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As filed with the Securities and Exchange Commission on February 1, 2000.
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CONVERGENT COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
Colorado 4813 84-1337265
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
400 Inverness Drive South, Suite 400
Englewood, Colorado 80112
(Address of Principal Executive Offices, including Zip Code)
Convergent Communications, Inc.
1996 Incentive and Non-Statutory Stock Option Plan
Convergent Communications, Inc.
1997 Incentive and Non-Statutory Stock Option Plan
Convergent Communications, Inc.
1998 Incentive and Non-Statutory Stock Option Plan
Convergent Communications, Inc.
1999 Employee Stock Option Plan
Convergent Communications, Inc.
1999 Director Stock Option Plan
Convergent Communications, Inc.
2000 Stock Incentive Plan
Convergent Communications, Inc.
Deferred Compensation Plan
Convergent Communications, Inc.
Acquisition Incentive Program (6)
(Full Title of the Plans)
MARTIN E. FREIDEL
Convergent Communications, Inc.
Executive Vice President and General Counsel
400 Inverness Drive South, Suite 400
Englewood, Colorado 80112
(Name and Address of Agent for Service)
(303) 749-3000
(Telephone Number, Including Area Code, of Agent for Service)
---------------
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Copies to:
RICHARD M. RUSSO, Esq.
Gibson, Dunn & Crutcher LLP
1801 California Street, Suite 4100
Denver, Colorado 80202-2641
(303) 298-5700
---------------
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<CAPTION>
==========================================================================================================
CALCULATION OF REGISTRATION FEE
==========================================================================================================
Proposed Proposed Maximum
Title of Securities Amount to be Maximum Offering Aggregate Offering Amount of
to be registered Registered Price Per Share (1) Price (1) Registration Fee
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, no par
value (2)............. 847,000 N/A $ 1,821,050 $ 480.76
- ----------------------------------------------------------------------------------------------------------
Common stock (3)....... 331,500 N/A $ 1,475,175 $ 389.45
- ----------------------------------------------------------------------------------------------------------
Common stock (4) 1,720,950 N/A $17,915,090 $ 4,729.58
- ----------------------------------------------------------------------------------------------------------
Common stock (5) 710,000 N/A $ 9,066,700 $ 2,393.61
- ----------------------------------------------------------------------------------------------------------
Common stock (6) 40,000 N/A $ 400,000 $ 105.60
- ----------------------------------------------------------------------------------------------------------
Common stock (7) 2,000,000 N/A $18,312,500 $ 4,834.50
- ----------------------------------------------------------------------------------------------------------
Common stock (8) 365,157 N/A $ 3,343,634 $ 882.72
- ----------------------------------------------------------------------------------------------------------
Common stock (9) 137,500 N/A $ 1,258,984 $ 332.37
- ----------------------------------------------------------------------------------------------------------
Common stock (10) 215,403 N/A $ 1,972,284 $ 520.68
- ----------------------------------------------------------------------------------------------------------
Total......... 6,367,528 N/A $55,565,416 $14,669.27
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) These shares are offered under our 1996 Incentive and Non-Statutory Stock
Option Plan. Pursuant to Rule 457(h)(1), the filing fee for the 847,000
shares subject to options that have been granted is calculated based upon
the weighted average of the various strike prices of such shares, which is
$2.15.
(3) These shares are offered under our 1997 Incentive and Non-Statutory Stock
Option Plan. Pursuant to Rule 457(h)(1), the filing fee for the 331,500
shares subject to options that have been granted is calculated based upon
the weighted average of the various strike prices of such shares, which is
$4.45.
(4) These shares are offered under our 1998 Incentive and Non-Statutory Stock
Option Plan. Pursuant to Rule 457(h)(1), the filing fee for the 1,720,950
shares subject to options that have been granted is calculated based upon
the weighted average of the various strike prices of such shares, which is
$10.41.
(5) These shares are offered under our 1999 Employee Stock Option Plan.
Pursuant to Rule 457(h)(1), the filing fee for the 710,000 shares subject
to options that have been granted is calculated based upon the weighted
average of the various strike prices of such shares, which is $12.77.
(6) These shares are offered under our 1999 Director Stock Option Plan.
Pursuant to Rule 457(h)(1), the filing fee for the 40,000 shares subject to
options that have been granted is calculated based upon the weighted
average of the various strike prices of such shares, which is $10.00.
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(7) Pursuant to Rule 457(h)(1), the filing fee for the 2,000,000 shares subject
to options that have not yet been granted is calculated based upon the
average high and low prices of our common stock reported on January 31,
2000, which is $9.15625 per share.
(8) These shares are offered under our Deferred Compensation Plan. Pursuant to
Rule 457(h)(1), the filing fee for the 365,157 shares that have not yet
been distributed is calculated based upon the average high and low prices
of our common stock reported on January 31, 2000, which is $9.15625 per
share.
(9) These shares are offered under compensation agreements with Barry Howard,
Michael Dozier, Greg McGraw, D. Randall Hake, Bruce Weinberg, and Scott
Bernstein, which are collectively referred to herein as the "Acquisition
Incentive Program." Pursuant to the compensation agreements, Mr. Howard has
the right to receive 7,500 shares through September 10, 2002; Mr. Dozier
has the right to receive 50,000 shares through August 3, 2003; Mr. McGraw
has the right to receive 40,000 shares through August 3, 2003; Mr. Hake has
the right to receive 20,000 shares through August 3, 2003; Mr. Weinberg has
the right to receive 10,000 shares through April 19, 2004; and Mr.
Bernstein has the right to receive 10,000 shares through April 19, 2004.
Pursuant to Rule 457(h)(1), the filing fee for these 137,500 shares is
calculated based upon the average high and low prices of our common stock
reported on January 31, 2000, which is $9.15625 per share.
(10) These shares are offered for resale and were issued under various of the
plans set forth above and other compensatory arrangements. Pursuant to Rule
457(h)(3), the filing fee for the 215,403 shares that have been issued is
calculated based upon the average high and low prices of our common stock
reported on January 31, 2000, which is $9.15625 per share.
================================================================================
ii
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INTRODUCTORY STATEMENT
Convergent Communications, Inc., a Colorado corporation, hereby files this
registration statement on Form S-8 relating to 6,367,528 shares of our common
stock, no par value, issuable in connection with our:
. 1996 Incentive and Non-Statutory Stock Option Plan;
. 1997 Incentive and Non-Statutory Stock Option Plan;
. 1998 Incentive and Non-Statutory Stock Option Plan;
. 1999 Employee Stock Option Plan;
. 1999 Director Stock Option Plan;
. 2000 Stock Incentive Plan;
. Deferred Compensation Plan; and
. Acquisition Incentive Program (together, the "Plans").
The shares of our common stock, reserved for issuance or to be awarded
pursuant to the Plans, have not been registered under the Securities Act.
However, we have awarded options under the Plans and certain of these options
have been exercised pursuant to a valid exemption from the registration
requirements of the Securities Act, resulting in the sale by us of restricted
shares of common stock.
This registration statement is intended to register the following for
issuance by us:
1. 3,841,405 shares of common stock that we may issue pursuant to
outstanding options previously awarded or awards previously granted under the
Plans; and
2. 2,310,702 shares of common stock that we may issue pursuant to options
or awards that may be subsequently awarded under the Plans.
Also, this registration statement, and the reoffer prospectus included
herein, is intended to register the following for reoffer and/or resale:
1. 215,403 restricted shares of common stock that we have issued under
the Plans pursuant to a valid exemption from the registration requirements of
the Securities Act; and
2. Shares of common stock that may be acquired in the future under the
Plans by persons who may be considered our affiliates as defined by Rule 405
under the Securities Act.
The materials constituting the reoffer prospectus have been prepared
pursuant to Part I of Form S-3, in accordance with General Instruction C to Form
S-8.
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REOFFER PROSPECTUS
CONVERGENT COMMUNICATIONS INC.
common stock
(no par value)
Up To 6,367,528 Shares
This Prospectus relates to up to 6,367,528 shares of common stock, no par
value, of Convergent Communications, Inc. that were acquired or will be acquired
pursuant to our compensatory arrangements and stock option plans (the "Plans")
by, and which may be offered for resale from time to time by, certain of our
employees and our subsidiaries named in Annex 1 hereto (the "Selling
Shareholders").
We will not receive any of the proceeds from the sale of the common stock
(hereinafter, the "Securities"). We will pay all of the expenses associated
with the registration of the Securities and this Prospectus. The Selling
Shareholders will pay the other costs, if any, associated with any sale of the
Securities.
Our common stock is quoted on the NASDAQ National Market under the symbol
"CONV." On January 31, 2000, the last reported sale price per share of our
common stock, as quoted on the NASDAQ National Market, was $9.15625.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
_______________________________
The date of this Prospectus is February 1, 2000.
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AVAILABLE INFORMATION
We have filed a registration statement on Form S-8 with the Securities and
Exchange Commission under the Securities Act of 1933. This Prospectus omits
some information and exhibits included in the registration statement, copies of
which may be obtained upon payment of a fee prescribed by the Commission or may
be examined free of charge at the principal office of the Commission in
Washington, D.C.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, and in accordance therewith file reports, proxy statements and
other information with the Commission. The reports, proxy statements and other
information filed by us with the Commission can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 500 West Madison Street, Room 1400, Chicago, Illinois 60606 and at
the Jacob K. Javits Federal Building, 75 Park Place, New York, New York 10278.
Copies of filings can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a website that contains reports,
proxy and informational statements and other information filed electronically
with the Commission at http://www.sec.gov.
INCORPORATION BY REFERENCE
The following documents previously filed by us with the Commission are
incorporated in this registration statement by reference:
(1) Our Prospectus filed on July 20, 1999 pursuant to Rule 424(b) of the
Securities Act;
(2) Our Quarterly Reports on Form 10-Q/A for the quarters ended March 31,
1999 and June 30, 1999 and our Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999;
(3) Our Current Report on Form 8-K filed on August 19, 1999; and
(4) The description of our common stock contained in our registration
statement on Form S-1 (Registration No. 333-78483) under the caption
"Description of Capital Stock".
All reports and other documents that we file pursuant to Sections 13(a) and
13(c), 14 and 15(d) of the Exchange Act prior to the filing of a post-effective
amendment which indicates that all securities offered hereunder have been sold
or which deregisters all such securities then remaining unsold are incorporated
by reference in this registration statement and to be a part hereof from the
date of filing of such reports and documents.
5
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RISK FACTORS
We Have a Limited Operating History
We have only been operating since March 1996. Accordingly, we have a
limited operating history upon which an evaluation of our performance and
prospects can be based. We face all of the risks common to companies in their
early stage of development in an emerging industry, including:
. under capitalization;
. cash shortages;
. high capital expenditures;
. an unproven business model;
. difficulties in managing rapid growth; and
. lack of sufficient customers, revenue, cash flow or EBITDA to be self-
sustaining.
In addition, since we are a new company, we have limited experience in
providing some of the products and services we currently offer, including
Internet access, web development and hosting services, electronic commerce
solutions, virtual private networks, frame relay and transport services. Our
failure to address any of the risks described above could have a material
adverse effect on our business, financial condition and results of operations
and on the price of our common stock.
We Have Experienced Increasing Negative EBITDA, Operating Losses and Net Losses
Since our formation we have generated larger negative EBITDA, operating
losses and net losses each quarter. For 1998, we had negative EBITDA of $30.0
million, an operating loss of $37.5 million and a net loss of $50.6 million.
For the first three quarters of 1999, we had negative EBITDA of $41.9 million,
an operating loss of $53.8 million and a net loss of $69.4 million. Our
preliminary estimates for the quarter ended December 31, 1999, include a range
of $48 million to $50 million for fourth quarter revenue, and 1999 year-end
revenue of $160 million to $162 million, up from $24.8 million in revenue for
the quarter ended December 31, 1998, and $61.6 million in revenue for the year
ended December 31, 1998. These trends will need to be reversed or our common
stock will lose its value. We cannot assure you that we will achieve or sustain
positive EBITDA, operating income or net income in the future. If we cannot, we
may not be able to meet our working capital requirements or pay interest on our
debt, which would have a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
6
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We Have an Unproven Business Model
Our business strategy is unproven. To be successful, we must convince
prospective customers to entrust their data and voice operations to a company
without a long and proven track record. We are not aware of any companies that
have a directly comparable business. We cannot assure you that our services
will be widely accepted. The prices we charge for services and products may be
higher than those charged by our competitors. In addition, the prices of
communications services and products have fallen historically, and we expect
them to continue to fall. We may be required to reduce prices periodically to
respond to competition and to generate adequate sales volume. The failure to
achieve or sustain adequate pricing levels or to achieve or sustain a profitable
business would have a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
Enterprise Network Services is a New Business Area
Currently there is no significant established market for Enterprise Network
Services. We have derived virtually all of our revenue from the sale of data
and voice products and services, not Enterprise Network Services. Our revenue
from the sale of Enterprise Network Services has been limited and we did not
have any revenue from these services until late 1997 and had only $2.0 million
of such revenue in 1998. As of September 30, 1999, we had entered into long-
term Enterprise Network Services contracts with 47 customers, representing
approximately $36.4 million in contract value. We generated approximately $2.8
million in revenue from Enterprise Network Services contracts for the first
three quarters of 1999. We may not be able to foresee future difficulties in
providing these services. Although we intend to substantially increase our
revenue from our Enterprise Network Services, there is limited historical
information about our ability to enter into and service these contracts. As a
result, we have a limited basis upon which you can evaluate our past or future
performance. If we fail to develop a market for our Enterprise Network
Services, there will be a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
We Have Substantial Leverage and Debt Service Obligations
We have a significant amount of debt in relation to our equity. At
September 30, 1999, we had $190.4 million in debt and a $70.2 million
shareholders' equity. We expect to incur substantial additional debt. Our
relatively high leverage could negatively affect our company in a number of
ways, including:
. making it more difficult to obtain additional financing when needed
for our operations, acquisitions, expansions or financing our
Enterprise Network Services (a service offering in which we own
communications assets inside our customers' premises);
. limiting our flexibility in responding to downturns in the economy
or in our business;
. reducing funds available for other corporate purposes;
7
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. placing us at a disadvantage compared to our competitors who have
less debt; and
. making it more difficult for us to pay our debts.
For example, our 13% Senior Notes require interest payments of $20.8
million each year. Our operating loss in 1998 was $37.5 million and for the
first three quarters of 1999 was $53.8 million. Due to our operating losses we
placed approximately $56.8 million of the proceeds from the sale of our 13%
Senior Notes into an escrow account to provide for the payment of interest on
our 13% Senior Notes through April 1, 2001. Thereafter, a significant portion
of our cash flow from operations, if any, will be dedicated to interest payments
on our debt, thereby reducing funds available for other corporate purposes.
Any of the above described factors could have a material adverse effect on
our business, financial condition and results of operations and on the price of
our common stock.
We May Require Significant Amounts of Additional Capital
If we are not successful in implementing our business plan in a relatively
short period of time, we will need to raise additional funds from other sources.
In addition, we could require additional capital due to material shortfalls in
our operating and financial performance or if we are more aggressive in our
expansion than currently contemplated. We cannot assure you that we will be
successful in raising sufficient debt or equity capital on a timely basis, on
acceptable terms, or at all. If we fail to obtain any necessary financing, we
could be compelled to alter our business strategy, delay or abandon some of our
future plans or expenditures, sell assets or default on interest payments on our
debt. Any of these events would have a material adverse effect on our business,
financial condition and results of operations and on the price of our common
stock.
In July 1999, we entered into a $103.5 million equipment credit facility
with Cisco Systems Capital Corporation of which $9.5 million has been utilized
and an additional $13.5 million is currently available. The Cisco facility
contains certain customary covenants, including financial maintenance covenants.
Some of the financial maintenance covenants are aggressive and may require us to
accelerate our business plan or renegotiate the covenants in the future in order
to satisfy those covenants or avoid a potential default under the facility. We
cannot provide you any assurance that we will be able to satisfy these financial
maintenance covenants.
We Face Risks Involving Acquired Businesses.
We have grown rapidly over the past two years by acquiring other
businesses. We expect that a portion of our future growth will result from
selective strategic acquisitions. Growth through acquisitions entails numerous
risks, including:
. difficulties in assimilating the operations, personnel, products,
. technologies and financial, computer, payroll and other systems of
the acquired businesses;
8
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. diversion of resources from our existing businesses, including
potential distraction of our management team;
. entering geographic and business markets in which we have little or
no prior experience;
. unanticipated liabilities or contingencies of acquired businesses;
. dilution to existing shareholders if we use stock to acquire
businesses;
. amortization of goodwill from acquired businesses, which will
reduce our earnings per share; and
. the potential loss of key employees or customers of the acquired
businesses.
We have encountered most of these issues in the past. For example, as a
result of our acquisitions, at September 30, 1999, we had $49.1 million of
goodwill, net of amortization, which is being amortized over 10 years. We may
encounter any of these issues in the future. In particular, we may issue common
stock to pay for acquisitions.
We cannot assure you that we will be able to integrate successfully any
businesses that we might acquire in the future. Our failure to do so could have
a material adverse effect on our business, financial condition and results of
operations and on the price of our common stock.
Our Switching Platform Has a Very Limited Performance History
Our multi-service data and voice switching platforms incorporate a number
of independent components manufactured by other companies. While all of the
components of our switching platforms have established histories of successful
performance as individual products, our unique integrated architecture has a
very limited operating history.
We have installed 16 switching platforms and intend to install additional
switching platforms that will utilize a new switch being manufactured by Cisco
Systems, Inc. Currently, Cisco is the only manufacturer of this switch and we
believe we will be the first company to deploy this switch nationwide. Any
failure by Cisco to provide these switches to us on a timely basis would delay
the roll-out of our data service capabilities and our business plan.
If any of our switching platforms contain undetected design faults or
"bugs," interruption of service to our customers or delay in our deployment
could negatively affect our financial performance. We cannot assure you that
our switching platforms will perform as expected or that we will be successful
in deploying them in all of our markets in a timely manner. These factors could
have a material adverse effect on our business, financial condition and results
of operations and on the price of our common stock.
9
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We Face Risks Associated with Implementing Our Business and Growth Strategies
We are highly leveraged. Our high leverage makes our success, and the
return to our shareholders, extremely dependent on our ability to successfully
implement our business and growth strategies. We are expanding rapidly. This
expansion has increased our operating complexity and strains our management
resources. The successful expansion and development of our operations
(including the acquisition of additional businesses) depends on a number of
factors including our ability to:
. design, market and sell new products and services;
. maintain a high level of quality for our services and products while
controlling costs;
. develop new customer relationships and achieve a sufficient customer
base; increase brand recognition;
. access potential markets;
. identify, complete and integrate suitable acquisitions;
. obtain any required government authorizations, franchises and permits;
. hire and retain qualified personnel;
. obtain financing; and
. install and operate our multi-service switching platform.
Our failure to accomplish any of the foregoing could have a material
adverse effect on our business, financial condition and results of operations
and on the price of our common stock.
We Are Still Developing Our Operational Support System
We are in the process of developing an advanced operational support system
which is designed to integrate all of our internal support systems and include a
full array of order management, customer service, billing and financial
applications. Our operational support system is designed to permit customer
care, sales engineering, service management, service delivery, accounting and
inventory sales management personnel to access a single customer record. We
believe that our operational support system is a critical element in providing
customer care. However, we have not completed the integration of all
applications that will be part of our operational support system. We also have
not completed the integration of some of our more recently acquired businesses
with our operational support system. Our failure to successfully and timely:
. implement all applications of our operational support system,
10
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. integrate all the customer records and the billing, ordering,
inventory management, accounting and other financial information
systems of the businesses we have acquired or will acquire onto our
operational support system,
. identify all of our information and processing needs,
. repair "bugs" and design defects that may exist in our operational
support system, and
. maintain and upgrade our operational support system as necessary,
could have a material adverse effect on our business, financial condition and
results of operations and on the price of our common stock.
Voice Over Internet Protocol is New Technology
We face risks in deploying voice over Internet Protocol technologies, which
are new, developing and unproven. We currently carry a limited amount of voice
calls on some local area networks, wide area networks, virtual private networks
and the networks inside the premises of our Enterprise Network Services
customers through the use of Internet Protocol. We anticipate using Internet
Protocol to carry much of our customers' voice calls on our network in the
future. Traditionally, voice calls have been transmitted by keeping a circuit
or line between the people on the call constantly open. This method of
transmitting voice calls is inefficient because during conversations there are
pauses and periods of silence when the capacity of the circuit is not being
used. Voice over Internet Protocol transmission is designed to eliminate this
inefficiency. This technology breaks the voice conversation into "packets" of
information and sends those packets over transmission lines individually. The
packets are then re-assembled at or near their destination so the parties are
able to have a conversation. When the parties on the call pause or are silent,
there are no packets transmitted and the transmission lines can be used for
other purposes. This technology promises to substantially reduce the cost of
carrying voice conversations. Voice over Internet Protocol transmission is
under development, is extremely complex and we are currently using it only to
carry voice transmissions on the local area networks, wide area networks,
virtual private networks and the networks inside the premises of our Enterprise
Network-Services customers. Some telecommunications companies (including ICG
Communications, Inc., IDT Corporation and RSL Communications Ltd.) are carrying
calls over similar technologies today and many others are developing this
technology. However, we believe that their transmission quality for external
calls over IP networks is not yet as good as the quality of traditional voice
transmission methods. Accordingly, there is a risk that we will not be able to
develop this technology well enough to be able to use it for all of our
customers' voice traffic and, therefore, will not be able to enjoy the
anticipated cost reductions.
We are making a large capital investment in this new technology. The
switches we expect to buy from Cisco Systems, Inc. are designed to be able to
provide voice transmission over Internet Protocol. If we are not eventually able
to provide voice over IP transmission with these switches for all of our
customers' voice traffic, some of the value of our investment in these switches
may be lost. Furthermore, it is not clear today which of the emerging versions
of this
11
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technology will prevail. Many telecommunications companies have far more
experience with these types of issues than we do. Our failure to successfully
offer Internet Protocol transmission on our network for all our customers' voice
traffic could have a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
We Are Dependent Upon the Products and Services of Others
Successful operation of our business requires that we provide superior
products and services. Although we can exercise direct control over the
customer care and support services we provide, many of the products and services
we offer are provided by others. These products and services are subject to
physical damage, power loss, capacity limitations, software defects, breaches of
security (by such things as computer viruses and "hackers") and other factors.
These problems, even if not caused by us, could lead to a decrease in our
revenue and as a result could have a material adverse effect on our business,
financial condition and results of operations and on the price of our common
stock.
We Have a Long Sales Cycle and Upfront Expenses for Enterprise Network Services
The Enterprise Network Services solutions we offer have not historically
been available to small and medium sized businesses. As a result, making a sale
often requires a significant amount of time and upfront expense to educate
customers regarding the benefits of Enterprise Network Services. Potential
Enterprise Network Services customers tend to engage in extensive internal
reviews before deciding to engage us. Due to the long sales cycle, our revenues
may fluctuate substantially and any given period may include substantial selling
expenses without related revenue. These risks could have a material adverse
effect on our business, financial condition and results of operations and on the
price of our common stock.
There Are Credit Risks Associated with Leasing Equipment and with Providing
Enterprise Network Services
When a company agrees to become one of our Enterprise Network Services
customers, we purchase and own all or a portion of the customer's existing
communications equipment. We may also purchase and own additional
communications equipment and install it on the customer's premise. The customer
agrees to pay us a monthly charge for a fixed term, usually three to five years.
In addition, we provide leasing options for our customers who prefer to lease
our communications equipment rather than contract for our Enterprise Network
Services. If a customer defaults on a payment under an Enterprise Network
Services contract or a lease, we will have the right to remove our property from
the customer's premises. If we are forced to remove our equipment due to a
customer's failure to pay, there are likely to be substantial delays and
expenses in removing our equipment, and the equipment may be damaged or become
obsolete in the interim, thereby making it more difficult to reuse or resell the
equipment. In addition, we may not be able to resell the equipment at a price
that allows us to recover our cost. We have limited experience dealing with the
risks posed by a payment default, and such risks could have a material adverse
effect on our business, financial condition and results of operations and on the
price of our common stock.
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Tie Communications Had Financial Problems in the Past
At the time we acquired the assets of Tie Communications, Tie was in
bankruptcy. Although we believe that Tie's previous financial difficulties were
the result of problems which we did not acquire, we cannot assure you that we
will be able to remedy all of the problems which led to Tie's bankruptcy. Tie
also had previously declared bankruptcy in 1991, primarily as a result of an
inability to service its indebtedness. If we fail to remedy these types of
financial problems, it could have a material adverse effect on our business,
financial condition and results of operations and on the price of our common
stock.
We Are Subject to Fluctuations in Our Financial Results.
Our revenue and operating results have in the past varied and in the future
may vary significantly from quarter to quarter and from year to year as a result
of a number of factors. These factors may include:
. the size and timing of contracts for Enterprise Network Services;
. customer requirements;
. the ability to retain and expand sales to existing customers;
. our ability to maintain or increase current rates of sales
productivity;
. the level of price and product competition; and
. the size and timing of future acquisitions.
As a result of all of these factors, it is possible that in any future
quarter our operating results could be below the expectations of securities
analysts and investors. In this event, there could be a material adverse effect
on the price of our common stock.
We Face Risks Selling Used Equipment We Purchase
Our Enterprise Network Services strategy includes purchasing our customers'
equipment, such as private branch exchanges (PBXs), computers and other data and
voice equipment. The equipment we purchase from customers may be replaced by
more technologically advanced equipment. To maintain our margins for Enterprise
Network Services, we will need to resell the used equipment. In addition, we
lease equipment to some of our customers, and that equipment may also need to be
sold at the end of the lease term. Some of the equipment may be damaged or
obsolete when we try to resell it. The pricing of our Enterprise Network
Service contracts and our leases is based on our assumptions regarding timing
and resale prices for this used equipment. However, we might not be able to
resell this used equipment in a timely manner at acceptable prices, and any
failure to do so could have a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
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We Face Competition From Many Sources
We compete for business with many companies that have much greater
financial resources, are more geographically diverse, have better name
recognition and have larger customer bases than we do. Numerous competitors
with long-standing relationships with our potential customers offer one or more
of the individual products and services we offer. We expect that we will face
substantial and growing competition from a number of providers of data and voice
networking and transport services and products.
A continuing trend toward business combinations and alliances in the
telecommunications industry may create significant new competitors with
resources far greater than ours. Technological developments may allow other
companies to provide a single-source solution in competition with our product
offerings. Cisco and other hardware manufacturers have designed or are
designing multi-service data and voice switches that are or will be available to
other providers.
To the extent that competitors begin bundling components of our Enterprise
Network Services (including data networking and the provision of customer
premises equipment) into their own product offerings, we will face additional
competition.
In data services, we compete with, among others, International Network
Services, Inacom Corporation, CompuCom Systems, Inc. and Norstan Consulting,
Inc. In the frame relay services market, we compete with, among others, MCI
WorldCom, Inc., AT&T Corporation, Frontier Communications, and Qwest
Communications International, Inc. In data products, we compete with, among
others, U S WEST, Inc., CompuCom and Inacom.
In voice services, we have numerous competitors in the local and long-
distance markets. Our main competitors for local voice services include the
Regional Bell Operating Companies, as well as agents who resell Bell services,
AT&T, MCI WorldCom and ITC/\Deltacom, Inc. and other competitive local exchange
carriers. In the long-distance market, our competitors include MCI WorldCom,
Qwest, Sprint Corporation and AT&T. In voice products, we compete with, among
others, Norstan, Staples, Inc. and Advanced Telecommunications, Inc.
Intensifying competition could have a material adverse effect on our
business, financial condition and results of operations and on the price of our
common stock.
We Are Subject to FCC and State Public Utility Commission Regulations
We are subject to both federal and state regulation. In rendering our
interstate and international telecommunications services, we must comply with
federal telecommunications laws and regulations prescribed by the Federal
Communications Commission. At the state level, we are subject to regulation by
the various state public utility commissions.
Among other things, the Telecommunications Act of 1996 opened the local
telecommunications marketplace to competition, allowing companies like us to
compete with incumbent local exchange companies. The implementation of the
Telecommunications Act of 1996 is ongoing and is the subject of proceedings
before the FCC, the various state public utility commissions and the courts. As
a result, the regulatory framework that we operate under is
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unsettled. We could also become subject to additional regulatory requirements as
a result of a change in our product offerings. If we are required to comply with
new regulations or new interpretations of existing regulations, this compliance
could have a material adverse effect on our business, financial condition and
results of operations and on the price of our common stock.
Factors Exist Which Could Discourage an Acquisition of Our Company
There are several factors that could deter an attempt to acquire our
company. These factors reduce the chance that our shareholders will be able to
sell their shares in an acquisition. These factors include:
. the rights of the holders of our 13% Senior Notes to require us to
repurchase their Notes if anyone acquires more than 50% of our voting
stock;
. the ability of our board of directors to issue preferred stock without
any further approval being required from our shareholders;
. the concentration of ownership of our stock by our officers and
directors; and
. the "staggered" nature of our board of directors which results in
directors being elected for terms of three years.
Our Success Depends on Our Executive Officers and Employees
Our success depends to a significant degree on the abilities and continued
efforts of our senior management. Our success also will depend on our ability
to attract, retain, and motivate qualified management, marketing, technical and
sales personnel. These people are in high demand and often have competing
employment opportunities. The labor market for engineers, technicians and sales
representatives who are skilled in both voice and data communications systems is
extremely competitive due to limited supply and we may lose key employees or be
forced to increase their compensation. Employee turnover could significantly
increase our training and other related employee costs. Additionally, there are
low levels of unemployment in many of the regions in which we operate. These
low levels of unemployment have led to pressure on wage rates, which can make it
more difficult and costly for us to attract and retain qualified employees. The
loss of key personnel, or the failure to attract additional personnel, could
have a material adverse effect on our business, financial condition and results
of operations and on the price of our common stock.
Our officers and directors beneficially own approximately 25.02% of our
common stock, including approximately 11.28% beneficially owned by our three
founding shareholders and their families. Our founding shareholders and their
families are parties to a voting agreement pursuant to which they have agreed
to vote their common stock as a group. Accordingly, our officers and directors,
and particularly our founding shareholders, are likely to continue to exercise
substantial influence over our business and the election of members of our board
of directors. This concentration of ownership may also delay or prevent an
attempt to acquire our company.
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We Face the Risk of System Failure
Our operations are dependent upon our ability to support our network
infrastructure and avoid damage from fires, earthquakes, floods, power losses,
telecommunications failures, network software flaws, transmission cable cuts and
similar unforeseen events. The occurrence of a natural disaster or other
unanticipated problems at our national operations center or any of our regional
centers could cause interruptions in our services. In addition, failures by our
service providers could cause interruptions in our services. Any damage or
failure that causes interruptions in our services could have a material adverse
effect on our business, financial condition and results of operations and on the
price of our common stock.
Terms of Our Indebtedness Restrict Our Corporate Activities.
The terms of the indenture governing our 13% Senior Notes and our credit
facilities restrict, and in some cases significantly limit or prohibit our
ability and the ability of our subsidiaries to:
. pay dividends and make other distributions on capital stock and redeem
capital stock;
. incur additional indebtedness or refinance existing indebtedness;
. make prepayments of certain indebtedness;
. create liens on our assets;
. make investments;
. engage in transactions with shareholders and affiliates;
. engage in mergers and consolidations; and
. engage in sales of assets.
We cannot assure you that the covenants in our indenture or our credit
facilities will not adversely affect our ability to finance our future
operations or capital needs or to engage in other business activities that may
be in the best interests of our shareholders. As a result, these restrictive
covenants could have a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
Possible Volatility of Our Stock Price
The price at which our common stock is traded is volatile and may continue
to fluctuate substantially due to factors such as:
. our historical and anticipated quarterly and annual operating results;
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. variations between our actual results and the expectations of
investors and analysts;
. announcements by us or others and developments affecting our business;
. investor perceptions of our company and comparable public companies;
and
. conditions and trends in data and voice communications industries.
In particular, the stock market has from time to time experienced
significant price and volume fluctuations affecting the common stocks of
communications companies, like us. These fluctuations may result in a material
decline in the market price of our common stock.
We Do Not Expect to Pay Dividends
We have not declared or paid, and for the foreseeable future we do not
anticipate declaring or paying, dividends on our common stock. In addition, the
agreements governing our indebtedness, including the indenture for our 13%
Senior Notes and our credit facilities, limit our ability to pay dividends on
our common stock.
An Economic Downturn May Have an Adverse Effect on Our Company
If the general economic health of the United States declines from recent
historically high levels, or if companies fear such a decline is imminent,
companies may reduce expenditures for products and services such as ours. Any
decline or concern about an imminent decline in the economy could delay
decisions among our customers to utilize more of our products and services or
could delay decisions by prospective customers to make initial evaluations of
our services. These delays would have a material adverse effect on our
business, prospects, financial condition and results of operations and on the
price of our common stock.
We May Face Potential Liability for Information Disseminated through Our Network
The law relating to the liability of online service providers, private
network operators and Internet service providers for information carried on or
disseminated through their networks is currently unsettled. The potential
liability for material carried on or disseminated through our systems which
might include defamatory statements and materials infringing on copyrights,
could require us to implement measures to reduce our exposure to such liability,
which may require the expenditure of substantial resources or the
discontinuation of certain product or service offerings. In addition, the costs
incurred in defending against any claims and the potential adverse outcomes of
those claims could have a material adverse effect on our business, financial
condition and results of operations and on the price of our common stock.
Dilution and Shares Eligible for Future Trading
To the extent outstanding warrants and options to purchase our common stock
are exercised or additional equity securities are issued at a price below the
price of a share in this offering, you may experience dilution. In addition,
approximately 9,771,000 shares of our common stock became eligible for public
trading on January 20, 2000 as lock-up periods expired with respect to those
shares of common stock. Up to an additional 3,450,000 shares of our
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common stock will be eligible for public trading on April 19, 2000 as the
remaining lock-up periods expire with respect to those shares of common stock.
SELLING SHAREHOLDERS
The table attached as Annex I hereto sets forth, as of the date of this
Prospectus or a subsequent date if amended or supplemented, (a) the name of each
Selling Shareholder and his or her relationship to us; (b) the number of shares
of common stock each Selling Shareholder beneficially owns (assuming that all
options to acquire shares are exercisable within 60 days, although options
actually vest over five years); and (c) the number of Securities offered
pursuant to this Prospectus by each Selling Shareholder. The information
contained in Annex I may be amended or supplemented from time to time.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the Securities
offered hereby.
PLAN OF DISTRIBUTION
We are registering the Securities on behalf of the Selling Shareholders.
All costs, expenses and fees in connection with the registration of the
Securities offered hereby will be borne by us. Brokerage commissions and
similar selling expenses, if any, attributable to the sale of Securities will be
borne by the Selling Shareholders (or their donees or pledgees).
The decision to sell any Securities is within the discretion of the holders
thereof, subject generally to our policies affecting the timing and manner of
sale of common stock by our affiliates. There can be no assurance that any
shares will be sold by the Selling Shareholders.
Each Selling Shareholder is free to offer and sell his or her Securities at
times, in a manner and at prices as he or she determines, subject to any
restrictions that may be imposed by us upon transactions involving our senior
executives. The Selling Shareholders have advised us that sales of Securities
may be effected from time to time in one or more types of transactions (which
may include block transactions) on the NASDAQ National Market, in the over-the-
counter market, in negotiated transactions, through put or call options on the
Securities, through settlement of short sales of Securities, or a combination of
such methods of sale, at market prices prevailing at the time of sale, or at
negotiated prices. These transactions may or may not involve brokers or
dealers. The Selling Shareholders have advised us that they have not entered
into any agreements, understandings or arrangements with any underwriters or
broker-dealers regarding the sale of their securities, nor is there an
underwriter or coordinating broker acting in connection with the proposed sale
of the Securities by the Selling Shareholders.
The Selling Shareholders may effect transactions by selling Securities
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. These broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholders and/or the
purchasers of Securities for whom the broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions).
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The Selling Shareholders and any broker-dealers that act in connection with
the sale of Securities might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by the
broker-dealers and any profit on the resale of the Securities sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The Selling Shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the Securities against certain liabilities including liabilities arising
under the Securities Act.
Because Selling Shareholders may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, the Selling Shareholders will be
subject to the prospectus delivery requirements of the Securities Act.
We have informed the Selling Shareholders that the anti-manipulative
provisions of Regulation M promulgated under the Exchange Act may apply to their
sales in the market.
Selling Shareholders also may resell all or a portion of the Securities in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of Rule 144.
Upon being notified by the Selling Shareholder(s) of any substantive
change(s) in the plan of distribution (which may include information regarding
any material arrangement that has been entered into with a broker-dealer for the
sale of Securities through a cross or block trade, the name of the participating
broker-dealer(s), the number of Securities involved, the price at which the
Securities were sold by the Selling Shareholders, the commissions paid or
discounts or concessions allowed by the Selling Shareholders to their broker-
dealer(s), and, where applicable, that the broker-dealer(s) did not conduct any
investigation to verify the information set out in the prospectus), we will file
a supplemental prospectus under Rule 424(c) of the Securities Act, setting forth
the updated information.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Gibson, Dunn &
Crutcher LLP, Denver, Colorado. The partner of Gibson, Dunn & Crutcher LLP in
charge of the engagement owns 10,000 shares of common stock.
EXPERTS
The consolidated financial statements of Convergent Communications, Inc.
incorporated in this Registration Statement by reference to the Prospectus filed
on July 20, 1999, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
No dealer, sales representative or any other person has been authorized to
give any information or to make any representation not contained in this
Prospectus in connection with this offering other than those contained in this
Prospectus, and if given or made, such information or representation must not be
relied upon as having been authorized by us or
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<PAGE>
the Selling Shareholders. This Prospectus does not constitute an offer to sell,
or a solicitation of any offer to buy, common stock by anyone in any
jurisdiction in which an offer or solicitation is not authorized, or in which
the person making an offer or solicitation is not qualified to do so, or to any
person to whom it is unlawful to make such an offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that the information contained in this
Prospectus is correct as of any time after the date of this Prospectus.
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ANNEX I
Selling Shareholder* Shares To Be Offered Hereby
- ---------------------------- ------------------------------------
David Backstrom 1,602
Vail Carson 1,805
James Devoglaer 1,004
Michael Dozier 12,500
William Frommelt 7,500
D. Randall Hake 5,000
John Herbers 1,715
Barry Howard 5,000
Michael Kohl 2,299
Peter Kopp 1,353
David Korba 3,621
Andre Loveland 8,000
Christopher Mach 2,625
Timothy Mahoney 2,347
Greg McGraw 10,000
John Phibbs 58,323
Donald Purner 11,173
Alan Reiter 1,750
John Schlepphorst 1,041
Jonathan Schultz 11,208
Scott Smith 1,640
Christopher Sullivan 1,096
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Patrick J. Von Tscharner 6,505
*In addition, unnamed shareholders who are not our affiliates, as defined by
Rule 405 under the Securities Act, may also sell an aggregate of 56,296 shares
of common stock pursuant to this Prospectus, provided that each of those
shareholders holds less than 1,000 shares.
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents previously filed by us with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, or as
otherwise indicated, are incorporated herein by reference:
1. Our Prospectus filed on July 20, 1999 pursuant to Rule 424(b) of the
Securities Act;
2. Our Quarterly Reports on Form 10-Q/A for the quarters ended March 31, 1999
and June 30, 1999 and our Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999;
3. Our Current Report on Form 8-K filed on August 19, 1999; and
4. The description of the common stock contained in our Registration Statement
on Form S-1 (Registration No. 333-78483) under the caption "Description of
Capital Stock".
All reports and other documents that we file pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act are incorporated by reference in this
registration statement and are a part of this registration statement from the
dates of filing of the reports and documents, if the reports and other documents
are filed prior to the filing of a post-effective amendment which indicates that
all securities offered by this registration statement have been sold, or the
securities which have not yet been sold are deregistered. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this registration statement shall be deemed to be modified or superseded for
purposes of this registration statement to the extent that the statement is
modified or superseded by a new statement. Any statement that is modified or
superseded shall not be, except as modified or superseded, a part of this
registration statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
The partner of Gibson, Dunn & Crutcher LLP in charge of the engagement owns
10,000 shares of common stock.
Item 6. Indemnification of Directors and Officers.
Reference is made to C.R.S. (S) 7-108-102 (1994), which provides for
indemnification of directors, officers and other employees in certain
circumstances, and to C.R.S. (S) 7-108-402 (1994), which provides for the
elimination or limitation of the personal liability for monetary damages of
directors under certain
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circumstances. Our Amended and Restated Articles of Incorporation eliminate the
personal liability for monetary damages of directors under certain circumstances
and provides indemnification to our directors and officers to the fullest extent
permitted by the Colorado Business Corporation Act. Among other things, these
provisions provide indemnification for officers and directors against
liabilities for judgments in and settlements of lawsuits and other proceedings
and for the advance and payment of fees and expenses reasonably incurred by the
director or officer in defense of any such lawsuit or proceeding.
Item 7. Exemptions from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
The exhibits listed on the accompanying Exhibit Index are filed or
incorporated by reference as part of this registration statement.
Item 9. Undertakings.
(1) We undertake:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in this
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration statement or
any material change to such information in this registration statement;
provided, however, that paragraphs (1)(a)(i) and (1)(a)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports that are filed by us pursuant to
Section 13 or Section 15(d) of the Exchange Act and that are incorporated by
reference in this registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered in the amendment, and
the offering of those securities at that time shall be deemed to be the initial
bona fide offering of those securities.
(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
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(2) We also undertake that, for purposes of determining any liability
under the Securities Act, each filing of the Company's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
liabilities (other than payment by us of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
indemnification by us is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, State of Colorado, on February 1, 2000.
CONVERGENT COMMUNICATIONS, INC.
By: /s/ John R. Evans
-------------------------------
Name: John R. Evans
Title: Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Martin
E. Freidel, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ John R. Evans Chairman, Chief Executive February 1, 2000
- -----------------------
John R. Evans Officer and Director (Principal
Executive Officer)
/s/ Brian R. Ervine Chief Financial Officer and February 1, 2000
- -----------------------
Treasurer (Principal Financial
Brian R. Ervine and Accounting Officer)
/s/ Keith V. Burge President, Chief Operating February 1, 2000
- -----------------------
Keith V. Burge Officer and Director
/s/ Philip G. Allen Executive Vice President, February 1, 2000
- -----------------------
Philip G. Allen Secretary and Director
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/s/ J. Thomas Markley Director February 1, 2000
- --------------------------
J. Thomas Markley
/s/ Richard G. Tomlinson Director February 1, 2000
- --------------------------
Richard G. Tomlinson
/s/ Spencer I. Browne Director February 1, 2000
- --------------------------
Spencer I. Browne
/s/ Michael J. Marocco Director February 1, 2000
- --------------------------
Michael J. Marocco
II-5
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EXHIBIT INDEX
Exhibit Description
- ------- -----------
Number
- ------
4.1 Amended and Restated Articles of Incorporation of
Convergent Communications, Inc., incorporated herein by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-4 (Reg. No. 333-5393)
4.2 Bylaws of Convergent Communications, Inc., incorporated
herein by reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-4 (Reg. No. 333-5393)
4.3 Articles of Amendment to the Amended and Restated Articles
of Incorporation of Convergent Communications, Inc.,
incorporated herein by reference to Exhibit 3.3 of the
Company's Registration Statement on Form S-1 (Reg. No.
333-78483)
4.4 Second Articles of Amendment to the Amended and Restated
Articles of Incorporation of Convergent Communications,
Inc., incorporated herein by reference to Exhibit 3.3 of
the Company's Registration Statement on Form S-1 (Reg. No.
333-78483)
4.5 Third Articles of Amendment to the Amended and Restated
Articles of Incorporation of Convergent Communications,
Inc., incorporated herein by reference to Exhibit 3.3 of
the Company's Registration Statement on Form S-1 (Reg. No.
333-78483)
5.1 Opinion of Gibson, Dunn & Crutcher LLP
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included on signature page of this
Registration Statement)
99.1 1996 Incentive and Non-Statutory Stock Option Plan
99.2 First Amendment to the 1996 Incentive and Non statutory Stock Option Plan
99.3 1997 Incentive and Non statutory Stock Option Plan
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99.4 First Amendment to the 1997 Incentive and Non statutory Stock Option Plan
99.5 1998 Stock Option Plan
99.6 First Amendment to the 1998 Stock Option Plan
99.7 Second Amendment to the 1998 Stock Option Plan
99.8 Third Amendment to the 1998 Stock Option Plan
99.9 1999 Employee Stock Option Plan
99.10 1999 Director Stock Option Plan
99.11 Stock Incentive Plan
99.12 Deferred Compensation Plan
99.13 Amendment to Deferred Compensation Plan
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EXHIBIT 5.1
[Letterhead of Gibson, Dunn & Crutcher LLP]
February 1, 2000
(303) 298-5700 C 18787-00001
Convergent Communications, Inc.
400 Inverness Drive South, Suite 400
Englewood, Colorado 80112
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We refer to an aggregate of 6,152,125 shares of Common Stock, no par value,
of Convergent Communications, Inc., a Colorado corporation (the "Company"),
which are the subject of a registration statement on Form S-8 (the "Registration
Statement") to be filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), which
shares (the "Shares") may be offered and sold under the Convergent
Communications, Inc. 1996 Incentive and Non-Statutory Stock Option Plan; the
Convergent Communications, Inc. 1997 Incentive and Non-Statutory Stock Option
Plan; the Convergent Communications, Inc. 1998 Incentive and Non-Statutory Stock
Option Plan; the Convergent Communications, Inc. 1999 Employee Stock Option
Plan; the Convergent Communications, Inc. 1999 Director Stock Option Plan; the
Convergent Communications, Inc. 2000 Stock Incentive Plan; the Convergent
Communications, Inc. Deferred Compensation Plan; and the Convergent
Communications, Inc. Acquisition Incentive Program (together, the "Plans").
We have examined the original, or a photostatic or certified copy, of
such records of the Company, certificates of officers of the Company and of
public officials and such other documents as we have determined relevant and
necessary as the basis for the opinion set forth below. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all
<PAGE>
Convergent Communications, Inc.
[Letterhead of Gibson, Dunn & Crutcher LLP]
February 1, 2000
Page 2
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Based upon our examination mentioned above, we are of the opinion that
the Shares have been validly authorized for issuance and, when (a) the
Registration Statement has become effective under the Act, (b) the Shares are
issued and sold in accordance with the terms set forth in the Registration
Statement and in the Plans, including, in the case of Shares issued pursuant to
the exercise of options issued under the Plans, the payment for the underlying
Shares, and (c) the pertinent provisions of any applicable state securities laws
have been complied with, the Shares so issued will be legally issued and will be
fully paid and nonassessable.
We consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm appearing on the cover of the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Act or the General Rules and Regulations of the Commission.
Very truly yours,
GIBSON, DUNN & CRUTCHER LLP
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated March 5, 1999, except for Note 16 as
to which the date is April 29, 1999, relating to the consolidated financial
statements, which appears in the Convergent Communications, Inc. Prospectus
filed on July 20, 1999. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Denver, Colorado
February 1, 2000
<PAGE>
EXHIBIT 99.1
CONVERGENT COMMUNICATIONS, INC.
1996 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
1. Purpose of Plan. The purpose of this 1996 Incentive and Nonstatutory
---------------
Stock Option Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to the
Employees, Directors and Consultants of Convergent Communications, Inc. (the
"Company") and to promote the success of the Company's business. Options granted
hereunder may be either "incentive stock options," as defined in Section 422 of
the Internal Revenue Code of 1986, as amended, or "nonstatutory stock options,"
at the discretion of the Board and as reflected in the terms of the written
stock option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Committee, if one has been appointed, or
-----
the Board of Directors of the Company if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the no par value common stock of the
------------
Company.
(d) "Company" shall mean Convergent Communications, Inc., a Colorado
-------
corporation.
(e) "Committee" shall mean the Committee appointed by the Board in
---------
accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed, or the Board if no committee is appointed.
(f) "Consultant" shall mean any person who is engaged by the Company
----------
or any Subsidiary to render consulting services and is compensated for such
consulting services.
(g) "Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(h) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the
Company.
<PAGE>
(i) "Incentive Stock Option" shall mean an Option which is intended to
----------------------
qualify as an incentive stock option within the meaning of Section 422 of
the Code and which shall be clearly identified as such in the written Stock
Option Agreement provided by the Company to each Optionee granted an
Incentive Stock Option under the Plan.
(j) "Non-Employee Director" shall mean a director who:
---------------------
(i) Is not currently an officer (as defined in Section 16a-1(f)
of the Securities Exchange Act of 1934, as amended) of the Company or
a Parent or Subsidiary of the Company, or otherwise currently employed
by the Company or a Parent or Subsidiary of the Company.
(ii) Does not receive compensation, either directly or
indirectly, from the Company or a Parent or Subsidiary of the Company,
for services rendered as a Consultant or in any capacity other than as
a director, except for an amount that does not exceed the dollar
amount for which disclosure would be required pursuant to Item 404(a)
of Regulation S-K adopted by the United States Securities and Exchange
Commission.
(iii) Does not possess an interest in any other transaction for
which disclosure would be required pursuant to Item 404(a) of
Regulation S-K adopted by the United States Securities and Exchange
Commission.
(k) "Nonstatutory Stock Option" shall mean an Option granted under
-------------------------
this Plan which does not qualify as an Incentive Stock Option and which
shall be clearly identified as such in the written Stock Option Agreement
provided by the Company to each Optionee granted a Nonstatutory Stock
Option under this Plan. To the extent that the aggregate fair market value
of Optioned Stock to which Incentive Stock Options granted under Options to
an Employee are exercisable for the first time during any calendar year
(under the Plan and all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such Options shall be treated as Nonstatutory Stock
Options under the Plan. The aggregate fair market value of the Optioned
Stock shall be determined as of the date of grant of each Option and the
determination of which Incentive Stock Options shall be treated as
qualified incentive stock options under Section 422 of the Code and which
Incentive Stock Options exercisable for the first time in a particular year
in excess of the $100,000 limitation shall be treated as Nonstatutory Stock
Options shall be determined based on the order in which such Options were
granted in accordance with Section 422(d) of the Code.
(l) "Option" shall mean an Incentive Stock Option, a Nonstatutory
------
Stock Option or both as identified in a written Stock Option Agreement
representing such stock option granted pursuant to the Plan.
-2-
<PAGE>
(m) "Optioned Stock" shall mean the Common Stock subject to an Option.
--------------
(n) "Optionee" shall mean an Employee or other person who is granted
--------
an Option.
(o) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1996 Incentive and Nonstatutory Stock
----
Option Plan.
(q) "Share" shall mean a share of the Common Stock of the Company, as
-----
adjusted in accordance with Section 11 of the Plan.
(r) "Stock Option Agreement" shall mean the agreement to be entered
----------------------
into between the Company and each Optionee which shall set forth the terms
and conditions of each Option granted to each Optionee, including the
number of Shares underlying such Option and the exercise price of each
Option granted to such Optionee under such agreement.
(s) "Subsidiary" shall mean a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 2,700,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares which were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board or a
---------
Committee appointed by the Board consisting of two or more Non-Employee
Directors to administer the Plan on behalf of the Board, subject to such
terms and conditions as the Board may prescribe.
(i) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board (which for purposes of this paragraph
(a)(i) of this Section 4 shall be the Board of Directors of the
Company). From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in
-3-
<PAGE>
substitution therefor, fill vacancies however caused, or remove all
members of the Committee and thereafter directly administer the Plan.
(ii) Members of the Board who are granted, or have been granted,
Options may vote on any matters affecting the administration of the
Plan or the grant of any Options pursuant to the Plan.
(b) Powers of the Board. Subject to the provisions of the Plan, the
-------------------
Board shall have the authority, in its discretion:
(i) To grant Incentive Stock Options, in accordance with
Section 422 of the Code, and Nonstatutory Stock Options or both as
provided and identified in a separate written Stock Option Agreement
to each Optionee granted such Option or Options under the Plan;
provided however, that in no event shall an Incentive Stock Option and
a Nonstatutory Stock Option granted to any Optionee under a single
Stock Option Agreement be subject to a "tandem" exercise arrangement
such that the exercise of one such Option affects the Optionee's right
to exercise the other Option granted under such Stock Option
Agreement;
(ii) To determine, upon review of relevant information and in
accordance with Section 8(b) of the Plan, the fair market value of the
Common Stock;
(iii) To determine the exercise price per Share of Options to be
granted, which exercise price shall be determined in accordance with
Section 8(a) of the Plan;
(iv) To determine the Employees or other persons to whom, and
the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option;
(v) To interpret the Plan;
(vi) To prescribe, amend and rescind rules and regulations
relating to the Plan;
(vii) To determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option;
(viii) To accelerate or defer (with the consent of the Optionee)
the exercise date of any Option, consistent with the provisions of
Section 7 of the Plan;
-4-
<PAGE>
(ix) To authorize any person to execute on behalf of the Company
any instrument required to effectuate the grant of an Option
previously granted by the Board; and
(x) To make all other determinations deemed necessary or
advisable for the administration of the Plan.
(xi) To determine whether a holder of Nonstatutory Stock Options
granted under this Plan shall have engaged in conduct which is
contrary to the best interests of the Company and whose Nonstatutory
Stock Option is therefore subject to cancellation as set forth in
Section 7.
(c) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees
and any other permissible holders of any Options granted under the Plan.
5 Eligibility.
-----------
(a) Persons Eligible. Options may be granted to any person selected
----------------
by the Board. Incentive Stock Options may be granted only to Employees. An
Employee, who is also a director of the Company, its Parent or a
Subsidiary, shall be treated as an Employee for purposes of this Section 5.
An Employee or other person who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) No Effect on Relationship. The Plan shall not confer upon any
-------------------------
Optionee any right with respect to continuation of employment or other
relationship with the Company nor shall it interfere in any way with his
right or the Company's right to terminate his employment or other
relationship at any time.
6 Term of Plan. The Plan became effective on October 1, 1996. It shall
------------
continue in effect until September 30, 2006, unless sooner terminated under
Section 13 of the Plan.
7 Term of Option. The term of each Option shall be 10 years from the
--------------
date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five years
from the date of grant thereof or such shorter time as may be provided in the
Stock Option Agreement.
The Nonstatutory Stock Options granted to, and held by, any person under
this Plan, may be deemed cancelled and forfeited by the Board, if the Board, in
its sole discretion, determines that
-5-
<PAGE>
the conduct of the holder of such Nonstatutory Stock Option has been contrary to
the best interests of the Company and could reasonably be deemed by the Board to
have a material adverse effect on the Company or the business of the Company.
8 Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be such price as is
determined by the Board, but the per Share exercise price under an
Incentive Stock Option shall be subject to the following:
(i) If granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than 10% of
the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall not be less than
110% of the fair market value per Share on the date of grant.
(ii) If granted to any other Employee, the per Share exercise
price shall not be less than 100% of the fair market value per Share
on the date of grant.
(b) Determination of Fair Market Value. The fair market value per
----------------------------------
Share on the date of grant shall be determined as follows:
(i) If the Common Stock is listed on the New York Stock
Exchange, the American Stock Exchange or such other securities
exchange designated by the Board, or admitted to unlisted trading
privileges on any such exchange, or if the 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
the Common Stock as reported by such exchange or system on the day the
fair market value is to be determined, or if no such price is reported
for such day, then the determination of such closing price shall be as
of the last immediately preceding day on which the closing price is so
reported;
(ii) If the Common Stock is not so listed or admitted to
unlisted trading privileges or so quoted, the fair market value shall
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. on the day the fair market value is determined;
or
(iii) If the 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
-6-
<PAGE>
value shall be determined in such reasonable manner as may be
prescribed by the Board.
(c) Consideration and Method of Payment. The consideration to be paid
-----------------------------------
for the Shares to be issued upon exercise of an Option, including the
method of payment, shall be determined by the Board and may consist
entirely of cash, check, other shares of Common Stock having a fair market
value on the date of exercise equal to the aggregate exercise price of the
Shares as to which said Option shall 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.
9 Exercise of Option.
------------------
(a) Procedure for Exercise: Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
In the sole discretion of the Board, at the time of the grant of an
Option or subsequent thereto but prior to the exercise of an Option, an
Optionee may be provided with the right to exchange, in a cashless
transaction, all or part of the Option for Common Stock of the Company on
terms and conditions determined by the Board.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment, as authorized by the Board, may consist of a
consideration and method of payment allowable under Section 8(c) and this
Section 9(a) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of the duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
-7-
<PAGE>
(b) Termination of Status as an Employee. In the case of an Incentive
------------------------------------
Stock Option, if any Employee ceases to serve as an Employee, he may, but
only within such period of time not exceeding three months as is determined
by the Board at the time of grant of the Option after the date he ceases to
be an Employee of the Company, exercise his Option to the extent that he
was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. In the case of an Incentive Stock Option,
----------------------
notwithstanding the provisions of Section 9(b) above, in the event an
Employee is unable to continue his employment with the Company as a result
of his total and permanent disability (as defined in Section 22(e)(3) of
the Code), he may, but only within such period of time not exceeding 12
months as is determined by the Board at the time of grant of the Option
from the date of termination, exercise his Option to the extent he was
entitled to exercise it at the date of such termination. To the extent that
he was not entitled to exercise the Option at the date of termination, or
if he does not exercise such Option (which he was entitled to exercise)
within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the case of an Incentive Stock Option, in
-----------------
the event of the death of the Optionee:
(i) During the term of the Option if the Optionee was at the time
of his death an Employee the Company and had been in Continuous Status
as an Employee or Consultant since the date of grant of the Option, the
Option may be exercised, at any time within 12 months following the
date of death, by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had the
Optionee continued living and remained in Continuous Status as an
Employee 12 months after the date of death; or
(ii) Within such period of time not exceeding three months as is
determined by the Board at the time of grant of the Option after the
termination of Continuous Status as an Employee, the Option may be
exercised, at any time within 12 months following the date of death, by
the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
10 Nontransferability of Options. In the case of an Incentive Stock
-----------------------------
Option, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
-8-
<PAGE>
11 Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of any
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of the proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another corporation in a transaction
in which the Company is not the survivor, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of such a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of 30 days from the date of such notice, and the Option will terminate
upon the expiration of such period.
12 Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
other person to whom an Option is so granted within a reasonable time after the
date of such grant. Within a reasonable time after the date of the grant of an
Option, the Company shall enter into and deliver to each Employee or other
person granted such Option a written Stock Option Agreement as provided in
Sections 2(r) and 16 hereof, setting forth the terms and conditions of such
Option and separately identifying the portion of the Option which is an
Incentive Stock Option and/or the portion of such Option which is a Nonstatutory
Stock Option.
-9-
<PAGE>
13 Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
the Plan:
(i) An increase in the number of Shares subject to the Plan
above 2,700,000 Shares, other than in connection with an adjustment
under Section 11 of the Plan;
(ii) Any change in the designation of the class of Employees
eligible to be granted Incentive Stock Options; or
(iii) Any material amendment under the Plan that would have to be
approved by the shareholders of the Company for the Board to continue
to be able to grant Incentive Stock Options under the Plan.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if the Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
14 Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, applicable state securities laws, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of legal counsel for the Company with
respect to such compliance.
As a condition to the existence of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares and such other
representations and warranties which in the opinion of legal counsel for the
Company, are necessary or appropriate to establish an exemption from the
registration requirements under applicable federal and state securities laws
with respect to the acquisition of such Shares.
15 Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the
-10-
<PAGE>
requirements of the Plan. Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
legal counsel to be necessary for the lawful issuance and sale of any Share
hereunder, shall relieve the Company of any liability relating to the failure to
issue or sell such Shares as to which such requisite authority shall not have
been obtained.
16 Option Agreement. Each Option granted to an Employee or other persons
----------------
shall be evidenced by a written Stock Option Agreement in such form as the Board
shall approve.
17 Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company. Such shareholder approval and any
shareholder approval required under Section 13 of the Plan, may be obtained at a
duly held shareholders meeting by the affirmative vote of the holders of a
majority of the outstanding shares of the voting stock of the Company, who are
present or represented and entitled to vote thereon, or by unanimous written
consent of the shareholders in accordance with the provisions of the Colorado
Business Corporation Act.
18 Information to Optionees. The Company shall provide to each
------------------------
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
19 Gender. As used herein, the masculine, feminine and neuter genders
------
shall be deemed to include the others in all cases where they would so apply.
20 CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
-------------
AND INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
COLORADO.
Adopted by Directors: Effective October 1, 1996
Adopted by Shareholders: Effective October 1, 1996
CONVERGENT COMMUNICATIONS, INC.
organized under the laws of Colorado
By ____________________________________
John R. Evans, Chairman and
Chief Executive Officer
-11-
<PAGE>
ATTEST:
______________________________________
Keith V. Burge, President and
Chief Operating Officer
S E A L
-12-
<PAGE>
EXHIBIT 99.2
Convergent Communications, Inc.
First Amendment to the 1996 Incentive and Nonstatutory Stock Option 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. 1996 Incentive and
nonstatutory Stock Option Plan" (hereinafter referred to as the "Plan"). The
Plan permits the grant of 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 allow for the
issuance of certificates rather than a Stock Option Agreement.
STOCK OPTION CERTIFICATE
1. Section 2 (r) of the Plan (entitled "Stock Option Agreement") shall be
deleted in its entirety and the following inserted in its place:
"(r) "Stock Option Certificate" shall mean the a certificate signed by
------------------------
the Corporation summarizing the terms of the Option."
2. Any and all remaining occurrences of the phrase "Stock Option
Agreement" shall be amended by substituting the phrase "Stock Option
Certificate" in its place.
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 August 1, 1999.
CONVERGENT COMMUNICATIONS, INC.
By:
___________________________________________
John R. Evans, Chief Executive Officer
<PAGE>
EXHIBIT 99.3
CONVERGENT COMMUNICATIONS, INC.
1997 INCENTIVE AND NONSTATUTORY
STOCK OPTION PLAN
1. Purpose of Plan. The purpose of this 1997 Incentive and Nonstatutory
---------------
Stock Option Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to the
Employees, Directors and Consultants of Convergent Communications, Inc. (the
"Company") and to promote the success of the Company's business. Options
granted hereunder may be either "incentive stock options," as defined in Section
422 of the Internal Revenue Code of 1986, as amended, or "nonstatutory stock
options," at the discretion of the Board and as reflected in the terms of the
written stock option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company, or if a
-----
Committee is appointed, "Board" shall refer to the Committee if the context
so requires.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean Convergent Communications, Inc., a Colorado
-------
corporation.
(e) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed, or the Board if no committee is appointed.
(f) "Consultant" shall mean any person who is engaged by the Company
----------
or any Subsidiary to render consulting services and is compensated for such
consulting services.
(g) "Continuous Status as an Employee" shall mean the absence of any
---------------------------------
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
(h) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the
Company.
(i) "Incentive Stock Option" shall mean an Option which is intended
----------------------
to qualify as an incentive stock option within the meaning of Section 422
of the Code and
<PAGE>
which shall be clearly identified as such in the written Stock Option
Agreement provided by the Company to each Optionee granted an Incentive
Stock Option under the Plan.
(j) "Non-Employee Director" shall mean a director who:
---------------------
(i) Is not currently an officer (as defined in Section 16a-1(f)
of the Securities Exchange Act of 1934, as amended) of the Company or
a Parent or Subsidiary of the Company, or otherwise currently employed
by the Company or a Parent or Subsidiary of the Company;
(ii) Does not receive compensation, either directly or
indirectly, from the Company or a Parent or Subsidiary of the Company,
for services rendered as a Consultant or in any capacity other than as
a director, except for an amount that does not exceed the dollar
amount for which disclosure would be required pursuant to Item 404(a)
of Regulation S-K adopted by the United States Securities and Exchange
Commission; and
(iii) Does not possess an interest in any other transaction for
which disclosure would be required pursuant to Item 404(a) of
Regulation S-K adopted by the United States Securities and Exchange
Commission.
(k) "Nonstatutory Stock Option" shall mean an Option granted under
-------------------------
this Plan which does not qualify as an Incentive Stock Option and which
shall be clearly identified as such in the written Stock Option Agreement
provided by the Company to each Optionee granted a Nonstatutory Stock
Option under this Plan. To the extent that the aggregate fair market value
of Optioned Stock to which Incentive Stock Options granted under Options to
an Employee are exercisable for the first time during any calendar year
(under the Plan and all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such Options shall be treated as Nonstatutory Stock
Options under the Plan. The aggregate fair market value of the Optioned
Stock shall be determined as of the date of grant of each Option and the
determination of which Incentive Stock Options shall be treated as
qualified incentive stock options under Section 422 of the Code and which
Incentive Stock Options exercisable for the first time in a particular year
in excess of the $100,000 limitation shall be treated as Nonstatutory Stock
Options shall be determined based on the order in which such Options were
granted in accordance with Section 422(d) of the Code.
(l) "Option" shall mean an Incentive Stock Option, a Nonstatutory
------
Stock Option or both as identified in a written Stock Option Agreement
representing such stock option granted pursuant to the Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.
-2-
<PAGE>
(n) "Optionee" shall mean an Employee or other person who is granted
--------
an Option.
(o) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1997 Incentive and Nonstatutory Stock
----
Option Plan.
(q) "Share" shall mean a share of the Common Stock of the Company, as
-----
adjusted in accordance with Section 11 of the Plan.
(r) "Stock Option Agreement" shall mean the agreement to be entered
----------------------
into between the Company and each Optionee which shall set forth the terms
and conditions of each Option granted to each Optionee, including the
number of Shares underlying such Option and the exercise price of each
Option granted to such Optionee under such agreement.
(s) "Subsidiary" shall mean a "subsidiary corporation," whether now
----------
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 1,200,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares which were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board or a
---------
Committee appointed by the Board consisting of two or more Non-Employee
Directors to administer the Plan on behalf of the Board, subject to such
terms and conditions as the Board may prescribe. If the Company has a
class of its equity securities registered under the Securities Exchange Act
of 1934, as amended ("1934 Act"), the Board shall appoint such a Committee.
(i) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board (which for purposes of this paragraph
(a)(i) of this Section 4 shall be the Board of Directors of the
Company). From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
-3-
<PAGE>
(ii) Members of the Board who are granted, or have been
granted, Options may vote on any matters affecting the administration
of the Plan or the grant of any Options pursuant to the Plan.
(b) Powers of the Board. Subject to the provisions of the Plan, the
-------------------
Board (or the Committee, subject to the approval of the Board) shall have
the authority, in its discretion:
(i) To grant Incentive Stock Options, in accordance with
Section 422 of the Code, and Nonstatutory Stock Options or both as
provided and identified in a separate written Stock Option Agreement
to each Optionee granted such Option or Options under the Plan;
provided however, that in no event shall an Incentive Stock Option and
a Nonstatutory Stock Option granted to any Optionee under a single
Stock Option Agreement be subject to a "tandem" exercise arrangement
such that the exercise of one such Option affects the Optionee's right
to exercise the other Option granted under such Stock Option
Agreement;
(ii) To determine, upon review of relevant information and in
accordance with Section 8(b) of the Plan, the fair market value of the
Common Stock;
(iii) To determine the exercise price per Share of Options to
be granted, which exercise price shall be determined in accordance
with Section 8(a) of the Plan;
(iv) To determine the Employees or other persons to whom, and
the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option;
(v) To interpret the Plan;
(vi) To prescribe, amend and rescind rules and regulations
relating to the Plan;
(vii) To determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the
holder thereof, modify or amend each Option;
(viii) To accelerate or defer (with the consent of the Optionee)
the exercise date of any Option, consistent with the provisions of
Section 7 of the Plan;
(ix) To authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option
previously granted by the Board; and
-4-
<PAGE>
(x) To make all other determinations deemed necessary or
advisable for the administration of the Plan.
(xi) To determine whether a holder of Nonstatutory Stock Options
granted under this Plan shall have engaged in conduct which is
contrary to the best interests of the Company and whose Nonstatutory
Stock Option is therefore subject to cancellation as set forth in
Section 7.
(c) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees
and any other permissible holders of any Options granted under the Plan.
5. Eligibility.
-----------
(a) Persons Eligible. Options may be granted to any person selected
----------------
by the Board. Incentive Stock Options may be granted only to Employees. An
Employee, who is also a director of the Company, its Parent or a
Subsidiary, shall be treated as an Employee for purposes of this Section 5.
An Employee or other person who has been granted an Option may, if he is
otherwise eligible, at the discretion of the Committee, if a Committee has
been appointed, or the Board, be granted an additional Option or Options.
(b) No Effect on Relationship. The Plan shall not confer upon any
-------------------------
Optionee any right with respect to continuation of employment or other
relationship with the Company nor shall it interfere in any way with his
right or the Company's right to terminate his employment or other
relationship at any time.
6. Term of Plan. The Plan became effective on the date first approved and
------------
adopted by the Board of Directors, as set forth on the last page of this Plan.
It shall continue in effect for 10 years from the date of such approval and
adoption, unless sooner terminated under Section 13 of the Plan.
7. Term of Option. The term of each Option shall be 10 years from the
--------------
date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than 10% of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five years
from the date of grant thereof or such shorter time as may be provided in the
Stock Option Agreement.
The Nonstatutory Stock Options granted to, and held by, any person under
this Plan, may be deemed canceled and forfeited by the Board, if the Board, in
its sole discretion, determines that the conduct of the holder of such
Nonstatutory Stock Option has been contrary to the best interests of the Company
and could reasonably be deemed by the Board to have a material adverse effect on
the Company or the business of the Company.
-5-
<PAGE>
8. Exercise Price and Consideration.
--------------------------------
(a) Exercise Price. The per Share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be no less than the fair
market value of Shares of common stock as of the date of grant of the
option or such higher price as may be determined by the Board, but the per
Share exercise price under an Incentive Stock Option shall be subject to
the following:
(i) If granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than 10% of
the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall not be less than
110% of the fair market value per Share on the date of grant.
(ii) If granted to any other Employee, the per Share exercise
price shall not be less than 100% of the fair market value per Share
on the date of grant.
(b) Determination of Fair Market Value. The fair market value per
----------------------------------
Share on the date of grant shall be determined as follows:
(i) If the Common Stock is listed on the New York Stock
Exchange, the American Stock Exchange or such other securities
exchange designated by the Board, or admitted to unlisted trading
privileges on any such exchange, or if the 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
the Common Stock as reported by such exchange or system on the day the
fair market value is to be determined, or if no such price is reported
for such day, then the determination of such closing price shall be as
of the last immediately preceding day on which the closing price is so
reported;
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges or so quoted, the fair market value shall 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. on the day the fair market value is determined;
or
(iii)If the 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 Board.
(c) Consideration and Method of Payment. The consideration to be
-----------------------------------
paid for the Shares to be issued upon exercise of an Option, including the
method of payment, shall
-6-
<PAGE>
be determined by the Board and may consist entirely of cash, check, other
shares of Common Stock having a fair market value on the date of exercise
equal to the aggregate exercise price of the Shares as to which said Option
shall 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.
9. Exercise of Option.
------------------
(a) Procedure for Exercise: Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan.
In the sole discretion of the Board, at the time of the grant of an
Option or subsequent thereto but prior to the exercise of an Option, an
Optionee may be provided with the right to exchange, in a cashless
transaction, all or part of the Option for Common Stock of the Company on
terms and conditions determined by the Board.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment, as authorized by the Board, may consist of a
consideration and method of payment allowable under Section 8(c) and this
Section 9(a) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of the duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for exercise under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Status as an Employee. In the case of an
------------------------------------
Incentive Stock Option, if any Employee ceases to serve as an Employee, he
may, but only within such period of time not exceeding three months as is
determined by the Board at the time of grant of the Option, after the date
he ceases to be an Employee of the Company, exercise his Option to the
extent that he was entitled to exercise the Option at the date of such
termination. To the extent that he was not entitled to exercise the Option
at the date of such termination, or if he does not exercise any portion of
the Option which he was entitled to
-7-
<PAGE>
exercise at the date of termination within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. In the case of an Incentive Stock
----------------------
Option, notwithstanding the provisions of Section 9(b) above, in the event
an Employee is unable to continue his employment with the Company as a
result of his total and permanent disability (as defined in Section
22(e)(3) of the Code), he may, but only within such period of time not
exceeding 12 months as is determined by the Board at the time of grant of
the Option from the date of termination, exercise his Option to the extent
he was entitled to exercise it at the date of such termination. To the
extent that he was not entitled to exercise the Option at the date of
termination, or if he does not exercise any portion of the Option which he
was entitled to exercise at the date of disability within the time
specified herein, the Option shall terminate.
(d) Death of Optionee. In the case of an Incentive Stock Option, in
-----------------
the event of the death of the Optionee:
(i) During the term of the Option if the Optionee was at the
time of his death an Employee the Company and had been in Continuous
Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within 12 months
following the date of death, by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in
Continuous Status as an Employee 12 months after the date of death; or
(ii) Within such period of time not exceeding three months as is
determined by the Board at the time of grant of the Option after the
termination of Continuous Status as an Employee, the Option may be
exercised, at any time within 12 months following the date of death,
by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of termination.
10. Nontransferability of Options. In the case of an Incentive Stock
-----------------------------
Option, the Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner (a "sale or other transfer") other
than by will or by the laws of descent and distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee. In the case of a
nonstatutory stock option, an Option may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner during the period ending
one year from the date of grant and thereafter only (i) after written notice to
the Board and (ii) in a manner which is in compliance with all applicable
provisions of the Securities Act of 1933, as amended ("1933 Act") and the 1934
Act to the reasonable satisfaction of the Company. Upon any permitted sale or
other transfer, the transferee shall remain subject to all terms and conditions
of the Plan and the Stock Option Agreement.
-8-
<PAGE>
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of any
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of the proposed sale of all or substantially all of the assets of the Company,
or the merger of the Company with or into another corporation in a transaction
in which the Company is not the survivor, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of such a merger or sale of assets, the
Board shall notify the Optionee that the Option shall be fully exercisable for a
period of 30 days from the date of such notice, and the Option will terminate
upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
other person to whom an Option is so granted within a reasonable time after the
date of such grant. Within a reasonable time after the date of the grant of an
Option, the Company shall enter into and deliver to each Employee or other
person granted such Option a written Stock Option Agreement as provided in
Sections 2(r) and 16 hereof, setting forth the terms and conditions of such
Option and separately identifying the portion of the Option which is an
Incentive Stock Option and/or the portion of such Option which is a Nonstatutory
Stock Option.
-9-
<PAGE>
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate the
-------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
the Plan:
(i) An increase in the number of Shares subject to the Plan
above 1,200,000 Shares, other than in connection with an adjustment
under Section 11 of the Plan;
(ii) Any change in the designation of the class of Employees
eligible to be granted Incentive Stock Options; or
(iii)Any material amendment under the Plan that would have to
be approved by the shareholders of the Company for the Board to
continue to be able to grant Incentive Stock Options under the Plan.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if the Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the 1933 Act, the
1934 Act, the rules and regulations promulgated thereunder, applicable state
securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of legal
counsel for the Company with respect to such compliance.
As a condition to the existence of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares and such other
representations and warranties which in the opinion of legal counsel for the
Company, are necessary or appropriate to establish an exemption from the
registration requirements under applicable federal and state securities laws
with respect to the acquisition of such Shares.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. Inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's legal counsel to be necessary for
-10-
<PAGE>
the lawful issuance and sale of any Share hereunder, shall relieve the Company
of any liability relating to the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
16. Option Agreement. Each Option granted to an Employee or other persons
----------------
shall be evidenced by a written Stock Option Agreement. The Stock Option
Agreement shall be in the form and shall include the terms and conditions set
forth on Exhibit A attached hereto.
---------
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company. Such shareholder approval and any
shareholder approval required under Section 13 of the Plan, may be obtained at a
duly held shareholders meeting by the affirmative vote of the holders of a
majority of the outstanding shares of the voting stock of the Company, who are
present or represented and entitled to vote thereon, or by unanimous written
consent of the shareholders in accordance with the provisions of the Colorado
Business Corporation Act.
18. Information to Optionees. The Company shall provide to each
------------------------
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
19. Gender. As used herein, the masculine, feminine and neuter genders
------
shall be deemed to include the others in all cases where they would so apply.
20. CHOICE OF LAW. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY
-------------
AND INTERPRETATION OF THIS PLAN AND THE INSTRUMENTS EVIDENCING OPTIONS WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
COLORADO.
Adopted by Directors: Effective _________________
Adopted by Shareholders: Effective _________________
CONVERGENT COMMUNICATIONS, INC.
organized under the laws of Colorado
By ____________________________________
John R. Evans, Chief Executive Officer
ATTEST:
______________________________________
Phillip Allen, Secretary
-11-
<PAGE>
EXHIBIT 99.4
Convergent Communications, Inc.
First Amendment to the 1997 Incentive and Nonstatutory Stock Option 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. 1997 Incentive and
nonstatutory Stock Option Plan" (hereinafter referred to as the "Plan"). The
Plan permits the grant of 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 allow for the
issuance of certificates rather than a Stock Option Agreement.
STOCK OPTION CERTIFICATE
1. Section 2 (r) of the Plan (entitled "Stock Option Agreement") shall be
deleted in its entirety and the following inserted in its place:
"(r) "Stock Option Certificate" shall mean the a certificate signed
by the Corporation summarizing the terms of the Option."
2. Any and all remaining occurrences of the phrase "Stock Option
Agreement" shall be amended by substituting the phrase "Stock Option
Certificate" in its place.
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 August 1, 1999.
CONVERGENT COMMUNICATIONS, INC.
By:_______________________________________
John R. Evans, Chief Executive Officer
<PAGE>
EXHIBIT 99.5
Convergent Communications, Inc.
1998 Stock Option Plan
INTRODUCTION
Convergent Communications, Inc., a Colorado corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive compensation
plan to be known as the "Convergent Communications, Inc. 1998 Stock Option Plan"
(hereinafter referred to as the "Plan"), as set forth in this document. The Plan
permits the grant of Non-Qualified Stock Options and Incentive Stock Options.
The purpose of the Plan is to promote the success and enhance the value of
the Corporation by linking the personal interests of Participants to those of
the Corporation's stockholders by providing Participants with an incentive for
outstanding performance. The Plan is further intended to assist the Corporation
in its ability to motivate, and retain the services of, Participants upon whose
judgment, interest and special effort the successful conduct of its operations
is largely dependent.
DEFINITIONS
For purposes of this Plan, the following terms shall be defined as follows
unless the context clearly indicates otherwise:
A. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
B. "Committee" shall mean the Stock Option Committee of the Board of
---------
Directors of the Corporation, if any. In the absence of a duly appointed Stock
Option Committee, the Committee shall refer to the Board of Directors of the
Corporation.
C. "Common Stock" shall mean the common stock, no par value, of the
------------
Corporation.
D. "Corporation" shall mean Convergent Communications, Inc., a Colorado
-----------
corporation.
E. "Director Participant" shall mean a director of the Corporation or of
--------------------
any Parent or Subsidiary on the date of a grant of Options under Section V(B)
hereof who is not a common law employee of the Corporation, any Parent or any
Subsidiary.
F. "Disability" shall have the same meaning as the term "permanent and
----------
total disability" under Section 22(e)(3) of the Code.
G. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations thereunder.
<PAGE>
H. "Executive" shall mean an employee of the Corporation or of any Parent
---------
or Subsidiary whose compensation is subject to the deduction limitations set
forth under Code Section 162(m).
I. "Fair Market Value" of the Corporation's Common Stock on a Trading Day
-----------------
shall mean the last reported sale price for Common Stock or, in case no such
reported sale takes place on such Trading Day, the average of the closing bid
and asked prices for the Common Stock for such Trading Day, in either case on
the principal securities exchange on which the Common Stock is listed or
admitted to trading, or if the Common Stock is not listed or admitted to trading
on any securities exchange, but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, if no sale is publicly reported, the
average of the closing bid and asked quotations for the Common Stock, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system or, if the Common Stock is not listed
on NASDAQ or a comparable system, the closing sale price of the Common Stock or,
if no sale is publicly reported, the average of the closing bid and asked
prices, as furnished by two members of the National Association of Securities
Dealers, Inc. who make a market in the Common Stock selected from time to time
by the Corporation for that purpose. In addition, for purposes of this
definition, a "Trading Day" shall mean, if the Common Stock is listed on any
securities exchange, a business day during which such exchange was open for
trading and at least one trade of Common Stock was effected on such exchange on
such business day, or, if the Common Stock is not listed on any national
securities exchange but is traded in the over-the-counter market, a business day
during which the over-the-counter market was open for trading and at least one
"eligible dealer" quoted both a bid and asked price for the Common Stock. An
"eligible dealer" for any day shall include any broker-dealer who quoted both a
bid and asked price for such day, but shall not include any broker-dealer who
quoted only a bid or only an asked price for such day. In the event the
Corporation's Common Stock is not publicly traded, the Fair Market Value of such
Common Stock shall be determined by the Committee in good faith.
J. "Good Cause" shall mean (i) a Participant's willful or gross misconduct
----------
or willful or gross negligence in the performance of his duties for the
Corporation or for any Parent or Subsidiary after prior written notice of such
misconduct or negligence and the continuance thereof for a period of 30 days
after receipt by such Participant of such notice, (ii) a Participant's
intentional or habitual neglect of his duties for the Corporation or for any
Parent or Subsidiary after prior written notice of such neglect, or (iii) a
Participant's theft or misappropriation of funds of the Corporation or of any
Parent or Subsidiary or commission of a felony.
K. "Incentive Stock Option" shall mean a stock option satisfying the
----------------------
requirements for tax-favored treatment under Section 422 of the Code.
L. "Non-Qualified Option" shall mean a stock option which does not satisfy
--------------------
the requirements for, or which is not intended to qualify for, tax-favored
treatment under Section 422 of the Code.
M. "Option" or "Plan Award" shall mean an Incentive Stock Option or a
------ ----------
Non-Qualified Stock Option granted pursuant to the provisions of Section V
hereof.
-2-
<PAGE>
N. "Optionee" shall mean a Participant who is granted an Option under the
-------
terms of this Plan.
O. "Outside Directors" shall mean members of the Board of Directors of the
-----------------
Corporation who are classified as "outside directors" under Section 162(m) of
the Code.
P. "Parent" shall mean a parent corporation of the Corporation within the
------
meaning of Section 424(e) of the Code.
Q. "Participant" shall mean any employee of the Corporation or any Parent
-----------
or Subsidiary, or a Director Participant, participating under the Plan.
R. "Plan Quarter" shall mean the three calendar month periods beginning
------------
January 1/st/, April 1/st/, July 1/st/ and October 1/st/.
S. "Retirement" shall mean the termination of employment by a Participant
----------
in the Plan from the Corporation or from any Parent or Subsidiary, who at the
time of such termination is at least fifty-five (55) years of age and who has
completed at least ten (10) years of service (at least 1,000 hours in any fiscal
year) with the Corporation or any Parent or Subsidiary, or any combination
thereof.
T. "Securities Act" shall mean the Securities Act of 1933, as amended, and
--------------
the rules and regulations thereunder.
U. "Subsidiary" shall mean a subsidiary corporation of the Corporation
----------
within the meaning of Section 424(f) of the Code.
SECTION I.
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be composed of
at least two Non-Employee Directors, as defined in Rule 16b-3(b)(3) promulgated
under the Exchange Act, and who also qualify as Outside Directors, if available.
Subject to the provisions of the Plan, the Committee may establish from time to
time such regulations, provisions, proceedings and conditions of awards which,
in its opinion, may be advisable in the administration of the Plan. A majority
of the Committee shall constitute a quorum, and, subject to the provisions of
Section IV of the Plan, the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by a majority
of the Committee, shall be the acts of the Committee.
SECTION II.
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, the
aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be one million seven hundred thousand (1,700,000)
shares. Shares of Common Stock underlying awards
-3-
<PAGE>
of Options shall be counted against the limitation set forth in the immediately
preceding sentence and may be reused to the extent that an Option expires, is
terminated, is unexercised, or is forfeited. Incentive and Non-Qualified Stock
Options awarded under the Plan may be fulfilled in accordance with the terms of
the Plan with either authorized and unissued shares of the Common Stock, issued
shares of such Common Stock held in the Corporation's treasury or shares of
Common Stock acquired on the open market.
SECTION III.
ELIGIBILITY
Officers and key employees (including officers or key employees who are
also directors) of the Corporation, or of any Parent or Subsidiary, who are
regularly employed on a salaried basis as common law employees shall be eligible
to participate in the Plan. Directors of the Corporation, or of any Parent or
Subsidiary, who are not common law employees of the Corporation, any Parent or
any Subsidiary shall also be eligible to participate in the Plan, but only to
the extent provided under Section V(B) hereof and, where appropriate under this
Plan, shall be referred to as "employees" and their service as directors as
"employment."
SECTION IV.
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder, to the extent such compliance is required, and shall otherwise have
plenary authority to interpret the Plan and to make all determinations specified
in or permitted by the Plan or deemed necessary or desirable for its
administration or for the conduct of the Committee's business. Subject to the
provisions of Section X hereof, all interpretations and determinations of the
Committee may be made on an individual or group basis and shall be final,
conclusive and binding on all interested parties. Subject to the express
provisions of the Plan, the Committee shall have authority, in its discretion,
to determine the persons to whom Plan Awards shall be granted, the times when
such Plan Awards shall be granted, the number of Plan Awards, the exercise price
of each Plan Award, the period(s) during which such Plan Award shall be
exercisable (whether in whole or in part), the restrictions to be applicable to
Plan Awards and the other terms and provisions thereof (which need not be
identical). In addition, the authority of the Committee shall include, without
limitation, the following:
A. Financing. The arrangement of temporary financing for an Optionee by
---------
registered broker-dealers, under the rules and regulations of the Federal
Reserve Board, for the purpose of assisting the Optionee in the exercise of an
Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer;
B. Procedures for Exercise of Option. The establishment of procedures for
---------------------------------
an Optionee (i) to exercise an Option by payment of cash or any other property
acceptable to the Committee, (ii) to have withheld from the total number of
shares of Common Stock to be acquired upon the exercise of an Option that number
of shares having a Fair Market Value, which, together with such cash as shall be
paid in respect of fractional shares, shall equal the option exercise price
-4-
<PAGE>
of the total number of shares of Common Stock to be acquired, (iii) to exercise
all or a portion of an Option by delivering that number of shares of Common
Stock already owned by him having a Fair Market Value which shall equal the
Option exercise price for the portion exercised and, in cases where an Option is
not exercised in its entirety, to permit the Optionee to deliver the shares of
Common Stock thus acquired by him in payment of shares of Common Stock to be
received pursuant to the exercise of additional portions of such Option, the
effect of which shall be that an Optionee can in sequence utilize such newly
acquired shares of Common Stock in payment of the exercise price of the entire
Option, together with such cash as shall be paid in respect of fractional shares
and (iv) to engage in any form of "cashless" exercise.
C. Withholding. The establishment of a procedure whereby a number of
-----------
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, or for the tender of cash or shares of Common Stock owned by any
Participant to meet any obligation of withholding for taxes incurred by the
Optionee upon such exercise.
D. Types of Plan Awards. The Committee may grant awards in the form of
--------------------
Incentive Stock Options and Non-Qualified Stock Options.
SECTION V.
STOCK OPTIONS
A. For Employees.
-------------
1. The Committee shall have the authority, in its discretion, to grant
Incentive Stock Options or to grant Non-Qualified Stock Options or to grant both
types of Options. No Option shall be granted for a term of more than ten (10)
years. Notwithstanding anything contained herein to the contrary, an Incentive
Stock Option may be granted only to common law employees of the Corporation or
of any Parent or Subsidiary now existing or hereafter formed or acquired, and
not to any director or officer who is not also such a common law employee. In
order to satisfy the "performance-based" exception to the deduction limitation
under Code Section 162(m), the maximum number of shares of Common Stock subject
to Options which may be granted to any single Executive during any one calendar
year is 250,000. The terms and conditions of the Options shall be determined
from time to time by the Committee; provided, however, that the Options granted
-------- -------
shall be subject to the terms and conditions of this Plan.
2. Exercise Price. The Committee shall establish the exercise price
--------------
at the time any Option is granted at such amount as the Committee shall
determine; provided, however, that the exercise price for each share of Common
-------- -------
Stock purchasable under any Option which is intended to satisfy the performance-
based exception to the deduction limitation under Section 162(m) of the Code or
any Incentive Stock Option granted hereunder shall be such amount as the
Committee shall, in its best judgment, determine to be not less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock at the date
the Option is granted; and provided, further, that in the case of an Incentive
Stock Option granted to a person who, at the time such Incentive Stock Option is
granted, owns shares of stock of the Corporation or of any Parent or Subsidiary
which possess more than ten percent (10%) of the total combined voting power of
all classes of
-5-
<PAGE>
shares of stock of the Corporation or of any Parent or Subsidiary, the exercise
price for each share of Common Stock shall be such amount as the Committee, in
its best judgment, shall determine to be not less than one hundred ten percent
(110%) of the Fair Market Value per share of Common Stock at the date the Option
is granted. The exercise price will be subject to adjustment in accordance with
the provisions of Section VI of the Plan.
3. Payment of Exercise Price. The price per share of Common Stock
-------------------------
with respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in cash or pursuant to any of the methods
set forth in Sections IV hereof. Shares of Common Stock delivered to the
Corporation in payment of the exercise price shall be valued at the Fair Market
Value of the Common Stock on the date preceding the date of the exercise of the
Option.
4. Employment Requirement. Notwithstanding anything else contained
----------------------
herein, each Option by its terms shall require the Optionee to remain in the
continuous full-time employ of the Corporation, or of any Parent or Subsidiary,
for at least six (6) months from the date of grant of the Option before the
right to exercise any part of the Option (by him or any other person) will
accrue.
5. Exercisability of Options. Each Option shall be exercisable in
-------------------------
whole or in installments, and at such time(s), and subject to the fulfillment of
any conditions on exercisability as may be determined by the Committee at the
time of the grant of such Options. The right to purchase shares of Common Stock
shall be cumulative so that when the right to purchase any shares of Common
Stock has accrued such shares of Common Stock or any part thereof may be
purchased at any time thereafter until the expiration or termination of the
Option. Unless otherwise determined by the Committee in its sole discretion,
each Option granted hereunder shall be exercisable, on a cumulative basis, as to
twenty percent (20%) of the shares of Common Stock set forth thereunder on each
of the first, second, third, fourth and fifth anniversaries of the date such
Option is granted.
6. Expiration of Options. No Option by its terms shall be exercisable
---------------------
after the expiration of ten (10) years from the date of grant of the Option.
7. Exercise Upon Death of Optionee. Subject to the provisions of
-------------------------------
Section V(A)(5) hereof, in the event of the death of the Optionee prior to his
termination of employment with the Corporation or with any Parent or Subsidiary,
or within 3 (three) months following his Retirement, his estate (or other
beneficiary, if so designated in writing by the Participant) shall have the
right, within one (1) year after the date of death (but in no case after the
expiration date of the Option(s)), to exercise his Option(s) with respect to all
or any part of the shares of Common Stock as to which the deceased Optionee had
not exercised his Option at the time of his death, but only to the extent the
Option or Options were exercisable as of the earlier of the date of his
Retirement or the date of his death.
8. Exercise Upon Disability of Optionee. Subject to the provisions of
------------------------------------
Section V(A)(5) hereof, if the employment by the Corporation or by any Parent or
Subsidiary of an Optionee is terminated because of Disability, he shall have the
right, within one (1) year after the
-6-
<PAGE>
date of such termination (but in no case after the expiration of the Option(s)),
to exercise his Option(s) with respect to all or any part of the shares of
Common Stock as to which he had not exercised his Option at the time of such
termination, but only to the extent such Option or Options were exercisable as
of the date of his termination of employment due to Disability.
9. Exercise Upon Optionee's Termination of Employment. Except as
--------------------------------------------------
provided in the following sentence, if the employment of an Optionee by the
Corporation or by any Parent or Subsidiary is terminated for any reason other
than those specified in Sections V(A)(7) and V(A)(8) above, he shall have the
right, within three (3) months after the date of such termination (but in no
case after the expiration date of the Option(s)), to exercise his Option(s) only
with respect to that number of shares of Common Stock that he was entitled to
purchase pursuant to Options that were exercisable immediately prior to such
termination. Notwithstanding the provisions of the immediately preceding
sentence, if an Optionee's employment is terminated by the Corporation or by any
Parent or Subsidiary for Good Cause, the Optionee shall, at the time of such
termination of employment, forfeit his rights to exercise all of such Option(s).
10. Maximum Amount of Incentive Stock Options. Each Plan Award under
-----------------------------------------
which Incentive Stock Options are granted shall provide that to the extent the
aggregate of the (a) Fair Market Value of the shares of Common Stock (determined
as of the time of the grant of the Option) subject to such Incentive Stock
Option and (b) the fair market values (determined as of the date(s) of grant of
the options) of all other shares of Common Stock subject to incentive stock
options granted to an Optionee by the Corporation or any Parent or Subsidiary,
which are exercisable for the first time by any person during any calendar year,
exceed(s) one hundred thousand dollars ($100,000), such excess shares of Common
Stock shall not be deemed to be purchased pursuant to Incentive Stock Options.
The terms of the immediately preceding sentence shall be applied by taking
options into account in the order in which they are granted.
B. For Director Participants.
-------------------------
1. 1997 Plan Quarters.
------------------
(a) Options. Subject to the terms and conditions of this Section V(B),
-------
as of the last day of the Plan Quarter beginning on October 1, 1997, each person
who was serving as a non-employee director of the Corporation (a "Director") on
the last day of such Plan Quarter (and who so served on an uninterrupted basis
for more than fifty percent (50%) of the business days contained in such Plan
Quarter) shall be granted Options to purchase five thousand (5,000) shares of
Common Stock for each Plan Quarter during 1997 that the Director served as a
Director, but only if the Director had served in such capacity on an
uninterrupted basis for more than fifty percent (50%) of the business days
contained in the applicable Plan Quarters during 1997, subject to availability
under the Plan.
(b) Exercise Price. Subject to the provisions of Section VI hereunder,
--------------
the option price of the shares of Common Stock covered by each Director Option
granted for the 1997 Plan Quarters shall be $3.00.
-7-
<PAGE>
(c) Exercisability of Stock Option. Each Option granted under this
------------------------------
Section V(B)(1) by its terms shall expire ten (10) years from the date of its
grant. Furthermore, an Option granted pursuant to this section shall become
exercisable on the date of grant.
2. 1998 Plan Quarters.
------------------
(a) Options. Subject to the terms and conditions of this Section
-------
V(B), as of the last day of the Plan Quarter beginning on October 1, 1997, each
person who was serving as a non-employee director of the Corporation (a
"Director") on the last day of such Plan Quarter (and who so served on an
uninterrupted basis for more than fifty percent (50%) of the business days
contained in such Plan Quarter) shall automatically be granted Options to
purchase twenty thousand (20,000) shares of Common Stock, subject to
availability under the Plan.
(b) Exercise Price. Subject to the provisions of Section VI
--------------
hereunder, the option price of the shares of Common Stock covered by each
Director Option shall be the greater of (i) the Fair Market Value of such shares
on January 1, 1998 or (ii) an amount that is greater than twenty-five percent
(25%) of the Fair Market Value of such shares on October 1, 1998.
(c) Exercisability of Stock Option. Each Option granted under this
------------------------------
Section V(B)(2) by its terms shall expire ten (10) years from the date of its
grant. Furthermore: (i) an option granted pursuant to this section shall become
exercisable on the last day of the Plan Quarter during which the date of such
grant occurs, but only if the Director has served in such capacity on an
uninterrupted basis for more than fifty percent (50%) of the business days
contained in such Plan Quarter; and (ii) the Option shall become exercisable as
to one-fourth (1/4) of the number of shares of Common Stock covered thereby on
the last day of the Plan Quarter during which the date of grant occurs and as to
one-fourth (1/4) of such number of shares on the last day of each of the next
succeeding three Plan Quarters, respectively, but only if, with regard to the
shares of Common Stock with respect to which the Option becomes exercisable at
the end of any Plan Quarter, the Director has served in such capacity on an
uninterrupted basis for more than fifty percent (50%) of the business days
contained in such Plan Quarter.
3. Director's Death. If a Director dies while holding an outstanding
----------------
Option, such Option, to the extent exercisable (and not exercised) on the date
of his death, shall remain so exercisable by his estate (or other beneficiaries,
as designated in writing by such Director) until the end of the exercise period
under the Option.
4. Director's Termination. If a Director's service as a director of the
----------------------
Corporation is terminated by reason of (i) his Disability, (ii) the failure of
the Corporation to retain, or nominate for re-election, such Director (who is
otherwise eligible) other than for Good Cause, (iii) his ineligibility for re-
election pursuant to the Corporation's By-laws, or (iv) his voluntary
termination of such directorship, such termination shall be considered a
"Qualifying Termination" and each Option granted to such Director, to the extent
exercisable (and not exercised) on the date of such Qualifying Termination,
shall remain so exercisable by him until the end of the exercise period under
such Option. If a Director's service as a director of the Corporation or of any
Parent or Subsidiary is terminated for Good Cause, such termination shall be
considered a "Non-Qualifying Termination." In the event of a Non-Qualifying
Termination, all outstanding
-8-
<PAGE>
unexercised stock options granted pursuant to this Section V(B) shall be
forfeited or canceled, as the case may be.
SECTION VI.
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the Common
----------------------
Stock of the Corporation by reason of any reorganization, recapitalization,
stock split, stock dividend or otherwise, there shall be substituted for or
added to each share of Common Stock theretofore appropriated or thereafter
subject, or which may become subject, to any Option, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged, or to
which each such share be entitled, as the case may be, and the per share price
thereof also shall be appropriately adjusted. Notwithstanding the foregoing, (i)
each such adjustment with respect to an Incentive Stock Option shall comply with
the rules of Section 424(a) of the Code and (ii) in no event shall any
adjustment be made which would render any Incentive Stock Option granted
hereunder to be other than an incentive stock option for purposes of Section 422
of the Code.
B. Merger, Consolidation or Change in Control of Corporation. Upon (i) the
---------------------------------------------------------
merger or consolidation of the Corporation with or into another corporation
(pursuant to which the stockholders of the Corporation immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in shares of voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (a) the
continuance of the Options granted hereunder or (b) the substitution of new
options for Options granted hereunder, or for the assumption of such Options by
the surviving corporation, (ii) the dissolution, liquidation or sale of
substantially all the assets of the Corporation or (iii) the Change in Control
of the Corporation, the holder of any such Option theretofore granted and still
outstanding (and not otherwise expired) shall have the right immediately prior
to the effective date of such merger, consolidation, dissolution, liquidation,
sale of assets or Change in Control of the Corporation to exercise such
Option(s) in whole or in part without regard to any installment provision that
may have been made part of the terms and conditions of such Option(s). The
Corporation, to the extent practicable, shall give advance notice to affected
Optionees of any such merger, consolidation, dissolution, liquidation, sale of
assets or Change in Control of the Corporation. All such Options which are not
so exercised shall be forfeited as of the effective time of any merger,
consolidation, dissolution, liquidation or sale of assets (but not in the case
of a Change in Control of the Corporation).
C. Definition of Change in Control of the Corporation. As used herein, a
--------------------------------------------------
"Change in Control of the Corporation" shall be deemed to have occurred if any
person (including any individual, firm, partnership or other entity) together
with all Affiliates and Associates (as defined under Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act) of such person, but
excluding (i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any subsidiary of the Corporation, (ii) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions
-9-
<PAGE>
as their ownership of the Corporation, (iii) the Corporation or any subsidiary
of the Corporation or (iv) only as provided in the immediately following
sentence, a Participant together with all Affiliates and Associates of a
Participant, is or becomes the Beneficial Owner (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Corporation representing 40% of more of the combined voting power of the
Corporation's then outstanding securities, such person being hereinafter
referred to as an Acquiring Person. The provisions of clause (iv) of the
immediately preceding sentence shall apply only with respect to the Option(s)
held by the Participant who, together with his Affiliates or Associates, if any,
is or becomes the direct or indirect Beneficial Owner of the percentage of
securities set forth in such clause.
SECTION VII.
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any procedures
-------------------------
determined by it to be appropriate in discharging its responsibilities under the
Plan. Subject to the provisions of Section X hereof, all actions and decisions
of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Incentive Stock Option
----------------------
or any other "derivative security" (as defined by Rule 16a-l(c) promulgated
under the Exchange Act) made under the Plan or any rights or interests therein
shall be assignable or transferable by a Participant except by will or the laws
of descent and distribution or pursuant to a domestic relations order. During
the lifetime of a Participant, Options granted hereunder shall be exercisable
only by the Participant.
C. Investment Representation. Upon the exercise of an Option, the
-------------------------
Committee may require, as a condition of receiving such securities, that the
Participant furnish to the Corporation such written representations and
information as the Committee deems appropriate to permit the Corporation, in
light of the existence or nonexistence of an effective registration statement
under the Securities Act to deliver such securities in compliance with the
provisions of the Securities Act.
D. Withholding Taxes. The Corporation shall have the right to deduct from
-----------------
all cash payments hereunder any federal, state, local or foreign taxes required
by law to be withheld with respect to such payments. In the case of the
issuance or distribution of Common Stock or other securities hereunder, the
Corporation, as a condition of such issuance or distribution, may require the
payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. The Participant may satisfy the withholding obligations by
paying to the Corporation a cash amount equal to the amount required to be
withheld or by tendering to the Corporation a number of shares of Common Stock
having a value equivalent to such cash amount, or by use of any available
procedure as described under Section IV(C) hereof.
E. Costs and Expenses. The costs and expenses of administering the Plan
------------------
shall be borne by the Corporation and shall not be charged against any award nor
to any employee receiving a Plan Award.
-10-
<PAGE>
F. Funding of Plan. The Plan shall be unfunded. The Corporation shall not
---------------
be required to segregate any of its assets to assure the payment of any Plan
Award under the Plan. Neither the Participants nor any other persons shall have
any interest in any fund or in any specific asset or assets of the Corporation
or any other entity by reason of any Plan Award, except to the extent expressly
provided hereunder. The interests of each Participant and former Participant
hereunder are unsecured and shall be subject to the general creditors of the
Corporation.
G. Other Incentive Plans. The adoption of the Plan does not preclude the
---------------------
adoption by appropriate means of any other incentive plan for employees.
H. Plurals and Gender. Where appearing in the Plan, masculine gender shall
------------------
include the feminine and neuter genders, and the singular shall include the
plural, and vice versa, unless the context clearly indicates a different
meaning.
I. Headings. The headings and sub-headings in this Plan are inserted for
--------
the convenience of reference only and are to be ignored in any construction
of the provisions hereof.
J. Severability. In case any provision of this Plan shall be held illegal
------------
or void, such illegality or invalidity shall not affect the remaining provisions
of this Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.
K. Payments Due Missing Persons. The Corporation shall make a reasonable
----------------------------
effort to locate all persons entitled to benefits under the Plan; however,
notwithstanding any provisions of this Plan to the contrary, if, after a period
of one (1) year from the date such benefits shall be due, any such persons
entitled to benefits have not been located, their rights under the Plan shall
stand suspended. Before this provision becomes operative, the Corporation shall
send a certified letter to all such persons at their last known addresses
advising them that their rights under the Plan shall be suspended. Subject to
all applicable state laws, any such suspended amounts shall be held by the
Corporation for a period of one (1) additional year and thereafter such amounts
shall be forfeited and thereafter remain the property of the Corporation.
L. Liability and Indemnification.
-----------------------------
(a) Neither the Corporation nor any Parent or Subsidiary shall be
responsible in any way for any action or omission of the Committee, or any other
fiduciaries in the performance of their duties and obligations as set forth in
this Plan. Furthermore, neither the Corporation nor any Parent or Subsidiary
shall be responsible for any act or omission of any of their agents, or with
respect to reliance upon advice of their counsel provided that the Corporation
and/or the appropriate Parent or Subsidiary relied in good faith upon the action
of such agent or the advice of such counsel.
(b) Except fo r their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or
-11-
<PAGE>
losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
M. Incapacity. If the Committee shall receive evidence satisfactory to it
----------
that a person entitled to receive payment of any Plan Award is, at the time when
such benefit becomes payable, a minor, or is physically or mentally incompetent
to receive such Plan Award and to give a valid release thereof, and that another
person or an institution is then maintaining or has custody of such person and
that no guardian, committee or other representative of the estate of such person
shall have been duly appointed, the Committee may make payment of such Plan
Award otherwise payable to such person to such other person or institution,
including a custodian under a Uniform Gifts to Minors Act, or corresponding
legislation (who shall be an adult, a guardian of the minor or a trust company),
and the release by such other person or institution shall be a valid and
complete discharge for the payment of such Plan Award.
N. Cooperation of Parties. All parties to this Plan and any person
----------------------
claiming any interest hereunder agree to perform any and all acts and execute
any and all documents and papers which are necessary or desirable for carrying
out this Plan or any of its provisions.
O. Governing Law. All questions pertaining to the validity, construction
-------------
and administration of the Plan shall be determined in accordance with the
laws of the State of Colorado.
P. Non-guarantee of Employment. Nothing contained in this Plan shall be
---------------------------
construed as a contract of employment between the Corporation (or any Parent or
Subsidiary), and any employee or Participant, as a right of any employee or
Participant to be continued in the employment of the Corporation (or any Parent
or Subsidiary), or as a limitation on the right of the Corporation or any Parent
or Subsidiary to discharge any of its employees, with or without cause.
Q. Notices. Each notice relating to this Plan shall be in writing and
-------
delivered in person or by certified mail to the proper address. All notices to
the Corporation or the Committee shall be addressed to it at Convergent
Communications, Inc., 67 Inverness Drive East, Suite 110, Englewood, Colorado
80112, Attn: Legal Department. All notices to Participants, former
Participants, beneficiaries or other persons acting for or on behalf of such
persons shall be addressed to such person at the last address for such person
maintained in the Committee's records.
R. Written Agreements. Each Plan Award may be evidenced by (i) a signed
------------------
written agreement between the Corporation and the Participant containing the
terms and conditions of the award, or (ii) a certificate signed by the
Corporation containing the terms and conditions of the award
-12-
<PAGE>
SECTION VIII.
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the Plan and the Options granted hereunder at any time and
for any purpose (including, without limitation, an amendment necessary for an
Option to maintain its qualification as an "incentive stock option" within the
meaning of Section 422 of the Code, if applicable, or to comply with Rule 16b-3
(or any successor rule) promulgated under the Exchange Act); provided, however,
that no amendment shall be made which shall increase the total number of shares
of the Common Stock of the Corporation which may be issued and sold pursuant to
Options, reduce the minimum exercise price in the case of an Incentive Stock
Option or modify the provisions of the Plan relating to eligibility, unless such
amendment is made by or with the approval of the stockholders (such approval
being granted within 12 months of the effective date of such amendment), but
only if such approval is required by any applicable provisions of the Code.
Except as otherwise provided herein, no amendment, suspension or termination of
the Plan shall alter or impair any Plan Awards previously granted under the
Plan, without the consent of the holder thereof.
SECTION IX.
TERM OF PLAN
The Plan shall remain in effect until December 31, 2008, unless sooner
terminated by the Board of Directors of the Corporation. No Plan Awards may be
granted under the Plan subsequent to the termination of the Plan.
SECTION X.
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary is denied
------
any vested benefit to which he is, or reasonably believes he is, entitled under
this Plan, either in total or in an amount less than the full vested benefit to
which he would normally be entitled, the Committee shall advise such person in
writing the specific reasons for the denial. The Committee shall also furnish
such person at the time with a written notice containing (i) a specific
reference to pertinent Plan provisions, (ii) a description of any additional
material or information necessary for such person to perfect his claim, if
possible, and an explanation of why such material or information is needed and
(iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within 60 days of receipt of the
--------------------------
information stated in subsection (a) above, such person shall, if he desires
further review, file a written request for reconsideration with the Committee.
C. Review of Document. So long as such person's request for review is
------------------
pending (including the 60 day period in subsection (b) above), such person or
his duly authorized representative may review pertinent Plan documents and may
submit issues and comments in writing to the Committee.
-13-
<PAGE>
D. Committee's Final and Binding Decision. A final and binding decision
--------------------------------------
shall be made by the Committee within 60 days of the filing by such person of
this request for reconsideration; provided, however, that if the Committee, in
-------- -------
its discretion, feels that a hearing with such person or his representative is
necessary or desirable, this period shall be extended for an additional 60 days.
E. Transmittal of Decision. The Committee's decision shall be conveyed to
-----------------------
such person in writing and shall (i) include specific reasons for the decision,
(ii) be written in a manner calculated to be understood by such person and (iii)
set forth the specific references to the pertinent Plan provisions on which the
decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this Plan to
--------------------
the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
-14-
<PAGE>
EXHIBIT 99.6
Convergent Communications, Inc.
First Amendment to the 1998 Stock Option 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. 1998 Stock Option Plan"
(hereinafter referred to as the "Plan"). The Plan permits the grant of 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 of Common Stock which may be granted for all purposes under the
Plan.
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, Section II
of the Plan shall be amended to increase the aggregate number of shares of
Common Stock which may be granted for all purposes under the Plan to a total of
two million five hundred thousand (2,500,000) 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 May 6, 1998.
<PAGE>
EXHIBIT 99.7
Convergent Communications, Inc.
Second Amendment to the 1998 Stock Option Plan
INTRODUCTION
Convergent Communications, Inc., a Colorado corporation (hereinafter
referred to as the "Corporation"), has established an incentive compensation
plan, as amended, known as the "Convergent Communications, Inc. 1998 Stock
Option Plan" (hereinafter referred to as the "Plan"). The Plan permits the grant
of Non-Qualified Stock Options and Incentive Stock Options.
Pursuant to this Second Amendment to the Plan (hereinafter referred to as
the "Amendment"), the Corporation desires to amend the Plan to increase the
number of shares of Common Stock which may be granted for all purposes under the
Plan.
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, Section II
of the Plan shall be amended to increase the aggregate number of shares of
Common Stock which may be granted for all purposes under the Plan to a total of
three million five hundred thousand (3,500,000) 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 October 30, 1998.
<PAGE>
EXHIBIT 99.8
Convergent Communications, Inc.
Third Amendment to the 1998 Stock Option 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. 1998 Stock Option Plan" (as
amended, hereinafter referred to as the "Plan"). The Plan permits the grant of
Non-Qualified Stock Options and Incentive Stock Options.
Pursuant to this Third Amendment to the Plan (hereinafter referred to as
the "Amendment"), the Corporation desires to amend the Plan to allow for the
issuance of certificates rather than a Stock Option Agreement.
STOCK OPTION CERTIFICATE
1. Section VII.R. of the Plan (entitled "Written Agreements") shall be
deleted in its entirety and the following inserted in its place:
"R. Written Certificate. Each Plan Award shall be evidenced by a
-------------------
certificate signed by the Corporation summarizing the terms of the award."
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 August 1, 1999.
CONVERGENT COMMUNICATIONS, INC.
By:__________________________________________
John R. Evans, Chief Executive Officer
<PAGE>
EXHIBIT 99.9
Convergent Communications, Inc.
1999 Employee Stock Option Plan
INTRODUCTION
Convergent Communications, Inc., a Colorado corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive compensation
plan to be known as the "Convergent Communications, Inc. 1999 Employee Stock
Option Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Non-Qualified Stock Options and
Incentive Stock Options.
The purpose of the Plan is to promote the success and enhance the value of
the Corporation by linking the personal interests of Participants (as defined
below) to those of the Corporation's stockholders by providing Participants with
an incentive for outstanding performance. The Plan is further intended to assist
the Corporation in its ability to motivate, and retain the services of,
Participants upon whose judgment, interest and special effort the successful
conduct of its operations is largely dependent.
DEFINITIONS
For purposes of this Plan, the following terms shall be defined as follows
unless the context clearly indicates otherwise:
A. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
B. "Committee" shall mean the Stock Option Committee of the Board of
---------
Directors of the Corporation, if any. In the absence of a duly appointed Stock
Option Committee, the Committee shall refer to the Board of Directors of the
Corporation.
C. "Common Stock" shall mean the common stock, no par value, of the
------------
Corporation.
D. "Corporation" shall mean Convergent Communications, Inc., a Colorado
-----------
corporation.
E. "Disability" shall have the same meaning as the term "permanent and
----------
total disability" under Section 22(e)(3) of the Code.
F. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations thereunder.
G. "Executive" shall mean an employee of the Corporation or of any Parent
---------
or Subsidiary whose compensation is subject to the deduction limitations set
forth under Section 162(m) of the Code.
H. "Fair Market Value" of the Corporation's Common Stock on a Trading Day
-----------------
shall mean the last reported sale price for Common Stock or, in case no such
reported sale takes place
<PAGE>
on such Trading Day, the average of the closing bid and asked prices for the
Common Stock for such Trading Day, in either case on the principal securities
exchange on which the Common Stock is listed or admitted to trading, or if the
Common Stock is not listed or admitted to trading on any securities exchange,
but is traded in the over-the-counter market, the closing sale price of the
Common Stock or, if no sale is publicly reported, the average of the closing bid
and asked quotations for the Common Stock, as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or any
comparable system or, if the Common Stock is not listed on NASDAQ or a
comparable system, the closing sale price of the Common Stock or, if no sale is
publicly reported, the average of the closing bid and asked prices, as furnished
by two members of the National Association of Securities Dealers, Inc. who make
a market in the Common Stock selected from time to time by the Corporation for
that purpose. In addition, for purposes of this definition, a "Trading Day"
shall mean, if the Common Stock is listed on any securities exchange, a business
day during which such exchange was open for trading and at least one trade of
Common Stock was effected on such exchange on such business day, or, if the
Common Stock is not listed on any national securities exchange but is traded in
the over-the-counter market, a business day during which the over-the-counter
market was open for trading and at least one "eligible dealer" quoted both a bid
and asked price for the Common Stock. An "eligible dealer" for any day shall
include any broker-dealer who quoted both a bid and asked price for such day,
but shall not include any broker-dealer who quoted only a bid or only an asked
price for such day. In the event the Corporation's Common Stock is not publicly
traded, the Fair Market Value of such Common Stock shall be determined by the
Committee in good faith.
I. "Good Cause" shall mean (i) a Participant's willful or gross
----------
misconduct or willful or gross negligence in the performance of his duties for
the Corporation or for any Parent or Subsidiary after prior written notice of
such misconduct or negligence and the continuance thereof for a period of 30
days after receipt by such Participant of such notice, (ii) a Participant's
intentional or habitual neglect of his duties for the Corporation or for any
Parent or Subsidiary after prior written notice of such neglect, or (iii) a
Participant's theft or misappropriation of funds of the Corporation or of any
Parent or Subsidiary or commission of a felony.
J. "Incentive Stock Option" shall mean a stock option satisfying the
----------------------
requirements for tax-favored treatment under Section 422 of the Code.
K. "Non-Qualified Option" shall mean a stock option which does not
--------------------
satisfy the requirements for, or which is not intended to qualify for,
tax-favored treatment under Section 422 of the Code.
L. "Option" or "Plan Award" shall mean an Incentive Stock Option or a
------ ----------
Non-Qualified Stock Option granted pursuant to the provisions of Section V
hereof.
M. "Optionee" shall mean a Participant who is granted an Option under the
--------
terms of this Plan.
N. "Outside Directors" shall mean members of the Board of Directors of
-----------------
the Corporation who are classified as "outside directors" under Section 162(m)
of the Code.
2
<PAGE>
O. "Parent" shall mean a parent corporation of the Corporation within the
------
meaning of Section 424(e) of the Code.
P. "Participant" shall mean any employee of the Corporation or any Parent
-----------
or Subsidiary participating under the Plan.
Q. "Retirement" shall mean the termination of employment by a Participant
----------
in the Plan from the Corporation or from any Parent or Subsidiary, who at the
time of such termination is at least fifty-five (55) years of age and who has
completed at least ten (10) years of service (at least 1,000 hours in any fiscal
year) with the Corporation or any Parent or Subsidiary, or any combination
thereof.
R. "Securities Act" shall mean the Securities Act of 1933, as amended,
--------------
and the rules and regulations thereunder.
S. "Subsidiary" shall mean a subsidiary corporation of the Corporation
----------
within the meaning of Section 424(f) of the Code.
SECTION I.
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be composed of
at least two Non-Employee Directors, as defined in Rule 16b-3(b)(3) promulgated
under the Exchange Act, and who also qualify as Outside Directors, if available.
Subject to the provisions of the Plan, the Committee may establish from time to
time such regulations, provisions, proceedings and conditions of awards which,
in its opinion, may be advisable in the administration of the Plan. A majority
of the Committee shall constitute a quorum, and, subject to the provisions of
Section IV of the Plan, the acts of a majority of the members present at any
meeting at which a quorum is present, or acts approved in writing by a majority
of the Committee, shall be the acts of the Committee.
SECTION II.
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, the
aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be one million four hundred thousand (1,400,000)
shares. Shares of Common Stock underlying awards of Options shall be counted
against the limitation set forth in the immediately preceding sentence and may
be reused to the extent that an Option expires, is terminated, is unexercised,
or is forfeited. Incentive and Non-Qualified Stock Options awarded under the
Plan may be fulfilled in accordance with the terms of the Plan with either
authorized and unissued shares of the Common Stock, issued shares of such Common
Stock held in the Corporation's treasury or shares of Common Stock acquired on
the open market.
3
<PAGE>
SECTION III.
ELIGIBILITY
Officers and key employees (including officers or key employees who are
also directors) of the Corporation, or of any Parent or Subsidiary, who are
regularly employed on a salaried basis as common law employees shall be eligible
to participate in the Plan.
SECTION IV.
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder, to the extent such compliance is required, and shall otherwise have
plenary authority to interpret the Plan and to make all determinations specified
in or permitted by the Plan or deemed necessary or desirable for its
administration or for the conduct of the Committee's business. Subject to the
provisions of Section X hereof, all interpretations and determinations of the
Committee may be made on an individual or group basis and shall be final,
conclusive and binding on all interested parties. Subject to the express
provisions of the Plan, the Committee shall have authority, in its discretion,
to determine the persons to whom Plan Awards shall be granted, the times when
such Plan Awards shall be granted, the number of Plan Awards, the exercise price
of each Plan Award, the period(s) during which such Plan Award shall be
exercisable (whether in whole or in part), the restrictions to be applicable to
Plan Awards and the other terms and provisions thereof (which need not be
identical). In addition, the authority of the Committee shall include, without
limitation, the following:
A. Financing. The arrangement of temporary financing for an Optionee by
---------
registered broker-dealers, under the rules and regulations of the Federal
Reserve Board, for the purpose of assisting the Optionee in the exercise of an
Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer;
B. Procedures for Exercise of Option. The establishment of procedures
---------------------------------
for an Optionee (i) to exercise an Option by payment of cash or any other
property acceptable to the Committee, (ii) to have withheld from the total
number of shares of Common Stock to be acquired upon the exercise of an Option
that number of shares having a Fair Market Value, which, together with such cash
as shall be paid in respect of fractional shares, shall equal the option
exercise price of the total number of shares of Common Stock to be acquired,
(iii) to exercise all or a portion of an Option by delivering that number of
shares of Common Stock already owned by him having a Fair Market Value which
shall equal the Option exercise price for the portion exercised and, in cases
where an Option is not exercised in its entirety, to permit the Optionee to
deliver the shares of Common Stock thus acquired by him in payment of shares of
Common Stock to be received pursuant to the exercise of additional portions of
such Option, the effect of which shall be that an Optionee can in sequence
utilize such newly acquired shares of Common Stock in payment of the exercise
price of the entire Option, together with such cash
4
<PAGE>
as shall be paid in respect of fractional shares and (iv) to engage in any form
of "cashless" exercise.
C. Withholding. The establishment of a procedure whereby a number of
-----------
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, or for the tender of cash or shares of Common Stock owned by any
Participant to meet any obligation of withholding for taxes incurred by the
Optionee upon such exercise.
D. Types of Plan Awards. The Committee may grant awards in the form of
--------------------
Incentive Stock Options and Non-Qualified Stock Options.
SECTION V.
STOCK OPTIONS
A. The Committee shall have the authority, in its discretion, to grant
Incentive Stock Options or to grant Non-Qualified Stock Options or to grant both
types of Options. No Option shall be granted for a term of more than ten (10)
years. Notwithstanding anything contained herein to the contrary, an Incentive
Stock Option may be granted only to common law employees of the Corporation or
of any Parent or Subsidiary now existing or hereafter formed or acquired, and
not to any director or officer who is not also such a common law employee. In
order to satisfy the "performance-based" exception to the deduction limitation
under Section 162(m) of the Code, the maximum number of shares of Common Stock
subject to Options which may be granted to any single Executive during any one
calendar year is 250,000. The terms and conditions of the Options shall be
determined from time to time by the Committee; provided, however, that the
-------- -------
Options granted shall be subject to the terms and conditions of this Plan.
B. Exercise Price. The Committee shall establish the exercise price at
--------------
the time any Option is granted at such amount as the Committee shall determine;
provided, however, that the exercise price for each share of Common Stock
- -------- -------
purchasable under any Option that is intended to satisfy the performance-based
exception to the deduction limitation under Section 162(m) of the Code or any
Incentive Stock Option granted hereunder shall be such amount as the Committee
shall, in its best judgment, determine to be not less than one hundred percent
(100%) of the Fair Market Value per share of Common Stock at the date the Option
is granted; and provided, further, that in the case of an Incentive Stock Option
granted to a person who, at the time such Incentive Stock Option is granted,
owns shares of stock of the Corporation or of any Parent or Subsidiary which
possess more than ten percent (10%) of the total combined voting power of all
classes of shares of stock of the Corporation or of any Parent or Subsidiary,
the exercise price for each share of Common Stock shall be such amount as the
Committee, in its best judgment, shall determine to be not less than one hundred
ten percent (110%) of the Fair Market Value per share of Common Stock at the
date the Option is granted. The exercise price will be subject to adjustment in
accordance with the provisions of Section VI of the Plan.
C. Payment of Exercise Price. The price per share of Common Stock with
-------------------------
respect to each Option shall be payable at the time the Option is exercised.
Such price shall be payable in
5
<PAGE>
cash or pursuant to any of the methods set forth in Sections IV hereof. Shares
of Common Stock delivered to the Corporation in payment of the exercise price
shall be valued at the Fair Market Value of the Common Stock on the date
preceding the date of the exercise of the Option.
D. Employment Requirement. Notwithstanding anything else contained
----------------------
herein, each Option by its terms shall require the Optionee to remain in the
continuous full-time employ of the Corporation, or of any Parent or Subsidiary,
for at least six (6) months from the date of grant of the Option before the
right to exercise any part of the Option (by him or any other person) will
accrue.
E. Vesting of Options. Unless otherwise determined by the Committee in
------------------
its sole discretion, each Option granted hereunder shall vest, on a cumulative
basis, as to twenty percent (20%) of the shares of Common Stock granted
hereunder on each of the first, second, third, fourth and fifth anniversaries of
the date such Option is granted.
F. Exercisability of Options. To the extent an Option is vested in
-------------------------
accordance with Section V(E) hereof, it will be exercisable only on or after the
earliest to occur of the following dates (the "Exercisability Date"):
(1) the date that is six (6) months after the effective date of a
registration statement filed by the Corporation under the Securities Act with
respect to an underwritten public offering of Common Stock in which the total
proceeds to the Corporation are at least twenty-five million dollars
($25,000,000) (or such later date as may be required by the managing underwriter
or underwriters as a condition to entering into an underwriting agreement with
the Corporation for such offering); or
(2) the seventh anniversary of the date of the grant of the Option.
G. Expiration of Options. No Option by its terms shall be exercisable
---------------------
after the expiration of ten (10) years from the date of grant of the Option.
H. Termination of Optionee's Employment.
------------------------------------
(1) If the employment of an Optionee terminates for any reason other
than termination by the Corporation or by any Parent or Subsidiary for Good
Cause, any portion of his or her Option that has not yet vested in accordance
with Section V(E) hereof shall automatically expire. If the Optionee's
employment is terminated by the Corporation or by any Parent or Subsidiary for
Good Cause, all unexercised Options whether vested or unvested shall
automatically expire.
(2) If the employment of an Optionee terminates before the
Exercisability Date, the Corporation may elect to terminate the non-expiring
portion of the Option by (i) notifying the Optionee (or his or her estate or
beneficiary, as the case may be) within 90 days following termination of
employment, and (ii) making a payment to the Optionee (or his or her estate or
beneficiary, as the case may be) equal to (x) the number of vested shares that
have not expired covered by the Option, times (y) the difference between the
then per share Fair Market
6
<PAGE>
Value of the Common Stock and the exercise price per share under the Option. If
the Corporation does not elect to terminate the non-expiring portion of the
Option pursuant to the preceding sentence, such Option will remain in effect
until the Exercisability Date occurs and for a period of 90 days thereafter.
(3) If the employment of an Optionee terminates after the
Exercisability Date, the non-expiring portion of the Option will remain in
effect for 90 days following termination of employment; provided, however, if
-------- -------
termination occurs as a result of death or Disability of an Optionee, the
non-expiring portion of the Option will remain in effect for one year following
such termination of employment.
I. Maximum Amount of Incentive Stock Options. Each Plan Award under
-----------------------------------------
which Incentive Stock Options are granted shall provide that to the extent the
aggregate of the (a) Fair Market Value of the shares of Common Stock (determined
as of the time of the grant of the Option) subject to such Incentive Stock
Option and (b) the fair market values (determined as of the date(s) of grant of
the options) of all other shares of Common Stock subject to incentive stock
options granted to an Optionee by the Corporation or any Parent or Subsidiary,
which are exercisable for the first time by any person during any calendar year,
exceed(s) one hundred thousand dollars ($100,000), such excess shares of Common
Stock shall not be deemed to be purchased pursuant to Incentive Stock Options.
The terms of the immediately preceding sentence shall be applied by taking
options into account in the order in which they are granted.
SECTION VI.
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the Common
----------------------
Stock of the Corporation by reason of any reorganization, recapitalization,
stock split, stock dividend or otherwise, there shall be substituted for or
added to each share of Common Stock theretofore appropriated or thereafter
subject, or which may become subject, to any Option, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged, or to
which each such share be entitled, as the case may be, and the per share price
thereof also shall be appropriately adjusted. Notwithstanding the foregoing, (i)
each such adjustment with respect to an Incentive Stock Option shall comply with
the rules of Section 424(a) of the Code and (ii) in no event shall any
adjustment be made which would render any Incentive Stock Option granted
hereunder to be other than an incentive stock option for purposes of Section 422
of the Code.
B. Merger, Consolidation or Change in Control of Corporation. Upon (i)
---------------------------------------------------------
the merger or consolidation of the Corporation with or into another corporation
(pursuant to which the stockholders of the Corporation immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in shares of voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of
7
<PAGE>
merger or consolidation does not provide for (a) the continuance of the Options
granted hereunder or (b) the substitution of new options for Options granted
hereunder, or for the assumption of such Options by the surviving corporation,
(ii) the dissolution, liquidation or sale of substantially all the assets of the
Corporation or (iii) the Change in Control of the Corporation, the holder of any
such Option theretofore granted and still outstanding (and not otherwise
expired) shall have the right immediately prior to the effective date of such
merger, consolidation, dissolution, liquidation, sale of assets or Change in
Control of the Corporation to exercise such Option(s) in whole or in part
without regard to any vesting provision that may have been made part of the
terms and conditions of such Option(s). The Corporation, to the extent
practicable, shall give advance notice to affected Optionees of any such merger,
consolidation, dissolution, liquidation, sale of assets or Change in Control of
the Corporation. All such Options which are not so exercised shall be forfeited
as of the effective time of any merger, consolidation, dissolution, liquidation
or sale of assets (but not in the case of a Change in Control of the
Corporation).
C. Definition of Change in Control of the Corporation. As used herein, a
--------------------------------------------------
"Change in Control of the Corporation" shall be deemed to have occurred if any
person (including any individual, firm, partnership or other entity) together
with all Affiliates and Associates (as defined under Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act) of such person, but
excluding (i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any subsidiary of the Corporation, (ii) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of the
Corporation, (iii) the Corporation or any subsidiary of the Corporation or (iv)
only as provided in the immediately following sentence, a Participant together
with all Affiliates and Associates of a Participant, is or becomes the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 40% of
more of the combined voting power of the Corporation's then outstanding
securities, such person being hereinafter referred to as an Acquiring Person.
The provisions of clause (iv) of the immediately preceding sentence shall apply
only with respect to the Option(s) held by the Participant who, together with
his Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth in such clause.
SECTION VII.
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any procedures
-------------------------
determined by it to be appropriate in discharging its responsibilities under the
Plan. Subject to the provisions of Section X hereof, all actions and decisions
of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Incentive Stock
----------------------
Option or any other "derivative security" (as defined by Rule 16a-l(c)
promulgated under the Exchange Act) made under the Plan or any rights or
interests therein shall be assignable or transferable by a Participant except by
will or the laws of descent and distribution or pursuant to a domestic
8
<PAGE>
relations order. During the lifetime of a Participant, Options granted hereunder
shall be exercisable only by the Participant.
C. Investment Representation. Upon the exercise of an Option, the
-------------------------
Committee may require, as a condition of receiving such securities, that the
Participant furnish to the Corporation such written representations and
information as the Committee deems appropriate to permit the Corporation, in
light of the existence or nonexistence of an effective registration statement
under the Securities Act to deliver such securities in compliance with the
provisions of the Securities Act.
D. Withholding Taxes. The Corporation shall have the right to deduct
-----------------
from all cash payments hereunder any federal, state, local or foreign taxes
required by law to be withheld with respect to such payments. In the case of the
issuance or distribution of Common Stock or other securities hereunder, the
Corporation, as a condition of such issuance or distribution, may require the
payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. The Participant may satisfy the withholding obligations by
paying to the Corporation a cash amount equal to the amount required to be
withheld or by tendering to the Corporation a number of shares of Common Stock
having a value equivalent to such cash amount, or by use of any available
procedure as described under Section IV(C) hereof.
E. Costs and Expenses. The costs and expenses of administering the Plan
------------------
shall be borne by the Corporation and shall not be charged against any award nor
to any employee receiving a Plan Award.
F. Funding of Plan. The Plan shall be unfunded. The Corporation shall
---------------
not be required to segregate any of its assets to assure the payment of any Plan
Award under the Plan. Neither the Participants nor any other persons shall have
any interest in any fund or in any specific asset or assets of the Corporation
or any other entity by reason of any Plan Award, except to the extent expressly
provided hereunder. The interests of each Participant and former Participant
hereunder are unsecured and shall be subject to the general creditors of the
Corporation.
G. Other Incentive Plans. The adoption of the Plan does not preclude the
---------------------
adoption by appropriate means of any other incentive plan for employees.
H. Plurals and Gender. Where appearing in the Plan, masculine gender
------------------
shall include the feminine and neuter genders, and the singular shall include
the plural, and vice versa, unless the context clearly indicates a different
meaning.
I. Headings. The headings and sub-headings in this Plan are inserted for
--------
the convenience of reference only and are to be ignored in any construction of
the provisions hereof.
J. Severability. In case any provision of this Plan shall be held
------------
illegal or void, such illegality or invalidity shall not affect the remaining
provisions of this Plan, but shall be fully
9
<PAGE>
severable, and the Plan shall be construed and enforced as if said illegal or
invalid provisions had never been inserted herein.
K. Payments Due Missing Persons. The Corporation shall make a reasonable
----------------------------
effort to locate all persons entitled to benefits under the Plan; however,
notwithstanding any provisions of this Plan to the contrary, if, after a period
of one (1) year from the date such benefits shall be due, any such persons
entitled to benefits have not been located, their rights under the Plan shall
stand suspended. Before this provision becomes operative, the Corporation shall
send a certified letter to all such persons at their last known addresses
advising them that their rights under the Plan shall be suspended. Subject to
all applicable state laws, any such suspended amounts shall be held by the
Corporation for a period of one (1) additional year and thereafter such amounts
shall be forfeited and thereafter remain the property of the Corporation.
L. Liability and Indemnification.
-----------------------------
(a) Neither the Corporation nor any Parent or Subsidiary shall be
responsible in any way for any action or omission of the Committee, or any other
fiduciaries in the performance of their duties and obligations as set forth in
this Plan. Furthermore, neither the Corporation nor any Parent or Subsidiary
shall be responsible for any act or omission of any of their agents, or with
respect to reliance upon advice of their counsel provided that the Corporation
and/or the appropriate Parent or Subsidiary relied in good faith upon the action
of such agent or the advice of such counsel.
(b) Except for their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
M. Incapacity. If the Committee shall receive evidence satisfactory to
----------
it that a person entitled to receive payment of any Plan Award is, at the time
when such benefit becomes payable, a minor, or is physically or mentally
incompetent to receive such Plan Award and to give a valid release thereof, and
that another person or an institution is then maintaining or has custody of such
person and that no guardian, committee or other representative of the estate of
such person shall have been duly appointed, the Committee may make payment of
such Plan Award otherwise payable to such person to such other person or
institution, including a custodian under a Uniform Gifts to Minors Act, or
corresponding legislation (who shall be an adult, a guardian of the minor or a
trust company), and the release by such other person or institution shall be a
valid and complete discharge for the payment of such Plan Award.
N. Cooperation of Parties. All parties to this Plan and any person
----------------------
claiming any interest hereunder agree to perform any and all acts and execute
any and all documents and papers which are necessary or desirable for carrying
out this Plan or any of its provisions.
10
<PAGE>
O. Governing Law. All questions pertaining to the validity, construction
-------------
and administration of the Plan shall be determined in accordance with the laws
of the State of Colorado.
P. Non-guarantee of Employment. Nothing contained in this Plan shall be
---------------------------
construed as a contract of employment between the Corporation (or any Parent or
Subsidiary), and any employee or Participant, as a right of any employee or
Participant to be continued in the employment of the Corporation (or any Parent
or Subsidiary), or as a limitation on the right of the Corporation or any Parent
or Subsidiary to discharge any of its employees, with or without cause.
Q. Notices. Each notice relating to this Plan shall be in writing and
-------
delivered in person or by certified mail to the proper address. All notices to
the Corporation or the Committee shall be addressed to it at Convergent
Communications, Inc., 400 Inverness Drive South, Suite 400, Englewood, Colorado
80112, Attn: Legal Department. All notices to Participants, former
Participants, beneficiaries or other persons acting for or on behalf of such
persons shall be addressed to such person at the last address for such person
maintained in the Committee's records.
R. Written Certificate. Each Plan Award shall be evidenced by a
-------------------
certificate signed by the Corporation summarizing the terms of the award.
SECTION VIII.
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the Plan and the Options granted hereunder at any time and
for any purpose (including, without limitation, an amendment necessary for an
Option to maintain its qualification as an "incentive stock option" within the
meaning of Section 422 of the Code, if applicable, or to comply with Rule 16b-3
(or any successor rule) promulgated under the Exchange Act); provided, however,
that no amendment shall be made which shall increase the total number of shares
of the Common Stock of the Corporation which may be issued and sold pursuant to
Options, reduce the minimum exercise price in the case of an Incentive Stock
Option or modify the provisions of the Plan relating to eligibility, unless such
amendment is made by or with the approval of the stockholders (such approval
being granted within 12 months of the effective date of such amendment), but
only if such approval is required by any applicable provisions of the Code.
Except as otherwise provided herein, no amendment, suspension or termination of
the Plan shall alter or impair any Plan Awards previously granted under the
Plan, without the consent of the holder thereof.
SECTION IX.
TERM OF PLAN
11
<PAGE>
The Plan shall remain in effect until December 31, 2009, unless sooner
terminated by the Board of Directors of the Corporation. No Plan Awards may be
granted under the Plan subsequent to the termination of the Plan.
SECTION X.
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary is
------
denied any vested benefit to which he is, or reasonably believes he is, entitled
under this Plan, either in total or in an amount less than the full vested
benefit to which he would normally be entitled, the Committee shall advise such
person in writing the specific reasons for the denial. The Committee shall also
furnish such person at the time with a written notice containing (i) a specific
reference to pertinent Plan provisions, (ii) a description of any additional
material or information necessary for such person to perfect his claim, if
possible, and an explanation of why such material or information is needed and
(iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within 60 days of receipt of the
--------------------------
information stated in subsection (a) above, such person shall, if he desires
further review, file a written request for reconsideration with the Committee.
C. Review of Document. So long as such person's request for review is
------------------
pending (including the 60 day period in subsection (b) above), such person or
his duly authorized representative may review pertinent Plan documents and may
submit issues and comments in writing to the Committee.
D. Committee's Final and Binding Decision. A final and binding decision
--------------------------------------
shall be made by the Committee within 60 days of the filing by such person of
this request for reconsideration; provided, however, that if the Committee, in
-------- -------
its discretion, feels that a hearing with such person or his representative is
necessary or desirable, this period shall be extended for an additional 60 days.
E. Transmittal of Decision. The Committee's decision shall be conveyed
-----------------------
to such person in writing and shall (i) include specific reasons for the
decision, (ii) be written in a manner calculated to be understood by such person
and (iii) set forth the specific references to the pertinent Plan provisions on
which the decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this Plan to
--------------------
the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
12
<PAGE>
_______________________________________
Keith V. Burge, President and COO
13
<PAGE>
EXHIBIT 99.10
Convergent Communications, Inc.
1999 Director Stock Option Plan
INTRODUCTION
Convergent Communications, Inc., a Colorado corporation (hereinafter
referred to as the "Corporation"), hereby establishes an incentive compensation
plan to be known as the "Convergent Communications, Inc. 1999 Director Stock
Option Plan" (hereinafter referred to as the "Plan"), as set forth in this
document. The Plan permits the grant of Non-Qualified Stock Options to certain
members of the Corporation's Board of Directors only.
DEFINITIONS
For purposes of this Plan, the following terms shall be defined as follows
unless the context clearly indicates otherwise:
A. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
----
the rules and regulations thereunder.
B. "Committee" shall mean three (3) of the members of the Board of
---------
Directors of the Corporation who are not Outside Directors (as defined below)
---
and who are not eligible to receive grants pursuant to Section III of this Plan.
---
The Committee shall be appointed by the Board of Directors at the meeting of the
Board of Directors at which the Plan is approved.
C. "Common Stock" shall mean the common stock, no par value, of the
------------
Corporation.
D. "Corporation" shall mean Convergent Communications, Inc., a Colorado
-----------
corporation.
E. "Disability" shall have the same meaning as the term "permanent and
----------
total disability" under Section 22(e)(3) of the Code.
F. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations thereunder.
G. "Fair Market Value" of the Corporation's Common Stock on a Trading Day
-----------------
shall mean the last reported sale price for Common Stock or, in case no such
reported sale takes place on such Trading Day, the average of the closing bid
and asked prices for the Common Stock for such Trading Day, in either case on
the principal securities exchange on which the Common Stock is listed or
admitted to trading, or if the Common Stock is not listed or admitted to trading
on any securities exchange, but is traded in the over-the-counter market, the
closing sale price of the Common Stock or, if no sale is publicly reported, the
average of the closing bid and asked quotations for the Common Stock, as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or any comparable system or, if the Common Stock is not listed
on NASDAQ or a comparable system, the closing sale price of the Common Stock or,
if no sale is publicly reported, the average of the closing bid and asked
prices, as furnished by
<PAGE>
two members of the National Association of Securities Dealers, Inc. who make a
market in the Common Stock selected from time to time by the Corporation for
that purpose. In addition, for purposes of this definition, a "Trading Day"
shall mean, if the Common Stock is listed on any securities exchange, a business
day during which such exchange was open for trading and at least one trade of
Common Stock was effected on such exchange on such business day, or, if the
Common Stock is not listed on any national securities exchange but is traded in
the over-the-counter market, a business day during which the over-the-counter
market was open for trading and at least one "eligible dealer" quoted both a bid
and asked price for the Common Stock. An "eligible dealer" for any day shall
include any broker-dealer who quoted both a bid and asked price for such day,
but shall not include any broker-dealer who quoted only a bid or only an asked
price for such day. In the event the Corporation's Common Stock is not publicly
traded, the Fair Market Value of such Common Stock shall be determined by the
Committee in good faith.
H. "Good Cause" shall mean (i) a Participant's willful or gross misconduct
----------
or willful or gross negligence in the performance of his duties for the
Corporation or for any Parent or Subsidiary after prior written notice of such
misconduct or negligence and the continuance thereof for a period of 30 days
after receipt by such Participant of such notice, (ii) a Participant's
intentional or habitual neglect of his duties for the Corporation or for any
Parent or Subsidiary after prior written notice of such neglect, or (iii) a
Participant's theft or misappropriation of funds of the Corporation or of any
Parent or Subsidiary or commission of a felony.
I. "Non-Qualified Option" shall mean a stock option which does not satisfy
--------------------
the requirements for, or which is not intended to qualify for, tax-favored
treatment under Section 422 of the Code.
J. "Option" or "Plan Award" shall mean a Non-Qualified Stock Option
------ ----------
granted pursuant to the provisions of Section V hereof.
K. "Optionee" shall mean a Participant who is granted an Option under the
--------
terms of this Plan.
L. "Outside Directors" shall mean members of the Board of Directors of the
-----------------
Corporation who are classified as "outside directors" under Section 162(m) of
the Code.
M. "Parent" shall mean a parent corporation of the Corporation within the
------
meaning of Section 424(e) of the Code.
N. "Participant" shall mean a director of the Corporation or of any Parent
-----------
or Subsidiary on the date of a grant of Options under Section V(B) hereof who is
not a common law employee of the Corporation, any Parent or any Subsidiary.
O. "Plan Quarter" shall mean the three calendar month periods beginning
------------
January 1/st/, April 1/st/, July 1/st/ and October 1/st/.
2
<PAGE>
P. "Retirement" shall mean the termination of employment by a Participant
----------
in the Plan from the Corporation or from any Parent or Subsidiary, who at the
time of such termination is at least fifty-five (55) years of age and who has
completed at least ten (10) years of service (at least 1,000 hours in any fiscal
year) with the Corporation or any Parent or Subsidiary, or any combination
thereof.
Q. "Securities Act" shall mean the Securities Act of 1933, as amended, and
--------------
the rules and regulations thereunder.
R. "Subsidiary" shall mean a subsidiary corporation of the Corporation
----------
within the meaning of Section 424(f) of the Code.
SECTION I.
ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the provisions
of the Plan, the Committee may establish from time to time such regulations,
provisions, proceedings and conditions of awards which, in its opinion, may be
advisable in the administration of the Plan. A majority of the Committee shall
constitute a quorum, and, subject to the provisions of Section IV of the Plan,
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by a majority of the Committee, shall be
the acts of the Committee.
SECTION II.
SHARES AVAILABLE
Subject to the adjustments provided in Section VI of the Plan, the
aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be one hundred thousand (100,000) shares. Shares
of Common Stock underlying awards of Options shall be counted against the
limitation set forth in the immediately preceding sentence and may be reused to
the extent that an Option expires, is terminated, is unexercised, or is
forfeited. Options awarded under the Plan may be fulfilled in accordance with
the terms of the Plan with either authorized and unissued shares of the Common
Stock, issued shares of such Common Stock held in the Corporation's treasury or
shares of Common Stock acquired on the open market.
SECTION III.
ELIGIBILITY
Directors of the Corporation, or of any Parent or Subsidiary, who are not
common law employees of the Corporation, any Parent or any Subsidiary shall be
eligible to participate in the Plan, but only to the extent provided under
Section V hereof.
3
<PAGE>
SECTION IV.
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder, to the extent such compliance is required, and shall otherwise have
plenary authority to interpret the Plan and to make all determinations specified
in or permitted by the Plan or deemed necessary or desirable for its
administration or for the conduct of the Committee's business. Subject to the
provisions of Section X hereof, all interpretations and determinations of the
Committee may be made on an individual or group basis and shall be final,
conclusive and binding on all interested parties. Subject to the express
provisions of the Plan, the Committee shall have authority, in its discretion,
to determine the persons to whom Plan Awards shall be granted, the times when
such Plan Awards shall be granted, the number of Plan Awards, the exercise price
of each Plan Award, the period(s) during which such Plan Award shall be
exercisable (whether in whole or in part), the restrictions to be applicable to
Plan Awards and the other terms and provisions thereof (which need not be
identical). In addition, the authority of the Committee shall include, without
limitation, the following:
A. Financing. The arrangement of temporary financing for an Optionee by
---------
registered broker-dealers, under the rules and regulations of the Federal
Reserve Board, for the purpose of assisting the Optionee in the exercise of an
Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer;
B. Procedures for Exercise of Option. The establishment of procedures for
---------------------------------
an Optionee (i) to exercise an Option by payment of cash or any other property
acceptable to the Committee, (ii) to have withheld from the total number of
shares of Common Stock to be acquired upon the exercise of an Option that number
of shares having a Fair Market Value, which, together with such cash as shall be
paid in respect of fractional shares, shall equal the option exercise price of
the total number of shares of Common Stock to be acquired, (iii) to exercise all
or a portion of an Option by delivering that number of shares of Common Stock
already owned by him having a Fair Market Value which shall equal the Option
exercise price for the portion exercised and, in cases where an Option is not
exercised in its entirety, to permit the Optionee to deliver the shares of
Common Stock thus acquired by him in payment of shares of Common Stock to be
received pursuant to the exercise of additional portions of such Option, the
effect of which shall be that an Optionee can in sequence utilize such newly
acquired shares of Common Stock in payment of the exercise price of the entire
Option, together with such cash as shall be paid in respect of fractional shares
and (iv) to engage in any form of "cashless" exercise.
C. Withholding. The establishment of a procedure whereby a number of
-----------
shares of Common Stock or other securities may be withheld from the total number
of shares of Common Stock or other securities to be issued upon exercise of an
Option, or for the tender of cash or
4
<PAGE>
shares of Common Stock owned by any Participant to meet any obligation of
withholding for taxes incurred by the Optionee upon such exercise.
D. Types of Plan Awards. The Committee may only grant awards in the form
--------------------
of Non-Qualified Stock Options.
5
<PAGE>
SECTION V.
STOCK OPTIONS
A. 1999 Plan Quarters.
------------------
1. Options. Subject to the terms and conditions of this Section V, as
-------
of the last day of the Plan Quarter beginning on October 1, 1998, each person
who was serving as a non-employee director of the Corporation (a "Director") on
the last day of such Plan Quarter (and who so served on an uninterrupted basis
for more than fifty percent (50%) of the business days contained in such Plan
Quarter) shall automatically be granted Options to purchase twenty thousand
(20,000) shares of Common Stock, subject to availability under the Plan.
2. Exercise Price. Subject to the provisions of Section VI hereunder,
--------------
the option price of the shares of Common Stock covered by each Director Option
shall be the Fair Market Value of such shares on December 31, 1998.
3. Vesting of Stock Option. Each Option granted under this Section V
-----------------------
by its terms shall expire ten (10) years from the date of its grant.
Furthermore: (i) an option granted pursuant to this section shall vest on the
last day of the Plan Quarter during which the date of such grant occurs, but
only if the Director has served in such capacity on an uninterrupted basis for
more than fifty percent (50%) of the business days contained in such Plan
Quarter; and (ii) the Option shall vest as to one-fourth (1/4) of the number of
shares of Common Stock covered thereby on the last day of the Plan Quarter
during which the date of grant occurs and as to one-fourth (1/4) of such number
of shares on the last day of each of the next succeeding three Plan Quarters,
respectively, but only if, with regard to the shares of Common Stock with
respect to which the Option vests at the end of any Plan Quarter, the Director
has served in such capacity on an uninterrupted basis for more than fifty
percent (50%) of the business days contained in such Plan Quarter.
4. Exercisability of Stock Option. To the extent an Option is vested
------------------------------
in accordance with Section V(A)(3) hereof, it will be immediately exercisable.
B. Director's Death. If a Director dies while holding an outstanding
----------------
Option, such Option, to the extent vested (and not exercised) on the date of his
death, shall remain in effect until the end of the exercise period under the
Option; provided, however, that any unvested Options at the time of a Director's
-------- -------
death shall terminate and shall not be exercisable.
C. Director's Termination. If a Director's service as a director of the
----------------------
Corporation is terminated by reason of (i) his Disability, (ii) the failure of
the Corporation to retain, or nominate for re-election, such Director (who is
otherwise eligible) other than for Good Cause, (iii) his ineligibility for re-
election pursuant to the Corporation's By-laws, or (iv) his voluntary
termination of such directorship, such termination shall be considered a
"Qualifying Termination" and each Option granted to such Director, to the extent
vested (and not exercised) on the date of such Qualifying Termination, shall
remain in effect for a period of one hundred eighty (180) days following the
Qualifying Termination date. If a Director's service as a director
6
<PAGE>
of the Corporation or of any Parent or Subsidiary is terminated for Good Cause,
such termination shall be considered a "Non-Qualifying Termination." In the
event of a Non-Qualifying Termination, all outstanding unexercised stock options
(whether vested or unvested) granted pursuant to this Section V shall be
forfeited or canceled, as the case may be.
SECTION VI.
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
A. Recapitalization, Etc. In the event there is any change in the Common
----------------------
Stock of the Corporation by reason of any reorganization, recapitalization,
stock split, stock dividend or otherwise, there shall be substituted for or
added to each share of Common Stock theretofore appropriated or thereafter
subject, or which may become subject, to any Option, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock shall be so changed or for which each such share shall be exchanged, or to
which each such share be entitled, as the case may be, and the per share price
thereof also shall be appropriately adjusted.
B. Merger, Consolidation or Change in Control of Corporation. Upon (i)
---------------------------------------------------------
the merger or consolidation of the Corporation with or into another corporation
(pursuant to which the stockholders of the Corporation immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in shares of voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (a) the
continuance of the Options granted hereunder or (b) the substitution of new
options for Options granted hereunder, or for the assumption of such Options by
the surviving corporation, (ii) the dissolution, liquidation or sale of
substantially all the assets of the Corporation or (iii) the Change in Control
of the Corporation, the holder of any such Option theretofore granted and still
outstanding (and not otherwise expired) shall have the right immediately prior
to the effective date of such merger, consolidation, dissolution, liquidation,
sale of assets or Change in Control of the Corporation to exercise such
Option(s) in whole or in part without regard to any vesting provision that may
have been made part of the terms and conditions of such Option(s). The
Corporation, to the extent practicable, shall give advance notice to affected
Optionees of any such merger, consolidation, dissolution, liquidation, sale of
assets or Change in Control of the Corporation. All such Options which are not
so exercised shall be forfeited as of the effective time of any merger,
consolidation, dissolution, liquidation or sale of assets (but not in the case
of a Change in Control of the Corporation).
C. Definition of Change in Control of the Corporation. As used herein, a
--------------------------------------------------
"Change in Control of the Corporation" shall be deemed to have occurred if any
person (including any individual, firm, partnership or other entity) together
with all Affiliates and Associates (as defined under Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act) of such person, but
excluding (i) a trustee or other fiduciary holding securities under an
7
<PAGE>
employee benefit plan of the Corporation or any subsidiary of the Corporation,
(ii) a corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of the
Corporation, (iii) the Corporation or any subsidiary of the Corporation or (iv)
only as provided in the immediately following sentence, a Participant together
with all Affiliates and Associates of a Participant, is or becomes the
Beneficial Owner (as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Corporation representing 40% of
more of the combined voting power of the Corporation's then outstanding
securities, such person being hereinafter referred to as an Acquiring Person.
The provisions of clause (iv) of the immediately preceding sentence shall apply
only with respect to the Option(s) held by the Participant who, together with
his Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth in such clause.
SECTION VII.
MISCELLANEOUS PROVISIONS
A. Administrative Procedures. The Committee may establish any procedures
-------------------------
determined by it to be appropriate in discharging its responsibilities under the
Plan. Subject to the provisions of Section X hereof, all actions and decisions
of the Committee shall be final.
B. Assignment or Transfer. No grant or award of any Option or any other
----------------------
"derivative security" (as defined by Rule 16a-l(c) promulgated under the
Exchange Act) made under the Plan or any rights or interests therein shall be
assignable or transferable by a Participant except by will or the laws of
descent and distribution or pursuant to a domestic relations order. During the
lifetime of a Participant, Options granted hereunder shall be exercisable only
by the Participant.
C. Investment Representation. Upon the exercise of an Option, the
-------------------------
Committee may require, as a condition of receiving such securities, that the
Participant furnish to the Corporation such written representations and
information as the Committee deems appropriate to permit the Corporation, in
light of the existence or nonexistence of an effective registration statement
under the Securities Act to deliver such securities in compliance with the
provisions of the Securities Act.
D. Withholding Taxes. The Corporation shall have the right to deduct from
-----------------
all cash payments hereunder any federal, state, local or foreign taxes required
by law to be withheld with respect to such payments. In the case of the
issuance or distribution of Common Stock or other securities hereunder, the
Corporation, as a condition of such issuance or distribution, may require the
payment (through withholding from the Participant's salary, reduction of the
number of shares of Common Stock or other securities to be issued, or otherwise)
of any such taxes. The Participant may satisfy the withholding obligations by
paying to the Corporation a cash amount equal to the amount required to be
withheld or by tendering to the Corporation a number of shares of Common Stock
having a value equivalent to such cash amount, or by use of any available
procedure as described under Section IV(C) hereof.
8
<PAGE>
E. Costs and Expenses. The costs and expenses of administering the Plan
------------------
shall be borne by the Corporation and shall not be charged against any award nor
to any employee receiving a Plan Award.
F. Funding of Plan. The Plan shall be unfunded. The Corporation shall
---------------
not be required to segregate any of its assets to assure the payment of any Plan
Award under the Plan. Neither the Participants nor any other persons shall have
any interest in any fund or in any specific asset or assets of the Corporation
or any other entity by reason of any Plan Award, except to the extent expressly
provided hereunder. The interests of each Participant and former Participant
hereunder are unsecured and shall be subject to the general creditors of the
Corporation.
G. Other Incentive Plans. The adoption of the Plan does not preclude the
---------------------
adoption by appropriate means of any other incentive plan for employees.
H. Plurals and Gender. Where appearing in the Plan, masculine gender
------------------
shall include the feminine and neuter genders, and the singular shall include
the plural, and vice versa, unless the context clearly indicates a different
meaning.
I. Headings. The headings and sub-headings in this Plan are inserted for
--------
the convenience of reference only and are to be ignored in any construction of
the provisions hereof.
J. Severability. In case any provision of this Plan shall be held illegal
------------
or void, such illegality or invalidity shall not affect the remaining provisions
of this Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.
K. Payments Due Missing Persons. The Corporation shall make a reasonable
----------------------------
effort to locate all persons entitled to benefits under the Plan; however,
notwithstanding any provisions of this Plan to the contrary, if, after a period
of one (1) year from the date such benefits shall be due, any such persons
entitled to benefits have not been located, their rights under the Plan shall
stand suspended. Before this provision becomes operative, the Corporation shall
send a certified letter to all such persons at their last known addresses
advising them that their rights under the Plan shall be suspended. Subject to
all applicable state laws, any such suspended amounts shall be held by the
Corporation for a period of one (1) additional year and thereafter such amounts
shall be forfeited and thereafter remain the property of the Corporation.
L. Liability and Indemnification.
-----------------------------
(a) Neither the Corporation nor any Parent or Subsidiary shall be
responsible in any way for any action or omission of the Committee, or any other
fiduciaries in the performance of their duties and obligations as set forth in
this Plan. Furthermore, neither the Corporation nor any Parent or Subsidiary
shall be responsible for any act or omission of any of their agents, or with
respect to reliance upon advice of their counsel provided that the Corporation
and/or the appropriate Parent or Subsidiary relied in good faith upon the action
of such agent or the advice of such counsel.
9
<PAGE>
(b) Except for their own gross negligence or willful misconduct
regarding the performance of the duties specifically assigned to them under, or
their willful breach of the terms of, this Plan, the Corporation, each Parent
and Subsidiary and the Committee shall be held harmless by the Participants,
former Participants, beneficiaries and their representatives against liability
or losses occurring by reason of any act or omission. Neither the Corporation,
any Parent or Subsidiary, the Committee, nor any agents, employees, officers,
directors or shareholders of any of them, nor any other person shall have any
liability or responsibility with respect to this Plan, except as expressly
provided herein.
M. Incapacity. If the Committee shall receive evidence satisfactory to it
----------
that a person entitled to receive payment of any Plan Award is, at the time when
such benefit becomes payable, a minor, or is physically or mentally incompetent
to receive such Plan Award and to give a valid release thereof, and that another
person or an institution is then maintaining or has custody of such person and
that no guardian, committee or other representative of the estate of such person
shall have been duly appointed, the Committee may make payment of such Plan
Award otherwise payable to such person to such other person or institution,
including a custodian under a Uniform Gifts to Minors Act, or corresponding
legislation (who shall be an adult, a guardian of the minor or a trust company),
and the release by such other person or institution shall be a valid and
complete discharge for the payment of such Plan Award.
N. Cooperation of Parties. All parties to this Plan and any person
----------------------
claiming any interest hereunder agree to perform any and all acts and execute
any and all documents and papers which are necessary or desirable for carrying
out this Plan or any of its provisions.
O. Governing Law. All questions pertaining to the validity, construction
-------------
and administration of the Plan shall be determined in accordance with the laws
of the State of Colorado.
P. Notices. Each notice relating to this Plan shall be in writing and
-------
delivered in person or by certified mail to the proper address. All notices to
the Corporation or the Committee shall be addressed to it at Convergent
Communications, Inc., 400 Inverness Drive South, Suite 400, Englewood, Colorado
80112, Attn: Legal Department. All notices to Participants, former
Participants, beneficiaries or other persons acting for or on behalf of such
persons shall be addressed to such person at the last address for such person
maintained in the Committee's records.
Q. Written Certificate. Each Plan Award shall be evidenced by a
-------------------
certificate signed by the Corporation summarizing the material terms of the
award.
SECTION VIII.
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the Plan and the Options granted hereunder at any time and
for any purpose (including, without limitation, an amendment necessary for an
Option to comply with Rule 16b-3 (or any
10
<PAGE>
successor rule) promulgated under the Exchange Act); provided, however, that no
amendment shall be made which shall increase the total number of shares of the
Common Stock of the Corporation which may be issued and sold pursuant to
Options, or modify the provisions of the Plan relating to eligibility, unless
such amendment is made by or with the approval of the stockholders (such
approval being granted within 12 months of the effective date of such
amendment), but only if such approval is required by any applicable provisions
of the Code. Except as otherwise provided herein, no amendment, suspension or
termination of the Plan shall alter or impair any Plan Awards previously granted
under the Plan, without the consent of the holder thereof.
SECTION IX.
TERM OF PLAN
The Plan shall remain in effect until December 31, 2009, unless sooner
terminated by the Board of Directors of the Corporation. No Plan Awards may be
granted under the Plan subsequent to the termination of the Plan.
SECTION X.
CLAIMS PROCEDURES
A. Denial. If any Participant, former Participant or beneficiary is
------
denied any vested benefit to which he is, or reasonably believes he is, entitled
under this Plan, either in total or in an amount less than the full vested
benefit to which he would normally be entitled, the Committee shall advise such
person in writing the specific reasons for the denial. The Committee shall also
furnish such person at the time with a written notice containing (i) a specific
reference to pertinent Plan provisions, (ii) a description of any additional
material or information necessary for such person to perfect his claim, if
possible, and an explanation of why such material or information is needed and
(iii) an explanation of the Plan's claim review procedure.
B. Written Request for Review. Within 60 days of receipt of the
--------------------------
information stated in subsection (a) above, such person shall, if he desires
further review, file a written request for reconsideration with the Committee.
C. Review of Document. So long as such person's request for review is
------------------
pending (including the 60 day period in subsection (b) above), such person or
his duly authorized representative may review pertinent Plan documents and may
submit issues and comments in writing to the Committee.
D. Committee's Final and Binding Decision. A final and binding decision
--------------------------------------
shall be made by the Committee within 60 days of the filing by such person of
this request for reconsideration; provided, however, that if the Committee, in
-------- -------
its discretion, feels that a hearing with such person or his representative is
necessary or desirable, this period shall be extended for an additional 60 days.
11
<PAGE>
E. Transmittal of Decision. The Committee's decision shall be conveyed to
-----------------------
such person in writing and shall (i) include specific reasons for the decision,
(ii) be written in a manner calculated to be understood by such person and (iii)
set forth the specific references to the pertinent Plan provisions on which the
decision is based.
F. Limitation on Claims. Notwithstanding any provisions of this Plan to
--------------------
the contrary, no Participant (nor the estate or other beneficiary of a
Participant) shall be entitled to assert a claim against the Corporation (or
against any Parent or Subsidiary) more than three years after the date the
Participant (or his estate or other beneficiary) initially is entitled to
receive benefits hereunder.
_________________________________________
Keith V. Burge, President and COO
12
<PAGE>
EXHIBIT 99.11
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
2
<PAGE>
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
3
<PAGE>
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
4
<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.
6
<PAGE>
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.
7
<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.
8
<PAGE>
10.3 Dividends. Unless otherwise provided by the Committee, no adjustment
---------
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.
9
<PAGE>
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
12
<PAGE>
EXHIBIT 99.12
DEFERRED COMPENSATION PLAN
OF
CONVERGENT COMMUNICATIONS, INC.
Convergent Communications, Inc., incorporated under the laws of the State
of Colorado, (hereinafter referred to as the "Company"), hereby establishes the
Convergent Communications, Inc. Deferred Compensation Plan (the "Plan")
effective as of November 1, 1997. The Company intends to provide, under the
Plan, certain of its Key Employees with benefits upon retirement, death,
disability or other termination of employment, for the purpose of promoting in
its Key Employees the strongest interest in the successful operation of the
Company and to induce such employees to remain in the employ of the Company.
ARTICLE I
Definitions
-----------
1.01 Administrative Committee shall mean the committee appointed pursuant
------------------------
to Article VIII of the Plan.
1.02 Adoption Agreement shall mean a written agreement between a
------------------
Participant and the Company, whereby a Participant agrees to defer a portion of
his or her Compensation pursuant to the provisions of the Plan, and the Company
agrees to make benefit payments in accordance with the provisions of the Plan.
1.03 Beneficiary shall mean any person, persons or entities designated by
-----------
a Participant to receive benefits hereunder upon the death of such Participant.
1.04 Benefit Account shall mean the account maintained on the books of the
---------------
Company for each Participant pursuant to Section 6.01 hereof.
1.05 Code shall mean the Internal Revenue Code of 1986, as amended.
----
1.06 Commissions shall mean that portion of a Participant's Compensation
-----------
which is defined as "commissions" as used by the Company's payroll department.
1.07 Commissions Contribution shall mean deferral of Commissions by
------------------------
Participant as provided in Article III of the Plan.
1.08 Company shall mean Convergent Communications, Inc., a Colorado
-------
corporation, and its Subsidiaries and Affiliates.
1.09 Compensation shall mean the total amount of all payments made by the
------------
Company to a Participant, including payment of Commissions, for services
rendered to the
<PAGE>
Company. Compensation shall not include Participant expense reimbursements,
contributions made by the Company under the Plan, payments made by the Company
for group insurance, hospitalization and like benefits, or contributions made by
the Company under any other employee benefit plan the Company maintains. Any
deferred compensation benefit payments under this Plan shall not be deemed
salary or other compensation to the Participant eligible for computation of
benefits to which they may be entitled under the pension plan, profit-sharing
plan, defined benefit plan, defined contribution plan, or other qualified
retirement plans of the Company for the benefit of its employees. The deferred
compensation benefit payments are compensation for all other purposes.
1.10 Deferral Contribution shall mean deferral of Compensation by a
---------------------
Participant as provided in Article III of the Plan.
1.11 Deferral Period shall mean the period of time during which
---------------
Compensation is being deferred pursuant to Article III of the Plan.
1.12 Deferral Change Date shall mean, for purposes of changing the amount
--------------------
of Deferral and Commissions Contributions under the Plan, January 1 of each Plan
Year.
1.13 Determination Date shall mean the last day of the Plan Year.
------------------
1.14 Disability shall mean, for the first two (2) years of the Disability,
----------
that the Participant can not substantially perform the duties of the
Participant's occupation. After the first two (2) years of Disability,
Disability shall mean the Participant can not work at any occupation for which
the Participant is fitted by education, training or experience as determined by
the Administrative Committee. In addition, Disability shall exist if the
Participant has total and permanent loss of sight of both eyes; or has both
hands severed at or above the wrist; or has both feet severed at or above the
ankle; or has such severance of one hand and one foot. The Participant shall be
considered disabled if the aforementioned conditions are caused by sickness or
accident; are continuous for at least six (6) months; and begin after the
execution of the Adoption Agreement, and is determined to be totally disabled by
the insurance carrier under the Company's Long Term Disability Plan. However
Disability hereunder shall not be deemed to include Disability resulting
directly from willfully and intentionally self-inflicted injury.
1.15 Disallowed 401(k) Contributions shall mean deferral of Compensation by
-------------------------------
a Participant as provided in Article III of the Plan.
1.16 Effective Date of this Plan shall be November 1, 1997.
--------------
1.17 Hardship shall mean an unforeseen financial emergency suffered by a
--------
participant. The financial emergency must be beyond the Participant's control
and must be of sufficient magnitude to cause the Participant great hardship if
early withdrawal of Participant's benefits were not allowed or if a change in
participant's Stated Deferral was not allowed. Any early withdrawal by reason
of Hardship shall be limited to the amount necessary to meet the financial
emergency.
-2-
<PAGE>
1.18 Investment Measurement Options shall mean the investment elections
------------------------------
made by the Participant on the form provided for that purpose by the
Administrative Committee.
1.19 Key Employees shall mean all employees of the Company who are
-------------
performing services for the Company, who are designated as Key Employees by the
Administrative Committee and approved by the President and/or Chief Executive
Officer. A person designated as a Key Employee shall remain so until such
designation is revoked by the President and/or Chief Executive Officer, in their
sole discretion.
1.20 Normal Retirement Age shall mean age 65.
---------------------
1.21 Normal Retirement Date shall mean the first day of the month after a
----------------------
Participant attains Normal Retirement Age and actually retires.
1.22 Participant shall mean a Key Employee of the Company who has
-----------
completed an Adoption Agreement accepted by the Administrative Committee as
evidenced by an authorized signature.
1.23 Plan Entry Date shall mean the Effective Date and the first day of
---------------
each quarter of the Plan Year.
1.24 Plan Year shall mean the twelve-month period on which the plan
---------
records are kept, which shall begin on January 1 and end on December 31, except
the first Plan Year shall be the short year from November 1, 1997 to December
31, 1997.
1.25 Retirement shall mean a Participant's termination of employment after
----------
reaching Normal Retirement Age.
1.26 Section 401(k) Plan shall mean the qualified Section 401(k) Profit-
-------------------
Sharing Plan maintained by the Company which is qualified under Section 401(a)
of the Code.
1.27 Service shall mean the period of time from the date of employment by
-------
the Company to the date of Retirement or termination of employment with the
Company.
1.28 Stated Deferral shall mean the amount of Compensation the Participant
---------------
agrees to defer as designated on the Withholding Request Form.
1.29 Subsidiaries and Affiliates shall mean any corporation or other
-----------------------------
employer during any period while it is, together with the Company, a member of a
controlled group of corporations or an affiliated service group under common
control (within the meaning of Section 414(b), (c) or (m) of the Code).
1.30 Successor Company shall mean any company which adopts this Plan for
-----------------
any former employees of Company who become employees of a Successor Company
under a plan of reorganization.
-3-
<PAGE>
1.31 Withholding Request Form shall mean a written document signed by the
------------------------
Participant, whereby the Participant states the amount of Disallowed 401(k)
Deferrals and Deferral Contributions to be made for the Plan Year.
ARTICLE II
Eligibility and Participation
-----------------------------
2.01 Participation. From time to time the Administrative Committee, in its
--------------
sole discretion, may designate those Key Employees to whom the opportunity to
participate in this Plan shall be extended.
2.02 Enrollment Requirements. Employees who have been selected by the
------------------------
Administrative Committee to participate in this Plan may enroll in the plan by
(a) entering into an Adoption Agreement with the Company, and (b) completing
such other forms and furnishing such other information as the Company may
reasonably require.
2.03 Enrollment Time Period. A Key Employee must execute an Adoption
-----------------------
Agreement within thirty (30) days after adoption of the Plan by the Company.
Otherwise, the Key Employee must execute an Adoption Agreement prior to the Plan
Entry Date of the Plan Year in which the Agreement is to be effective.
2.04 Failure of Eligibility. A Participant shall cease to be a Participant
----------------------
at Termination of Employment (unless the Participant qualifies for benefits set
forth in Article VI), or upon revocation by the Administrative Committee of the
Participant's status as a Key Employee. A person who ceases to be a Participant
during the Deferral Period will have no further right to defer Compensation
hereunder. However, the employment of a Participant shall not be deemed to be
terminated by reason of an approved leave of absence granted in accordance with
uniform rules applied in a non-discriminatory manner or employment by Company.
ARTICLE III
Participant Contributions
-------------------------
3.01 Disallowed 401(k) Contributions. Each Participant may elect to defer
-------------------------------
a portion of his or her Compensation which is equal to the amount that the
Participant was unable to defer pursuant to the Company's Section 401(k) Plan
because such deferrals would otherwise violate the deferral percentage
requirements of Section 401(k) of the Code. The amount that may be deferred
pursuant to this paragraph is the difference between the annual deferral
limitation set forth in Section 402(g) of the Code (for the 1998 calendar year
in the amount of $10,000) and the amount actually deferred by the Participant
under the Company's Section 401(k) Plan. The Participant must defer the largest
amount possible under the Company's Section 401(k) Plan before the Participant
qualifies to make deferrals pursuant to this paragraph.
3.02 Deferral Contributions. Each Participant hereunder may elect a
-----------------------
Deferral Contribution of a portion of his or her Compensation earned and payable
on or after the Effective
-4-
<PAGE>
Date of this Plan and before the commencement of the pay period in which the
election becomes effective. Deferral Contributions must equal at least $2,000
each Plan Year and may not exceed 25% of Compensation. In addition, a
Participant may elect to defer up to 100% of any Incentive Compensation payment
awarded to them.
3.03 Commissions Contributions. Each Participant may elect a Commissions
-------------------------
Contribution of a portion of his or her Commissions earned and payable on or
after the Effective Date of this Plan. A Participant may elect to defer up to
one hundred percent (100%) of any Commissions payable to them.
3.04 Subsequent Deferral and Commissions Contributions. Subsequent to the
-------------------------------------------------
initial deferrals provided for in Sections 3.02 and 3.03 above, a Participant
may from time to time elect to increase or decrease the amount of Commissions or
Compensation deferred in pay periods which commence on or after the next
Deferral Change Date which follows such subsequent election.
3.05 Procedure for Deferral. The initial election provided for in Sections
----------------------
3.02 and 3.03 and any subsequent election or elections provided for in Section
3.04 shall be made on the Withholding Request Form provided by the
Administrative Committee for that purpose. Except as provided in Section 3.04,
the amount specified in the election shall be deferred and shall be subtracted
from the Commissions and Compensation otherwise payable to the Participant
during the period in which the election is in effect.
3.06 Election to Defer Irrevocable; Exceptions. Except as otherwise
------------------------------------------
provided herein, a Participant's election to defer compensation shall be
irrevocable except for changes allowed at each Deferral Change Date. The
Administrative Committee, in its sole discretion, upon demonstration of a
substantial Hardship by the Participant, may permit subsequent alteration on a
date other than such Deferral Change Date of a Participant's deferral election.
A request to alter the amount of Compensation deferred shall be submitted by
Participant in writing to the Administrative Committee. The application shall
set forth in detail the reasons for the requested reduction.
ARTICLE IV
Company Contributions
---------------------
4.01 Company Discretionary Contributions For each Plan Year, the Company
-----------------------------------
may, in its sole discretion, make a contribution to each Participant's Benefit
Account in a dollar amount to be determined by Company.
4.02 Company Matching Contributions. The Company shall make a matching
------------------------------
contribution to each Participant's Benefit Account in an amount equal to 100% of
the Participant's Disallowed 401(k) contribution made to the Plan for each Plan
Year.
4.03 Company Incentive Compensation Contributions. For each Plan Year the
--------------------------------------------
Company may, in its sole discretion, make a contribution to each Participant's
Benefit Account,
-5-
<PAGE>
which contribution shall be considered an additional Incentive Compensation
payment on behalf of a Participant which is paid to this Plan. Incentive
Compensation Contributions may be made in cash, in Company common stock, or any
combination thereof as determined in the sole discretion of the Company.
ARTICLE V
Unfunded Status and Life Insurance
----------------------------------
5.01 Unfunded Status. All benefits payable under this Plan shall be paid
---------------
as they become due and payable by the Company out of its general assets. In the
event the Company, in its sole discretion, decides to fund all or any part of
the benefits payable under this Plan with contributions to a separate fund, the
Company shall maintain separate accounts for each Participant to which such
contributions are allocated. Nothing contained in this Plan shall be deemed to
create a trust of any kind for the benefit of the Participants or create any
fiduciary relationship between the Company and the Participants or their
Beneficiaries. To the extent that any person acquires a right to receive
benefits under this Plan, such rights shall be no greater than the right of any
unsecured general creditor of the Company.
5.02 Life Insurance. The Company's obligation under this Plan shall be an
--------------
unfunded and unsecured promise to pay. The Company shall not be required to
fund its obligations, but the Company, in its sole discretion, may apply for and
own for its own benefit, insurance on the life of a Participant in such amounts
and in such forms as the Company may choose. The Participant shall have no
interest whatsoever in any such policy or policies, but at the request of the
Company shall submit to medical examinations and shall accurately and truthfully
supply such information and execute such documents as may be required by the
insurance company or companies to whom the Company has applied for insurance.
The Company shall be under no obligation to provide the benefits in Article VII
of this Plan if the Participant fails to comply with these provisions. Any
insurance policy acquired by or held by the Company in connection with the
liabilities assumed by it pursuant to the Plan shall not be deemed to be held
under any trust for the benefit of the Participant, the Participant's
Beneficiary or estate, or to be security for the performance of the obligations
of the Company but shall be, and remain, a general, unpledged and unrestricted
asset of the Company.
ARTICLE VI
Participant Benefit Account And Vesting
---------------------------------------
6.01 Benefit Account. The Company shall establish a Benefit Account on its
---------------
books for each Participant, and shall credit to each Participant's Benefit
Account the following amounts at the times specified:
(a) Participant Disallowed 401(k) Contributions. The amount of
-------------------------------------------
Compensation the Participant elects to defer pursuant to Article III of
the Plan, credited as of the month the Participant would otherwise have
received the Compensation reduced by any current Plan Year distributions
as of the month the distribution was made. The
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<PAGE>
Company shall deduct from Participant's Compensation any amounts it, in
its sole discretion, determines that it is required to withhold under any
state or federal law for taxes or other charges.
(b) Participant Deferral Contributions. The amount of Compensation the
----------------------------------
Participant elects to defer pursuant to Article III of the Plan, credited
as of the month the Participant would otherwise have received the
Compensation reduced by any current Plan Year distributions as of the
month the distribution was made. The Company shall deduct from
Participant's Compensation any amounts it, in its sole discretion,
determines that it is required to withhold under any state or federal law
for taxes or other charges;
(c) Participant Commissions Contributions. The amount of Commissions the
-------------------------------------
Participant elects to defer pursuant to Article III of the Plan, credited
as of the month the Participant would otherwise have received the
Commissions reduced by any current Plan Year distributions as of the
month the distribution was made. The Company shall deduct from
Participant's Compensation any amounts it, in its sole discretion,
determines that it is required to withhold under any state or federal law
for taxes or other charges;
(d) Company Discretionary Contributions. The amount of Company
-----------------------------------
Discretionary Contributions made pursuant to Article IV of the Plan,
credited as of the Determination Date of the applicable Plan Year;
(e) Company Matching Contributions. The amount of Company Matching
------------------------------
Contributions made pursuant to Article IV of the Plan, credited as of the
month of contribution;
(f) Company Incentive Compensation Contributions. The amount of Company
--------------------------------------------
Incentive Compensation Contributions made pursuant to Article IV of the
Plan, credited as of the Determination Date of the applicable Plan Year;
and
(g) Earnings Credited. As of each Determination Date, the earnings for
-----------------
each Benefit Account for the current Plan Year shall be credited. The
earnings shall be accrued monthly and compounded annually based upon the
income and unrealized gain or loss of the Investment Measurement Options
selected by the Participant for the Plan Year (the "Earnings").
A Participant's Benefit Account shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan. A Participant's Benefit Account shall not constitute or
be treated as a trust fund of any kind. All benefits payable under this Plan
shall be paid as they become due and payable by the Company out of its general
assets.
6.02 Account Balance. Each Participant's Account Balance as of each
---------------
Determination Date shall consist of the balance of the Participant's Benefit
Account as of the immediately preceding Determination Date plus the amounts
required to be credited to such account by the
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<PAGE>
Company pursuant to Section 6.01 less the amount of all distributions, if any,
made from such Benefit Account since the immediately preceding Determination
Date.
6.03 Statement of Account. The Administrative Committee shall provide to
--------------------
each Participant, within 120 days after the close of each Plan Year, a statement
in such form as the Administrative Committee deems desirable setting forth the
balance to the credit of such Participant in his Benefit Account as of the last
day of the preceding calendar year.
6.04 Vesting of Benefit Account. All contributions made to this Plan by a
--------------------------
Participant or by the Company and earnings thereon shall be 100% nonforfeitable
at all times.
ARTICLE VII
Payment of Benefits
-------------------
7.01 Benefit Payments Prior to Termination of Employment. Participant
---------------------------------------------------
Disallowed 401(k) Contributions, Deferral Contributions, Commissions
Contributions and Company Matching Contributions shall be distributed to the
Participant after such contributions have remained in the Plan for at least one
(1) Plan Year, measured from the beginning of the initial Plan Year in which
each such contribution is allocated. Prior to the Plan Year in which the
distribution of such contributions is required, the Participant may elect, on a
form to be provided by the Administrative Committee, to defer such distribution
to a later specified date. The Participant may also extend such later specified
date to a further date if such election is made prior to the Plan Year in which
the specified date falls due. Company Discretionary and Incentive Compensation
Contributions shall be distributed to the Participant after such contributions
have remained in the Plan for at least one (1) year, measured from the beginning
of the initial Plan Year in which such contributions are allocated, unless the
Participant elects to further defer distribution of such contributions in the
manner specified herein.
7.02 Benefit Payments Upon Termination of Employment. Upon a Participant's
-----------------------------------------------
termination of employment for any reason, voluntary or involuntary, including by
reason of Retirement, Disability or Death, the Participant shall receive a
benefit based upon the vested portion of the Participant's Benefit Account. The
Benefit Account shall be increased by its Earnings from the immediately
preceding Determination Date to the date of termination of employment (the
"Adjusted Benefit Account"). The benefit shall be payable in lump sum or
installments. The form and the term of the benefit shall be selected by the
Participant in his or her Adoption Agreement.
7.03 Survivor Benefit Before Termination of Employment. If a Participant
-------------------------------------------------
dies before commencement of benefits while this Plan is in force and before
termination of employment, the Participant's designated Beneficiary shall
receive a benefit equal to the Participant's Adjusted Benefit Account. The form
and term of the benefit shall be selected by the Participant in his or her
Adoption Agreement.
7.04 Survivor Benefit After Termination of Employment. If a Participant
------------------------------------------------
dies before commencement of benefits while this Plan is in force and after
termination of employment, the
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<PAGE>
Participant's designated Beneficiary shall receive a benefit equal to the
Adjusted Benefit Account. The form and term of the benefit shall be selected by
the Participant in his or her Adoption Agreement.
7.05 Survivor Benefit After Commencement of Payments. If a Participant
-----------------------------------------------
dies while receiving benefits herein described but before receiving all monthly
payments he or she is entitled to receive under the Adoption Agreement, the
balance of such monthly payments shall be paid as they accrue to the
Participant's Beneficiary, and the estate of such Beneficiary if the Beneficiary
dies before receiving all payments. Payments to the estate of such Beneficiary
may be converted to lump sum if so elected on the Adoption Agreement.
7.06 Hardship Distribution. The Administrative Committee may, under
---------------------
uniform and non-discriminatory rules, upon finding that a terminated Participant
has suffered a Hardship or is suffering a Hardship as defined in Section 1.15,
distribute to such terminated Participant all or a portion of the vested Account
Balance. The amount of any early distribution shall not exceed the amount
required to meet such hardship and is not reasonably available from other
resources of the Participant.
7.07 Employment by a Successor Company. If the Participant terminates
---------------------------------
employment with the Company under a plan of reorganization in which the
Participant is employed by a Successor Company, the Participant will be eligible
for all accrued benefits under the Plan measured as of the date of such
reorganization.
7.08 Recipients of Payments: Designation of Beneficiary. All payment to
---------------------------------------------------
be made by the Company shall be made to the Participant, if living. In the
event of a Participant's death prior to the receipt of all benefit payments, all
subsequent payments to be made under the Plan shall be to the Beneficiary or
Beneficiaries of the Participant. Each Participant shall file in writing with
the Company a designation of Beneficiary and contingent Beneficiary to whom the
Participant's interest under the Plan shall be paid in the event of death. Such
designation may be changed by the Participant at any time and without the
consent of any previously designated Beneficiary. In the absence of an
effective Beneficiary designation as to any portion of a Participant's interest
under the Plan or if the Beneficiary cannot be located, such amount shall be
paid to the Participant's personal representative. But if the Company believes
that none has been appointed within six months after the Participant's death,
the Company may direct that such amount shall not be paid until a personal
representative has been appointed or may direct that such amount be paid to the
Participant's surviving spouse, or if there is none, to the Participant's
surviving children and issue of deceased children by right of representation, or
if there be none, the Participant's surviving parents and if none, according to
the laws of descent and distribution of the State of Colorado.
In the event a benefit is payable to a minor or person declared incompetent or
incapable of handling the disposition of his or her property, the Administrative
Committee may pay such benefit to the guardian, legal representative or person
having the care or custody of such minor, incompetent or incapable person. The
Administrative Committee may require proof of incompetency, minority
guardianship as it may deem appropriate prior to distribution of the
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<PAGE>
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
ARTICLE VIII
Administration
--------------
8.01 Administrative Committee. The Plan shall be administered, interpreted
------------------------
and enforced by the Administrative Committee in accordance with its terms and
purposes. The Administrative Committee shall be appointed by an officer of the
Company and shall consist of three (3) or more persons to act on behalf of the
Company. Interpretation by the Administrative Committee shall be final and
binding upon a Participant except for the procedure set forth in Section 8.03.
No further appeal from a decision on review shall be permitted. The
Administrative Committee shall select the participating Key Employees and
determine the assumptions to be used in computing benefits under the Plan. The
Administrative Committee may adopt rules and regulations relating to the Plan as
it may deem necessary or advisable for the administration of the Plan. No member
of the Committee may act, vote or otherwise influence a decision of the
Committee specifically relating to his or her own participation in the Plan. In
the administration of this Plan, the Committee may, from time to time, employ
agents and delegate to them such administrative duties as it sees fit and may,
from time to time, consult with counsel who may be counsel to the Participant.
8.02 Committee Procedure. All determination of the Committee shall be
-------------------
made by not less than a majority of its members present at the meeting at which
a quorum is present. A majority of the entire Committee shall constitute a
quorum for the transaction of business. Any action required or permitted to be
taken at a meeting of the Committee may be taken without a meeting, if a
unanimous written consent which sets forth the action is signed by each member
of the Committee and filed with the minutes of proceedings of the Committee.
Service on the Committee shall constitute services as a director of the Company
so that members of the Committee shall be entitled to indemnification and
reimbursement for their services as members of the Committee to the same extent
as for services as directors of the Company.
8.03 Claim Procedures.
----------------
(a) All claims shall be filed in writing by the Participant, his or
her Beneficiary or the authorized representative of the claimant, by
completing such procedures as the Administrative Committee shall
require. Such procedures shall be reasonable and may include the
completion of forms and the submission of documents and additional
information.
(b) If a claim is denied, notice of denial shall be furnished by the
Administrative Committee to the claimant within ninety (90) days after
the receipt of the claim by the Administrative Committee, unless
special circumstances require an extension of time for processing the
claim, in which event notification of the extension shall be provided
to the Participant or Beneficiary and the extension shall not exceed
ninety (90) days.
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<PAGE>
(c) The Administrative Committee shall provide adequate notice, in
writing, to any claimant whose claim has been denied, setting forth
the specific reasons for such denial, specific reference to pertinent
Plan provisions, a description of any additional material or
information necessary for the claimant to perfect his or her claim and
an explanation of why such material or information is necessary, all
written in a manner calculated to be understood by the claimant. Such
notice shall include appropriate information as to the steps to be
taken if the claimant wishes to submit his or her claim for further
review. The claimant or the claimant's authorized representative must
request such review within a reasonable period of time prescribed by
the Administrative Committee. In no event shall such period of time
be less than sixty (60) days. A decision on review shall be made not
later than sixty (60) days after the Company's receipt of the request
for review. If special circumstances require a further extension of
time for processing, a decision shall be rendered not later than one
hundred twenty (120) days following the Company's receipt of the
request for review. If such an extension of time for review is
required, written notice of the extension shall be furnished to the
claimant prior to the commencement of the extension. The decision on
review shall be furnished to the claimant. Such decision shall be in
writing and shall include specific reasons for the decision, written
in a manner calculated to be understood by the claimant, as well as
specific references to pertinent Plan provisions on which the decision
is based. Any claims arising out of this Plan shall be arbitrated in
Denver, Colorado, pursuant to the Convergent Communications, Inc.
Arbitration Procedures, or, if such procedures are no longer in
effect, pursuant to the Commercial Rules of Arbitration of the
American Arbitration Association.
ARTICLE IX
Miscellaneous
-------------
9.01 Employment Not Guaranteed by Plan. Neither the Plan nor any action
---------------------------------
taken hereunder shall be construed as giving a Participant the right to be
retained as a Key Employee or as an employee of the Company for any period.
9.02 Amendment and Termination. The Company may, at any time, amend or
-------------------------
terminate the Plan, provided that the Company may not reduce or modify the
vested portion of any benefit or any benefit being paid to a Participant or
Beneficiary prior to such amendment or termination. Furthermore, if the Company
terminates the Plan, the Company shall return to the Participant the amount of
all vested Participant and Company contributions and Earnings on such amounts.
A Successor Company under a plan of reorganization may adopt the Plan for
Participants employed by the Successor Company. With the approval of the Board
of Directors of the Company, all assets and liabilities may be transferred to
the Successor Company for Participants employed by the Successor Company.
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<PAGE>
9.03 Merger/Direct Transfer. The Plan may enter into merger agreements or
----------------------
direct transfer of assets agreements with the representatives of other deferred
compensation or supplemental income plans, and accept the direct transfer of
plan assets, or transfer plan assets, as a party to any such agreement.
Participant account balances so received by the Plan shall always be 100% non-
forfeitable and subject to the distribution requirements of this Plan.
9.04 Assignment of Benefits. No Participant or Beneficiary shall have the
----------------------
right to assign, transfer, hypothecate, encumber or anticipate his or her
interest in any benefits under this Plan, nor shall the benefits under this Plan
be subject to any legal process to levy upon or attach the benefits for payment
of any claim against the Participant or his or her Beneficiary. In the event of
any attempted assignment or transfer, the Company shall have no further
liability hereunder.
9.05 Disposition of Unclaimed Payments. Each Participant must file with
---------------------------------
the Company from time to time, in writing, his or her post office address and
each change of post office address. The communication, statement or notice
addressed to a Participant at the last post office address filed with the
Company, or if no address is filed with the Company, then at the last post
office address as shown on the Company records, will be binding upon the
Participant and his or her Beneficiaries for all purposes of the Plan. The
Company shall not be required to search for or locate a Participant or his or
her Beneficiary.
9.06 Taxes. The Company shall deduct from all payments made hereunder all
-----
applicable federal or state taxes that it, in its sole discretion, determines is
required by law to be withheld from such payments.
9.07 Independence of Benefits. The benefits payable under this Plan shall
------------------------
be independent of, and in addition to, any other benefits or compensation
whether by salary or bonus.
9.08 Governing Law. This Plan is intended to constitute an unfunded Plan
-------------
for a select group of management or highly compensated employees and directors
and rights thereunder shall be governed by the laws of the State of Colorado,
except to the extent pre-empted by Federal law.
9.09 Form of Communication. Any election, application, claim, notice or
---------------------
other communication required or permitted to be made by a Participant to the
Administrative Committee shall be made in writing and in such form as the
Administrative Committee shall prescribe. Such communication shall be effective
upon mailing, if sent by first class mail, postage pre-paid, and addressed to
the Company's offices at: 67 Inverness Drive East, Suite 110, Englewood, CO
80112.
9.10 Severability. If any provision of this Plan is held to be illegal,
------------
invalid or unenforceable under present or future laws, such provision shall be
fully severable; this Plan shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Plan; and
the remaining provision of this Plan shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable provision or by
its
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<PAGE>
severance from this Plan. Furthermore, in lieu of each such illegal, invalid or
unenforceable provision, there shall be added automatically as part of this Plan
a provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid or enforceable.
9.11 Binding Agreement. The provisions of this Plan shall be binding upon
-----------------
the Participant and the Company and their successors, assigns, heirs, executors
and beneficiaries.
ACCEPTED by the Company on the ____day of ________________________, 1998.
COMPANY:
Convergent Communications, Inc.,
ATTEST: By: ________________________________
Title: _________________________
By: ________________________________
Title: _________________________
____________________________
Secretary
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<PAGE>
EXHIBIT 99.13
NOTE: THE original temlpate, (Normal) could not be found. Document has been
attacted to Blank.dot template
AMENDMENT TO
DEFERRED COMPENSATION PLAN
OF
CONVERGENT COMMUNICATIONS SERVICES, INC.
CONVERGENT COMMUNICATIONS SERVICES, INC., a Colorado corporation (the
"Company"), a subsidiary of CONVERGENT COMMUNICATIONS, INC., a Colorado
corporation, hereby adopts an amendment to the Convergent Communications
Services, Inc. Deferred Compensation Plan (the "Plan"), formerly known as the
Convergent Communications, Inc. Deferred Compensation Plan (as amended herein)
effective as of the 1st day of January, 1999 (the "Effective Date"), which
amendment revises the plan document originally effective on November 1, 1997.
Amendments
----------
The Plan is hereby amended as follows:
1. The definition of "Plan" in the introduction to the Plan document shall
mean the Convergent Communications Services, Inc. Deferred Compensation Plan.
2. Section 1.08 of the Plan is hereby amended and shall hereafter read as
follows:
"1.08 Company shall mean Convergent Communications Services,
-------
Inc., a Colorado corporation, and its subsidiaries and affiliates."
3. Section 1.32 is added to the Plan and shall hereafter read as follows:
"1.32 Company Stock shall mean the common capital stock of
-------------
Company as such stock existed both before and after the initial
public offering of such stock on July 20, 1999."
4. Section 3.07 shall be added to the Plan and shall hereafter read as
follows:
"3.07 Stock Bonus Deferrals. Each Participant that receives from
the Company a bonus of Company Stock may elect to defer all or a
portion of such Company Stock. The election to defer stock bonuses
shall be made on a withholding request form provided by the
Administrative Committee for that purpose and shall be made in the
Plan Year prior to the time that Participant may otherwise receive
such stock bonus transfers."
5. Section 7.02 of the Plan is hereby amended and shall hereafter read as
follows:
"7.02 Benefit Payments Upon Termination of Employment. Upon a
-----------------------------------------------
Participant's termination of employment for any reason, voluntary or
<PAGE>
involuntary, including by reason of Retirement, Disability or Death,
the Participant shall receive a benefit based upon the vested portion
of the Participant's Benefit Account. The Benefit Account shall be
increased by its Earnings from the immediately preceding
Determination Date to the date of termination of employment (the
"Adjusted Benefit Account"). Benefit payments shall be in lump sum or
installments. The form and the term of the benefit payment shall be
selected by the Participant in his or her Adoption Agreement. With
respect to distributions of Company Stock, such stock shall be valued
for distribution purposes as of the date of termination of
employment. Effective as of the date of the initial public offering
of the Company Stock, July 20, 1999, such stock shall only be
distributed in kind."
6. The effective date of this Amendment to the Plan shall be January 1,
1999.
IN WITNESS WHEREOF, this Amendment to the Plan is executed as of the ____
day of _______________, 1999.
COMPANY:
Convergent Communications Services, Inc.,
ATTEST: By: ________________________________
Title: ___________________________
By: ________________________________
Title: ___________________________
____________________________
Secretary
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