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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X] Filed by a Party other than the
Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CONVERGENT COMMUNICATIONS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ____
(2) Aggregate number of securities to which transaction applies: _______
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined): _____
(4) Proposed maximum aggregate value of transaction: ___________________
(5) Total fee paid: ____________________________________________________
[_] Fee paid previously with preliminary materials: _______________________
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ____________________________________________
(2) Form, Schedule or Registration Statement No.: ______________________
(3) Filing Party: ______________________________________________________
(4) Date Filed: ________________________________________________________
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Your VOTE is important
Convergent Communications, Inc.
Proxy Statement
NOTICE OF ANNUAL MEETING
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Convergent Communications, Inc.
400 Inverness Drive South, 4th Floor
Englewood, Colorado 80112
NOTICE OF ANNUAL MEETING
Dear Convergent Communications Shareholder:
On Friday, June 16, 2000, Convergent Communications, Inc. will hold its Annual
Meeting of Shareholders at the Inverness Hotel, 200 Inverness Drive West,
Englewood, Colorado 80112. The meeting will begin at 9:00 a.m., Mountain
Daylight Time.
Only shareholders who owned stock at the close of business on May 5, 2000 can
vote at this meeting or any adjournments that may take place. A list of the
shareholders entitled to vote will be available for examination at the meeting
by any shareholder for any purpose germane to the meeting. The list will also
be available on the same basis for ten days prior to the meeting at our
principal executive office, 400 Inverness Drive South, 4th Floor, Englewood,
Colorado 80112. At the meeting we will:
1. Elect three Directors;
2. Ratify the appointment of PricewaterhouseCoopers, LLP as our
independent auditors for 2000;
3. Approve the Stock Incentive Plan, as amended; and
4. Attend to other business properly presented at the meeting.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE THREE
PROPOSALS OUTLINED IN THIS PROXY STATEMENT.
At the meeting we will also report on our 1999 business results and other
matters of interest to shareholders.
Also enclosed with this mailing is a copy of our 1999 annual report. The
approximate date of mailing for this proxy statement and card(s) is May 24,
2000.
We hope that you like the new format of our Proxy Statement. We welcome your
comments.
By Order of the Board of Directors,
/s/ Joseph R. Zell
Joseph R. Zell
President and Chief Executive
Officer
May 24, 2000
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TABLE OF CONTENTS
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NOTICE OF ANNUAL MEETING.................................................... 1
QUESTIONS AND ANSWERS....................................................... 3
PROPOSALS YOU MAY VOTE ON................................................... 6
NOMINEES FOR CLASS II DIRECTORS............................................. 9
CONTINUING DIRECTORS--CLASS I............................................. 10
CONTINUING DIRECTORS--CLASS II............................................ 10
STATEMENT ON CORPORATE GOVERNANCE........................................... 11
BOARD COMMITTEE MEMBERSHIP ROSTER........................................... 13
DIRECTORS' COMPENSATION..................................................... 14
DIRECTORS' & OFFICERS' OWNERSHIP OF OUR STOCK............................... 14
ADDITIONAL BENEFICIAL OWNERSHIP INFORMATION................................. 15
STOCK PERFORMANCE GRAPH..................................................... 16
EXECUTIVE COMPENSATION: REPORT OF THE COMPENSATION COMMITTEE................ 17
EXECUTIVE COMPENSATION...................................................... 19
OPTION GRANTS TABLE....................................................... 19
CURRENT OFFICERS.......................................................... 21
RELATED PARTY TRANSACTIONS.................................................. 23
INDEMNIFICATION AGREEMENTS.................................................. 23
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..................... 24
OTHER BUSINESS.............................................................. 24
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QUESTIONS AND ANSWERS
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1. Q: What may I vote on?
A: (1) The election of three Class II nominees to serve on our Board of
Directors;
(2) The ratification of the appointment of PricewaterhouseCoopers,
LLP as our independent auditors for 2000; and
(3) The approval of our Stock Incentive Plan, as amended.
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2. Q: How does the board recommend I vote on the proposals?
A: The Board recommends a vote FOR each of the nominees, FOR the
ratification of the appointment of PricewaterhouseCoopers LLP as
independent auditors for 2000, and FOR the approval of our Stock
Incentive Plan.
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3. Q: Who is entitled to vote?
A: Shareholders as of the close of business on May 5, 2000 (the Record
Date) are entitled to vote at the Annual Meeting.
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4. Q: How do I vote?
A: Sign and date each proxy card you receive and return it in the prepaid
envelope. If you return your signed proxy card but do not mark the
boxes showing how you wish to vote, your shares will be voted FOR the
three proposals. You have the right to revoke your proxy at any time
before the meeting by:
(1) notifying our Corporate Secretary;
(2) voting in person; OR
(3) returning a later-dated proxy card.
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5. Q: Who will count the vote?
A: Representatives of American Stock Transfer and Trust Company, our
registrar and transfer agent, will count the votes and act as the
inspector of election.
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6. Q: Is my vote confidential?
A: Proxy cards, ballots and voting tabulations that identify individual
shareholders are mailed or returned directly to American Stock
Transfer and Trust Company, and handled in a manner that protects your
voting privacy. Your vote will not be disclosed except: (1) as needed
to permit American Stock Transfer and Trust Company to tabulate and
certify the vote; (2) as required by law; or (3) in limited
circumstances such as a proxy contest in opposition to the Board.
Additionally, all comments written on the proxy card or elsewhere will
be forwarded to management, but your identity will be kept
confidential unless you ask that your name be disclosed.
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7. Q: What shares are included on the proxy card(s)?
A: The shares on your proxy card(s) represent ALL of your shares,
including those in our Deferred Compensation Plan and shares held in
custody for your account by Norwest Bank Minnesota as trustee for the
Convergent Communications Services, Inc. 401(k) plan for employees. If
you do not return your proxy card(s), your shares will not be voted.
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8. Q: How many shares can vote?
A: As of the Record Date, 28,967,586 shares of common stock and 175,000
shares of Preferred B Stock were issued and outstanding. Every
shareholder of common stock is entitled to one vote for each share
held. Each share of Preferred B Stock represents 76.92 shares of
underlying common stock. If you hold Preferred B Stock, you are
entitled to vote the underlying common stock on all matters submitted
to a vote of holders of our common stock. In summary, there were a
total of 42,429,126 eligible votes as of the Record Date.
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9. Q: What is a "quorum"?
A: A "quorum" is a majority of the outstanding shares. They may be
present at the meeting or represented by proxy. There must be a quorum
for the meeting to be held, and a proposal must receive more than 50%
of the shares voting to be adopted. If you submit a properly executed
proxy card, even if you abstain from voting, then you will be
considered part of the quorum. However, abstentions are not counted in
the tally of votes FOR or AGAINST a proposal. A WITHHELD vote is the
same as an abstention.
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10. Q: Who can attend the Annual Meeting and how do I get a ticket?
A: All shareholders on May 5, 2000 can attend. Just check the box on your
proxy card or, if your shares are held through a broker and you'd like
to attend, please write to Martin E. Freidel, Executive Vice
President, General Counsel and Corporate Secretary, Convergent
Communications, Inc., 400 Inverness Drive South, 4th Floor, Englewood,
Colorado 80112. Include a copy of your brokerage account statement or
an omnibus proxy (which you can get from your broker), and we will
send you a ticket.
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11. Q: How will voting on any other business be conducted?
A: Although we do not know of any business to be considered at the 2000
Annual Meeting other than the proposals described in this proxy
statement, if any other business is presented at the Annual Meeting,
your signed proxy card gives authority to Joseph R. Zell, our
President and Chief Executive Officer, and Martin E. Freidel, our
Executive Vice President and General Counsel, to vote on such matters
at their discretion.
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12. Q: Who are the largest principal shareholders?
A: As of April 21, 2000, shareholders owning in excess of 5% of our
common stock were as follows:
(i) Affiliates of the Texas Pacific Group (TPG Advisors III, Inc. and
T3 Advisors, Inc.) own 150,000 shares of our Preferred B Stock.
Pursuant to our Amended and Restated Articles of Incorporation,
the Preferred B Stock votes with the common stock on an "as
converted" basis. As such, the Preferred B Stock owned by TPG
represents approximately 11,538,462 shares of our common stock.
(ii) Our three founders (John Evans, Keith Burge and Philip Allen)
and their families owned approximately 3,240,065 shares or 11.2%
of our common stock.
(iii) Affiliates of Sandler Capital Management owned approximately
2,741,869 shares or 9.5% of our common stock and 25,000 shares
of Preferred B Stock representing approximately 1,923,078
shares of our common stock upon conversion.
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13. Q: When are the shareholder proposals for the 2001 Annual Meeting due?
A: All shareholder proposals to be considered for inclusion in next
year's proxy statement must be submitted in writing to Martin E.
Freidel, Executive Vice President, General Counsel and Corporate
Secretary, Convergent Communications, Inc., 400 Inverness Drive South,
4th Floor, Englewood, Colorado 80112 by January 21, 2001.
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14. Q: Can a shareholder nominate someone to be a director of the company?
A: As a shareholder, you may recommend any person as a nominee for
director of Convergent Communications, Inc. by writing to the Board of
Directors, c/o Convergent Communications, Inc., 400 Inverness Drive
South, 4th Floor, Englewood, Colorado 80112. Recommendations must be
received by December 31, 2000 for the 2001 Annual Meeting, and must be
accompanied by the name, residence and business address of the
nominating shareholder; a representation that the shareholder is a
record holder of our common stock or holds our common stock through a
broker and the number and class of shares held; a representation that
the shareholder intends to appear in person or by proxy at the meeting
of the shareholders to nominate the individual(s) if the nominations
are to be made at a shareholder meeting; information regarding each
nominee which would be required to be included in a proxy statement; a
description of any arrangement or understandings between and among the
shareholder and each and every nominee; and the written consent of
each nominee to serve as a director, if elected.
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15. Q: How much did this proxy solicitation cost?
A: Are only expenses related to printing costs and the reimbursement to
brokerage houses and other custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses for forwarding proxy and
solicitation materials to shareholders.
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PROPOSALS YOU MAY VOTE ON
1. ELECTION OF DIRECTORS
There are 3 nominees for election this year--Jeffrey A. Shaw, Richard W.
Boyce and Michael J. Marocco. Detailed information on each is provided on page
9. The Board has seven members, with one seat currently vacant. Our directors
are divided into three classes. A class of directors is elected annually, and
each serve a three-year term. If any director is unable to stand for re-
election, the Board may reduce its size or designate a substitute. If a
substitute is designated, proxies voting on the original director candidate
will be cast for the substituted candidate.
Your board unanimously recommends a vote FOR each of these directors.
2. RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT AUDITORS
The Audit Committee has recommended, and the Board has approved, the
appointment of PricewaterhouseCoopers LLP ("PwC") as our independent auditors
for 2000. PwC has served as our independent auditors since inception. They
have unrestricted access to the Audit Committee to discuss audit findings and
other financial matters. Representatives of PwC will attend the Annual Meeting
to answer appropriate questions. They also may make a statement.
Audit services provided by PwC during 1999 included an audit of our
consolidated financial statements, audits of employee benefit plan financial
statements and a review of our Annual Report and certain other filings with
the SEC. In addition, PwC provided various non-audit services to us during
1999.
Your board unanimously recommends a vote FOR the ratification of the
appointment of PwC as independent auditors for 2000.
3. APPROVAL OF STOCK INCENTIVE PLAN
The Board has adopted a Stock Incentive Plan, as amended, pursuant to which
options and other incentive stock grants are granted to our employees and
independent directors. Details concerning the Stock Incentive Plan are
described below.
Eligibility. Options may be granted to any employee or member of the Board
of Directors selected by the Compensation Committee. Incentive Stock Options
may be granted only to our employees. We currently have approximately 1,600
employees which are eligible to receive grants under the Stock Incentive Plan.
Pursuant to our employment agreement with our new Chief Executive Officer,
Joseph R. Zell, Mr. Zell will receive a grant of 1.5 million options
exercisable at $13.00 per share.
Administration. Under the terms of the Stock Incentive Plan, we may grant
options to purchase 3,500,000 shares of our common stock to eligible
individuals. The Stock Incentive Plan provides that it be administered by the
Board of Directors or a committee appointed by the Board of Directors
consisting of two or more non-employee directors. The Compensation Committee
of the Board of Directors has been appointed to administer the Stock Incentive
Plan.
Adjustments and Other Provisions. The Stock Incentive Plan provides for an
adjustment in the number of shares reserved and in the exercise price of each
option if there is a stock dividend, split up, subdivision or combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization in which we are the surviving corporation. In the event of a
proposed dissolution, liquidation or sale of all or substantially all of our
assets or a change of control, the options may, in the discretion of the
Compensation Committee, become exercisable immediately prior to the
consummation of the proposed action without regard to any vesting provision
with respect to such options.
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Stock Option Terms. The Compensation Committee will determine the vesting
schedule of the options and the price per share at which the option is
exercisable. Unless otherwise determined by the Compensation Committee, each
option will vest, on a cumulative basis, as to 20% percent of the shares on
each of the first, second, third, fourth and fifth anniversaries of the grant
date of such option. No option will be exercisable for more than 10 years
after it is granted and the exercise price must be at least 100% of the fair
market value of our common stock on the date of the grant. If an optionee owns
shares possessing more than 10% of the voting power of all classes of our
outstanding stock, the Compensation Committee may grant an option to that
employee only if the exercise price of the option is at least 110% of the fair
market value of our common stock on the day of the grant. The Stock Incentive
Plan provides that if our common stock is listed on a securities exchange or
admitted to unlisted trading privileges on any such exchange or if our common
stock is quoted on a National Association of Securities Dealers, Inc. system
that reports closing prices, the fair market value shall be the closing price
of our common stock as reported by such exchange or system. If our common
stock is not listed or admitted to unlisted trading privileges or so quoted,
the fair market value will be the average of the last reported highest bid and
the lowest asked prices quoted on the National Association of Securities
Dealers, Inc. Automated Quotations System or, if not so quoted, then by the
National Quotation Bureau, Inc. If our common stock is not so listed or
admitted to unlisted trading privileges or so quoted, and bid and asked prices
are not reported, the fair market value shall be determined in such reasonable
manner as may be prescribed by the Compensation Committee.
The consideration to be paid for the shares to be issued upon exercise of an
option, including the method of payment, will be determined by the
Compensation Committee and may consist entirely of cash, check, other shares
of our common stock having a fair market value on the date of exercise equal
to the aggregate exercise price of shares as to which the option will be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment for the issuance of shares to the extent
permitted under the Colorado Business Corporation Act.
Amendments and Discontinuance. The Board of Directors may amend, alter or
discontinue the Stock Incentive Plan in any respect provided the action does
not (i) increase the number of shares reserved under the Stock Plan (except
for certain adjustments described above), (ii) reduce the minimum exercise
price in the case of incentive options, or (iii) modify the provisions of the
Stock Incentive Plan relating to eligibility unless approved by our
shareholders.
Tax Effects. Under Sections 421(a) and 422 of the Internal Revenue Code of
1986, as amended, the grant or exercise of incentive options under the Stock
Incentive Plan will not result in income taxable to the optionee or in a
business expense that we may deduct. Upon a later sale of the shares received
on exercise of an incentive option, the optionee will realize capital gain or
loss, so long as the optionee satisfies the minimum holding period
requirements under the Stock Incentive Plan and the Internal Revenue Code.
If an optionee disposes of shares acquired from the exercise of an option
under the Stock Incentive Plan prior to the expiration of the statutory
holding period ("disqualifying disposition") or if the option is a
nonstatutory option, such optionee will be required to recognize as
compensation taxable as ordinary income the difference between the exercise
price and the fair market value on the date of exercise as well as the amount
realized on any disposition of the shares in excess of the option exercise
price paid by the optionee. We will be entitled to a deduction equal to the
amount that the optionee is required to include in income in our taxable year
which falls within the end of the participating employee's taxable year when
the disqualifying disposition occurs.
The current maximum rate for long-term capital gains realized by
noncorporate taxpayers is less than the current maximum rate on ordinary
income.
The amount by which the fair market value of our common stock exceeds the
exercise price of an incentive option on the date of exercise will be
considered a tax preference item for the optionee and may be subject to the
alternative minimum tax under Section 55 of the Internal Revenue Code in the
year the option is exercised.
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The above summary of the tax effects of options granted or exercised under
the Stock Incentive Plan is based on an interpretation of the laws and
regulations currently in effect. Changes in these laws and regulations or
their construction may modify the projected tax effect of options granted or
exercised under the Stock Plan.
Nontransferability. Options granted under the Stock Incentive Plan are not
transferable other than by will or by the laws of descent and distribution.
Indemnification. The Board of Directors and the members of the Compensation
Committee are entitled to indemnification by us against reasonable expenses,
including attorneys' fees, actually incurred in connection with the defense of
any action, suit or proceeding by reason of any action taken or failure to act
under or in connection with the Stock Incentive Plan or any option granted
under the Stock Incentive Plan or shares purchased pursuant to the exercise of
options under the Stock Incentive Plan, so long as a member of the
Compensation Committee or Board of Directors is not determined in any action,
suit or proceeding to be liable for gross negligence, fraud or willful
misconduct in the performance of his duties.
The Board of Directors has not determined any benefits or amounts that will
be received by or allocated to our officers should you approve the Stock
Incentive Plan. The Stock Incentive Plan is intended to conform to Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, which among
other things, requires shareholder approval of the Stock Incentive Plan. A
plan that complies with Rule 16b-3 permits officers and directors to
participate in employer benefit plans without violating the "short-swing
profit" provisions that prohibit purchases and sales within any six-month
period of each other. Rule 16b-3 accomplishes this by exempting from the
definition of purchases and sales a transaction by an officer or director made
in compliance with the Rule. Grants of options under the Stock Incentive Plan
will be exempt if you approve the Stock Incentive Plan. If you do not approve
the Stock Incentive Plan, we may issue options under the Stock Incentive Plan
but they will not be exempt transactions. Consequently, it would be more
difficult for option holders to exercise the options and sell the stock
received upon exercise.
Market Value. The market price of our common stock as quoted on the Nasdaq
National Market on April 20, 2000 was $8.438 per share.
Your board unanimously recommends a vote FOR the approval of the Stock
Incentive Plan.
Abstentions, broker non-votes or votes withheld on any of the proposals will
be treated as present at the meeting for purposes of determining a quorum, but
will not be counted as votes cast.
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NOMINEES FOR CLASS II DIRECTORS (Term expires 2003)
JEFFREY A. SHAW Director since 2000
Age 35
Mr. Shaw is a senior partner of the Texas Pacific Group, having joined at its
inception. Prior to joining Texas Pacific, Mr. Shaw was a principal of Acadia
Partners/Oak Hill Partners, an affiliate of Keystone, Inc. (formerly the
Robert M. Bass Group). Prior to that, Mr. Shaw was an investment banker in the
Emerging Growth Group as well as the Corporate Finance department of Goldman,
Sachs & Co. Mr. Shaw currently serves on the Boards of Directors of America
West Airlines, Inc., Del Monte Foods Corp., The Leisure Company, Quantum
Bridge Communications, Inc., and Ryanair plc. and previously served on the
Boards of Directors of Allied Waste Industries, Inc., Continental Micronesia,
Inc., Ducati S.p.A., Ducati North America.
RICHARD W. BOYCE Director since 2000
Age 45
Mr. Boyce is the Operating Partner of Texas Pacific Group, a $3 Billion
private equity buyout firm. In the past 2 years he has served as the CEO of
J.Crew, and also provided operating oversight to the remainder of the
portfolio. Prior to joining TPG, Mr. Boyce was employed by PepsiCo from 1992
to 1997, most recently as SVP of North American Operations. Prior roles
included CFO, GM of the Canadian Business Unit, and SVP of Worldwide Strategic
Planning for PepsiCo. Mr. Boyce was previously a partner at the management
consulting firm of Bain & Company, and worked in sales at Union Carbide prior
to attending business school. Mr. Boyce currently serves on the Board of
Directors of J.Crew, ON Semiconductor, ZiLOG, and as Chairman of the Board of
Del Monte Foods.
MICHAEL J. MAROCCO Director since 1998
Age 41
The managing director of Sandler Capital Management. Mr. Marocco joined
Sandler in 1989 and is currently responsible for analyzing, structuring and
managing Sandler's private equity investments. Before joining Sandler, Mr.
Marocco held various positions at Morgan Stanley Dean Witter, including a
fixed income research analyst specializing in companies in the communications
industry and vice president in the Communications Industries group.
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CONTINUING DIRECTORS--CLASS I DIRECTORS (TERM EXPIRES 2001)
JOSEPH R. ZELL Director since 2000
Age 40
Mr. Zell is our President and Chief Executive Officer. Previously, he was
president of U S WEST !NTERPRISE. Mr. Zell began his career at US WEST in 1991
as director of product development for !NTERPRISE. He later served as
executive director of Applications Innovation. Zell was named president of
!NTERPRISE in 1997. Prior to being named president of !NTERPRISE, he was
president of US WEST Wholesale Markets, and also served as vice president of
Markets and Innovation at !NTERPRISE, where he developed, sourced and managed
applications and products that addressed the full range of voice, video and
data networking. Zell managed a portfolio of products and services at US WEST
with revenue of more than $2.7 billion in 1999, including data networking,
Internet services, hosted applications, voice/data networking equipment,
managed services, and private line service. The !NTERPRISE division achieved a
leading position in 1999 as the most aggressive provider of ADSL services,
achieving sales of over 100,000 units in 1999. He is on the board of directors
for US Internetworking, Intertainer, Netpliance, the Shaka Franklin Foundation
and the US WEST Foundation.
CONTINUING DIRECTORS--CLASS III DIRECTORS (TERM EXPIRES 2002)
RICHARD G. TOMLINSON, PH.D. Director since 1997
Age 64
President of Connecticut Research, Inc., a management consulting company
founded in 1986 which serves the telecommunications, electric utility and
computer industries. Dr. Tomlinson has published numerous marketing studies,
venture analyses and technical papers, is a contributing author for several
books and holds five patents. Before founding Connecticut Research, Inc., Dr.
Tomlinson was the Vice President for Strategic Planning of United Technologies
Communications Co. Inc., a subsidiary of United Technologies Building Systems
Co. His career at United Technologies Corporation spanned 20 years, including
16 years at the UTC Research Laboratory where he was a Senior Principal
Scientist.
SPENCER I. BROWNE Director since 1998
Age 50
Principal of Strategic Asset Management, LLC, a consulting company that
assists small and medium-sized companies in obtaining financing. Mr. Browne
was a director and president and chief operating officer of M.D.C. Holdings,
Inc. (NYSC: MDC), a material homebuilder, from 1989 to 1996. He was also a co-
founder, director and chief executive officer of Asset Investors Corporation
and Commercial Assets, Inc., which are publicly-owned real estate investment
trusts. Mr. Browne is also a director for Annaly Mortgage Management, Inc.
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STATEMENT ON CORPORATE GOVERNANCE
The corporate governance standards established by the Board provide a
structure within which directors and management can effectively pursue our
objectives for the benefit of our shareholders. Our business is managed under
the direction of the Board of Directors, but the Board delegates the conduct
of business to our senior management team. The principal functions of the
Board are to:
. Select and evaluate the Chief Executive Officer;
. Review and approve our strategic direction and annual operating plan,
and monitor our performance against the plan;
. Review management compensation and succession planning;
. Advise and counsel management; and
. Review the structure and operation of the Board.
Select and Evaluate the Chief Executive Officer: Annually, the Compensation
Committee and the non-employee directors meet to evaluate the performance of
the Chief Executive Officer. The results of this evaluation are then clearly
communicated to the Chief Executive Officer.
Review and Approve Our Strategic Direction and Annual Operating Plan, and
Monitor Our Performance Against the Plan: The Board stays abreast of
political, regulatory and economic trends and developments that may impact our
strategic direction. During the year, the Board and management participate in
meetings at which major strategies and financial and other objectives and
plans are discussed and approved. Annually, the Board reviews and approves our
strategic plan and a yearly budget and operating plan. On an ongoing basis
during the year, the Board monitors our performance against our annual
operating plan.
Review Management Compensation and Succession Planning: The Compensation
Committee of the Board reviews and approves the Chief Executive Officer's
evaluation of the top management team. On an annual basis, the following
occur:
. The Chief Executive Officer reviews succession planning and management
development with the Board, and provides an assessment of persons
considered potential successors.
. The Board (largely through the Compensation Committee) evaluates the
compensation plans for senior management and other employees to ensure
they are appropriate, competitive and properly reflect our objectives
and performance.
. The Chief Executive Officer meets with the Compensation Committee to
develop appropriate goals and objectives for the next year, which are
then discussed with the entire Board.
. The Compensation Committee meets to review performance against these
established goals and communicates its evaluation to the Chief Executive
Officer.
Advise and Counsel Management: Providing advice and counsel to management
occurs both in formal Board and Committee meetings and through informal,
individual director's contacts with the Chief Executive Officer and other
members of management. The Board is composed of individuals whose knowledge,
background, experience and judgment are useful to the Company. The information
needed for the Board's decision-making generally will be found within our
organization, and Board members have full access to management. On occasion,
the Board may seek legal or other expert advice from a source independent of
management, and generally this is done with the knowledge and concurrence of
the Chief Executive Officer.
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Review Structure and Operations of the Board: The Board periodically reviews
the Board's structure and operations.
. SELECTION AND EVALUATION OF BOARD CANDIDATES: When searching for new
nominees, the Board selects candidates based on their character,
judgment, and business experience. The Board evaluates the performance
of individual directors on an annual basis. This evaluation provides the
basis for the Board's recommendation of a slate of directors to the
shareholders. You should know the following information about this
process:
. Each class of directors is elected by shareholders for a three-year
term.
. The Board consists entirely of independent outside directors except
for the Chief Executive Officer. We do not have consulting
agreements with our directors.
. Periodically, the Board conducts an assessment of how it is
functioning as a whole so that it may continuously improve its
performance.
. BOARD OPERATIONS AND MEETINGS: Our Board usually meets four times per
year in regularly scheduled meetings, but will meet more often if
necessary. The Board held sixteen meetings during 1999, and all of the
directors attended at least 75% of the Board meetings and Committee
meetings of which they were members. The Board meets periodically, at
least annually, without the Chief Executive Officer. While the Board
believes that a carefully planned agenda is important for effective
Board meetings, the agenda is flexible enough to accommodate unexpected
developments. You should know the following information about Board
operations and meetings:
. The items on the agenda are typically determined by the Chairman or
Chief Executive Officer in consultation with the Board. Any director
may request that an item be included on the agenda.
. At Board meetings, ample time is scheduled to assure full discussion
of important matters. Management presentations are scheduled to
permit a substantial proportion of Board meeting time to be
available for discussion and comments.
. Generally, Board members receive information well in advance of
Board meetings so they will have an opportunity to prepare for
discussion of the items at the meeting. Information is provided from
a variety of sources, including management reports, a comparison of
performance to operating and financial plans, reports on our stock
performance and operations prepared by third parties, and articles
in various business publications. In many cases, significant items
requiring Board approval may be reviewed in one or more meetings and
voted upon in subsequent meetings, with the intervening time being
used for clarification and discussion of relevant issues.
. COMMITTEE STRUCTURE: The full Board considers all major decisions of the
Company. However, the Board has established the following two standing
committees, each of which is chaired by an outside director, so that
certain important areas can be addressed in more depth than may be
possible in a full Board meeting:
. The Audit Committee recommends appointment of our independent
auditors. It also approves audit reports and plans, accounting
policies, financial statements, internal audit reports, internal
controls, audit fees and other expenses. All members are non-
employee directors.
. The Compensation Committee manages executive officer compensation.
It also administers our compensation and incentive plans, including
our stock incentive plans. The committee evaluates the
competitiveness of our compensation and the performance of the Chief
Executive Officer and issues the Compensation Committee Report on
executive compensation to shareholders (see pages 17 to 18). All
members of the committee are non-employee directors.
The Board of Directors believes that corporate governance is an evolving
process and periodically reviews and updates this Statement on Corporate
Governance.
12
<PAGE>
BOARD COMMITTEE MEMBERSHIP ROSTER
(as of April 25, 2000)
<TABLE>
<CAPTION>
NAME AUDIT COMPENSATION
- ---- ----- ------------
<S> <C> <C>
R. W. Boyce.................................................. X
S. I. Browne................................................. X X
M. J. Marocco................................................ X
J. A. Shaw................................................... X
R. G. Tomlinson.............................................. X
J. R. Zell...................................................
Number of Meetings in 1999................................... 2 3
</TABLE>
13
<PAGE>
DIRECTORS' COMPENSATION
Non-employee directors receive $2,000 for each meeting attended in-person,
including committee meetings and $1,000 for each meeting attended
telephonically, including committee meetings. We reimburse directors for any
expenses related to their Board service.
Non-employee directors also receive options to purchase 20,000 shares each
year of their term and 2,500 options for each committee of which they are a
member, which vest as to 25% of the options each quarter that they serve as a
director. The exercise price of the options is the fair market value of our
shares on the grant date.
DIRECTORS' & OFFICERS' OWNERSHIP OF OUR STOCK
The following table shows how much common stock each of our executive
officers who were also officers at the end of 1999 and our current directors
owned as of April 21, 2000. Directors and all of our current officers as a
group beneficially owned approximately 43.30% of the common stock. The address
for each of the individuals listed below is 400 Inverness Drive South, 4th
Floor, Englewood, Colorado 80112.
Directors' & Officers' Stock Ownership
<TABLE>
<CAPTION>
Shares of
Common Total
Stock Shares Percent
Beneficially Other Beneficially Beneficially
Name Owned(1) Options Warrants Shares(2) Owned Owned(3)
- ---- ------------ ------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
R. G. Tomlinson......... 50,000 30,625 810 -- 81,435 *
M. J. Marocco(4)........ 4,664,947 15,625 1,036,401 -- 5,716,973 17.89%
S. I. Browne(5)......... 77,500 16,250 12,500 -- 106,250 *
J. A. Shaw(6)........... 11,538,462 -- 1,600,000 -- 13,138,462 31.20%
R. W. Boyce(6).......... 11,538,462 -- 1,600,000 -- 13,138,462 31.20%
J. R. Zell.............. -- 375,000 -- -- 375,000 1.28%
B. R. Ervine............ -- -- -- -- -- *
M. E. Freidel(7)........ 33,700 63,000 -- 10,614 107,314 *
M. R. Dozier............ 57,361 17,500 -- 15,490 90,351 *
All Officers and
Directors as a group
(12 persons)........... 16,497,579 533,000 2,699,711 46,638 19,776,928 43.30%
</TABLE>
- --------
* Less than 1%.
(1) Includes the common shares issuable upon conversion of the Preferred B
Stock.
(2) Includes shares in our 401(k) plan and our Deferred Compensation Plan
trust account.
(3) Based on 28,967,586 shares of common stock issued and outstanding as of
April 21, 2000. Percentage ownership is calculated by dividing (i) the
sum of the number of shares owned by the stockholder plus the number of
shares the stockholder would receive after exercising options and
warrants exercisable within sixty (60) days of the date of this proxy
statement (shares issued after exercising options and warrants are called
"conversion shares"), by (ii) the total number of common shares of stock
outstanding plus the stockholder's conversion shares.
(4) Includes shares held by affiliates of Sandler Capital Management as
described in the table entitled "Certain Beneficial Owners" shown below.
Mr. Marocco disclaims any beneficial ownership to the shares listed.
(5) Includes shares held by Strategic Asset Management, LLC of which Mr.
Browne is a member.
(6) Includes shares held by affiliates of the Texas Pacific Group as
described in the table entitled "Certain Beneficial Owners" shown below.
Each of Messrs. Shaw and Boyce disclaims any beneficial ownership to the
shares listed.
(7) Includes shares owned by Freidel Development International, LLC, as Mr.
Freidel has voting power over these shares.
14
<PAGE>
ADDITIONAL BENEFICIAL OWNERSHIP INFORMATION
The following table shows how much common stock shareholders reporting
ownership in excess of 5% of our common stock owned as of April 21, 2000.
<TABLE>
<CAPTION>
Shares of
Common Total
Stock Shares Percent
Beneficially Other Beneficially Beneficially
Name Owned(1)(2) Options Warrants Shares(3) Owned Owned(4)
- ---- ------------ ------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Founders Group(5)....... 3,280,000 515,000 44,385 60,065 3,899,450 13.38%
Sandler Capital
Management(6).......... 4,664,947 -- 1,036,401 -- 5,701,348 17.87%
TPG(7).................. 11,538,462 -- 1,600,000 -- 13,138,462 31.20%
</TABLE>
- --------
(1) The information is based on reported ownership on the date of SEC
filings. The owners report they hold the shares for themselves and their
affiliates, advisory clients and investors. The entities may disclaim
that they constitute a "group" for purposes of owning these shares.
(2) Includes the common shares issuable upon conversion of the Preferred B
Stock.
(3) Includes shares in our 401(k) plan and our Deferred Compensation Plan
trust account.
(4) Based on 28,967,586 shares of common stock issued and outstanding as of
April 21, 2000. Percentage ownership is calculated by dividing (i) the
sum of the number of shares owned by the stockholder plus the number of
shares the stockholder would receive after exercising options and
warrants exercisable within sixty (60) days of the date of this proxy
statement (shares issued after exercising options and warrants are called
"conversion shares"), by (ii) the total number of common shares of stock
outstanding plus the stockholder's conversion shares.
(5) The "Founders Group" is composed of John Evans, Keith Burge, Philip Allen
and their families. Their address is 9800 Mt. Pyramid Court, Suite 400,
Englewood, CO 80112.
(6) Information is based upon the Schedule 13D filed by affiliates of Sandler
Capital Management with the SEC on August 3, 1999. The address for
Sandler Capital Management is 767 Fifth Avenue, 45th Floor, New York, NY
10153.
(7) Information is based upon the Schedule 13D filed by affiliates of the
Texas Pacific Group (TPG) with the SEC on April 4, 2000. The address for
TPG is 201 Main Street, Suite 2420, Fort Worth, TX 76102.
15
<PAGE>
STOCK PERFORMANCE GRAPH
<TABLE>
<CAPTION>
7/20/99 7/30/99 8/31/99 9/30/99 10/29/99 11/30/99 12/31/99
<S> <C> <C> <C> <C> <C> <C> <C>
Convergent Communications, Inc. 100.000 74.419 56.686 46.512 46.512 50.872 73.837
Nasdaq US 100.000 93.605 89.588 88.942 105.312 109.804 126.489
Nasdaq Telecommuications Stocks 100.000 96.905 100.743 100.743 107.888 119.398 145.157
</TABLE>
16
<PAGE>
EXECUTIVE COMPENSATION: REPORT OF
THE COMPENSATION COMMITTEE
The Committee's Responsibilities: The Compensation Committee of the Board
has responsibility for setting and administering the policies that govern
executive compensation. The Committee is composed entirely of outside
directors. Reports of the Committee's actions and decisions are presented to
the full Board. The purpose of this report is to summarize the philosophical
principles, specific program objectives and other factors considered by the
Committee in reaching its determinations regarding the executive compensation
of the Named Executive Officers.
Compensation Philosophy: The Committee has approved principles for the
management compensation program which:
. Encourage strong financial and operational performance of the Company;
. Emphasize performance-based compensation ("pay at risk"), which balances
rewards for short-term and long-term results;
. Focus executives on "beating the competition" through plans which
include measurements based on performance relative to peer companies;
and
. Provide a competitive level of total compensation necessary to attract
and retain talented and experienced executives.
Compensation Methodology: We strive to provide a comprehensive executive
compensation program that is competitive and performance-based in order to
attract and retain superior executive talent. Each year the committee reviews
market data and assesses our competitive position for three components of
executive compensation: (1) base salary, (2) annual incentives, and (3) long-
term incentives. To assist in benchmarking the competitiveness of its
compensation programs, we, among other things, participate in executive
compensation surveys compiled by third-party consultants. This information is
supplemented by compensation information for general industry. The
compensation survey data reflect adjustments for each company's relative
revenue, asset base, employee population and capitalization, along with the
scope of managerial responsibility and reporting relationships.
Components of Compensation:
. BASE SALARY: Annual base salary is designed to compensate executives for
their level of responsibility and sustained individual performance. The
committee approves in advance all salary increases for executive officers.
. ANNUAL INCENTIVES: Annual incentive awards for our officers are provided in
order to promote the achievement of our business objectives. Each year the
committee considers our prior year's performance and objectives, as well as
its expectations for us in the upcoming year. Bearing in mind these
considerations, the committee sets certain performance criteria or goals
that must be met before payments are made. Additionally, individual
performance goals may be established for each participant. Participants
receive no payments unless minimum thresholds are achieved. Payments may
range from 0% to 100% of the guideline annual incentive, with payments
increasing as performance improves.
The committee establishes a fixed percentage of annual salary as an
executive's guideline annual incentive opportunity, based on comparative
survey data on annual incentives paid in the communications industry. The
guideline amount increases with the level of responsibility of the executive.
Annual incentive awards for 1999 were based on meeting weighted objectives for
three principal measurements:
. Individual objectives
. Market capitalization; and
17
<PAGE>
. EBITDA (earnings before interest, taxes, depreciation and amortization).
For 1999, the annual incentive approved by the committee for each of our
officers was significantly below the targeted levels as a result of missing
the market capitalization and EBITDA targets. The Bonus column of the
Executive Compensation Table on page 18 contains the annual incentive earned
for 1999 for each of our officers who were officers at the end of 1999.
. LONG-TERM INCENTIVE COMPENSATION: The committee reviews and approves all
long-term incentive awards. In 1999, these awards were primarily stock
options. These awards provide compensation to executives only if
shareholder value increases. In determining the number of stock options
awarded, the committee reviewed surveys of similar awards made to
individuals in comparable positions at other communications companies and
the executive's past performance. They also consider the number of long-
term incentive awards previously granted to the executive.
Options have an exercise price equal to the fair market value of common
stock on the date of grant and are typically exercisable at the rate of 20%
per year beginning one year from the date of grant.
Chief Executive Officer Compensation: The Compensation Committee meets
annually, in private, to review the Chief Executive Officer's performance. The
committee uses this performance evaluation in considering the Chief Executive
Officer's compensation. The Chief Executive Officer participates in the same
programs and receives compensation based on the same factors as the other
executive officers. However, the Chief Executive Officer's overall
compensation reflects a greater degree of policy and decision-making authority
and a higher level of responsibility with respect to the strategic direction
and financial and operational results of the Company. John R. Evans was our
Chief Executive Officer until his resignation on April 17, 2000. Mr. Evans'
compensation components were:
. BASE SALARY: His annual base salary was $300,000.
. ANNUAL INCENTIVE: Annual incentive compensation for Mr. Evans was based
upon our attainment of annual performance goals, and on Mr. Evans'
individual objectives as determined by the committee. Based on these
criteria, Mr. Evans received $150,000 as his incentive compensation
for 1999.
. LONG-TERM INCENTIVE AWARDS: During Mr. Evans' employment, Mr. Evans
received 3 grants totaling 175,000 stock options exercisable at prices
from $2.20 to $20.00 per share. As a result of the termination of Mr.
Evans' employment agreement on April 17, 2000, the vesting of all of
these options has been accelerated such that all of the options are
currently exercisable.
Omnibus Budget Reconciliation Act of 1993: This Act has had no material
impact upon our ability to take a tax deduction for annual compensation in
excess of $1 million paid to any of our officers. Therefore, the committee has
determined that it is not necessary to seek shareholder approval to amend any
current compensation plan at this time to comply with this Act.
Compensation Committee Interlocks and Insider Participation: There are none.
Respectfully submitted by the members of the Compensation Committee of the
Board of Directors during 1999:
Spencer I. Browne, Chair
J. Thomas Markley (former Director)
Michael J. Marocco
18
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation we paid the Chief Executive
Officer and each of the four other most highly compensated executive officers
as of the end of 1999, based on salary and incentive bonus. The Named
Executive Officers are as follows:
<TABLE>
<C> <S>
John R. Evans............... Former Chairman and Chief Executive Officer
(employment terminated April 17, 2000)
Keith V. Burge.............. Former President and Chief Operating Officer
(employment terminated April 17, 2000)
Philip G. Allen............. Former Executive Vice President and Secretary
(employment terminated April 17, 2000)
Martin E. Freidel........... Executive Vice President, General Counsel and
Secretary
Michael R. Dozier........... Executive Vice President, Operations
John J. Phibbs.............. Former Executive Vice President, Chief Financial
Officer and Treasurer (employment terminated
August 16, 1999)
</TABLE>
<TABLE>
<CAPTION>
Long-Term
Compensation-
Securities
Other Annual Underlying All Other
Salary Bonus(1) Compensation(2) Options(3) Compensation(4)
------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
J. R. Evans..... 300,000 75,000 18,581 25,000 85,000
K. V. Burge..... 275,000 68,750 15,515 25,000 78,750
P. G. Allen..... 165,000 30,938 12,600 25,000 40,938
M. E. Freidel... 175,000 32,817 13,715 15,000 42,817
M. R. Dozier.... 222,917 125,000 56,047 100,000 221,523
J. J.
Phibbs(5)...... 182,500 57,426 106,066 -- 43,265
</TABLE>
- --------
(1) Includes the cash portion of the individual's bonus under his employment
agreement. The remaining amount of the bonus was paid in shares of our
common stock, valued at fair market value, which amount is reflected
under "All Other Compensation." In the case of Mr. Ervine the amount
shown for 1999 represents a signing bonus.
(2) Includes automobile allowance and other fringe benefit payments. In the
case of Mr. Dozier, the amount includes $30,018 in relocation expenses.
(3) Amounts listed are options granted. Twenty percent of the options to
purchase shares vest on each anniversary of the date of grant.
(4) Includes contributions to our 401(k) Plan and the portion of the bonus
payments made under the individual's employment agreement that were paid
in shares of our common stock, some of which are held under our deferred
compensation plan. In the case of Mr. Dozier, this amount includes
$192,188 in shares issued pursuant to an acquisition integration bonus.
The shares deferred under our deferred compensation plan are held in a
"rabbi trust" for a period we and the employee specify, which cannot be
less than one year. The number of shares held for the benefit of the
Named Officers are as follows: Mr. Evans, 20,288; Mr. Burge, 17,875; Mr.
Allen, 10,973; Mr. Freidel, 8,479; and Mr. Dozier, 14,433.
OPTION GRANTS TABLE
The following table lists our grants during the last fiscal year of stock
options to our officers who were officers at the end of 1999. The amounts
shown as potential realizable values rely on arbitrarily assumed rates of
share price appreciation prescribed by the SEC. In assessing those values,
please note that the ultimate value of the options, as well as your shares,
depends on actual future share values. Market conditions and the efforts of
the directors, the officers and others to foster our future success can
influence those future share values.
19
<PAGE>
The potential realizable values for all shareowners represent the
corresponding increases in the value of outstanding shares, assuming
28,967,586 shares were outstanding.
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates
Number of of Stock Price
Securities Percent of Appreciation for
Underlying Total Options Exercise Option Term(2)
Options Granted to Price Expiration --------------------
Name Granted to Employees Per Share Date 5% 10%
- ---- ---------- ------------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. R. Evans............. 25,000 2.2% $20.00 4/9/2009 $(31,693) $ 245,701
K. V. Burge............. 25,000 2.2% $20.00 4/9/2009 $(31,693) $ 245,701
P. G. Allen............. 15,000 1.3% $20.00 4/9/2009 $(19,016) $ 147,421
B. R. Ervine............ 150,000 13.3% $10.25 12/14/2009 $966,925 $2,450,379
M. E. Freidel........... 15,000 1.3% $20.00 4/9/2009 $(19,016) $ 147,421
M. R. Dozier............ 100,000 8.9% $15.00 8/16/2009 $648,186 $1,920,628
</TABLE>
- --------
(1) 20% of the option to purchase shares vest on each anniversary of the date
of grant.
(2) Potential realizable value is based on an assumption that the price per
share of our common stock appreciates annually at the rate shown
(compounded annually) from the date of grant until the end of the option
term. Potential realizable value is shown net of the exercise price.
These rates of appreciation are provided in accordance with the
Securities and Exchange Commission regulations and do not represent our
estimate or projection of the future common stock price.
1999 Option Holdings
The following table lists the number of shares acquired and the value
realized as a result of option exercises during 1999 for our officers who were
officers at the end of 1999. It also includes the number and value of their
exercisable and non-exercisable options as of December 31, 1999. The table
contains values for "in the money" options, meaning a positive spread between
the year-end share price of $15.875 and the exercise price. These values have
not been, and may never be, realized. The options might never be exercised,
and the value, if any, will depend on the share price on the exercise date.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Including Unexercised Options In-The-Money Options
At Fiscal Year-End At Fiscal Year-End
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------------------------- -------------------------
<S> <C> <C>
J. R. Evans............. 70,000/105,000 $869,250/$742,000
K. V. Burge............. 70,000/105,000 $869,250/$742,000
P. G. Allen............. 70,000/95,000 $869,250/$742,000
B. R. Ervine............ 0/150,000 $ 0/$843,750
M. E. Freidel........... 60,000/105,000 $652,500/$978,750
M. R. Dozier............ 17,500/170,000 $ 67,813/$358,750
</TABLE>
20
<PAGE>
CURRENT OFFICERS
Our current officers are as follows:
<TABLE>
<C> <S>
Joseph R. Zell President and Chief Executive Officer. Mr. Zell
Age: 40 previously served as president of U S WEST !NTERPRISE.
Mr. Zell began his career at US WEST in 1991 as director
of product development for !NTERPRISE. He later served as
executive director of Applications Innovation. Zell was
named president of !NTERPRISE in 1997. Prior to being
named president of !NTERPRISE, he was president of US
WEST Wholesale Markets, and also served as vice president
of Markets and Innovation at !NTERPRISE, where he
developed, sourced and managed applications and products
that addressed the full range of voice, video and data
networking. Zell managed a portfolio of products and
services at US WEST with revenue of more than $2.7
billion in 1999, including data networking, Internet
services, hosted applications, voice/data networking
equipment, managed services, and private line service.
The !NTERPRISE division achieved a leading position in
1999 as the most aggressive provider of ADSL services,
achieving sales of over 100,000 units in 1999. He is on
the board of directors for US Internetworking,
Intertainer, Netpliance, the Shaka Franklin Foundation
and the US WEST Foundation
- ------------------------------------------------------------------------------
Michael R. Dozier Executive Vice President--Operations. Mr. Dozier
Age: 53 previously served as Chief Operating Officer of Tie
Communications, Inc. Mr. Dozier has more than 20 years of
experience in the telecommunications industry including
serving as Vice President of Sales for United USN,
Executive Vice President of Quest United, President of
the South Central and Texas Gulf Regions of WilTel
Communications Services and Vice President of Sales and
Vice President of Operations at Tie Systems, Inc. Mr.
Dozier was an executive officer of Tie prior to our
purchase of substantially all of the assets of Tie. At
the time we purchased Tie's assets, Tie was a debtor in
possession under the U.S. Bankruptcy Code.
- ------------------------------------------------------------------------------
Brian R. Ervine Executive Vice President, Chief Financial Officer and
Age: 38 Treasurer. Mr. Ervine previously served as Chief
Financial Officer of North American Operations and Vice
President of Finance for the global operations of
Metapath Software International ("MSI"), a leading global
provider of enterprise-wide network software solutions.
Prior to joining MSI, Mr. Ervine was Vice President of PC
ServiceSource, Inc. From 1991 to 1993 Mr. Ervine served
as Assistant Controller for CompuCom Systems, Inc. Prior
to joining CompuCom Systems, Mr. Ervine was a senior
audit manager at KPMG Peat Marwick, LLP.
- ------------------------------------------------------------------------------
Martin E. Freidel Executive Vice President, General Counsel and
Age: 36 Secretary. Mr. Freidel previously served as Special
Counsel to the law firm of Miller Wood Welch, LLC in
Denver, Colorado, where he also acted as our Associate
General Counsel. From December 1992 until December 1996,
Mr. Freidel was Vice President and General Counsel with
ICG Communications, Inc. and its predecessors. Before
joining ICG, Mr. Freidel served as Vice President--
Regulatory for LDDS Communications, Inc. (now MCI
WorldCom) and Vice President and General Counsel for
MidAmerican Technologies, Inc., MidAmerican
Communications, Inc. and Republic Telecom Services, Inc.,
which were purchased by LDDS in 1991.
</TABLE>
21
<PAGE>
<TABLE>
<C> <S>
D. Randall Hake Executive Vice President--Human Resources. Mr. Hake
Age: 41 previously served as Vice President of Administration and
Human Resources for Tie. Prior to joining Tie, Mr. Hake
served in various capacities with Memorex Telex
Corporation including Director of Compensation, Benefits
and Staffing and Director of Human Resources--North
America. Mr. Hake was an executive officer of Tie prior
to our purchase of substantially all of the assets of
Tie. At the time we purchased Tie's assets, Tie was a
debtor in possession under the U.S. Bankruptcy Code.
- ------------------------------------------------------------------------------
Gregory P. McGraw Executive Vice President--Corporate Development. Mr.
Age: 45 McGraw previously served as Chief Financial Officer and
Vice President of Marketing and Business Development for
Tie. Prior to joining Tie, Mr. McGraw served as Vice
President--Sales and Marketing for Telemate.Net Software,
Inc., an Internet software company. From 1982 to 1990 Mr.
McGraw held various positions with ROLM Corporation (now
Siemens AG). Mr. McGraw was an executive officer of Tie
prior to our purchase of substantially all of the assets
of Tie. At the time we purchased Tie's assets, Tie was a
debtor in possession under the U.S. Bankruptcy Code.
</TABLE>
Employment Agreements
We have employment agreements with individuals who served as our executive
officers during 1999 as follows:
Messrs. Evans, Burge and Allen
Each of Messrs. Evans', Burge's and Allen's employment agreements were
terminated April 17, 2000.
Mr. Phibbs
Mr. Phibbs' employment with us terminated on August 16, 1999.
Mr. Dozier
Mr. Dozier's current employment agreement is effective as of March 9, 2000
and provides for a term of three years. Mr. Dozier receives an annual base
salary of $250,000. In addition, Mr. Dozier receives a car allowance, benefit
package and an incentive bonus of up to 100% of his base salary. The incentive
bonus is determined by our Compensation Committee. If we terminate the
employment agreement without cause, Mr. Dozier is entitled to continue to
receive his salary, benefits and accrued bonus for a period of 24 months, as
well as the vesting of an additional 20% of his options. If Mr. Dozier
terminates the employment agreement as a result of a change in control, Mr.
Dozier is entitled to continue to receive his salary, benefits and accrued
bonus for a period of 24 months, as well as the immediate vesting of all
options granted to him. In addition, Mr. Dozier is subject to covenants not to
compete with our business or interfere with our business and employee
relationships.
Mr. Ervine
Mr. Ervine's current employment agreement is effective as of March 9, 2000
and provides for a term of three years. Mr. Ervine receives an annual base
salary of $235,000. In addition, Mr. Ervine receives a car allowance, benefit
package and an incentive bonus of up to 75% of his base salary. The incentive
bonus is determined by our Compensation Committee. If we terminate the
employment agreement without cause, or if Mr. Ervine terminates as a result of
a change in control, Mr. Ervine is entitled to continue to receive his salary,
benefits and accrued bonus for a period of 24 months, as well as the immediate
vesting of all options granted to him. In addition, Mr. Ervine is subject to
covenants not to compete with our business or interfere with our business and
employee relationships.
22
<PAGE>
Mr. Freidel
Mr. Freidel's current employment agreement is effective as of March 9, 2000
and provides for a term of three years. Mr. Freidel receives an annual base
salary of $175,000. In addition, Mr. Freidel receives a car allowance, benefit
package and an incentive bonus of up to 75% of his base salary. The incentive
bonus is determined by our Compensation Committee. If we terminate the
employment agreement without cause, or if Mr. Freidel terminates as a result
of a change in control, Mr. Freidel is entitled to continue to receive his
salary, benefits and accrued bonus for a period of 24 months, as well as the
immediate vesting of all options granted to him.
RELATED PARTY TRANSACTIONS
In August, 1998 our operating subsidiary, Convergent Communications
Services, Inc., entered into a Strategic Alliance Agreement with Strategic
Healthcare Solutions, LLC. The agreement is a two year agreement and provides
for the payment of a monthly fee and commissions to SHS for new customers in
the healthcare industry that are introduced to us by Strategic Healthcare
Solutions and that become Enterprise Network Services customers. Under the
agreement, we issued a warrant to Strategic Healthcare Solutions which
entitles it to receive up to a maximum of 131,250 shares of our common stock
at an exercise price of $12.00. The warrant includes performance objectives
which are reviewed semi- annually. If Strategic Healthcare Solutions does not
meet those performance objectives, all or a portion of the shares available
for exercise is reduced. As of April 21, 2000, 93,005 shares had been
canceled. The warrant is not exercisable until August 1, 2000 and expires
August 1, 2003. Spencer I. Browne is a principal of Strategic Asset
Management, Strategic Asset Management has an ownership interest in Strategic
Healthcare Solutions.
On August 16, 1999, a Promissory Note with a face value of $100,000 was
executed and delivered by Michael R. Dozier payable to Convergent
Communications Services, Inc. for repayment of a loan in conjunction with
certain relocation expenses. The Note bears interest on any unpaid balance at
the rate of 10% per annum and must be repaid on the earlier of (i) August 16,
2002 and (ii) the date he ceases employment.
In October 1999, we entered into a long-term Enterprise Managed Services
("EMS") agreement with Cavion Technologies, Inc. Under this agreement we have
designed a network which we now own, maintain and monitor and support
connectivity, including providing equipment and related services for the
network. In connection with this agreement we purchased $286,000 of equipment
from Cavion. In exchange for the use of our equipment and services provided,
Cavion will pay us a monthly fee over a term of five years. In October 1999,
one of our senior officers was elected as a member of the Board of Directors
of Cavion. In addition, through a business combination we completed in 1997,
we own 67,603 shares of Cavion which represents a less than 2% ownership
percentage. In connection with the EMS agreement we recognized revenue of
approximately $135,000 during 1999 of which, approximately $85,000 remained in
trade accounts receivable as of December 31, 1999.
Effective March 22, 2000, our operating subsidiary, Convergent
Communications Services, Inc., entered into an EMS Master Agreement with
eSecureHealth, Inc., a/k/a Health2Health. The agreement is a 5 year agreement
that provides for a monthly service fee to Convergent Communications Services,
Inc. of $112,442 (or $6,746,620 over the term. Spencer I. Browne is the
Executive Vice President--Finance and Co-Chair of the Board of H2H and holds a
shared ownership interest in H2H of approximately 23%.
INDEMNIFICATION AGREEMENTS
Our bylaws require that we indemnify our directors and officers, to the
extent permitted by Colorado law, against any costs, expenses (including
attorneys' fees) and other liabilities to which they may become subject by
reason of their service to us. To insure against such liabilities, we have
purchased liability insurance for our directors and officers and have entered
into indemnification agreements with our non-employee directors. This
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insurance and the indemnification agreements supplement the provisions in our
Amended and Restated Articles of Incorporation which eliminate the potential
monetary liability of directors and officers to us or our shareholders in
certain situations as permitted by law.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that during 1999, all SEC filings of our officers, directors and
ten percent shareholders complied with the requirements of Section 16 of the
Securities Exchange Act, based on a review of forms filed, or written notice
that no annual forms were required.
OTHER BUSINESS
The Board of Directors knows of no other matters for consideration at the
meeting. If any other business should properly arise, the persons appointed in
the enclosed proxy have discretionary authority to vote in accordance with
their best judgment.
A copy of our 1999 Annual Report on form 10-K/A to the Securities and
Exchange Commission may be obtained by shareholders, without charge, upon
written request to Investor Relations, Convergent Communications, Inc., 400
Inverness Drive South, 4th Floor, Englewood, Colorado 80112. You may also
obtain our SEC filings through the internet at www.sec.gov.
By Order of the Board of Directors,
Martin E. Freidel
Executive Vice President,
General Counsel and Corporate Secretary
May 24, 2000
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CONVERGENT COMMUNICATIONS, INC.
STOCK INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of this Stock Incentive Plan ("Plan") of Convergent
Communications, Inc., a Colorado corporation, is to enable the Company, as
defined in Section 2.2(a)(iii) hereof, to attract, retain and motivate its
employees, officers, management and other key personnel, and to further align
the interests of such persons with those of the stockholders of the Company, by
providing for or increasing their proprietary interest in the Company.
SECTION 2. ADMINISTRATION OF THE PLAN
2.1 Composition of Committee. The Plan shall be administered by the Board
------------------------
of Directors (the "Board") and/or by a committee of the Board, as appointed from
time to time by the Board (the "Committee"). The Board shall fill vacancies on,
and from time to time may remove or add members to, the Committee. The Committee
shall act pursuant to a majority vote or unanimous written consent.
Notwithstanding the foregoing, with respect to any Award that is not intended to
satisfy the conditions of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or Section 162(m)(4)(C) of the Internal Revenue
Code of 1986, as amended (the "Code"), the Committee may appoint one or more
separate committees (any such committee, a "Subcommittee") composed of one or
more directors (who may but need not be members of the Committee) and may
delegate to any such Subcommittee(s) the authority to grant Awards, as defined
in Section 5.1 hereof, under the Plan to Employees, to determine all terms of
such Awards, and/or to administer the Plan or any aspect of it. Any action by
any such Subcommittee within the scope of such delegation shall be deemed for
all purposes to have been taken by the Committee. The Committee may designate
the Secretary of the Company or other Company employees to assist the Committee
in the administration of the Plan, and may grant authority to such persons to
execute agreements evidencing Awards made under this Plan or other documents
entered into under this Plan on behalf of the Committee or the Company.
2.2 Powers of the Committee. Subject to the express provisions of this
-----------------------
Plan, the Committee shall be authorized and empowered to do all things necessary
or desirable in connection with the administration of this Plan with respect to
the Awards over which such Committee has authority, including, without
limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating to
this Plan and to define terms not otherwise defined herein; provided that,
unless the Committee shall specify otherwise, for purposes of this Plan (i) the
term "fair market value" shall mean, as of any date, the closing price for a
Share, as defined in Section 3.1 hereof, reported for that date for securities
listed on the National Market of The Nasdaq Stock Market or, if no Shares traded
on the National Market of The Nasdaq Stock Market on the date in question, then
for the next preceding date for which Shares traded on the National Market of
The Nasdaq Stock Market; and (ii) the term "Company" shall mean Convergent
Communications, Inc. and its subsidiaries and affiliates, unless the context
otherwise requires.
(b) to determine which persons are Employees (as defined in Section 4
hereof), to which of such Employees, if any, Awards shall be granted hereunder
and the timing of any such Awards, and to grant Awards;
(c) to determine the number of Shares subject to Awards and the
exercise or purchase price of such Shares;
<PAGE>
(d) to establish and verify the extent of satisfaction of any
performance goals applicable to Awards;
(e) to prescribe and amend the terms of the certificates evidencing
Awards made under this Plan (which need not be identical);
(f) to determine whether, and the extent to which, adjustments are
required pursuant to Section 11 hereof;
(g) to interpret and construe this Plan, any rules and regulations
under the Plan and the terms and conditions of any Award granted hereunder, and
to make exceptions to any such provisions in good faith and for the benefit of
the Company; and
(h) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
2.3 Determinations of the Committee. All decisions, determinations and
-------------------------------
interpretations by the Committee or the Board regarding the Plan shall be final
and binding on all Employees and Participants, as defined in Section 3 hereof.
The Committee or the Board, as applicable, shall consider such factors as it
deems relevant, in its sole and absolute discretion, to making such decisions,
determinations and interpretations including, without limitation, the
recommendations or advice of any officer of the Company or Employee and such
attorneys, consultants and accountants as it may select.
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Aggregate Limits. Subject to adjustment as provided in Section 11, at
----------------
any time, the aggregate number of shares of the Company's common stock, no par
value ("Shares"), issued and issuable pursuant to all Awards (including all ISOs
(as defined in Section 5.1 hereof)) granted under this Plan shall not exceed two
million (2,000,000) shares; provided that no more than five hundred thousand
(500,000) of such Shares may be issued pursuant to all Incentive Bonuses and
Performance Stock Awards granted under the Plan. The Shares subject to the Plan
may be either Shares reacquired by the Company, including Shares purchased in
the open market, or authorized but unissued Shares.
3.2 Code Section 162(m) Limits. The aggregate number of Shares subject to
--------------------------
Options granted under this Plan during any calendar year to any one Employee
shall not exceed five hundred thousand (500,000). The aggregate number of
Shares issued or issuable under any Incentive Bonus or Performance Stock Awards
granted under this Plan during any calendar year to any one Employee shall not
exceed five hundred thousand (500,000). Notwithstanding anything to the
contrary in the Plan, the foregoing limitations shall be subject to adjustment
under Section 11 only to the extent that such adjustment will not affect the
status of any Award intended to qualify as "performance based compensation"
under Code Section 162(m).
3.3 Issuance of Shares. For purposes of Section 3.1, the aggregate number
------------------
of Shares issued under this Plan at any time shall equal only the number of
Shares actually issued upon exercise or settlement of an Award and not returned
to the Company upon cancellation, expiration or forfeiture of an Award or
delivered (either actually or by attestation) in payment or satisfaction of the
purchase price, exercise price or tax obligation of an Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee,
prospective employee, consultant or advisor of the Company (an "Employee") shall
be eligible to be
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considered for the grant of Awards hereunder. For purposes of the administration
of Awards, the term "Employee" shall also include a former Employee or any
person (including any estate) who is a beneficiary of a former Employee. A
"Participant" is any Employee to whom an Award has been made and any person
(including any estate) to whom an Award has been assigned or transferred
pursuant to Section 10.1.
SECTION 5. PLAN AWARDS
5.1 Award Types. The Committee, on behalf of the Company, is authorized
-----------
under this Plan to enter into certain types of arrangements with Employees and
to confer certain benefits on them. The following such arrangements or benefits
are authorized under the Plan if their terms and conditions are not inconsistent
with the provisions of the Plan: Stock Options, Incentive Bonuses and
Performance Stock. Such arrangements and benefits are sometimes referred to
herein as "Awards." The authorized types of arrangements and benefits for which
Awards may be granted are defined as follows:
Stock Options: A Stock Option is a right granted under Section 6 to purchase a
number of Shares at such exercise price, at such times, and on such other terms
and conditions as are specified in or determined pursuant to the certificate
evidencing the Award (the "Option Certificate"). Options intended to qualify as
Incentive Stock Options ("ISOs") pursuant to Code Section 422 and Options which
are not intended to qualify as ISOs ("Non-qualified Options") may be granted
under Section 6 as the Committee in its sole discretion shall determine.
Incentive Bonus: An Incentive Bonus is a bonus opportunity awarded under
Section 7 pursuant to which a Participant may become entitled to receive an
amount based on satisfaction of such performance criteria as are specified in
the document evidencing the Award (the "Incentive Bonus Agreement").
Performance Stock: Performance Stock is an award of Shares made under Section
8, the grant, issuance, retention and/or vesting of which is subject to such
performance and other conditions as are expressed in the document evidencing the
Award (the "Performance Stock Agreement").
5.2 Grants of Awards. An Award may consist of one such arrangement or
----------------
benefit or two or more of them in tandem or in the alternative.
SECTION 6. STOCK OPTION GRANTS
The Committee may grant an Option or provide for the grant of an Option,
either from time-to-time in the discretion of the Committee or automatically
upon the occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the recipient of the Award, within the control of others
or not within the any person's control.
6.1 Option Certificate. Each Option Certificate shall contain provisions
------------------
regarding (a) the number of Shares that may be issued upon exercise of the
Option, (b) the purchase price of the Shares and the means of payment for the
Shares, (c) the term of the Option, (d) such terms and conditions of
exercisability as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions, and (f)
such further terms and conditions, in each case not inconsistent with the Plan
as may be determined from time to time by the Committee. Option Certificates
evidencing ISOs shall contain such terms and conditions as may be necessary to
comply with the applicable provisions of Section 422 of the Code.
6.2 Option Price. The purchase price per Share of the Shares subject to
------------
each Option granted under the Plan shall equal or exceed 100% of the fair market
value of a Share on the date
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the Option is granted, except that (i) the Committee may specifically provide
that the exercise price of an Option may be higher or lower in the case of an
Option granted to employees of a company acquired by the Company in assumption
and substitution of options held by such employees at the time such company is
acquired, and (ii) in the event an Employee is required to pay or forego the
receipt of any cash amount in consideration of receipt of an Option, the
exercise price plus such cash amount shall equal or exceed 100% of the fair
market value of such Stock on the date the Option is granted.
6.3 Option Term. The "Term" of each Option granted under the Plan,
-----------
including any ISOs, shall not exceed ten (10) years from the date of its grant.
6.4 Option Vesting. Options granted under the Plan shall be exercisable at
--------------
such time and in such installments during the period prior to the expiration of
the Option's Term as determined by the Committee in its sole discretion. The
Committee shall have the right to make the timing of the ability to exercise any
Option granted under the Plan subject to such performance requirements as deemed
appropriate by the Committee. At any time after the grant of an Option the
Committee may, in its sole discretion, reduce or eliminate any restrictions
surrounding any Participant's right to exercise all or part of the Option,
except that no Option shall first become exercisable within six (6) months from
its date of grant, other than upon death, Disability (as defined in Section 6.5
hereof), a Change of Control (as defined in Section 12.2 hereof) or upon
satisfaction of such performance requirements as deemed appropriate by the
Committee.
6.5 Termination of Employment. Subject to Section 12, upon a termination
-------------------------
of employment by a Participant prior to the full exercise of an Option, the
following procedures shall apply unless determined otherwise by the Committee in
its sole discretion or, in the case of an ISO, unless other procedures are
necessary to comply with the provisions of Section 422, 424 or 425 of the Code:
(a) Death or Disability. If a Participant terminates service on
account of becoming disabled, the Participant may exercise the Option in whole
or in part within ninety (90) days after the date of the Employee's disability,
but in no event later than the date on which it would have expired if the
Employee had not become disabled. Unless provided otherwise by the Committee, an
Employee shall be deemed to be disabled if he or she is determined to be
disabled for purposes of meeting any insurance requirements under long-term
disability policies ("Disability") provided by the Company. If an Employee dies
during a period in which he or she is entitled to exercise an Option (including
the periods referred to in the first sentence of this paragraph (a) or in
paragraph (c) of this Section), the Participant may exercise the Option in whole
or in part within ninety (90) days after the date of the Employee's death, but
in no event later than the date on which it would have expired if the Employee
had lived.
(b) Cause. If a Participant's employment with the Company or a
subsidiary shall be terminated for cause, as determined by the Committee in its
sole discretion, he or she shall forfeit any and all outstanding option rights
and such rights shall be deemed to have lapsed for purposes hereof as of the
date of the Participant's termination of service.
(c) Other Forms of Termination. If a Participant ceases to be
employed by the Company or a subsidiary for any reason other than Disability,
death or termination for cause during a period in which he or she is entitled to
exercise an Option, the Participant's Option shall terminate ninety (90) days
after the date of such cessation of employment, but in no event later than the
date on which it would have expired if such cessation of employment had not
occurred. During such period the Option may be exercised only to the extent that
the Participant was entitled to do so at the date of cessation of employment
unless the Committee, in its sole discretion, permits exercise of the Option to
a greater extent. The employment of a Participant
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<PAGE>
shall not be deemed to have ceased upon his or her absence from the Company on a
leave of absence granted in accordance with the usual procedures of the Company.
6.6 Option Exercise.
---------------
(a) Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional Shares and the Committee may require, by the terms of the Option
Certificate, a partial exercise to include a minimum number of Shares.
(b) Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery to the representative of the Company
designated for such purpose by the Committee all of the following: (i) notice of
exercise in such form as the Committee authorizes specifying the number of
Shares to be purchased by the Participant, (ii) payment or provision for payment
of the exercise price for such number of Shares, (iii) such representations and
documents as the Committee, in its sole discretion, deems necessary or advisable
to effect compliance with all applicable provisions of the Securities Act of
1933, as amended, and any other federal, state or foreign securities laws or
regulations, (iv) in the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Employee, appropriate proof
of the right of such person or persons to exercise the Option, and (v) such
representations and documents as the Committee, in its sole discretion, deems
necessary or advisable to provide for the tax withholding pursuant to Section
13. Unless provided otherwise by the Committee, no Participant shall have any
right as a stockholder with respect to any Shares purchased pursuant to any
Option until the registration of Shares in the name of such person, and no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such Shares are so registered.
(c) Payment of Exercise Price. To the extent authorized by the
Committee, the exercise price of an Option may be paid in the form of one of
more of the following, either through the terms of the Option Certificate or at
the time of exercise of an Option: (i) cash or certified or cashiers' check,
(ii) shares of capital stock of the Company that have been held by the
Participant for such period of time as the Committee may specify, (iii) other
property deemed acceptable by the Committee, (iv) a reduction in the number of
Shares or other property otherwise issuable pursuant to such Option, or (v) any
combination of (i) through (iv).
SECTION 7. INCENTIVE BONUS
Each Incentive Bonus Award will confer upon the Employee the opportunity to
earn a future payment tied to the level of achievement with respect to one or
more performance criteria established for a performance period of not less than
one year.
7.1 Incentive Bonus Award. Each Incentive Bonus Award shall contain
---------------------
provisions regarding (a) the target and maximum amount payable to the
Participant as an Incentive Bonus, (b) the performance criteria and level of
achievement versus these criteria which shall determine the amount of such
payment, (c) the period as to which performance shall be measured for
determining the amount of any payment, (d) the timing of any payment earned by
virtue of performance, (e) restrictions on the alienation or transfer of the
Incentive Bonus prior to actual payment, (f) forfeiture provisions, and (g) such
further terms and conditions, in each case not inconsistent with the Plan as may
be determined from time to time by the Committee. The maximum amount payable as
an Incentive Bonus may be a multiple of the target amount payable, but the
maximum amount payable pursuant to that portion of an Incentive Bonus Award
granted under this Plan for any fiscal year to any Participant that is intended
to satisfy the
5
<PAGE>
requirements for "performance based compensation" under Code Section 162(m)
shall not exceed $1,000,000.
7.2 Performance Criteria. The Committee shall establish the performance
--------------------
criteria and level of achievement versus these criteria which shall determine
the target and maximum amount payable under an Incentive Bonus Award, which
criteria may be based on financial performance and/or personal performance
evaluations. The Committee may specify the percentage of the target Incentive
Bonus that is intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m). Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive Bonus
that is intended by the Committee to satisfy the requirements for "performance-
based compensation" under Code Section 162(m) shall be a measure based on one or
more Qualifying Performance Criteria (as defined in Section 10.2 hereof)
selected by the Committee and specified at the time the Incentive Bonus Award is
granted. The Committee shall certify the extent to which any Qualifying
Performance Criteria has been satisfied, and the amount payable as a result
thereof, prior to payment of any Incentive Bonus that is intended by the
Committee to satisfy the requirements for "performance-based compensation" under
Code Section 162(m).
7.3 Timing and Form of Payment. The Committee shall determine the timing
--------------------------
of payment of any Incentive Bonus. The Committee may provide for or, subject to
such terms and conditions as the Committee may specify, may permit a Participant
to elect for the payment of any Incentive Bonus to be deferred to a specified
date or event. The Committee may provide for a Participant to have the option
for his or her Incentive Bonus, or such portion thereof as the Committee may
specify, to be paid in whole or in part in Shares or Stock Units (as defined in
Section 9.1 hereof).
7.4 Discretionary Adjustments. Notwithstanding satisfaction of any
-------------------------
performance goals, the amount paid under an Incentive Bonus Award on account of
either financial performance or personal performance evaluations may be reduced
by the Committee on the basis of such further considerations as the Committee in
its sole discretion shall determine.
SECTION 8. PERFORMANCE STOCK
Performance Stock consists of an award of Shares, the grant, issuance,
retention and/or vesting of which shall be subject to such performance
conditions and to such further terms and conditions as the Committee deems
appropriate.
8.1 Performance Stock Award. Each Performance Stock Award shall set forth
-----------------------
(a) the number of Shares subject to such Award or a formula for determining
such, (b) the performance criteria and level of achievement versus these
criteria which shall determine the number of Shares granted, issued, retainable
and/or vested, (c) the period as to which performance shall be measured for
determining achievement of performance , (d) forfeiture provisions, and (e) such
further terms and conditions, in each case not inconsistent with the Plan as may
be determined from time to time by the Committee.
8.2 Performance Criteria. The grant, issuance, retention and/or vesting
--------------------
of Performance Stock shall be subject to such performance criteria and level of
achievement versus these criteria as the Committee shall determine, which
criteria may be based on financial performance and/or personal performance
evaluations. Notwithstanding anything to the contrary herein, the performance
criteria for any Performance Stock that is intended by the Committee to satisfy
the requirements for "performance-based compensation" under Code Section 162(m)
shall be a measure based on one or more Qualifying Performance Criteria selected
by the Committee and specified at the time the Performance Stock Award is
granted.
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8.3 Timing and Form of Payment. The Committee shall determine the timing
--------------------------
of payment of any Incentive Bonus. The Committee may provide for or, subject to
such terms and conditions as the Committee may specify, may permit a Participant
to elect for the payment of any Performance Stock to be deferred to a specified
date or event. The Committee may provide for a Participant to have the option
for his or her Performance Stock, or such portion thereof as the Committee may
specify, to be granted in whole or in part in Shares or Stock Units.
8.4 Discretionary Adjustments. Notwithstanding satisfaction of any
-------------------------
performance goals, the number of Shares granted, issued, retainable and/or
vested under a Performance Stock Award on account of either financial
performance or personal performance evaluations may be reduced by the Committee
on the basis of such further considerations as the Committee in its sole
discretion shall determine.
8.5 Termination of Employment. Subject to Section 12, upon a termination
-------------------------
of employment by a Participant prior to the full exercise of Performance Stock,
the following procedures shall apply unless determined otherwise by the
Committee in its sole discretion:
(a) Death or Disability. If a Participant terminates service on
account of becoming disabled, the Participant may exercise the Performance Stock
in whole or in part within ninety (90) days after the date of the Employee's
disability, but in no event later than the date on which it would have expired
if the Employee had not become disabled. Unless provided otherwise by the
Committee, an Employee shall be deemed to be disabled if he or she is determined
to be disabled for purposes of meeting any insurance requirements under long-
term disability policies ("Disability") provided by the Company. If an Employee
dies during a period in which he or she is entitled to exercise an Performance
Stock (including the periods referred to in the first sentence of this paragraph
(a) or in paragraph (c) of this Section), the Participant may exercise the
Performance Stock in whole or in part within ninety (90) days after the date of
the Employee's death, but in no event later than the date on which it would have
expired if the Employee had lived.
(b) Cause. If a Participant's employment with the Company or a
subsidiary shall be terminated for cause, as determined by the Committee in its
sole discretion, he or she shall forfeit any and all outstanding option rights,
including Performance Stock, and such rights shall be deemed to have lapsed for
purposes hereof as of the date of the Participant's termination of service.
(c) Other Forms of Termination. If a Participant ceases to be
employed by the Company or a subsidiary for any reason other than Disability,
death or termination for cause during a period in which he or she is entitled to
exercise Performance Stock, the Participant's Performance Stock shall terminate
ninety (90) days after the date of such cessation of employment, but in no event
later than the date on which it would have expired if such cessation of
employment had not occurred. During such period Performance Stock may be
exercised only to the extent that the Participant was entitled to do so at the
date of cessation of employment unless the Committee, in its sole discretion,
permits exercise of Performance Stock to a greater extent. The employment of a
Participant shall not be deemed to have ceased upon his or her absence from the
Company on a leave of absence granted in accordance with the usual procedures of
the Company.
SECTION 9. STOCK UNITS
9.1 Stock Units. A "Stock Unit" is a bookkeeping entry representing an
-----------
amount equivalent to the fair market value of one Share. Stock Units represent
an unfunded and unsecured obligation of the Company, except as otherwise
provided for by the Committee.
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<PAGE>
9.2 Grant of Stock Units. Stock Units may be issued upon exercise of
--------------------
Options, may be granted in payment and satisfaction of Incentive Bonus Awards
and may be issued in lieu of, Performance Stock or any other Award that the
Committee elects to be paid in the form of Stock Units.
9.3 Settlement of Stock Units. Unless provided otherwise by the
-------------------------
Committee, settlement of Stock Units shall be made by issuance of Shares and
shall occur within ninety (90) days after an Employee's termination of
employment for any reason. The Committee may provide for Stock Units to be
settled in cash (at the election of the Company or the Participant, as specified
by the Committee) and to be made at such other times as it determines
appropriate or as it permits a Participant to choose. The amount of Shares, or
other settlement medium, to be so distributed may be increased by an interest
factor or by dividend equivalents, which may be valued as if reinvested in
Shares. Until a Stock Unit is settled, the number of shares of Shares
represented by a Stock Unit shall be subject to adjustment pursuant to Section
11.
SECTION 10. OTHER PROVISIONS APPLICABLE TO AWARDS
10.1 Transferability. Unless the agreement or certificate, as applicable,
---------------
evidencing an Award (or an amendment thereto authorized by the Committee)
expressly states that the Award is transferable as provided hereunder, no Award
granted under the Plan, nor any interest in such Award, may be sold, assigned,
conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner
prior to the vesting or lapse of any and all restrictions applicable thereto,
other than by will or the laws of descent and distribution. The Committee may
in its sole discretion grant an Award or amend an outstanding Award to provide
that the Award is transferable or assignable to a member or members of the
Employee's "immediate family," as such term is defined under Exchange Act Rule
16a-1(e), or to a trust for the benefit solely of a member or members of the
Employee's immediate family, or to a partnership or other entity whose only
owners are members of the Employee's family, provided that (i) no consideration
is given in connection with the transfer of such Award, and (2) following any
such transfer or assignment the Award will remain subject to substantially the
same terms applicable to the Award while held by the Employee, as modified as
the Committee in its sole discretion shall determine appropriate, and the
Participant shall execute an agreement agreeing to be bound by such terms.
10.2 Qualifying Performance Criteria. For purposes of this Plan, the term
-------------------------------
"Qualifying Performance Criteria" shall mean any one or more of the following
performance criteria, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit or subsidiary,
either individually, alternatively or in any combination, and measured either
annually or cumulatively over a period of years, on an absolute basis or
relative to a pre-established target, to previous years' results or to a
designated comparison group, in each case as specified by the Committee in the
Award: (a) cash flow, (b) earnings per share (including earnings before
interest, taxes, depreciation and amortization), (c) return on equity, (d) total
stockholder return, (e) return on capital, (f) return on assets or net assets,
(g) revenue, (h) income or net income, (i) operating income or net operating
income, (j) operating profit or net operating profit, (k) operating margin, (l)
return on operating revenue, (m) market share, (n) loan volume and (o) overhead
or other expense reduction. The Committee may appropriately adjust any
evaluation of performance under a Qualifying Performance Criteria to exclude any
of the following events that occur during a performance period: (i) asset
write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect
of changes in tax law, accounting principles or other such laws or provisions
affecting reported results, (iv) accruals for reorganization and restructuring
programs, and (v) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion and
analysis of financial condition and results of operations appearing in the
Company's annual report to stockholders for the applicable year.
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10.3 Dividends. Unless otherwise provided by the Committee, no adjustment
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shall be made in Shares issuable under Awards on account of cash dividends which
may be paid or other rights which may be issued to the holders of Shares prior
to their issuance under any Award. The Committee shall specify whether
dividends or dividend equivalent amounts shall be paid to any Participant with
respect to the Shares subject to any Award that have not vested or been issued
or that are subject to any restrictions or conditions on the record date for
dividends.
10.4 Agreements or Certificates Evidencing Awards. The Committee shall,
--------------------------------------------
subject to applicable law, determine the date an Award is deemed to be granted,
which for purposes of this Plan shall not be affected by the fact that an Award
is contingent on subsequent stockholder approval of the Plan. The Committee or,
except to the extent prohibited under applicable law, its delegate(s) may
establish the terms of agreements or certificates evidencing Awards under this
Plan and may, but need not, require as a condition to any such agreement's or
certificate's effectiveness, as applicable, that such agreement or certificate
be executed by the Participant and that such Participant agree to such further
terms and conditions as specified in such agreement or certificate, as the case
may be. The grant of an Award under this Plan shall not confer any rights upon
the Participant holding such Award other than such terms, and subject to such
conditions, as are specified in this Plan as being applicable to such type of
Award (or to all Awards) or as are expressly set forth in the Agreement or
Certificate evidencing such Award.
10.5 Tandem Stock or Cash Rights. Either at the time an Award is granted
---------------------------
or by subsequent action, the Committee may, but need not, provide that an Award
shall contain as a term thereof, a right, either in tandem with the other rights
under the Award or as an alternative thereto, of the Participant to receive,
without payment to the Company, a number of Shares, cash or a combination
thereof, the amount of which is determined by reference to the value of the
Award.
10.6 Financing. The Committee may in its discretion provide financing to
---------
a Participant in a principal amount sufficient to pay the purchase price of any
Award and/or to pay the amount of taxes required by law to be withheld with
respect to any Award. Any such loan shall be subject to all applicable legal
requirements and restrictions pertinent thereto, including Regulation G
promulgated by the Federal Reserve Board. The grant of an Award shall in no way
obligate the Company or the Committee to provide any financing whatsoever in
connection therewith.
SECTION 11. CHANGES IN CAPITAL STRUCTURE
11.1 If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (i) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards theretofore granted under
this Plan and the exercise or settlement price of such Awards, provided,
however, that such adjustment shall be made in such a manner that will not
affect the status of any Award intended to qualify as an ISO under Code Section
422 or as "performance based compensation" under Code Section 162(m), and (ii)
the maximum number and type of shares or other securities that may be issued
pursuant to such Awards thereafter granted under this Plan.
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SECTION 12. CHANGE OF CONTROL
12.1 Effect of Change of Control. The Committee may through the terms of
---------------------------
the Award or otherwise provide that any or all of the following shall occur,
either immediately upon the Change of Control or a Change of Control Transaction
(as defined in Section 12.2 hereof), or upon termination of the Employee's
employment within twenty-four (24) months following a Change of Control or a
Change of Control Transaction: (a) in the case of an Option, the Participant's
ability to exercise any portion of the Option not previously exercisable, (b) in
the case of an Incentive Bonus, the right to receive a payment equal to the
target amount payable or, if greater, a payment based on performance through a
date determined by the Committee prior to the Change of Control, and (c) in the
case of Shares issued in payment of any Incentive Bonus, and/or in the case of
Performance Stock or Stock Units, the lapse and expiration on any conditions to
the grant, issuance, retention, vesting or transferability of, or any other
restrictions applicable to, such Award. The Committee also may, through the
terms of the Award or otherwise, provide for an absolute or conditional
exercise, payment or lapse of conditions or restrictions on an Award which shall
only be effective if, upon the announcement of a Change of Control Transaction,
no provision is made in such Change of Control Transaction for the exercise,
payment or lapse of conditions or restrictions on the Award, or other procedure
whereby the Participant may realize the full benefit of the Award.
12.2 Definitions. Unless the Committee or the Board shall provide
-----------
otherwise, "Change of Control" shall mean an occurrence of any of the following
events: (a) an acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "person or group"
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) other
than an employee benefit plan of the Company, immediately after which such
Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 under the
Exchange Act) of more than forty percent (40%) of the combined voting power of
the Company's then outstanding Voting Securities; (b) approval by the
stockholders of (i) a merger, consolidation or reorganization involving the
Company, unless the company resulting from such merger, consolidation or
reorganization (the "Surviving Corporation") shall adopt or assume this Plan and
a Participant's Awards under the Plan and either (A) the stockholders of the
Company immediately before such merger, consolidation or reorganization own,
directly or indirectly immediately following such merger, consolidation or
reorganization, at least seventy-five percent (75%) of the combined voting power
of the Surviving Corporation in substantially the same proportion as their
ownership immediately before such merger, consolidation or reorganization, or
(B) at least a majority of the members of the Board of Directors of the
Surviving Corporation were directors of the Company immediately prior to the
execution of the agreement providing for such merger, consolidation or
reorganization, or (ii) a complete liquidation or dissolution of the Company; or
(c) such other events as the Committee or the Board from time to time may
specify. "Change of Control Transaction" shall include any tender offer, offer,
exchange offer, solicitation, merger, consolidation, reorganization or other
transaction which is intended to or reasonably expected to result in a change of
control.
SECTION 13. TAXES
13.1 Withholding Requirements. The Committee may make such provisions or
------------------------
impose such conditions as it may deem appropriate for the withholding or payment
by the Participant of any taxes which it determines are required in connection
with any Awards granted under this Plan, and a Participant's rights in any Award
are subject to satisfaction of such conditions.
13.2 Payment of Withholding Taxes. Notwithstanding the terms of Section
----------------------------
13.1 hereof, the Committee may provide in the agreement evidencing an Award or
otherwise that all or any portion of the taxes required to be withheld by the
Company or, if permitted by the Committee, desired to be paid by the
Participant, in connection with the exercise of a Non-
10
<PAGE>
qualified Option or the exercise, vesting, settlement or transfer of any other
Award shall be paid or, at the election of the Participant, may be paid by the
Company withholding shares of the Company's capital stock otherwise issuable or
subject to such Award, or by the Participant delivering previously owned shares
of the Company's capital stock, in each case having a fair market value equal to
the amount required or elected to be withheld or paid. Any such elections are
subject to such conditions or procedures as may be established by the Committee
and may be subject to disapproval by the Committee.
SECTION 14. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue the Plan or any agreement
evidencing an Award made under the Plan, but no such amendment shall, without
the approval of the shareholders of the Company:
(a) increase the maximum number of shares of Common Stock for which
Awards may be granted under the Plan;
(b) reduce the price at which Options may be granted below the price
provided for in Section 6.2;
(c) reduce the exercise price of outstanding Options;
(d) impair the rights of any Award holder, without such holder's
consent, under any Award granted prior to the date of any Change of Control;
(e) extend the term of the Plan; or
(f) change the class of persons eligible to be Participants.
SECTION 15. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
The Plan, the grant and exercise of Awards thereunder, and the obligation
of the Company to sell, issue or deliver Shares under such Awards, shall be
subject to all applicable federal, state and foreign laws, rules and regulations
and to such approvals by any governmental or regulatory agency as may be
required. The Company shall not be required to register in a Participant's name
or deliver any Shares prior to the completion of any registration or
qualification of such Shares under any federal, state or foreign law or any
ruling or regulation of any government body which the Committee shall, in its
sole discretion, determine to be necessary or advisable. This Plan is intended
to constitute an unfunded arrangement for a select group of management or other
key employees.
No Option shall be exercisable unless a registration statement with respect
to the Option is effective or the Company has determined that such registration
is unnecessary. Unless the Awards and Shares covered by this Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person receiving an Award
and/or Shares pursuant to any Award may be required by the Company to give a
representation in writing that such person is acquiring such Shares for his or
her own account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.
11
<PAGE>
SECTION 16. OPTION GRANTS BY SUBSIDIARIES
In the case of a grant of an option to any eligible Employee employed by a
subsidiary of the Company within the meaning of Section 424(f) of the Code
("Subsidiary"), such grant may, if the Committee so directs, be implemented by
the Company issuing any subject shares to the Subsidiary, for such lawful
consideration as the Committee may determine, upon the condition or
understanding that the Subsidiary will transfer the shares to the optionholder
in accordance with the terms of the option specified by the Committee pursuant
to the provisions of the Plan. Notwithstanding any other provision hereof, such
option may be issued by and in the name of the Subsidiary and shall be deemed
granted on such date as the Committee shall determine.
SECTION 17. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual's employment at any time. The Award agreements or certificates may
contain such provisions as the Committee may approve with reference to the
effect of approved leaves of absence.
SECTION 18. EFFECTIVENESS AND EXPIRATION OF PLAN
The Plan shall be effective on the date the Board adopts the Plan. All
Awards granted under this Plan are subject to, and may not be exercised before,
the approval of this Plan by the stockholders prior to the first anniversary
date of the effective date of the Plan, by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present, or represented
by proxy, and entitled to vote, at a meeting of the Company's stockholders or by
written consent in accordance with the laws of the State of Colorado; provided
that if such approval by the stockholders of the Company is not forthcoming, all
Awards previously granted under this Plan shall be void. No Awards shall be
granted pursuant to the Plan more than ten (10) years after the effective date
of the Plan.
SECTION 19. NON-EXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as it or they may deem desirable, including
without limitation, the granting of restricted stock or stock options otherwise
than under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
SECTION 20. GOVERNING LAW
This Plan and any agreements hereunder shall be interpreted and construed
in accordance with the laws of the State of Colorado and applicable federal law.
The Committee may provide that any dispute as to any Award shall be presented
and determined in such forum as the Committee may specify, including through
binding arbitration. Any reference in this Plan or in the agreement or
certificate evidencing any Award to a provision of law or to a rule or
regulation shall be deemed to include any successor law, rule or regulation of
similar effect or applicability.
Effective: January 11, 2000
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Convergent Communications, Inc.
First Amendment to the Stock Incentive Plan
INTRODUCTION
Convergent Communications, Inc., a Colorado corporation (hereinafter referred
to as the "Corporation"), has established an incentive compensation plan known
as the "Convergent Communications, Inc. Stock Incentive Plan" (hereinafter
referred to as the "Plan"). The Plan permits the grant of performance stock
awards, incentive bonuses, non-qualified stock options and incentive stock
options.
Pursuant to this First Amendment to the Plan (hereinafter referred to as the
"Amendment"), the Corporation desires to amend the Plan to increase the number
of Shares which may be granted for all purposes under the Plan.
STOCK SUBJECT TO PLAN
3.1 Aggregate Limits. Subject to the adjustments provided in Section 11 of
----------------
the Plan, Section 3.1 of the Plan shall be amended to increase the aggregate
number of Shares which may be granted for all purposes under the Plan to a total
of three million five hundred thousand (3,500,000) Shares.
3.2 Code Section 162(m) Limits. Section 3.2 of the Plan shall be amended to
--------------------------
increase the aggregate number of Shares subject to Options granted under the
Plan during any calendar year to any one Employee to a maximum of one million
five hundred thousand (1,500,000) Shares.
CONTINUATION OF PLAN
All other terms and conditions of the Plan shall remain in full force and
effect.
EFFECTIVE DATE
This Amendment shall be effective as of March 31, 2000.
/s/ John R. Evans
- -----------------------------------------------------------
John R. Evans, Chief Executive Officer
<PAGE>
PROXY/VOTING INSTRUCTION CARD
CONVERGENT COMMUNICATIONS, INC.
c/o American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS I (whether one or more of
us) appoint Joseph R. Zell and Martin E. Freidel, and each of them, to be my
Proxies. The Proxies may vote on my behalf, in accordance with my instructions,
all of my shares entitled to vote at the Annual Shareholders Meeting of
Convergent Communications, Inc. The meeting is scheduled for June 16, 2000, but
this proxy includes any adjournment(s) of that meeting. The Proxies may vote on
my behalf as if I were personally at the meeting. This card also provides
voting instructions (for shares held in my account(s), if any) to the trustees
of Convergent Communications' Deferred Compensation Plan and 401(k) plan.
Comments: (Please feel free to comment on any aspects of our business in
the following space. Your comments will be reviewed, although we may not
respond on an individual basis.)
PLEASE COMPLETE, DATE AND SIGN ON REVERSE SIDE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE
DETACH HERE BEFORE MAILING TOP PORTION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
The Proxies may vote, in their discretion, on any other business that properly
comes before the meeting. This proxy when properly executed will be voted as
instructed below by the undersigned stockholder. If no marking is made, this
proxy will be deemed to be direction to vote FOR proposals 1, 2 and 3, unless
otherwise determined by the Board of Directors or the Proxies.
The Board of Directors recommends a vote FOR all of the proposals:
1. TO VOTE FOR _____ or AGAINST _____ or WITHHOLD FROM VOTING _____
A resolution electing the three (3) nominees proposed as directors.
2. TO VOTE FOR _____ or AGAINST _____ or WITHHOLD FROM VOTING _____
The ratification of the appointment of PricewaterhouseCoopers L.L.P.,
Certified Public Accountants, as our auditors for the ensuing year and the
authorization of the directors to fix their remuneration.
3. TO VOTE FOR _____ or AGAINST _____ or WITHHOLD FROM VOTING _____
A resolution approving the Stock Incentive Plan.
Please sign exactly as name appears at the left. When Shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person. Please date the proxy.
Dated_________________________________ Signed _________________________
(Please mark address changes above.)
[_] MULTIPLE SHAREHOLDER PUBLICATIONS. Please check here to stop mailing of
shareholder publications for this Signed account, since multiple copies come to
this address.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
