated Directors (as defined in the Series B Articles of
Amendment) shall terminate upon a redemption of Series B Shares, the Parties
shall take such action as is necessary to cause such Investor (in the case of
the foregoing clause (i)) or TPG (in the case of the foregoing clause (ii)) to
have the right, in its sole discretion, to have representatives (in the same
number as the number of directors which such Investor has the right to designate
pursuant to Section 8.02(a)) appointed by them attend any one or more meetings
of the Board as observers, and not as directors, which representatives shall be
entitled to receive the same notices of meetings of and proposed actions by the
Board as directors generally, but shall not be entitled to any voting or consent
rights of a director.
Section 8.03. Additional Piggyback Registration Rights. From and after
the Closing Date, the Company shall not (i) grant to any Person rights to
participate in any Piggyback Registration that are more favorable than the
rights granted to the Investors in the case of a cut-back in a Piggyback
Registration or (ii) grant any Person a right to piggyback on a Demand
Registration unless such Persons agree that in the event of any required
cut-back, such Persons shall have their security proposed to be included in such
registration reduced prior to any reduction in Registrable Shares of the
Investors included in such registration.
Article IX
MISCELLANEOUS
Section 9.01. Securities Act Legend. Except as otherwise
provided in this Section 9.01, each stock certificate or other
instrument evidencing the Series B Shares, the Warrants, any
Conversion Stock or any Warrant Stock shall bear a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR OTHER SECURITIES LAWS. THEY ARE `RESTRICTED
SECURITIES' WITHIN THE MEANING OF SEC RULE 144. THE SHARES
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND SUCH
LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT AND SUCH LAWS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE REASONABLE SATISFACTION OF THE COMPANY."
Any holder of any such certificate or instrument bearing the foregoing legend
shall be entitled to promptly receive from the Company, without expense, a new
certificate or instrument of identical tenor representing the same kind of
securities and the same number or other amount thereof not bearing such legend
if such securities shall have been effectively registered under the Securities
Act and are sold or otherwise disposed of in accordance with the intended method
of disposition by the seller thereof set forth in the registration statement, or
such securities may be freely transferred by such holder by reason of an
exemption from registration under the Securities Act, or such legend otherwise
is not required in order to ensure compliance with the Securities Act. The
written opinion of Cleary, Gottlieb, Steen & Hamilton, or other legal counsel
selected by such holder and reasonably satisfactory to the Company with respect
to any of the foregoing or with respect to any question concerning whether any
proposed transfer of any such securities would violate the Securities Act shall
be sufficient to determine the issue.
Section 9.02. Rule 144. The Company covenants that following
the initial registration of any Common Stock, it will file any reports
required to be filed by it under the Securities Act and the Exchange
Act so as to enable Investors who continue to hold any Registrable
Shares to sell such Registrable Shares without registration under the
Securities Act within the limitation of the exemptions provided by (i)
Rule 144 under the Securities Act, as such Rule may be amended from
time to time, or (ii) any similar rule or rules now in effect or
hereafter adopted by the Commission. Upon the request of any Investor,
the Company will promptly deliver to such Investor a written statement
as to whether it has complied with such requirements.
Section 9.03. Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers of or consents to
departures from the provisions hereof may not be given, unless
approved in writing by the Company and by the Majority Investors.
Notwithstanding the foregoing, any waiver or departure with respect to
any matter which relates exclusively to the rights and obligations of
Investors in a specific Piggyback Registration or Demand Registration,
which relates only to the Registrable Shares being registered pursuant
to that Piggyback Registration or Demand Registration, which applies
only to such specific Piggyback Registration or Demand Registration,
and which does not directly or indirectly adversely affect the rights
of any other Investor with respect to any Registrable Shares not being
so registered, shall be authorized and effective if approved in
writing by the Company and the Majority Investors.
Section 9.04. Termination. The provisions of this Agreement
shall terminate as to any particular Investor, other than the
provisions of Article VI, which shall survive any such termination
indefinitely, at the first time as of which all Registrable Shares
held by such Investor may be publicly sold by such Investor pursuant
to Rule 144 under the Securities Act without registration or
qualification under the Securities Act or state securities laws,
without limitations as to volume or manner of sale and without any
limitation, restriction or condition; provided, however, that any
obligations of the Company pursuant to Article V or any other
provision of this Investor Rights Agreement with respect to any
pending or completed Demand Registration or Piggyback Registration
which have not been fully performed shall survive until fully
performed. In the case of any dispute concerning whether the condition
stated in the immediately preceding sentence has been satisfied as of
any time, the opinion of an independent law firm of nationally
recognized standing selected by the Majority Investors reasonably
satisfactory to the Company shall be final and conclusive. The fees
and expense of such law firm will be paid by the losing party to such
dispute.
Section 9.05. Certain Mergers and Other Events. If the
Company proposes to consummate any consolidation, merger, binding
share exchange or reorganization in which the Company is not the
continuing corporation or any sale, conveyance, transfer or lease to
another Person of the properties and assets of the Company as an
entirety or substantially as an entirety and if, as a result of or in
connection with such transaction, the Investors would receive or would
be entitled to receive, in exchange for or otherwise with respect to
the Registrable Shares held by them, any common stock, other capital
stock or other securities of the successor or acquiring corporation or
any Affiliate thereof or any Rights for any such common stock, capital
stock or other securities, then the Company shall not consummate such
transaction unless the successor or acquiring Person (as the case may
be) shall, in a manner reasonably satisfactory to the Majority
Investors, grant to the Investors registration rights which shall be
no less favorable to the Investors than the provisions of this
Agreement. In the event of (i) any reclassification, reorganization or
change of the outstanding shares of Common Stock or other capital
stock of the Company, (ii) any consolidation, merger, binding share
exchange or reorganization to which the Company is party (other than a
consolidation, merger, share exchange or reorganization in which the
Company is the continuing corporation and which does not result in any
reclassification of or change in the Registrable Shares of any class,
series or type), (iii) any event which results in the securities
deliverable upon exercise or conversion of any Common Stock Rights
referred to in the definitions of Registrable Shares in Section 1.01
consisting of or including any securities other than shares of Common
Stock, or (iv) any other event of any kind occurs which results in a
change in the securities constituting or included in the Registrable
Shares immediately before such event, then the Investors shall be
entitled to registration rights with respect to all such securities
issued or issuable to them by reason thereof which are comparable in
all material respects to those provided for herein with respect to
Registrable Shares. In the event any dispute relating to this Section
9.5 shall arise, then such dispute shall promptly thereafter be
submitted for resolution by an independent law firm of recognized
national standing selected by the Company and reasonably acceptable to
the Majority Investors (acting as provided above in this Section),
whose decision (with the advice of an independent investment banking
firm of recognized national standing selected by such law firm, if
such law firm believes it advisable to seek such advice) shall be
final and conclusive. The reasonable fees and expenses of such law
firm (and of any such investment banking firm) shall be paid by the
Company.
Section 9.06. Determinations Generally. Unless otherwise
expressly provided herein, all decisions and determinations required
or permitted to be made hereunder by any Investor (including any
decision as to whether to give any consent or approval) shall be made
by such Person in its sole discretion.
Section 9.07. Binding Effect; Successors and Assigns; Entire
Agreement. Except as expressly provided in this Agreement, nothing in
this Agreement, express or implied, is intended or shall be construed
to confer upon or give any creditor, stockholder or Affiliate of the
Company or any other Person except the parties and the Persons who
from time to time are Investors any remedy or claim under or by reason
of this Agreement or any term, covenant or condition hereof, all of
which shall be for the sole and exclusive benefit of the parties. This
Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the Company and the Persons who from time to
time are Investors and their respective successors and permitted
assigns. Except as otherwise specifically permitted or contemplated by
this Agreement, neither this Agreement nor any of the rights,
interests or obligations of the Company hereunder shall be assigned or
delegated without the prior written consent of the Majority Investors.
The provisions of Article VI shall inure to the benefit of, and be
enforceable by, each of the Investor Indemnified Parties and the
Company Indemnified Parties. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter herein and
supersede all prior agreements and undertakings, both written and
oral, among the parties, or any of them, with respect to the specific
subject matter hereof.
Section 9.08. Interpretation. The headings of the articles
and sections contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not
affect the meaning or interpretation of this Agreement.
Section 9.09. No Implied Waivers. No action taken pursuant to
this Agreement, including, without limitation, any investigation by or
on behalf of any party or beneficiary, shall be deemed to constitute a
waiver by the party or beneficiary taking such action of compliance
with any agreements, covenants, obligations or commitments contained
herein or made pursuant hereto. The waiver by any party of a breach or
benefit of any provision of this Agreement shall not operate or be
construed as a waiver of any preceding or succeeding breach and no
failure by any party or beneficiary to exercise any right, privilege
or remedy hereunder shall be deemed a waiver of such party's or
beneficiary's rights, privileges or remedies hereunder or shall be
deemed a waiver of such party's or beneficiary's rights to exercise
the same at any subsequent time.
Section 9.10. Further Assurances. Each party shall cooperate
and take such actions as may be reasonably requested by another party
in order to carry out the provisions and purposes of this Agreement
and the transactions contemplated hereby. The obligations of the
Company with respect to the Registrable Shares of any Investor
included in any Demand Registration or Piggyback Registration are
subject to the compliance by such Investor with the immediately
preceding sentence, but the failure of any Investor to so comply shall
not affect the Company's obligations with respect to the Registrable
Shares of any other Investor included therein.
Section 9.11. Counterparts. This Agreement 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 may be executed by facsimile signatures and
may be delivered by the exchange of counterparts of signature pages by
means of telecopier transmission.
Section 9.12. 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.
400 Inverness Drive South
Suite 400
Englewood, Colorado 80112
Attn: General Counsel
Telephone: (303) 749-3000
Telecopy: (303) 749-3113
with a copy to:
Richard M. Russo, Esq.
Gibson, Dunn & Crutcher L.L.P.
1801 California Street
Suite 4100
Denver, Colorado 80202
Telephone: (303) 298-5715
Telecopy: (303) 296-5310
If to any Investor, to such Investor at such Investor's address
specified on Schedule 1 or supplied by such Investor in writing to the
Company for purposes hereof, with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Paul J. Shim
Telephone: (212) 225-2930
Telecopy: (212) 225-3999
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 communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
Section 9.13. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York
without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than
the State of New York.
Section 9.14. Severability. If any provision of this
Agreement 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.
Section 9.15. Specific Performance. Without intending to
limit the remedies available to any of the parties, each of the
Investors and the Company acknowledges and agrees that a violation,
breach or threatened by the other of any term of this Agreement will
cause such party irreparable injury for which an adequate remedy at
law is not available. The parties agree that each party shall have the
right of specific performance and, accordingly, shall be entitled to
an injunction, restraining order or other form of equitable relief, in
addition to any and all other rights and remedies at law, from any
court of competent jurisdiction restraining any other party from
committing any breach or threatened breach of, or otherwise
specifically to enforce, any provision of this Agreement and all such
rights will be cumulative. The parties further agree that any defense
in any action for specific performance that a remedy at law would be
adequate is waived.
Section 9.16. Sandler Capital Agreements. Sandler Capital
Partners IV, L.P., an Initial Investor hereunder, agrees on behalf of
itself and its Affiliates (collectively, "Sandler") for the benefit of
the Investors that notwithstanding the other terms of this Agreement
or the terms of any securities or agreement to which Sandler may be a
party:
(i) the Investors shall be entitled to exercise piggyback
registration rights hereunder in connection with any
demand registration right exercised by Sandler
otherwise than pursuant to this Agreement with respect
to a number of Registrable Shares not to exceed 50% of
the securities sought to be registered by Sandler
pursuant to such demand registration; and
(ii) the issuance, exercise or accumulation of dividends in
respect of any Series B Share or Warrant shall not
result in any adjustment to the exercise price of any
warrants held by Sandler or the number of securities
for which such warrants are exercisable.
If requested, Sandler shall execute and deliver such instruments as shall be
necessary or desirable to effect the foregoing agreements.
(Signatures continued on the next page)
IN WITNESS WHEREOF, the parties have executed this Investor Rights
Agreement as of the date first written above.
CONVERGENT COMMUNICATIONS, INC.
By:
----------------------------------
Name:
Title:
[INVESTOR SIGNATURES]
<PAGE>
Exhibit A
Directors of the Board
Class I
Class II
Class III
JOINT FILING AGREEMENT
JOINT FILING AGREEMENT (this "Agreement"), dated as of April
14, 2000, among TPG Advisors III, Inc., a Delaware corporation ("TPG Advisors
III") and T3 Advisors, Inc., a Delaware corporation ("T3 Advisors).
W I T N E S S E T H
WHEREAS, as of the date hereof, each of TPG Advisors III and
T3 Advisors is filing a statement on Schedule 13D under the Securities Exchange
Act of 1934 (the "Exchange Act") with respect to the securities of Convergent
Communications, Inc., a corporation organized and existing under the laws of
Colorado (the "Schedule 13D");
WHEREAS, each of TPG Advisors III and T3 Advisors is
individually eligible to file the Schedule 13D;
WHEREAS, each of TPG Advisors III and T3 Advisors wishes to
file the Schedule 13D and any amendments thereto jointly and on behalf of each
of TPG Advisors III and T3 Advisors, pursuant to Rule 13d-1(k)(1) under the
Exchange Act;
NOW, THEREFORE, in consideration of these premises and other
good and valuable consideration, the parties hereto agree as follows:
1. TPG Advisors III and T3 Advisors hereby agree that the
Schedule 13D is, and any amendments thereto will be, filed on behalf of each of
TPG Advisors III and T3 Advisors pursuant to Rule 13d-1(k)(1)(iii) under the
Exchange Act.
2. TPG Advisors III hereby acknowledges that, pursuant to Rule
13d-1(k)(1)(i) under the Exchange Act, TPG Advisors III is responsible for the
timely filing of the Schedule 13D and any amendments thereto, and for the
completeness and accuracy of the information concerning TPG Advisors III
contained therein, and is not responsible for the completeness and accuracy of
the information concerning T3 Advisors, unless TPG Advisors III knows or has
reason to know that such information is inaccurate.
3. T3 Advisors hereby acknowledges that, pursuant to Rule
13d-1(k)(1)(i) under the Exchange Act, T3 Advisors is responsible for the timely
filing of the Schedule 13D and any amendments thereto, and for the completeness
and accuracy of the information concerning T3 Advisors contained therein, and is
not responsible for the completeness and accuracy of the information concerning
TPG Advisors III contained therein, unless T3 Advisors knows or has reason to
know that such information is inaccurate.
4. Each of TPG Advisors III and T3 Advisors hereby agree that
this Agreement shall be filed as an exhibit to the Schedule 13D, pursuant to
Rule 13d-1(k)(1)(iii) under the Exchange Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers hereunto duly authorized as of the day
and year first above written.
TPG ADVISORS III, INC.
By:
------------------------------
Name: Richard A. Ekleberry
Title: Vice President
T3 ADVISORS, INC.
By:
------------------------------
Name: Richard A. Ekleberry
Title: Vice President
