<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONVERGENT GROUP CORPORATION
(Exact name of registrant as specified in charter)
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<S> <C> <C>
DELAWARE 7371 84-1264004
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
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6399 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 600
ENGLEWOOD, CO 80111
(303) 741-8900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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GLENN E. MONTGOMERY, JR.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
CONVERGENT GROUP CORPORATION
6399 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 600
ENGLEWOOD, CO 80111
(303) 741-8900
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
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With copies to:
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<S> <C>
JAMES M. LURIE, ESQ. NEIL WOLFF, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP WILSON SONSINI GOODRICH & ROSATI
30 ROCKEFELLER PLAZA PROFESSIONAL CORPORATION
NEW YORK, NEW YORK 10112 650 PAGE MILL ROAD
(212) 408-2400 PALO ALTO, CALIFORNIA 94304
(650) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
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TITLE OF EACH CLASS PROPOSED MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
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<S> <C> <C>
Common stock, $.001 par value........................ $115,000,000 $30,360
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(1) Includes shares that the Underwriters have the option to purchase from
Convergent Group and the selling stockholders solely to cover
over-allotments, if any.
(2) Estimated pursuant to Rule 457(o) under the Securities Act of 1933, as
amended, solely for the purpose of computing the amount of the registration
fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 2000
[CONVERGENT GROUP LOGO]
SHARES
COMMON STOCK
Convergent Group Corporation is offering shares of its common
stock. This is our initial public offering and no public market currently exists
for our shares. We will apply to have our common stock approved for quotation on
the Nasdaq National Market under the symbol "CVGP." We anticipate that the
initial public offering price will be between $ and $ per share.
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
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PER SHARE TOTAL
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Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Convergent Group................................ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
Convergent Group has granted the underwriters a 30-day option to purchase
up to an additional shares of common stock and certain selling
stockholders have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock, in each case to cover over-
allotments. FleetBoston Robertson Stephens Inc. expects to deliver the shares of
common stock to purchasers on , 2000.
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ROBERTSON STEPHENS
DONALDSON, LUFKIN & JENRETTE
WIT SOUNDVIEW
The date of this prospectus is , 2000
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[graphics]
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
AND THE SELLING STOCKHOLDERS HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO
SELL, AND SEEKING OFFERS TO BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. UNLESS
THE CONTEXT OTHERWISE INDICATES, REFERENCES IN THIS PROSPECTUS TO "CONVERGENT
GROUP," "WE," "US" AND "OUR" REFER TO CONVERGENT GROUP CORPORATION AND ITS
SUBSIDIARIES.
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4
[FRONT FOLD OUT GRAPHIC DESCRIPTION]
The title in the upper left hand corner of the foldout reads
"Transforming to the Digital Enterprise." In the center of the foldout are five
square boxes of equal size entitled, from left to right, "Architect
Infrastructure for eBusiness," "Deploy Integration Solutions Across the
Enterprise," "Integrate Existing Applications," "Complete Transformation into
the Digital Utility" and "Exploit Digital Opportunities."
The first box contains several small cubes. As the reader moves across
the page from left to right, the cubes converge into a single large cube, which
appears in the rightmost box in the foldout.
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[FRONT INSIDE COVER GRAPHIC DESCRIPTION]
The text in the upper left hand corner of the page reads "Business
Model." The text in the upper right hand corner of the page reads "Convergent
Group--solutions for the digital economy." In the center of the page there is a
flowchart consisting of four connected boxes. The thin rectangular box on the
far left side of the page has a heading entitled "Lead Generation" and four
separate square boxes entitled "Marketing," "Alliances," "Clients/Friends" and
"AE/PM Activity" inside. The center of the flowchart contains a large
rectangular box divided into four equal sections entitled "Align," "Engineer,"
"Build" and "Manage." A smaller, thin rectangular box directly beneath the
center box is entitled "Resource Management." The thin rectangular box on the
far right side of the page is divided into three sections entitled "Harvest Best
Practices," "Customer Solution" and "Customer Care."
At the top of the flowchart there is a small square divided into three
sections entitled "Market Plan," "Training" and "Infrastructure." This square is
connected to another square entitled "Communicate."
<PAGE> 6
TABLE OF CONTENTS
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PAGE
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Summary..................................................... 2
Risk Factors................................................ 6
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Consolidated Financial Data........................ 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 31
Management.................................................. 45
Certain Transactions........................................ 52
Principal and Selling Stockholders.......................... 55
Description of Capital Stock................................ 56
Shares Eligible for Future Sale............................. 60
Underwriting................................................ 62
Legal Matters............................................... 64
Experts..................................................... 64
Where You Can Find More Information......................... 64
Index to Consolidated Financial Statements.................. F-1
</TABLE>
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Convergent Group, the Convergent Group logo, The Digital Utility,
Government Gateway, Solutions for the Digital Economy and Model Office are
service marks of Convergent Group Corporation, and Energy Network Object Model
and Asset Object Model are trademarks of Convergent Group Corporation. All other
service marks and trademarks referred to in this prospectus are the property of
their respective owners.
1
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SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including Risk Factors, before
investing in our common stock.
CONVERGENT GROUP CORPORATION
OUR BUSINESS
We are a leading provider of professional services that enable our utility
and local government clients to implement Internet-based eBusiness solutions. We
combine our use of existing and emerging digital technologies with our business
expertise in the utility and local government sectors to deliver solutions that
address our clients' mission-critical business problems. Our eBusiness
transformation solutions help our clients to integrate data from various
isolated sources to create a single, Web-based point of entry through which
internal decision-makers, business partners, suppliers, customers and
constituents can access business information on a real-time basis. We design our
solutions to help our clients increase revenues, reduce costs, improve customer
services, ensure service reliability, improve resource management and exploit
their information assets.
We work with our clients through all phases of their eBusiness
transformation process. Throughout this process we:
- Engineer -- with our clients' input, an information technology
infrastructure and internal business processes that tailor our
proprietary Digital Utility and Government Gateway eBusiness frameworks
to our clients' particular needs;
- Build -- the infrastructure, systems and processes with minimal
disruption to our clients' organizations and provide comprehensive
training and change management services; and
- Manage -- our solutions for our clients to help them minimize the
internal resources they must commit to maintain their systems and to help
them maximize their return on investment.
The two large vertical markets we address, utility and local governments,
have only recently begun converting their traditional customer service and
business models to Internet-based eBusiness platforms. We were one of the first
companies to integrate energy and service delivery management systems in our
core markets. We have completed engagements for clients such as Allegheny Power,
Alliant Energy Corporation, Cinergy Corp., City of Indianapolis, Indiana,
Consolidated Edison Company and the Southern California Edison Company. During
the past five years, we have completed over 270 major information technology
engagements.
OUR OPPORTUNITY
According to International Data Corporation, the U.S. utilities industry,
one of the five largest vertical markets in the United States, is estimated to
have spent approximately $345 million on Internet services in 1999. That number
is estimated to grow to approximately $2.0 billion by 2003, representing a 55%
compound annual growth rate. As the industry continues the process of
deregulation, gas and electric utilities face the need to simultaneously:
- increase revenues;
- improve customer satisfaction to retain consumers who now can switch
energy providers;
- capitalize on their well developed service delivery infrastructures and
established customer relationships to cross-sell a diverse package of
customer services with other service providers, such as cable television
and telephone companies;
- drive down costs as competitive pricing replaces the historic regulatory
cost-plus pricing model;
- differentiate and extend their product lines and services to compete on
factors other than price; and
- obtain and rapidly distribute information about their service networks on
a real-time basis, particularly during emergencies or power outages.
2
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According to International Data Corporation, governments in the United
States also represent a significant segment of the economy. Government spending
on Internet services is estimated to have been approximately $505 million in
1999. That number is estimated to grow to approximately $2.8 billion by 2003,
representing a 55% compound annual growth rate. Governments generally continue
to employ labor-intensive, paper-based processes which rely on incompatible
computer and telephone systems. Local governments face demands from their
individual and business constituents to:
- consume fewer resources while maintaining service levels, in order to
free up tax revenues for social and other services;
- speed the processing of licenses and permits and simultaneously reduce
the occurrence of errors in processing, both to enhance constituent
satisfaction and to compete for expanding and relocating businesses; and
- allow real-time access to information by administrators and policy
makers.
To respond to these demands, utilities and government agencies are seeking
ways to improve customer and constituent satisfaction and reduce costs by giving
themselves, their business partners, their suppliers and their customers and
constituents better access to fully-integrated business processes. Utilities and
local governments have realized how the Internet can help service-oriented
businesses achieve their goals, and they now realize that they must deliver
functional, Web-based integrated services to their business partners, suppliers,
customers and constituents.
OUR SOLUTION
We offer complete eBusiness solutions to utilities and local governments.
Relying upon our industry expertise, our services help utilities and local
governments to transform their organizations into digital business environments
that can integrate data and processes from various sources to provide real-time
responses to internal and external information requirements. Our solutions are
based on our proprietary Model Office, a component-based working solution which
enables us to address our clients' specific organizational goals and to create
our Digital Utility and Government Gateway solutions, which transform our
clients' operations from paper-based processes into seamless, digital business
environments.
We design and implement processes that integrate our clients' core
functions with the data supporting front and back office functions such as
customer relationship management and billing. The result is a single,
integrated, Web-based point of entry through which internal decision makers,
business partners, suppliers, customers and constituents can access business
information on a real-time basis.
OUR STRATEGY
Our strategic goal is to be the global leader in eBusiness services serving
the utility and local government markets. The key elements of our corporate
growth strategy are to:
- capitalize on our industry expertise;
- expand our Internet-based customer relationship management service
offering;
- enhance our other consulting and Internet service offerings;
- increase brand awareness;
- recruit and retain highly qualified professionals; and
- continue geographic expansion.
CORPORATE INFORMATION
We were incorporated in Delaware in April 1994. Our principal executive
offices are located at 6399 South Fiddler's Green Circle, Suite 600, Englewood,
Colorado 80111, and our telephone number is (303) 741-8400. Our Web site is
located at www.convergentgroup.com. Information contained on our Web site does
not constitute part of this prospectus.
3
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THE OFFERING
Common stock offered by Convergent
Group................................... shares
Common stock to be outstanding after
this offering........................... shares
Use of proceeds......................... To repay outstanding
indebtedness, to pay
certain fees to one of
our principal
stockholders and for
working capital and
general corporate
purposes.
Proposed Nasdaq National Market
symbol.................................. CVGP
The number of shares to be outstanding after this offering is based on the
number of shares outstanding on December 31, 1999. The common stock to be
outstanding after the offering excludes:
- shares issuable upon the exercise of options outstanding as of December
31, 1999 at a weighted average exercise price of $ per share; and
- shares reserved for issuance under our stock option plan.
Unless otherwise indicated, all share and per share information in this
prospectus gives effect to the conversion of all outstanding shares of our
preferred stock into shares of common stock at the time of the closing of this
offering. All information in this prospectus assumes that the underwriters'
over-allotment option is not exercised.
4
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SUMMARY FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
The following table sets forth our summary historical financial data. You
should read this information together with our consolidated financial statements
and the notes to those statements included in this prospectus and the
information under "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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<CAPTION>
YEARS ENDED DECEMBER 31,
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1995(1) 1996(1)(2) 1997 1998 1999(3)
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CONSOLIDATED STATEMENT OF
OPERATIONS DATA
Revenues......................... $ 57,980 $ 51,742 $ 40,856 $ 47,415 $ 66,610
Gross profit..................... 17,244 22,403 10,520 15,892 24,109
Restructuring and
recapitalization
costs (recovery).............. -- 16,360 (1,218) (95) 13,249
Operating income (loss).......... (10,907) (26,279) (17) 3,759 (5,995)
Net income (loss)................ (11,061) (26,753) (1,105) 5,677 (5,250)
Basic net income (loss) per
share......................... $ (0.38) $ (0.69) $ (0.03) $ 0.19 $ 0.54(4)
Diluted net income (loss) per
share......................... $ (0.30) $ (0.57) $ (0.03) $ 0.12 $ 0.25(4)
Weighted average shares of common
stock used in computing basic
and diluted net income (loss)
per share
Basic......................... 29,418,240 38,924,330 32,468,695 30,270,735 28,857,030
Diluted....................... 36,772,868 46,816,161 40,936,900 47,543,703 61,411,230
</TABLE>
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(1) Results for 1995 and 1996 include revenues from our discontinued GDS
software product line. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Results for 1996 reflect a restructuring charge, the write-off of goodwill
and loss on impairment of assets, principally relating to the
discontinuation of our GDS software product line.
(3) Results for 1999 reflect $13.2 million of charges associated with our August
1999 recapitalization.
(4) Reflects a one time adjustment of $0.72 per share (basic) and $0.34 per
share (diluted) related to the purchase in our recapitalization of
previously outstanding preferred stock for less than its stated redemption
value.
The following table is a summary of our consolidated balance sheet at
December 31, 1999. The "as adjusted" column gives effect to the conversion of
all outstanding shares of our preferred stock into common stock as of the
closing of this offering and the sale by us of shares of common stock
in this offering after deducting estimated underwriting discounts and
commissions and offering expenses payable by us, assuming an initial public
offering price of $ per share and the application of the net proceeds
thereof as discussed under "Use of Proceeds."
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DECEMBER 31, 1999
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ACTUAL AS ADJUSTED
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CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 1,596 $
Working capital (deficit)................................. 5,932
Total assets.............................................. 26,707
Long-term debt (net of deferred acquisition costs)........ 21,753
Total stockholders' equity (deficit)...................... (11,035)
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5
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should consider carefully the following risks, together with the other
information contained in this prospectus, before you decide to purchase our
common stock. If any of the following risks actually occur, our business,
results of operations and financial condition would likely suffer. This could
cause the market price of our common stock to decline, and you could lose all or
part of the money you paid to purchase our common stock.
RISKS RELATED TO OUR OPERATING RESULTS
OUR SUCCESS DEPENDS ON A LIMITED NUMBER OF SIGNIFICANT CLIENTS, AND OUR REVENUES
COULD BE REDUCED BY THE LOSS OF A MAJOR CLIENT OR SIGNIFICANT PROJECT
We have derived, and believe that we will continue to derive, a significant
portion of our revenues from a limited number of large client projects. In 1998,
our five largest clients accounted for approximately 54% of our revenues, with
Cinergy Corp. representing 20%, Alliant Energy Corporation representing 15% and
Citizens Utilities Company representing 10% of our revenues. In 1999, our five
largest clients accounted for approximately 49% of our revenues, with Cinergy
representing 18%, and Alliant and Citizens Utilities, each representing 9% of
our revenues. The volume of work performed for specific clients is likely to
vary from year to year, and a major client in one year may not contract with us
in a subsequent year. If we lose any major clients or any of our clients cancel
or significantly reduce a large project's scope, our revenues, profits and cash
flows could be significantly reduced.
OUR QUARTERLY REVENUES AND OPERATING RESULTS ARE VOLATILE DUE TO MANY FACTORS,
SO OUR PAST PERFORMANCE IS NOT A GOOD INDICATOR OF FUTURE PERFORMANCE
Our quarterly revenues and operating results are difficult to predict. Our
quarterly operating results have varied in the past and are likely to vary
significantly from quarter to quarter. As a result, we believe that
period-to-period comparisons of our results of operations are not a good
indicator of our future performance. A number of factors, primarily arising from
the nature of the services we provide to our clients, are likely to cause these
variations, including:
- Size, Scope and Timing of Projects. The size, scope and timing of the
projects in which we are engaged varies significantly. A few large
projects represent a significant percentage of our revenues in each
quarter. Because the decision to use our services often involves
strategic decisions within a client's organization, we cannot easily
predict or control the quarter in which we will start a new client
engagement. Existing clients may decide to delay starting a new project
for several quarters after finishing a prior portion of a project with
little or no advance notice of such delay to us. As a result, we could be
given notice during a quarter that we will not start projects which we
had previously expected to start, resulting in flat or declining revenues
on a quarter-to-quarter basis. This could result in short-term losses
even if we expect to start the project and recognize the revenues in the
future.
- Project Delays. If we experience delays in connection with a client
project, we may not be able to recognize revenues for the project until
after we have completed the delayed work.
- Employee Underutilization. Personnel and related costs constitute the
substantial majority of our expenses. To maintain our profitability, we
must keep our employees working at or near their full capacity. We
establish our expenses in advance of any particular quarter. Thus, an
unanticipated termination of a major project, a client's decision not to
proceed to the next stage of a project or the completion during a quarter
of several major client projects could result in employee downtime, which
could significantly reduce our profits. Unanticipated variations in the
number, or progress toward completion, of the projects in which we are
engaged could reduce employee utilization rates, which could, in turn,
cause significant variations in operating results in any particular
quarter and could result in losses for such quarter.
6
<PAGE> 12
- Retention of Personnel. We may contract with a client to provide
particular services, yet be unable to provide the services or be forced
to delay our completion of the project if we are unable to attract, train
and retain skilled management, strategic, technical, design, sales,
marketing and support professionals.
- Compensation Expense. One of our officers holds options which vest on
achievement of performance goals, which will result in compensation
expense if the goal is achieved, reducing our reported profits. Our
executive officers and several of our key employees will receive
below-market value stock options if we achieve certain performance goals.
The associated compensation expense may cause our results in a quarter to
be materially lower than if the grant had been made at fair market value.
WE COULD LOSE MONEY UNDER OUR FIXED-PRICE CONTRACTS IF WE DO NOT ESTIMATE ALL OF
OUR COSTS ACCURATELY
In 1998 and 1999, fixed-price contracts accounted for 99% and 91% of our
revenues, respectively. We only maintain our profit margins or make a profit at
all on a fixed-price contract if we keep our costs at the level we estimate
before we begin a project. If our costs are higher than we expected, because,
for example, we need to increase the size of our project team, we are not
entitled to any additional compensation under a fixed-price contract. Therefore,
we assume the financial risk for correctly estimating the costs and resources
needed to complete the project. As a result, our failure to accurately estimate
the resources required for a project or our failure to complete our contractual
obligations in a manner consistent with the project plan upon which the
fixed-price contract was based would result in an unprofitable engagement. If
the contract were large enough, this could adversely affect our overall
profitability. We have been required to commit additional resources to complete
certain projects, which has on occasion resulted in losses on certain contracts.
We may experience similar situations in the future. In addition, for certain
projects we may fix the price before the design specifications are finalized,
which could result in a fixed price that turns out to be too low and therefore
would adversely affect our profitability on the engagement.
OUR CLIENTS' ABILITY TO TERMINATE THEIR CONTRACTS ON SHORT NOTICE MAKES IT
DIFFICULT TO ACCURATELY PREDICT OUR REVENUES
Our clients retain us on a project-by-project basis. Because large client
projects often involve multiple engagements, there is a risk that a client may
choose not to retain us for additional stages of a project or that the client
will cancel or delay additional planned projects. Such cancellations or delays
could result from factors unrelated to our work product or the progress of the
project. In addition, our existing clients can generally reduce the scope of or
cancel their use of our services without penalty and with little or no notice.
Substantially all of our contracts with our clients are terminable by our
clients for convenience and upon short notice, generally 30 days or less. We
cannot, however, reduce our costs as quickly or as easily as our clients can
cancel their contracts with us. If a client were to terminate its contract with
us with little or no notice, our revenues would decline and our gross margin in
the quarter of cancellation would be reduced.
WE RELY ON A SINGLE SUBCONTRACTOR TO PERFORM ALL OF OUR DATA CONVERSION
SERVICES, AND IF THIS SUBCONTRACTOR IS UNAVAILABLE, WE MAY EXPERIENCE PROJECT
DELAYS, INCREASED COSTS AND REDUCED PROFITS
We derived 18% of our revenues for 1998 and 25% of our revenues for 1999
from data conversion services. We do not perform these services ourselves;
instead, we subcontract these services to a third party and supervise its work.
We principally use one subcontractor, Analytical Surveys, Inc., to provide most
of our data conversion services. This subcontractor's ability to render services
to us may be limited by factors beyond our control, such as high turnover or
personnel shortages within its organization. If this subcontractor were not able
to render services to us for any reason, we may not be able to find suitable
replacements on a timely basis. Our loss of our subcontractor's services could
result in project delays and increased costs associated with switching
subcontractors during a project. Such delays or increased costs could harm our
revenues, cash flows and profits.
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OUR FAILURE TO MEET CLIENT EXPECTATIONS, OR DEFICIENCIES IN OUR PERFORMANCE
UNDER CERTAIN CONTRACTS, COULD RESULT IN LOSSES, CONTRACT TERMINATION, NEGATIVE
PUBLICITY OR FINANCIAL PENALTIES
We engineer, build and manage business systems and other applications that
are often critical to our clients' businesses. Any defects or errors in our work
product or any failure to meet our clients' expectations could result in any of
the following:
- delayed or lost revenues because our clients refuse to pay our fees, or
because they stop requesting our services;
- requirements to provide additional services to a client at no charge;
- negative publicity regarding us and our services, which could harm our
reputation and adversely affect our ability to attract and retain
clients; and
- claims for substantial damages against us, regardless of our
responsibility for such failure.
We cannot be sure that contractual provisions which attempt to limit our
liability for damages will protect us in the event we are sued. Furthermore, our
general liability insurance coverage may not cover one or more large claims, or
the insurer may disclaim coverage as to any future claim.
CERTAIN OF OUR GOVERNMENT CLIENTS HAVE THE CONTRACTUAL RIGHT TO AUDIT OUR
PERFORMANCE, AND THE RESULTS OF SUCH AN AUDIT MAY RESULT IN AN ADJUSTMENT TO OUR
REVENUES
Certain government entities with which we contract have the authority to
audit our performance. The scope of such audits could include inspections of
income statements, balance sheets, fee structures, collections practices,
service levels and our compliance with applicable laws, regulations and
standards. A future audit revealing material performance deficiencies would
result in a reduction in our revenues. Moreover, the consequent negative
publicity could harm our reputation among other governments with which we would
like to contract and adversely affect the growth of our business.
RISKS RELATED TO OUR MARKETS
OUR REVENUES AND PROFITABILITY WILL DECLINE IF OUR TARGET MARKETS EXPERIENCE
FINANCIAL DIFFICULTIES
Utilities have large fixed cost bases and often face limits in their
pricing flexibility, so an economic downturn could result in broad cancellations
of discretionary projects. Approximately 78% of our total revenues in each of
1998 and 1999 were derived from contracts with our utility clients. Local
governments derive a significant portion of their revenues from sales and other
taxes, which decline when the economy slows down. Approximately 22% of our total
revenues in each of 1998 and 1999 were derived from contracts with our local
government clients. Because public entities have little ability to increase
revenues by changing taxes in the short term, any decline in the amount of tax
collected by them could result in deferred or cancelled projects as these
clients attempt to preserve their core operations. As a result, these clients
may substantially reduce their information technology and related budgets.
THE MARKET FOR EBUSINESS TRANSFORMATION SERVICES IS NEW, WE CANNOT ASSURE YOU
THAT IT WILL DEVELOP AS QUICKLY OR AS FULLY AS WE ANTICIPATE, AND THE VIABILITY
OF THIS MARKET MAY DEPEND ON FACTORS BEYOND OUR CONTROL
We cannot be certain that a viable market for eBusiness transformation
services will emerge or be sustainable. If a viable and sustainable market for
our services does not develop, our revenues and the growth of our business could
be seriously harmed. Even if an eBusiness transformation services market
develops, we may not be able to differentiate our services from those of our
competitors, which could also adversely affect our revenues, operating margins
and the growth of our business. Industry analysts have made many predictions
concerning the growth of the Internet as a business medium. These predictions
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should not be relied upon. If the market for eBusiness transformation services
fails to develop, or develops more slowly than expected, our business may be
negatively impacted.
IF THE INTERNET INFRASTRUCTURE FAILS TO DEVELOP OR BE ADEQUATELY MAINTAINED,
CLIENTS MAY LOSE INTEREST IN OUR WEB-BASED SOLUTIONS
Our success depends in part on the increase in Internet usage generally and
in particular as a means for people and businesses to access and disperse
information electronically. The rate at which the general public and businesses
adapt to the use of the Internet as a viable medium may decrease for a number of
reasons, including:
- network infrastructure which cannot support increased Internet traffic
levels and increased bandwidth requirements;
- delays in the development of Internet-enabling technologies and
performance improvements;
- delays in the development or adoption of new standards and protocols
required to handle increased levels of Internet activity;
- delays in the development of the security and authentication technology
necessary to provide secure transmission of confidential information;
- changes in, or insufficient availability of, home or office access to
telecommunications services to support the Internet; and
- failure to meet the public's expectations in providing information and
services over the Internet.
If the public's use of the Internet declines, our clients will have less
interest in transforming their activities to eBusiness platforms, and their
demand for our services could significantly decrease, which would decrease our
revenues and force us to find new markets for our services.
GOVERNMENTAL REGULATION OF THE INTERNET MAY RESTRICT THE OPERATION AND GROWTH OF
OUR BUSINESS
There are currently few laws or regulations on Internet communications or
commerce. Laws and regulations may be adopted in the future, however, that
address Internet-related issues such as user privacy, pricing, and the
characteristics and quality of products and services. An increase in regulation
or the application of existing laws to the Internet could significantly increase
our cost of operations and harm our business.
CHANGES IN THE UTILITY REGULATORY ENVIRONMENT COULD AFFECT OUR CLIENTS AND HAVE
AN ADVERSE EFFECT ON OUR REVENUES
As the utility industry continues to deregulate, our utility clients are
faced with increasing competition from other utility providers, which we believe
has led to increased demand for our services. If governments were to decrease
the rate at which the industry is deregulating, or to reverse the trend of
deregulation altogether, the demand for our services could decline.
In addition, our utility clients are subject to extensive regulations under
laws of the United States and the states in which they offer services. The
failure of our utility clients to comply with these regulatory requirements
could lead to revocation, suspension or loss of licensing status, termination of
contracts and legal and administrative enforcement actions. If a client were to
suffer these consequences, its business would be adversely affected and that
could cause the client to cancel or delay discretionary expenditures such as our
work for the client, thereby reducing our revenues. The regulatory agencies
governing our utility clients' activities have substantial discretion in
evaluating the permissibility of our utility clients' current and future
activities. If a regulatory agency determines that a client's expenditures on
our services should not be made, or that the expenditures cannot be reflected in
the cost structure which underlies the client's rates to its end users, then the
client would reduce its use of our services, which would result in a reduction
in our revenues.
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RISKS RELATED TO OUR TECHNOLOGIES
WE MAY BE UNABLE TO INTEGRATE NEW TECHNOLOGIES AND INDUSTRY STANDARDS
EFFECTIVELY
We must continue to improve the responsiveness, functionality and features
of our solutions in accordance with industry standards and to address the
increasingly sophisticated technological needs of our clients. Our ability to do
this depends, in part, on our ability to:
- Adapt our Solutions to Developing Technologies. We must continue to
develop our technical expertise and, in the process, adapt our solutions
to new technologies which are designed to replace the current Internet
structure around which our solutions are based. These new technologies
may include the use of broadband-based Internet technologies and the
development and adoption of new standard generalized markup language
applications such as XML.
- Maintain Relationships with Suppliers. We use third party software and
applications to create our solutions. These third parties often have not
designed their products specifically for our or our clients' use, and
they could, with no notice to us, substantially modify their products. We
may not have the technical expertise to use these modified products, or
such products may no longer serve our purposes. Moreover, a third party
software or applications developer could choose to discontinue products
that are important to our solutions. If any such situations occurred, we
would have to develop new technological expertise, either internally or
by hiring additional professional staff, or find suitable substitutes. As
a result, our costs may increase and our profits may decrease.
- Continue to use Best-in-Class Technologies. We advertise that our
solutions incorporate what we believe to be industry "best-in-class"
third party products and components. If industry standards change too
quickly, or if new or unknown industry participants develop superior
products and components, we may not have the technological expertise
necessary to include these new "best-in-class" products and components in
our solutions.
We may not be successful in responding to the above technological and industry
challenges in a timely and cost-effective manner. If we are unable to integrate
new technologies and industry standards effectively, our revenues, profits and
cash flows may decrease. In addition, we may be required to hire and retain
additional personnel who have expertise in these areas, thus increasing our cost
structure.
IF WE ARE UNABLE TO EFFICIENTLY REUSE SOFTWARE CODE AND METHODOLOGIES, WE MAY
NOT BE ABLE TO DELIVER OUR SERVICES RAPIDLY AND COST-EFFECTIVELY
Our business model depends to a significant extent on our ability to reuse
software code and methodologies that we develop in the course of client
engagements. If we are unable to negotiate contracts which permit us to reuse
codes and methodologies used or developed during a client engagement, our
business model will be significantly affected and our ability to rapidly and
cost-effectively deploy solutions for our clients will be adversely affected. If
this occurs, we will lose some of the competitive advantages which we believe
our current business model enjoys.
Some of our contracts have granted to our clients the rights to specific
portions of the intellectual property developed in the course of that client's
project. As a result, in order to use that intellectual property in future
engagements we must license it back from the client. If we are unable to agree
on the terms of such a license, we may incur unanticipated expenses when
developing solutions for new clients.
WE MAY NOT BE ABLE TO FULLY PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS
Our success depends largely on the proprietary methodologies and other
intellectual property that we develop during the course of client engagements.
We rely upon a combination of trade secret, nondisclosure and other contractual
arrangements, and copyright and trademark laws to protect our proprietary
rights. None of our intellectual property has been patented. We enter into
confidentiality agreements with our employees, generally require that our
clients enter into such agreements, and limit
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access to and distribution of our proprietary information. However, we cannot
guarantee that the steps we have taken to protect our proprietary rights will be
adequate to deter misappropriation of our intellectual property. In addition, we
may not be able to detect unauthorized use of our intellectual property and take
appropriate steps to enforce our rights.
Existing trade secret and copyright laws afford us only limited protection.
Third parties may attempt to disclose, obtain or use our solutions or
technologies. Others may independently develop and obtain patents or copyrights
for technologies that are similar or superior to our technologies. If that
happens, we may need to license these technologies and we may not be able to
obtain licenses on reasonable terms, if at all.
Laws and enforcement practices relating to the protection of intellectual
property in many foreign countries are weaker and less reliable than in the
United States. Thus, as our business expands into foreign countries, risks
associated with protecting our intellectual property will increase.
WE MAY BE SUBJECT TO LITIGATION IF ANOTHER PARTY CLAIMS THAT WE HAVE INFRINGED
UPON ITS INTELLECTUAL PROPERTY RIGHTS
The tools, techniques, methodologies, programs and components we use to
provide our services may infringe upon the intellectual property rights of
others, although we are not currently aware of any such infringement. The U.S.
Patent and Trademark Office has only recently started granting patents in our
area of specialization, and can issue patents with broad claims on which our
services or software could infringe. Since U.S. patent applications are not
disclosed until the patent issues, we might invest to develop a portion of our
business and then discover that we cannot pursue this business without a license
from another party. Infringement claims generally result in significant legal
and other costs and may distract management from running our core business.
Royalty payments under licenses from third parties, if available, would increase
our costs. If a license were not available we might not be able to continue
providing a certain product or service, which would reduce our revenues.
Additionally, developing non-infringing technologies would increase our costs.
RISKS RELATED TO OUR GROWTH PLAN
FAILURE TO MANAGE OUR GROWTH MAY RESULT IN LOST REVENUES, DECREASED OPERATING
PROFITS AND POTENTIAL NET LOSSES
We have grown rapidly and continue to hire new employees and open offices
in new geographic markets. Our integration, consulting and other services'
revenues increased approximately 35% in 1998 and 42% in 1999. Our headcount has
grown from 166 as of January 1, 1998 to 243 as of December 31, 1999, and is
expected to grow significantly over the next 12 to 18 months. Some members of
our senior management team have only recently joined us. In addition, we
recently opened offices in Boston, Massachusetts; London, England and Brisbane,
Australia.
Our growth has placed, and will continue to place, a significant strain on
our management and our operating and financial systems. Our personnel, systems,
procedures and controls may be inadequate to support our future operations. In
order to accommodate the increased number of engagements, the number of clients
and the increased size of our operations, we will need to hire, train and
integrate into our business a large number of personnel to manage our current
engagements and to manage our operations going forward. We will also need to
improve our financial and management controls, reporting systems and operating
systems. We currently plan to redesign several internal systems, including our
recruiting and engagement management systems. We may encounter difficulties in
developing and implementing these new systems, which could seriously harm our
results of operations. In addition, our future success will depend in large part
on our ability to continue to set fixed-price fees accurately, maintain high
rates of employee utilization and maintain project quality, particularly if the
average size of our projects continues to increase.
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Our management has limited experience managing a business of our size and
no experience managing a public company. Managing a publicly traded company will
create additional responsibilities for our management, which may require us to
hire additional personnel.
OUR ABILITY TO ATTRACT, TRAIN AND RETAIN QUALIFIED EMPLOYEES IS CRUCIAL TO OUR
RESULTS OF OPERATIONS AND OUR FUTURE GROWTH
We expect to significantly expand our employee base in order to satisfy the
expected growth in our business. Accordingly, our future success depends in
large part on our ability to hire, train, motivate and retain highly skilled
employees. Any inability to hire, train and retain a sufficient number of
qualified employees could hinder our growth. Skilled personnel are in short
supply, and this shortage is likely to continue for some time. As a result,
competition for these people is intense, and we may have difficulty finding and
retaining qualified personnel. In addition, the stock option component of our
compensation package may be viewed as less valuable after this offering, which
may make it more difficult to hire employees after the offering than experienced
prior to this offering. Consequently, we may have more difficulty hiring
qualified employees after this offering than previously experienced. Moreover,
even if we are able to expand our employee base, the costs incurred to attract
and retain additional employees may reduce our operating margins.
OUR EFFORTS TO DEVELOP BRAND AWARENESS OF OUR SERVICES AND SOLUTIONS AND
INTRODUCE NEW SERVICE OFFERINGS MAY NOT BE SUCCESSFUL
An important element of our business strategy is to develop and maintain
widespread awareness of our Digital Utility and Government Gateway brand names.
Historically, we have not invested in promoting brand awareness and our early
efforts to do so may not be successful. Brand promotion is a long-term
investment and is not expected to result in short-term revenue increases. To
promote our brand names, we plan to increase our marketing expenses, which may
cause our operating margins to decline. Moreover, our brands may be closely
associated with the success or failure of some of our high-profile clients. As a
result, the failure or difficulties of one of our high-profile clients may
damage our brands. If we fail to successfully promote and maintain our brand
names or incur significant related expenses, our operating margins and our
growth may decline. In addition, we have recently introduced new Internet-based
customer relationship management service offerings. We cannot assure you that
these new service offerings or future new service offerings will meet client
expectations.
COMPETITION FROM BIGGER, MORE ESTABLISHED COMPETITORS WHO HAVE GREATER FINANCIAL
RESOURCES COULD RESULT IN PRICE REDUCTIONS, REDUCED PROFITABILITY AND LOSS OF
MARKET SHARE
Competition in the eBusiness services market is intense. If we fail to
compete successfully against current or future competitors, our business,
financial condition and operating results would be seriously harmed. We
currently compete against Internet service firms, systems integration firms,
management consulting firms, companies selling electronic commerce hardware,
software, services and solutions, and the internal IT departments of companies
seeking to engage in electronic commerce. We expect competition to persist and
intensify in the future. We compete against companies with longer operating
histories, larger client bases, larger professional staffs, greater brand
recognition and greater financial, technical, marketing and other resources than
we have. This may place us at a disadvantage in responding to our competitors'
pricing strategies, technological advances, advertising campaigns, strategic
partnerships and other initiatives. We cannot be certain that we will be able to
compete successfully with existing or new competitors. In addition, many of our
current and potential clients may decide for financial or other reasons to use
their internal information technology departments rather than retain our
services.
Although the industry expertise required to enter our market is high, the
technical barriers to entry are low, and we expect other companies to enter our
market. We expect that competition will intensify in the future. Some large
information technology consulting firms have announced that they will focus more
resources on business opportunities in our target markets. Because we contract
with our clients on a project-by-project basis, we compete for engagements at
each successive stage of the eBusiness transformation process. There is no
guarantee that we will be retained by our existing or future clients on later
stages of work.
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Current and potential competitors also have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address client needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge, reducing our market share
and thereby reducing our revenues and profits.
Historically, only a small percentage of our client engagements resulted
from a competitive bidding process or other request for proposal process. We
believe we have been successful in past competitive bid processes because of our
significant domain and business expertise and notwithstanding that we may not
have submitted the lowest priced proposal. However, if a significant number of
our current or prospective clients decided to adopt a general policy of
conducting a competitive bidding process, pricing considerations may become a
more significant competitive factor.
WE DEPEND ON OUR KEY PERSONNEL, AND THE LOSS OF CERTAIN KEY PERSONNEL MAY
ADVERSELY AFFECT OUR BUSINESS
We believe that our success will depend on the continued employment of our
executive management team, principally Glenn E. Montgomery, Jr., our Chairman
and Chief Executive Officer. This dependence is particularly important to our
business because personal relationships are a critical element of obtaining and
maintaining client engagements. The loss of one or more members of our executive
management team could seriously harm our future sales. In addition, if any of
these key employees joins a competitor or forms a competing company, some of our
clients might choose to use the services of that competitor or new company
instead of our own. Furthermore, our clients or other companies seeking to
develop in-house business capabilities may hire away some of our key employees.
This would not only result in the loss of key employees but could also result in
the loss of a client relationship or a new business opportunity.
OUR INTERNATIONAL EXPANSION PLANS MAY NOT SUCCEED
A key element of our strategy is to expand our operations into
international markets. We have recently opened offices in London, England and
Brisbane, Australia, and we currently have professionals operating in Canada,
Brazil, New Zealand, Korea, the United Kingdom, Australia and South Africa. We
have only limited experience in marketing, selling and delivering our services
internationally, and we may have difficulty managing our international
operations because of distance, language and cultural differences. If we do not
expand our revenues through these international operations, we will suffer
losses due to the costs of starting and operating internationally, and could
potentially lose the investment we make.
Other risks related to our international operations include:
- Currency Exchange Rates. If we are compensated for our services overseas
in U.S. dollars, we may need to convert these funds into the local
currency in order to pay our employees and certain foreign taxes.
Alternatively, if we are compensated for our services in the applicable
local currency, we may need to convert that currency into U.S. dollars in
order to pay U.S. taxes. In either event, fluctuations in currency
exchange rates could adversely affect our revenues and operating margins.
- Autonomy and Integration of International Offices. Currently our
operations are managed from our Colorado office, but as we continue to
expand we may grant an amount of autonomy to certain of our international
offices. If we grant such autonomy, we may experience difficulties
integrating the operations of international offices with our U.S.
operations. This problem could divert the attention of management and
cause unforeseen delays in the collection of revenues.
- Export of Technology. We may be subject to restrictions on the import and
export of sensitive U.S. technologies such as data security and
encryption technologies that we may wish to use in the solutions we
develop for our foreign clients. These restrictions may limit the amount
of business we are able attract in our international markets.
- Differing Regulatory Requirements. The legal and regulatory requirements
of countries in which we currently conduct business, or in which we wish
to conduct business in the future, may differ from those in the U.S.,
particularly in the areas of tax and labor laws. As a result, we may
incur additional legal expenses complying with these laws and
regulations. In addition, laws relating to
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the protection and enforcement of intellectual property rights in many
foreign countries are not as advanced as in the United States.
- Political and Economic Instability. Certain countries in which we conduct
business have experienced political and economic instability in the past,
and may continue to experience such instability in the future.
FUTURE ACQUISITIONS OR INVESTMENTS COULD DISRUPT OUR ONGOING BUSINESS, DISTRACT
OUR MANAGEMENT AND EMPLOYEES, INCREASE OUR EXPENSES AND ADVERSELY AFFECT OUR
BUSINESS
A portion of our future growth may be accomplished by acquiring existing
businesses, products or technologies. If we identify an appropriate acquisition
candidate, we may not be able to negotiate the terms of the acquisition
successfully, finance the acquisition, or integrate the acquired business,
products or technologies into our existing business and operations. Further,
completing a potential acquisition and integrating an acquired business may
cause significant diversions of management time and resources.
If we consummate one or more significant acquisitions in which the
consideration consists of stock or other securities, your ownership interest
could be significantly diluted. If we were to proceed with one or more
significant acquisitions in which the consideration included cash, we could be
required to use a substantial portion of our available cash, including proceeds
of this offering, to consummate such an acquisition. Acquisition financing may
not be available on favorable terms, or at all. In addition, we may be required
to amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would have an adverse effect on our
future operating results.
WE MAY BECOME SUBJECT TO LITIGATION IN CONNECTION WITH THE HIRING OF CERTAIN
EMPLOYEES
Some companies have adopted a strategy of suing or threatening to sue
former employees and their new employers for the alleged breach of an employment
agreement. As we hire new employees from our current or potential competitors,
we may become a party to one or more lawsuits involving the former employment of
an employee. Any future litigation against us or our employees, regardless of
the outcome, may result in substantial costs and expenses to us and may divert
management's attention away from the operation of our business.
WE MAY BE UNABLE TO ENFORCE THE CONFIDENTIALITY AND NON-COMPETITION RESTRICTIONS
IN SOME OF OUR EMPLOYEES' EMPLOYMENT AGREEMENTS IF THOSE EMPLOYEES LEAVE US
Our employees, including key technical personnel, may leave us to join our
competitors or start new businesses which may compete with us. Although members
of our executive management team and certain employees are generally subject to
confidentiality restrictions, and although certain members of our executive
management team are also subject to non-competition restrictions, we cannot
completely assure you that we will be able to legally enforce such restrictions
or otherwise prevent the unauthorized disclosure or use of our proprietary
knowledge, practices and procedures if such employees leave us.
WE MAY REQUIRE ADDITIONAL FINANCING
We may need to raise additional funds in the future in order to fund more
aggressive brand promotion or more rapid expansion, to develop new or enhanced
services, to respond to competitive pressures or to make acquisitions.
Additional financing may not be available on terms favorable to us, and may not
be available at all. If adequate funds are not available on acceptable terms, we
may be unable to fund our expansion, successfully promote our brand, take
advantage of acquisition opportunities, develop or enhance our services or
respond to competitive pressures, any of which could seriously harm our
business, results of operations and financial condition. If we raise additional
funds by issuing equity securities, the newly issued securities may have rights
superior to those of the common stock and stockholders may experience dilution
of their ownership interests. If we raise additional funds by issuing debt, we
may be subject to limitations on the payment of dividends.
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RISKS RELATED TO THIS OFFERING
OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR SHAREHOLDERS WILL RETAIN SIGNIFICANT
CONTROL OVER US AFTER THIS OFFERING, WHICH WILL ALLOW THEM TO INFLUENCE THE
OUTCOME OF MATTERS SUBMITTED TO THE SHAREHOLDERS FOR APPROVAL
Upon completion of this offering, our directors, executive officers and 5%
stockholders will own, in the aggregate, approximately % of our outstanding
common stock, or % if the underwriters exercise their over-allotment options
in full. As a result, these stockholders, acting together, will be able to
exercise substantial influence over all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions, such as acquisitions, and to block an unsolicited tender offer.
This concentration of ownership could have the effect of delaying, deferring or
preventing a change in control of our company or impeding a merger,
consolidation, takeover or other business combination which you, as a
stockholder, may otherwise view favorably. See "Principal and Selling
Stockholders."
WE EXPECT THE MARKET PRICE OF OUR COMMON STOCK TO BE VOLATILE, AND IT MAY DROP
UNEXPECTEDLY
Our initial public offering price will be determined through negotiations
among us, the selling stockholders and the representatives of the underwriters
based on factors that may not be indicative of future market performance. Our
initial public offering price may bear no relationship to the price at which our
common stock will trade upon completion of this offering. An active public
market for our common stock may not develop or be sustained after this offering,
and the market price could fall below the initial public offering price. If an
active public market for our common stock does not develop or is not sustained,
it may be difficult for you to sell your shares of common stock at a price that
is attractive to you.
The market price of our common stock after this offering may vary
significantly from the initial offering price in response to a number of
factors, some of which are beyond our control, including the following:
- changes in financial estimates or investment recommendations by
securities analysts relating to our stock;
- changes in market valuations of other electronic commerce software and
service providers or electronic businesses;
- announcements by us or by our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- loss of major clients;
- additions or departures of key personnel; and
- fluctuations in the stock market price and volume of traded shares
generally, especially fluctuations in the traditionally volatile
technology sector.
In the past, securities class action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources, which could seriously harm our business and the market price of
our common stock.
THE FUTURE SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK MAY NEGATIVELY AFFECT
OUR STOCK PRICE
The market price of our common stock could drop as a result of sales of a
large number of shares of our common stock in the market after this offering, or
the perception that such sales could occur. These factors also could make it
more difficult for us to raise funds through future offerings of our common
stock.
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There will be shares of common stock outstanding immediately after
this offering. All of the shares sold in this offering will be freely
transferable without restriction or further registration under the Securities
Act, except for shares purchased by our "affiliates" as defined in Rule 144 of
the Securities Act. The remaining 69,477,333 shares will be "restricted
securities" as defined in Rule 144. These restricted securities may be sold in
the future without registration under the Securities Act to the extent permitted
under Rule 144, Rule 701 or an exemption under the Securities Act. In addition,
persons holding an aggregate of 68,878,299 of these restricted securities after
the offering will have registration rights that could allow these holders to
sell all of their shares freely through a registration statement filed under the
Securities Act. In connection with this offering, holders of all shares of
restricted securities have agreed not to sell their shares without the prior
written consent of FleetBoston Robertson Stephens Inc. for a period of 180 days
from the date of this prospectus.
After this offering, we will have 14,231,152 shares of common stock
reserved for issuance under our stock option plan, of which options to purchase
6,346,472 shares are subject to currently outstanding options as of December 31,
1999. Following this offering, we intend to file a registration statement on
Form S-8 to register these shares.
BECAUSE WE ARE CURRENTLY UNABLE TO SPECIFY THE SPECIFIC USES TO WHICH A
SUBSTANTIAL PORTION OF THE NET PROCEEDS FROM THIS OFFERING WILL BE APPLIED, YOU
WILL BE RELYING ON THE JUDGMENT OF OUR MANAGEMENT REGARDING THE APPLICATION OF
THE PROCEEDS
After repaying outstanding indebtedness and making a payment to one of our
principal stockholders with a portion of the net proceeds of this offering, we
expect to use the remaining net proceeds from this offering of approximately
$ million for working capital and general corporate purposes, but we are
unable to identify the specific uses to which the remaining net proceeds will be
applied. Accordingly, our management will have broad discretion with respect to
the expenditure of the proceeds.
YOU WILL SUFFER SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK VALUE OF THE
COMMON STOCK YOU PURCHASE
The initial public offering price is expected to be substantially higher
than the pro forma net tangible book value per share of the outstanding common
stock immediately after the offering. Accordingly, based on an assumed initial
public offering price of $ per share, purchasers of common stock in this
offering will experience immediate and substantial dilution of approximately
$ in the net tangible book value of the common stock. In addition, investors
will incur additional dilution upon the exercise of approximately 6,346,472
outstanding stock options.
WE HAVE VARIOUS MECHANISMS IN PLACE TO DISCOURAGE TAKEOVER ATTEMPTS
Certain provisions of our restated certificate of incorporation and amended
bylaws may discourage, delay or prevent a change in control of our company that
a stockholder may consider favorable. These provisions include:
- authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
- a classified board of directors with staggered, three-year terms, which
may lengthen the time required to gain control of our board of directors;
- prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
- requiring super-majority voting to effect certain amendments to our
restated certificate of incorporation and amended bylaws;
- limitations on who may call special meetings of stockholders;
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- prohibiting stockholder action by written consent, thereby requiring all
actions to be taken at a meeting of the stockholders; and
- establishing advance notice requirements for nominations of candidates
for election to the board of directors or for proposing matters that can
be acted upon by stockholders at stockholder meetings.
In addition, Section 203 of the Delaware General Corporation Law may
discourage, delay or prevent a change in control of our company.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS; MARKET DATA
This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing forward-looking statements may be found in
the material set forth under "Summary," "Risk Factors," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Business" as
well as in this prospectus generally. We generally use words such as "believes,"
"intends," "expects," "anticipates," "plans," and similar expressions to
identify forward-looking statements. You should not place undue reliance on
these forward-looking statements. Our actual results could differ materially
from those expressed or implied in the forward-looking statements for many
reasons, including the risks described under "Risk Factors" and elsewhere in
this prospectus.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, they relate only to events as of the date on which
the statements are made, and we cannot assure you that our future results,
levels of activity, performance or achievements will meet these expectations.
This prospectus contains data related to the Internet professional services
industry and estimates regarding its size and growth. These market data have
been included in studies published by the market research firm of International
Data Corporation. These data include projections that are based on a number of
assumptions, including increasing worldwide business use of the Internet, the
growth in the number of Web access devices per user, the absence of any failure
of the Internet and the continued improvement of security on the Internet. If
any of these assumptions is incorrect, actual results may differ from the
projections based on those assumptions and these markets may not grow at the
rates projected by these data, or at all. The failure of these markets to grow
at these projected rates may harm our business and the market price of our
common stock.
17
<PAGE> 23
USE OF PROCEEDS
We estimate that the net proceeds to be received by us from the offering
will be approximately $ million, assuming an initial public offering price
of $ per share and after deducting estimated underwriting discounts and
commissions and expenses payable by us. If the underwriters' over-allotment
option is exercised in full, we estimate that the net proceeds to be received by
us will be approximately $ million. If the overallotment option is
exercised, we will not receive any proceeds from the sale of common stock to be
sold by the selling stockholders.
We intend to use certain of the proceeds we receive from this offering to
repay outstanding indebtedness under our revolving credit facility plus accrued
interest, which as of January 31, 2000, totaled approximately $22.4 million. See
"Certain Transactions -- 1999 Recapitalization." We also intend to use a portion
of the proceeds we receive from this offering to pay to InSight Capital Partners
certain fees due it. Based on the number of shares of common stock expected to
be outstanding upon consummation of this offering and assuming initial offering
price of $ per share, the fee payable to InSight Capital Partners will be
approximately $ million. See "Certain Transactions -- InSight Capital
Partners Transaction Fee."
We intend to use the remaining net proceeds we receive from this offering
for working capital and general corporate purposes, including advertising and
marketing our brands and expanding our sales, project management and marketing
staffs. Except for the repayment of outstanding indebtedness and the payment of
the fee to InSight Capital Partners, we have not identified any specific
expenditure plans with respect to the proceeds we will receive from this
offering and our management will have broad discretion in the application of the
net proceeds. A portion of the net proceeds may be used to acquire or invest in
complementary businesses, technologies, products or services or to invest in
geographic expansion. Although we are not contemplating any specific
acquisitions at this time and no portion of the net proceeds has been allocated
for any acquisition, we evaluate acquisition opportunities on an ongoing basis.
Pending use, we intend to invest the net proceeds in interest bearing,
investment-grade instruments, certificates of deposit or direct or guaranteed
obligations of the United States.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock. We do not
anticipate paying any cash dividend in the foreseeable future. We currently
intend to retain future earnings, if any, to finance operations and the
expansion of our business. Any future determination to pay cash dividends will
be at the discretion of our board of directors and will be dependent upon our
financial condition, operating results and capital requirements and other
factors that our board of directors deems relevant.
18
<PAGE> 24
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding shares
of our preferred stock into common stock that will occur upon
consummation of this offering; and
- on a pro forma as adjusted basis to reflect the sale of shares of
common stock by us in this offering, after deducting estimated
underwriting discounts and commissions and offering expenses, assuming an
initial public offering price of $ per share.
This information should be read together with our consolidated financial
statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term debt (net of deferred acquisition costs).......... $ 21,753 $ 21,753 $
Stockholders' equity (deficit):
Preferred Stock, $.001 par value; 75,000,000 shares
authorized; 41,978,689 shares issued and outstanding;
and no shares issued and outstanding pro forma and pro
forma as adjusted...................................... 42 --
Common Stock, $.001 par value; 125,000,000 shares
authorized; 27,498,644 shares issued and outstanding;
69,477,333 shares issued and outstanding pro forma; and
shares issued and outstanding pro forma as
adjusted............................................... 28 70
Additional paid-in capital................................ 46,864 46,864
Deferred compensation..................................... (5,397) (5,397)
Accumulated deficit....................................... (52,882) (52,882)
Accumulated other comprehensive income.................... 310 310
-------- -------- --------
Total stockholders' equity (deficit)................. (11,035) (11,035)
-------- -------- --------
Total capitalization.............................. $ 10,718 $ 10,718 $
======== ======== ========
</TABLE>
This table excludes the following:
- 6,346,472 shares issuable upon exercise of stock options outstanding as
of December 31, 1999; and
- 7,884,680 shares available for future grant or issuance under our stock
option plan.
19
<PAGE> 25
DILUTION
Our pro forma net tangible book value (deficit) as of December 31, 1999 was
$(11.0) million, or $(0.16) per share of common stock. Pro forma tangible book
value (deficit) per share equals our total tangible assets minus our total
liabilities, divided by the total number of shares of common stock outstanding
as of December 31, 1999, assuming conversion of all outstanding shares of our
preferred stock into shares of common stock upon closing of this offering. As of
December 31, 1999, our pro forma net tangible book value (deficit), as adjusted
for the sale by us of the shares in this offering, assuming an initial public
offering price of $ per share, and after deducting the estimated
underwriting discounts and commission and offering expenses, would have been
approximately $ million, or $ per share of common stock. This represents
an immediate increase in pro forma net tangible book value (deficit) of $
per share to existing stockholders and an immediate dilution of $ per share
to new investors purchasing shares in this offering. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $
Pro forma net tangible book value (deficit) per share at
December 31, 1999...................................... $
Increase per share attributable to this offering..........
Pro forma net tangible book value (deficit) per share after
this offering.............................................
--------
Dilution per share to new investors......................... $
========
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1999 to give effect to the automatic conversion of all outstanding shares of our
preferred stock into common stock upon the closing of this offering, the total
number of shares of common stock purchased from us, the total consideration paid
to us and the average price paid per share by the existing stockholders and by
new investors purchasing shares in this offering, assuming an initial public
offering price of $ per share:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
---------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... % $ % $
New investors.............................. $
----- ----- ----- -----
Total............................ 100.0% $ 100.0%
===== ===== ===== =====
</TABLE>
If the underwriters over-allotment option is exercised in full, the number
of shares of common stock held by existing shareholders will be reduced to
, or % of the total number of shares of common stock to be
outstanding after this offering, and the number of shares of common stock held
by new investors will increase to shares, or % of the total number of
shares of common stock to be outstanding after this offering. See "Principal and
Selling Stockholders."
The foregoing tables and calculations above exclude 6,346,472 shares of
common stock issuable upon exercise of options outstanding as of December 31,
1999 at a weighted average exercise price of $0.046 per share. New investors in
this offering will suffer further dilution to the extent that these options are
exercised. In addition, 7,884,680 shares of common stock are reserved for future
issuance under our stock option plan.
This offering will benefit our existing stockholders by creating a public
market for our common stock.
20
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data as of December 31, 1998 and
December 31, 1999 and for each of the years in the three-year period ended
December 31, 1999 come from our consolidated financial statements which have
been audited by Grant Thornton LLP, our independent public accountants, and are
included elsewhere in this prospectus. The selected consolidated financial data
as of and for the years ended December 31, 1995 and 1996 come from our
consolidated financial statements which are not included in this prospectus. The
data set forth below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and related notes appearing elsewhere in this
prospectus. Historical results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------
1995(1) 1996(1)(2) 1997 1998 1999
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Integration, consulting and other services........ $ 19,966 $ 27,406 $ 21,517 $ 28,957 $ 41,029
Subcontractor and other revenue................... 38,014 24,336 19,339 18,458 25,581
---------- ---------- ---------- ---------- ----------
Total revenues................................ 57,980 51,742 40,856 47,415 66,610
Cost of revenues:
Cost of integration, consulting and other
services........................................ 20,334 16,608 17,326 17,564 22,296
Cost of subcontractor and other revenue........... 20,402 12,731 13,010 13,959 20,205
---------- ---------- ---------- ---------- ----------
Total cost of revenues........................ 40,736 29,339 30,336 31,523 42,501
---------- ---------- ---------- ---------- ----------
Gross profit........................................ 17,244 22,403 10,520 15,892 24,109
Selling, general, and administrative expenses....... 23,027 26,397 11,574 12,123 16,855
Recapitalization costs.............................. -- -- -- -- 7,098
Employee stock compensation expense................. -- -- 8 12 2,231
Consulting agreement termination costs.............. -- -- -- -- 3,920
Loss from disposal of assets........................ -- -- -- 93 --
Research and development............................ 5,124 5,925 173 -- --
Gain (loss) from restructuring...................... -- 7,901 (1,218) (95) --
Loss on impaired assets............................. -- 8,459 -- -- --
---------- ---------- ---------- ---------- ----------
Total operating expenses...................... 28,151 48,682 10,537 12,133 30,104
---------- ---------- ---------- ---------- ----------
Operating income (loss)............................. (10,907) (26,279) (17) 3,759 (5,995)
Other income (loss):
Net interest income (expense)..................... (154) (474) (1,088) 57 (602)
---------- ---------- ---------- ---------- ----------
Income (loss) before provision (benefit) for
income taxes.................................... (11,061) (26,753) (1,105) 3,816 (6,597)
Income tax benefit.................................. -- -- -- 1,861 1,347
---------- ---------- ---------- ---------- ----------
Net income (loss)................................... (11,061) (26,753) (1,105) 5,677 (5,250)
========== ========== ========== ========== ==========
Preferred stock adjustment.......................... -- -- -- -- 20,816
---------- ---------- ---------- ---------- ----------
Net income (loss) attributable to common
shareholders...................................... $ (11,061) $ (26,753) $ (1,105) $ 5,677 $ 15,566
========== ========== ========== ========== ==========
Net income (loss) per share:
Basic net income (loss) per share................. $ (0.38) $ (0.69) $ (0.03) $ 0.19 $ 0.54
========== ========== ========== ========== ==========
Diluted net income (loss) per share............... $ (0.30) $ (0.57) $ (0.03) $ 0.12 $ 0.25
========== ========== ========== ========== ==========
Weighted average common shares outstanding:
Basic average shares.............................. 29,418,240 38,924,330 32,468,695 30,270,735 28,857,030
========== ========== ========== ========== ==========
Diluted average shares............................ 36,772,868 46,816,161 40,936,900 47,543,703 61,411,230
========== ========== ========== ========== ==========
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................... $ 2,918 $ 1,755 $ 2,092 $ 4,958 $ 1,596
Working capital (deficit)........................... (4,638) (12,411) (8,666) (490) 5,932
Total assets........................................ 42,253 23,861 13,511 17,977 26,707
Long-term debt (net of deferred acquisition
costs)............................................ 695 5,201 4,735 -- 21,753
Total stockholders' equity (deficit)................ (11,701) (44,914) (46,153) (40,454) (11,035)
</TABLE>
- ---------------
(1) Results for 1995 and 1996 include revenues from our discontinued GDS
software product line. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(2) Our 1996 financial statements were restated for the write-off of goodwill.
No opinion was expressed on the restated financial statements.
21
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements included
in this prospectus. This discussion includes forward-looking statements that
involve risks and uncertainties. Please see "Cautionary Note Regarding Forward
Looking Statements; Market Data."
OVERVIEW
We provide professional services that enable utilities and local
governments to implement eBusiness solutions that transform their organizations
from paper-based operations into digital business environments. Our solutions
provide our clients with the ability to integrate data from various sources in
order to provide real-time responses to internal and external information
requirements.
Utility Graphics Consulting Corporation, the predecessor of Convergent
Group, was founded in 1985. UGC provided both automated mapping and facilities
management services and geographic information systems (GIS) consulting
services. In 1994, UGC merged with Graphic Data Systems Corporation, a GIS
software product company, to form Convergent Group. Following the merger, we
initially pursued opportunities in the GIS market, developing and marketing
Graphic Data Systems' computer-aided design and GIS products, which we called
"GDS" software. However, after two years of unsuccessful operations, we
discontinued operations of the GDS software group in 1996. Since that time we
have focused solely on the development of information technology solutions for
the utility and local government markets.
We derive the majority of our revenue from our professional services which
include consulting and software integration. Our consulting services consist of
evaluating existing information systems, recommending solutions and components
including hardware and software to transition to real-time information digital
environments, analyzing the cost and benefit, developing the strategies to
implement digital environments and training personnel to transition the change.
Integration services consist of developing specific software code or employing
our previously developed code, which is our intellectual property, to integrate
new software into new or existing systems. These professional services are
included in integration, consulting and other services revenue.
Subcontractor and other revenue includes data conversion services and
computer hardware and software revenue, each of which can be a portion of the
solution we provide our client. Data conversion has historically been performed
principally through a single subcontractor whom we manage as part of delivering
our solutions for our clients. We have recently begun using several other
subcontractors for new client engagements. We act as a value added reseller for
some computer hardware and software manufacturers. We expect revenue from data
conversion services to decline in future years as a percent of our overall
revenues.
We expect that we will derive an increasing percentage of our revenues from
consulting and integration services in future periods. We provide most of our
hardware and software procurement and data conversion services during the
earlier stages of a client engagement, and once we have completed these services
for a client, the client's further requirements for these services are
substantially lower. Thus, when existing clients retain us for subsequent
projects, it will increasingly be to provide consulting and integration software
and eBusiness services.
We derive revenues from our professional services through fixed-price,
fixed-time contracts, obtained mainly on a non-competitive bid basis. To
determine our fixed price, we first evaluate a client's current information
technology resources and its projected requirements. We then prepare a detailed
scope of work that addresses the client's stated requirements. After the client
approves the project, we determine the costs of the various project components,
including those for professional services, hardware, software and data
conversion. These costs are then reviewed internally by our pricing committee,
and the completed contract is delivered to the client for approval. Under most
contracts we require that the client pay a project initiation fee to cover the
mobilization of the project team. Typically, project initiation fees are
22
<PAGE> 28
charged in connection with projects which include a significant amount of
consulting and/or integration costs. We recognize revenue from fixed-price
contracts on the basis of the estimated percentage-of-completion of services
rendered or when the services have been performed and accepted, and losses, if
any, are accrued when they become known and/or are reasonably determinable.
Clients are generally invoiced on a monthly basis with payment due in 30 days.
Our projects vary in size and scope. In 1998, our five largest clients
accounted for approximately 54% of our revenues, with Cinergy Corp. accounting
for approximately 20%, Alliant Energy Corporation accounting for approximately
15% and Citizens Utilities accounting for approximately 10% of revenues during
this period. In 1999, our five largest clients accounted for approximately 49%
of our revenues, with Cinergy accounting for approximately 18% and Alliant and
Citizens Utilities, each accounting for approximately 9% of revenues during this
period. We expect that our client base will continue to expand and that the
concentration of revenues among a small number of large clients will decrease.
This decrease in concentration is a result of both an industry trend toward
shorter project life cycles and our diversification in markets outside the
United States, particularly in Europe, the Asia-Pacific region, and South
America. Our current average project term is approximately two years. We expect
that this period will decrease to twelve to eighteen months in the future as a
result of the implementation of our rapid performance modeling methodology. In
addition, as a result of rapid changes in the software and information
processing technology industries, our clients are replacing their information
technology systems more frequently than in the past, thereby shortening their
requirements for delivery and completion.
Our most significant operating expenses for integration, consulting and
other services consist of project personnel costs, including compensation,
benefits and project-related travel expenses. We expect to increase the number
of professional staff significantly during 2000 and in future years to support
our expected revenue growth in this area. As a result of this growth, we expect
our direct cost of integration, consulting and other services revenue to
increase significantly. In addition, we expect the personnel cost of each
professional staff member to increase as the solutions we deliver become more
complex and require our staff members to obtain additional training. Members of
our professional staff are highly trained and we expect that salary and benefit
costs will increase as we strive to maintain our competitive position. Although
these direct costs are expected to increase, we expect our gross profit margins
on our integration, consulting and other services revenue to increase due to
improved delivery efficiencies achieved through the use of our internally
developed software solutions and our rapid performance modeling methodology.
Expenses related to subcontractor and other revenue include software,
hardware and subcontractor costs. We expect costs of software and hardware to
decrease as a percentage of revenue. Data conversion services are labor
intensive and generate low gross profit margins. We plan to improve our profit
margins on these services by better managing our subcontractors and by engaging
additional subcontractors. Data migration services, which will be included in
integration consulting and other services revenues, are less labor intensive
than data conversion services but require a higher degree of technical skill. As
a result of our personnel growth and accompanying enhanced internal
capabilities, we believe that we can realize higher profit margins on data
migration services than on data conversion services by performing these services
internally.
Selling, general and administrative expenses are expected to increase
during 2000 due to the opening of new sales and marketing offices in the United
Kingdom and Australia, each of which were opened during the first quarter of
2000. Selling expenses are also expected to increase due to our efforts to
develop brand name recognition through the aggressive marketing of our Digital
Utility and Government Gateway solutions. In addition, administrative costs are
expected to increase as a percentage of revenue as we hire additional management
personnel to manage our growth.
Due to the historic lack of profitability from the sales of our GDS
software product and the significant research and development costs related to
its continuing development, we discontinued all further development and sale of
the product in December 1996, recording a restructuring charge of $16.3 million
relating to asset write-offs and obligations in excess of expected revenue. We
now have no material revenues or expenses associated with this software product.
23
<PAGE> 29
In August 1999, we completed a recapitalization in which we repurchased all
of the preferred and common stock previously held by our two largest
shareholders. We raised $45.5 million in the recapitalization through the sale
of preferred equity, and obtained a $25.0 million revolving credit facility,
from which $22.0 million was borrowed in connection with the recapitalization.
Total recapitalization expenses of $13.2 million included $3.9 million paid to
terminate a consulting agreement with a former stockholder, approximately $1.0
million used to pay cash bonuses, $2.2 million of non-cash employee stock
issuance expenses, $2.4 million used to terminate existing employment
agreements, $3.5 million used to retire performance obligations and $200,000
used to pay legal, accounting and termination fees. These expenses represented a
one time charge against our operating income. In connection with the
recapitalization, we issued $1.4 million of stock and stock options. The stock
and options were issued as an incentive to our employees and we recorded the
issuance as a non-cash operating expense. These options will carry future
amortization charges of approximately $1.0 million per year for each of the next
5 years. In addition, as a result of the granting of options which vest over the
next five years based on the achievement of performance targets established by
our board of directors, there could be additional non-cash compensation expense
of up to $475,000 over the next five years. For further information regarding
the recapitalization, see "Certain Transactions -- 1999 Recapitalization."
We plan to continue to expand our operations by hiring additional
professional staff members and other employees, and adding new offices, systems
and other infrastructure. The resulting increase in operating expenses would
harm our operating results if our revenues do not increase to support such
expenses. Based on all of the foregoing, we believe that our quarterly revenue
and operating results are likely to vary significantly in the future and that
period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied on as indications of future performance.
24
<PAGE> 30
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues of certain
consolidated financial data for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Integration, consulting and other services....... 34.4% 53.0% 52.7% 61.1% 61.6%
Subcontractor and other revenue.................. 65.6 47.0 47.3 38.9 38.4
----- ----- ----- ----- -----
Total revenues........................... 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of integration, consulting and other
services...................................... 35.1 32.1 42.4 37.0 33.5
Cost of subcontractor and other revenue.......... 35.2 24.6 31.8 29.4 30.3
----- ----- ----- ----- -----
Total cost of revenues................... 70.3 56.7 74.2 66.4 63.8
----- ----- ----- ----- -----
Gross profit....................................... 29.7 43.3 25.8 33.6 36.2
Expenses:
Selling, general, and administrative expenses.... 39.7 63.6 28.3 25.6 25.3
Recapitalization costs........................... -- -- -- -- 14.0
Employee stock compensation expense.............. -- -- -- -- 3.3
Consulting agreement termination costs........... -- -- -- -- 5.9
(Gain) loss from restructuring................... -- 11.6 (3.0) -- --
Loss from disposal of assets..................... -- 3.7 -- -- --
Research and development......................... 8.8 11.5 -- -- --
----- ----- ----- ----- -----
Total expenses........................... 48.5 90.4 25.3 25.6 48.5
----- ----- ----- ----- -----
Operating income (loss).................. (18.8) (47.1) 0.5 8.0 (9.0)
Other income (loss):
Interest income (expense)........................ (0.2) (0.9) (2.7) 0.1 (0.9)
Income (loss) before provision (benefit)
for income taxes....................... (19.0) (48.0) (2.2) 8.1 (9.9)
----- ----- ----- ----- -----
Income tax benefit....................... -- -- -- 3.9 2.0
----- ----- ----- ----- -----
Net income (loss)........................ (19.0) (48.0) (2.2) 12.0 (7.9)
===== ===== ===== ===== =====
Preferred stock adjustments........................ -- -- -- -- 31.3
----- ----- ----- ----- -----
Net income (loss) available to common
stockholders........................... (19.0)% (48.0)% (2.2)% 12.0% 23.4%
===== ===== ===== ===== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1998 AND 1999
Revenues. Revenues increased 40.5% from $47.4 million for the year ended
December 31, 1998 to $66.6 million for the year ended December 31, 1999. This
increase was due to growth in both integration, consulting and other services
revenue and subcontractor and other revenue. Revenues from integration,
consulting and other services increased 41.7% from $29.0 million for the year
ended December 31, 1998 to $41.0 million for the year ended December 31, 1999.
Revenues from subcontractors and other revenue increased 38.6% from $18.5
million for the year ended December 31, 1998 to $25.6 million for the year ended
December 31, 1999. These increases reflect an increase in the number and size of
our client engagements.
Gross Profit. Gross profit increased 51.7% from $15.9 million for the year
ended December 31, 1998 to $24.1 million for the year ended December 31, 1999.
Gross profit from integration, consulting and other services revenue increased
64.4% from $11.4 million for the year ended December 31, 1998 to $18.7 million
for the year ended December 31, 1999. Our gross profit margin from integration,
consulting and other services revenue increased from 39.3% for the year ended
December 31, 1998 to 45.7% for the
25
<PAGE> 31
year ended December 31, 1999. Each of these increases reflects the
implementation during 1999 of our Rapid Performance Modeling project approach,
which decreased the cost of delivering our services. Gross profit from
subcontractor and other revenue increased 19.5% from $4.5 million for the year
ended December 31, 1998 to $5.4 million for the year ended December 31, 1999.
This increase was due primarily to the increase in the number and size of our
client engagements, as well as increased production against subcontractor
backlog. The gross profit margin on subcontractor and other revenue decreased
from 24.4% for the year ended December 31, 1998 to 21.0% for the year ended
December 31, 1999. This decrease was due to a shift in revenue from higher
margin hardware and software sales to lower margin subcontractor revenue.
Operating Expenses. Excluding $13.2 million in costs associated with our
recapitalization, total operating expenses increased 38.9% from $12.1 million
for the year ended December 31, 1998 to $16.9 million for the year ended
December 31, 1999. This increase reflected an increase in selling, general and
administrative expense resulting from expenses incurred in connection with our
initiation of customer relationship management services, the opening of a new
office in Boston, Massachusetts, and hiring additional management, marketing and
technical personnel to support the growth in our business.
Net Interest Income (Expense). Net interest income of $100,000 for the year
ended December 31, 1998 compared to net interest expense of $600,000 for the
year ended December 31, 1999. This decrease was due to the interest payable on
the $22.0 million borrowed under our revolving credit loan facility in
connection with our recapitalization.
Income (Loss) Before Taxes. Our income (loss) before provision (benefit)
for income taxes decreased from $3.8 million for the year ended December 31,
1998 to ($6.6) million for the year ended December 31, 1999. Excluding costs
associated with our recapitalization, income before taxes would have increased
74.3% from $3.8 million for the year ended December 31, 1998 to $6.7 million for
the year ended December 31, 1999.
Income Tax Benefit. The income tax benefit was $1.9 million for the year
ended December 31, 1998, compared to an income tax benefit of $1.3 million for
the year ended December 31, 1999. Income tax benefit is recorded to the extent
we expect to realize a tax benefit from the use of our net operating losses in
future periods.
At December 31, 1999 we had net operating loss carryforwards for U.S.
federal income tax purposes of $33.1 million which expire at various dates
between 2008 and 2019. As a result of limitations placed on utilization of these
net operating loss carryforwards by Section 382 of the Internal Revenue Code,
our utilization of these net operating loss carryforwards will be limited to
approximately $3.8 million per year. We also had approximately $7.0 million of
foreign net operating loss carryforwards, principally resulting from our former
operations in the United Kingdom. These net operating losses carry forward
indefinitely and will be available to offset future operating profits, if any,
in the United Kingdom.
Net Income (Loss). We incurred a net loss of $5.3 million for the year
ended December 31, 1999, as compared to net income of $5.7 million for the year
ended December 31, 1998. Excluding the costs associated with our
recapitalization (net of tax benefits), we would have realized net income of
$8.0 million in 1999. As a result of our repurchase in the recapitalization of
our previously outstanding preferred stock at less than its redemption value, we
also recorded in 1999 a one-time adjustment of $20.8 million.
YEARS ENDED DECEMBER 31, 1997 AND 1998
Revenues. Revenues increased 16.1% from $40.9 million for the year ended
December 31, 1997 to $47.4 million for the year ended December 31, 1998,
reflecting an increase in integration, consulting and other services revenues of
34.6% from $21.5 million for the year ended December 31, 1997 to $29.0 million
for the year ended December 31, 1998. The increase in integration, consulting
and other services revenue was due to an increase in the number and size of our
client engagements and an increase in the scope of our engagements.
Subcontractor and other revenue decreased 4.6% from $19.3 million for
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the year ended December 31, 1997 to $18.5 million for the year ended December
31, 1998. This decrease was due primarily to a decrease in third-party hardware
and software sales.
Gross profit. Gross profit increased 51.1% from $10.5 million for the year
ended December 31, 1997 to $15.9 million for the year ended December 31, 1998.
This increase was due primarily to an increase in gross profit from integration,
consulting, and other services revenue. Gross profit from integration,
consulting and other services revenue increased 172% from $4.2 million for the
year ended December 31, 1997 to $11.4 million for the year ended December 31,
1998. Our gross profit margin on integration, consulting and other services
revenue increased from 19.5% for the year ended December 31, 1997 to 39.3% for
the year ended December 31, 1998. These increases were primarily due to the
absence in 1998 of costs incurred in 1997 for project rework required as a
result of the discontinuance of our GDS software product group in 1996. As part
of the discontinuance, we transitioned our clients, at our expense, from GDS
software to compatible third-party software. This replacement and rework was
substantially completed during 1997. Gross profit from subcontractor and other
revenue decreased 28.9% from $6.3 million for the year ended December 31, 1997
to $4.5 million for the year ended December 31, 1998. The gross profit margin on
subcontractor and other revenue decreased from 32.7% for the year ended December
31, 1997 to 24.4% for the year ended December 31, 1998. These decreases reflect
a growth in subcontractor revenue, which provides a lower gross margin than does
other revenue.
Operating Expenses. Operating expenses increased 15.1% from $10.5 million
for the year ended December 31, 1997 to $12.1 million for the year ended
December 31, 1998. Operating expenses for each of the years ended December 31,
1998 and 1997 include reversals of $100,000 and $1.2 million, respectively, of
the restructuring reserve established in 1996 in connection with the
discontinuance of our GDS software product group. The restructuring reserve was
reversed primarily during 1997 to reflect the sale of assets associated with our
discontinued GDS product line. See Note M to the Notes to Consolidated Financial
Statements. There was no restructuring reserve balance remaining at December 31,
1998. Excluding the effect of the reversals, operating expenses increased 4.0%
from $11.8 million for the year ended December 31, 1997 to $12.2 million for the
year ended December 31, 1998. This increase was due primarily to a 4.7% increase
in selling, general and administrative expenses from $11.6 million for the year
ended December 31, 1997 to $12.1 million for the year ended December 31, 1998.
This increase resulted from the increase in the number of our sales, marketing
and administrative employees and related personnel costs.
Net Interest Income (Expense). Net interest expense of $1.1 million for the
year ended December 31, 1997 compared to net interest income of $100,000 for the
year ended December 31, 1998. This increase reflected the elimination of
interest expense on approximately $4.7 million of long-term debt which was
converted into shares of our previously outstanding preferred stock. See Note H
to the Notes to Consolidated Financial Statements.
Income (Loss) Before Taxes. Our income (loss) before benefit for income
taxes increased by $4.9 million from ($1.1) million for the year ended December
31, 1997 to $3.8 million for the year ended December 31, 1998. This increase was
due primarily to improved gross profit from integration, consulting, and other
services revenue.
Income Tax Benefit. The income tax benefit was $1.9 million for the year
ended December 31, 1998. No income tax benefit was recorded for the year ended
December 31, 1997. Income tax benefit is recorded to the extent we expect to
realize a tax benefit from the use of our net operating losses in future
periods.
Net Income (Loss). We realized net income of $5.7 million for the year
ended December 31, 1998, an increase of $6.8 million over a net loss of ($1.1)
million for the year ended December 31, 1997. This increase is due primarily to
an increase in gross profits of $5.4 million, a reduction in interest expense of
$1.1 million, and our income tax benefit recorded for the year ended December
31, 1998.
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QUARTERLY OPERATIONS DATA
The following table sets forth certain unaudited quarterly operations data
for 1998 and 1999. In our opinion, this data reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the data. The results of operations for any quarter are not
necessarily indicative of the results of operations for a full year or any
future period. We expect that our quarterly operating results to vary
significantly in future periods. See "Risk Factors -- Risks Related to our
Operating Results."
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1998 1999 1999
--------- -------- ------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Integration, consulting and
other services........... $ 6,025 $ 7,280 $ 7,471 $8,181 $9,283 $10,366
Subcontractor and other
revenue.................. 4,233 3,567 5,170 5,488 5,526 5,936
-------- -------- -------- ------ ------ -------
Total revenues....... 10,258 10,847 12,641 13,669 14,809 16,302
Cost of revenues:
Cost of integration,
consulting and other
services................. 3,721 4,244 4,144 5,455 5,153 5,865
Cost of subcontractor and
other revenue............ 3,459 3,004 3,493 4,003 4,345 4,719
-------- -------- -------- ------ ------ -------
Total cost of
revenues........... 7,180 7,248 7,637 9,458 9,498 10,584
-------- -------- -------- ------ ------ -------
Gross profit................. $ 3,078 $ 3,599 $ 5,004 $4,211 $5,311 $ 5,718
<CAPTION>
QUARTERS ENDED
----------------------------
SEPTEMBER 30, DECEMBER 31,
1999 1999
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Integration, consulting and
other services........... $10,724 $10,656
Subcontractor and other
revenue.................. 6,925 7,194
------- -------
Total revenues....... 17,649 17,850
Cost of revenues:
Cost of integration,
consulting and other
services................. 5,600 5,678
Cost of subcontractor and
other revenue............ 5,731 5,410
------- -------
Total cost of
revenues........... 11,331 11,088
------- -------
Gross profit................. $ 6,318 $ 6,762
</TABLE>
We do not believe our business is seasonal. However, we experienced a
slight decrease in our integration, consulting and other services revenue during
the fourth quarter of 1999 due to downtime resulting from the relocation of our
operations in October 1999.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations and investments in property and equipment
primarily through the sale of equity securities, bank borrowings, capital lease
financings and cash generated through operations.
Cash provided by (used in) operating activities decreased from $3.9 million
for the year ended December 31, 1998 to ($12.7) million for the year ended
December 31, 1999. This decrease resulted from our net loss of $5.3 million for
1999 compared to our net income of $5.7 million in 1998 and an increase in
receivables and unbilled revenues generated as a result of our revenue growth.
Cash provided by operating activities increased from $2.7 million for the year
ended December 31, 1997 to $3.9 million for the year ended December 31, 1998.
This increase resulted from the decrease in cash required to satisfy severance,
committed office lease, and equipment rental expenses associated with the
discontinuance of our GDS software product group.
Net cash provided by (used in) financing activities increased from a
nominal amount for the year ended December 31, 1998 to $11.1 million for the
year ended December 31, 1999. This increase resulted from net borrowings on our
revolving credit line of $22.0 million, offset by distributions to shareholders
of $7.3 million in connection with our recapitalization. Net cash provided by
(used in) financing activities decreased from ($1.8) million for the year ended
December 31, 1997 to a nominal amount for the year ended December 31, 1998. This
decrease was due to cash payments in 1997 used to repay both the $1.0 million
outstanding obligation on our then existing line of credit and the $800,000
outstanding in connection with certain other debt obligations.
Our capital expenditures were $1.8 million for the year ended December 31,
1999, $1.0 million for the year ended December 31, 1998 and $600,000 for the
year ended December 31, 1997. Approximately $200,000 of capital expenditures
during 1999 were used to replace or upgrade existing property and equipment.
Additional expenditures in 1999 were used to purchase new property and equipment
needed as a result of the increase in personnel, the addition of new operating
and administrative hardware and
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software systems and the opening of additional offices. Capital expenditures for
2000 are expected to be approximately $5.0 million. The majority of capital
expenditures for 2000 are projected to cover the purchase of additional software
and hardware for employees we expect to hire during the year.
Cash and cash equivalents decreased from $5.0 million for the year ended
December 31, 1998 to $1.6 million for the year ended December 31, 1999. This
decrease resulted from cash expended to complete our recapitalization, including
$3.9 million used to terminate the consulting agreement.
In connection with our August 1999 recapitalization, we entered into a
Revolving Credit Loan Agreement with Fleet Bank which provides a line of credit
of up to $25.0 million. We borrowed $22.0 million under the Agreement during
1999 to partially fund the purchase of our previously outstanding Series A and
Series B Preferred Stock and Class A Common Stock. At our election, interest on
borrowings under this credit facility are based on either the LIBOR rate plus
2.5% or the prime rate plus 0.75%. As of December 31, 1999, $20.0 million of our
outstanding balance bears interest under the LIBOR rate option, and the
remaining $2.0 million bears interest under the prime rate option. The effective
blended interest rate on borrowings at December 31, 1999 was 8.45%. The
Agreement includes covenants relating to the maintenance of certain financial
ratios, including minimum interest coverage, debt service and current assets
ratios and limitations on additional debt. We were in compliance with all
covenants at December 31, 1999. We will use a portion of the net proceeds from
this offering to repay amounts due under the Agreement. Also in connection with
the recapitalization, we issued $44.9 million, net of issuance costs, of
convertible preferred stock to fund the purchase of our Series A and Series B
Preferred Stock and Class A Common Stock.
We believe that cash provided from operations, borrowings available under
our revolving credit loan facility or a new credit facility, and the net
proceeds of this offering, will be sufficient to meet working capital and
capital expenditure requirements for at least the next twelve months.
Thereafter, we may need to raise additional funds through public or private
financing, or make other arrangements to fund our operations and potential
acquisitions, if any. We cannot assure you that any such financings or other
arrangements will be available in amounts or on terms acceptable to us or at
all, and any such financings or arrangements could place operating or other
restrictions on us. Our inability to raise capital when needed could seriously
harm the growth of our business and results of operations. If additional funds
are raised through the issuance of equity securities, the percentage ownership
of our stockholders would be reduced. Furthermore, these equity securities could
have rights, preferences or privileges senior to those of our common stock.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded
to accept or recognize only two-digit entries in the date code field. However,
these systems and software products now need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. While computer systems
and software used by many utilities and local governments have been upgraded to
comply with these year 2000 requirements, existing systems and software at some
of these entities may still need to be upgraded to comply with these year 2000
requirements or risk system failure or miscalculations which could cause
disruptions of normal business activities.
As of the date of this prospectus, we have not experienced any year 2000
problems and are not aware of any material 2000 problems experienced by our
clients or potential clients.
We funded our year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We currently provide our services to clients located in North America, and
to a lesser extent, Europe, South America and the Asia-Pacific region. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
As all
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of our contracts with clients currently provide that payments to us be made in
U.S. dollars, a strengthening of the dollar could make our services less
competitive in foreign markets. We do not expect any material adverse effect on
our consolidated financial position, results of operations or cash flows due to
movements in any specific foreign currency. We currently do not use financial
instruments to hedge foreign denominated operating expenses, but we intend to
assess the need to utilize financial instruments to hedge currency exposures on
an ongoing basis. We do not enter into derivative or other financial instruments
for trading or speculative purposes. Our interest income is sensitive to changes
in the general level of U.S. interest rates, particularly since the majority of
our investments are in short-term instruments. Due to the short-term nature of
our investments, we believe that there is no material risk exposure. Our long
term debt bears interest at variable rates based on LIBOR or the prime rate. As
a result, interest rate changes generally do not affect the fair market value of
our variable rate debt but do impact future earnings and cash flows, assuming
other factors are held constant.
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BUSINESS
OVERVIEW
We are a leading provider of professional services that enable our utility
and local government clients to implement Internet-based eBusiness solutions. We
combine our use of existing and emerging digital technologies with our business
expertise in the utility and local government sectors to deliver solutions that
address our clients' mission-critical business problems. Our eBusiness
transformation solutions help our clients to integrate data from various
isolated sources to create a single, Web-based point of entry through which
internal decision-makers, business partners, suppliers, customers and
constituents can access business information on a real-time basis. We design our
solutions to help our clients increase revenues, reduce costs, improve customer
services, ensure service reliability, improve resource management and exploit
their information assets.
We work with our clients through all phases of their eBusiness
transformation process. Throughout this process we:
- Engineer -- with our client's input, an information technology
infrastructure and internal business processes that tailor our
proprietary Digital Utility and Government Gateway eBusiness frameworks
to our clients' particular needs;
- Build -- the infrastructure, systems and processes with minimal
disruption to our clients' organizations and provide comprehensive
training and change management services; and
- Manage -- our solutions for our clients to help them minimize the
internal resources they must commit to maintain their systems and to help
them maximize their return on investment.
The two large vertical markets we address, utility and local governments,
have only recently begun converting their traditional customer service and
business models to Internet-based eBusiness platforms. We were one of the first
companies to integrate energy and service delivery management systems in our
core markets. We have completed engagements for clients such as Allegheny Power,
Alliant Energy Corporation, Cinergy Corp., Consolidated Edison Company, Southern
California Edison Company, and the City of Indianapolis, Indiana. During the
past five years, we have completed over 270 major information technology
engagements.
INDUSTRY BACKGROUND
Evolution of the Internet and eBusiness. Commercial Internet use is
expanding rapidly, both in terms of the number of users and the ways in which
organizations use the Internet. The initial commercial use of the Internet was
as a static informational and advertising medium. Web sites had little ability
to automate business processes or execute transactions and thus remained
separate from core business systems, which, in turn, had not been designed to
communicate with standards-based Internet software. Today, organizations faced
with growing competition, deregulation, and globalization pressures seek to
transform their Web sites and intranet and extranet applications from simple
marketing tools into advanced software applications that support core business
processes. In order to accomplish this transformation, organizations are
rebuilding and upgrading their information technology systems to transact
directly, seamlessly and instantaneously with customers, constituents,
suppliers, partners and distributors. This new medium of interaction, commonly
referred to as eBusiness, is rapidly creating new markets, communications
channels and revenue opportunities while enabling organizations to reduce costs,
improve operating efficiencies and improve customer relationship management.
To automate all of the functions associated with an eBusiness environment,
organizations cannot simply link Internet customers, constituents, suppliers,
business partners and distributors directly to their existing internal systems,
which were designed for a static environment in which a defined number of
specifically trained employees performed very specific functions such as
billing, service scheduling or records management. With each internal system
serving a distinct independent function, it is extremely
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difficult for a customer or constituent to have a user-friendly,
customer-service-focused experience without significant integration of existing
internal systems.
To integrate their existing internal systems, organizations need an
advanced technology approach in which "business logic," a set of business
procedures and rules, is built into a set of core software applications that
bridges these existing systems with the Internet. These core software
applications handle business functions that previously could only be executed by
specially trained personnel. A successful eBusiness system must present on-line
functions to customers in a simple format, yet provide comprehensive access to
all of the information and transactional capabilities the organization has to
offer. In addition, the software systems that integrate the Internet with the
existing internal systems must be carefully designed to handle large volumes of
Internet traffic and ensure around the clock reliability. These software systems
must use a component-based design which is flexible and extendable to meet the
needs of the organization as it grows.
Organizations are increasingly turning to outside professional Internet
solutions providers to create and manage these systems. The primary advantages
of outside solutions providers are their comparative expertise, speed,
efficiency and reduced risk. Internal information technology departments, for
example, primarily maintain and troubleshoot legacy systems. This involves
minimal exposure to the Internet and other rapidly developing technologies and
little experience designing and integrating new systems. Compared to internal
departments, outside solutions providers, who can often reapply the components,
techniques and methodologies they developed on similar complex information
technology projects, can identify possible solutions more easily, design and
implement these solutions more quickly, and be more assured that a solution will
actually work. In addition, outside professional Internet solutions providers
can often offer more objective advice, free of internal cultural or political
pressures. The combination of these factors has created a significant and
growing demand for third-party Internet professional service providers.
International Data Corporation has forecasted that the market for Internet
professional services worldwide will grow from $7.8 billion in 1998 to $78.5
billion by 2003.
OUR CORE MARKETS
According to International Data Corporation, the U.S. utilities industry,
one of the five largest vertical markets in the United States, is estimated to
have spent approximately $345 million on Internet services in 1999. That number
is estimated to grow to approximately $2.0 billion by 2003, representing a 55%
compound annual growth rate. As the industry continues the process of
deregulation, gas and electric utilities face the need to simultaneously:
- increase revenues;
- improve customer satisfaction to retain consumers who now can switch
energy providers;
- capitalize on their well developed service delivery infrastructures and
established customer relationships to cross-sell a diverse package of
customer services with other service providers such as cable television
and telephone companies;
- drive down costs as competitive pricing replaces the historic regulatory
cost-plus pricing model;
- differentiate and extend their product lines and services to compete on
factors other than price; and
- obtain and rapidly distribute information about their service networks on
a real-time basis, particularly during emergencies or power outages.
Local governments in the United States also represent a significant segment
of the economy. According to International Data Corporation, government spending
on Internet services is estimated to have been approximately $505 million in
1999. That number is estimated to grow to approximately $2.8 billion by 2003,
representing a 54% compound annual growth rate. Local governments generally
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continue to employ labor-intensive, paper-based processes which rely on
incompatible computer and telephone systems. Local governments face demands from
their individual and business constituents to:
- consume fewer resources while maintaining service levels, in order to
free up tax revenues for social and other services;
- speed the processing of licenses and permits and simultaneously reduce
the occurrence of errors in processing, both to enhance constituent
satisfaction and to compete for expanding and relocating businesses; and
- allow real-time access to information by administrators and policy
makers.
To respond to these demands, utilities and local governments are seeking
ways to improve customer and constituent satisfaction and reduce costs by giving
themselves, their business partners, their suppliers and their customers and
constituents better access to integrated business processes. Utilities and local
governments have realized how the Internet can help service-oriented businesses
achieve their goals, and they now realize that they must deliver functional,
Web-based integrated services to their clients, business partners, suppliers and
constituents.
THE OPPORTUNITY
We believe that many Internet professional service providers lack the
substantive industry expertise required to transform utilities and local
governments into digital business environments. Traditional third-party
enterprise-level planning solutions, for example, integrate support functions
such as financial administration and customer service, but do not integrate core
functions such as work management or land and facilities management. Utilities
and local governments need solutions that are built around their core
functions -- maintaining their extensive, constantly changing physical
infrastructures of wires, pipes, roads and sewage systems -- but are also linked
to their front and back office functions. A complete eBusiness solution for
utilities and local governments must thus integrate the data that supports their
core operations with the data that supports their front and back office
functions -- data that often resides in different departments, on different
databases and on different information systems.
Thus, while Internet professional service providers may possess the
technology and resources that utility and local governments seek, few have the
substantive understanding of the disparate information systems that support a
utility's or local government's core operations required to provide a complete
eBusiness solution for these organizations. Furthermore, developing that domain
expertise is not easily accomplished. As a result, there is substantial unmet
demand for solutions providers who can combine sophisticated technological and
resource expertise with deep knowledge of the utility industry or the public
sector.
THE CONVERGENT SOLUTION
Relying upon our substantial knowledge of, and expertise in, the utility
industry and the public sector, our services help utilities and local
governments to transform their organizations into digital business environments
that can integrate data and processes from various sources to provide real-time
responses to internal and external information requirements. Our solutions are
based on our proprietary Model Office, a component based working solution which
enables us to address our clients' specific organizational goals and to create
our Digital Utility and Government Gateway solutions, which transform our
clients' paper-based processes into seamless, digital business environments.
We design and implement processes that integrate our clients' core
functions with the data supporting front and back office functions, such as
customer relationship management and billing. The result is a single,
integrated, Web-based point of entry through which internal decision makers,
business partners, customers and constituents can access business information on
a real-time basis.
Our solutions include our business process redesign and change management
services. Our business process redesign services focus our clients' executive
management on how improvements in their
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information technology systems can transform strategic decision making processes
and relationships with customers or constituents, business partners and
suppliers. Our change management services educate individuals within our
clients' organizations on how changes in business processes will change the way
they perform their daily jobs. We help our clients manage their solutions by
providing ongoing technical support and release updates, offering application
hosting services and offering workshops that allow our clients to learn how
their industry peers are using their information technology resources to improve
their business processes and expand their business opportunities.
We deliver our solutions using our proprietary Rapid Performance Modeling
(RPM) delivery methodology -- a project approach that relies on repeatable
processes and methodologies to combine corporate knowledge and industry best
practices and quality methods. These best practices services and tools provide
the backbone for all of our project-related engagements, and can be adapted to
address our clients' specific strategic needs. Solutions components developed on
any specific project can then be reused in future projects, providing us with an
expanded methodology base. We believe that our use of component engineering and
integration techniques provides repeatable, demonstrated functionality to our
clients at accelerated speed and reduced risk compared to more traditional
development approaches.
STRATEGY
Our strategic goal is to be the global leader in eBusiness services serving
the utility and local government markets. The key elements of our corporate
growth strategy include the following:
Capitalize on Our Industry Expertise. We believe that our in-depth
expertise in the utility and local government markets gives us the background to
focus on our clients' most complex, mission-critical problems. Members of our
senior management and sales and project management teams have an average of
fourteen years of utility or public sector consulting and systems integration
experience, and came to us directly from, or have experience working in, the
industries we serve. Our specific industry expertise benefits us and our clients
at each phase of our solutions delivery process by reducing the learning curve
on new engagements, improving efficiency of implementation and reducing project
delivery times. Accordingly, we will continue to emphasize our industry
expertise to differentiate ourselves from our potential competitors.
Expand Internet-Based Customer Relationship Management (eCRM) Service
Offerings and Enhance our Consulting and Internet Service Offerings. As
utilities and local governments seek ways to improve customer and constituent
satisfaction and retention, we will introduce services to meet this need. We are
introducing several new eCRM service offerings, including front office
customer-facing systems enabled by Internet technology. To quickly develop our
expertise and market presence in this area, we have instituted partnerships with
leading eBusiness and eCRM software companies, including Quintus and Vignette,
as well as several other software vendors focused on eBusiness functionality for
the utility and local government markets.
We believe that the leaders in the eBusiness solutions market must be able
to respond quickly to changing market conditions and evolving client needs. To
meet this need, we have developed a corporate intranet that contains a library
of reusable software objects, templates, frameworks, and methodologies we have
developed during our client engagements. These repeatable solutions reduce our
development time and increase our productivity and profitability. We intend to
continuously expand our repeatable eBusiness components library by adding
components based on emerging Internet technologies, particularly in the area of
enhanced applications for customer relationship management and application
maintenance services and hosting.
Broaden Client Relationships. Successful completion of relatively small,
early-stage projects has enabled us to gain much broader, comprehensive
follow-on engagements. A key component of our strategy is to establish
credibility with clients through the successful execution of these smaller,
early-stage projects and to capitalize upon that performance to obtain the
mandate for our clients' larger, business-critical projects.
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Increase Brand Awareness. We have recently launched an aggressive
multi-media marketing campaign to build brand recognition of our Digital Utility
and Government Gateway solutions within their respective markets. We believe
that our success in developing name recognition of our solutions will increase
our visibility with potential clients, industry partners and prospective
employees. We believe that maintaining a reputation for delivering innovative
eBusiness solutions and client satisfaction will enhance our ability to win
sole-source repeat business from our existing clients and attract new clients
through increased referral-driven sales and strong references.
Recruit and Retain Highly Qualified Professionals. Our growth and our
ability to provide strategic eBusiness solutions are based largely on our
ability to attract, develop and retain experienced professionals through our
employee care programs. Our strategy is to expand our existing expertise by
hiring and retaining senior professionals from within our core markets. We
strive to maintain a team-oriented and results-driven culture that offers
energetic professionals exposure to cutting-edge technologies and provides
incentives through competitive compensation plans. We provide learning
opportunities on a continuing basis to expand our employees' ability to deliver
innovative and effective solutions to our clients' rapidly changing
technological environment.
Continue Geographic Expansion. Our clients are based throughout North
America and in Brazil, New Zealand, Korea, the United Kingdom, Australia and
South Africa. In order to expand our global operations we have opened offices in
London, England and Brisbane, Australia. We believe that demand for eBusiness
solutions in the utility and public sector industries is growing rapidly, and
that this demand will create opportunities for us to continue to grow, both in
the United States and globally. We believe that having a regional presence to
serve our utility and public sector clients will help us to develop and
strengthen long-term client relationships and enable us to respond quickly to
our clients' needs.
BUILDING THE DIGITAL ENTERPRISE
eBusiness transformation involves developing and integrating various
systems and processes within an enterprise to provide online, real-time access
to information. Our proprietary Rapid Performance Modeling (RPM) delivery
methodology serves as a roadmap to design, build and manage our eBusiness
solutions. We use our RPM methodology in our projects to manage project scope
and customer expectations and to deliver timely solutions on budget. RPM offers
repeatable approaches to eBusiness transformation, allowing for rapid adoption
of best practices and reinforces consistent quality across all projects. It
provides for quality assurance with unit, integration and systems testing
procedures throughout design, development and deployment to ensure that the
solutions we deliver meet our quality standards and our clients' business needs.
We continually seek to evolve our RPM methodology based on project experiences
that identify and supplement industry best practices.
The key components of our RPM methodology are to:
- evaluate our client's business vision, culture, commitment to technology
solutions and existing information technology infrastructure and
resources;
- present a detailed cost-benefit analysis of the recommended solution that
quantifies costs (such as hardware, software and applications procurement
and development, internal resource requirements and system maintenance),
benefits (such as revenue generation and productivity) and timing;
- customize repeatable components from our prior solutions and develop
specialty applications to suit our client's particular needs;
- develop a deployment impact strategy that outlines key processes, tasks,
communications, coordination and logistical elements for enterprise-wide
deployment with minimal disruption to the organization;
- test all systems hardware and software components, system integration and
capacity against specifications; and
- establish communications channels to support deployment and
administration of our solutions.
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eBusiness Information Technology Infrastructure. We engineer, build and
manage the information technology infrastructure necessary for eBusiness. To
support eBusiness, an information technology infrastructure must allow data from
a variety of disparate internal and external data environments to flow
seamlessly throughout an organization, its supply chain and its customer base.
To accomplish this, we have customized what we determined to be best-in-class
third party commercial software packages to create our proprietary Energy
Network Object Model and our Asset Object Model -- the backbone of our clients'
information technology infrastructures. These components provide standard,
repeatable procedures to move interrelated but isolated data from different
databases to support common energy delivery and asset management applications
such as permitting, public records management, outage and distribution
management and mobile dispatch and field service. By providing real-time access
to the data our clients' employees need to perform their functions, these
components eliminate the need to manually coordinate interrelated functions
before performing work or delivering services, resulting in quicker customer and
constituent response times. As we build and integrate the information technology
infrastructure around our object models, we license our repeatable components to
our clients and design and write specialty applications software programs for
them. These programs are intended to enhance the capabilities of third party
commercial software and integrate such software into the network environment.
We provide comprehensive data management services at this phase of the
eBusiness transformation process. We analyze an organization's data resources to
determine whether they will be sufficient to support the organization's
eBusiness requirements. Due to similar data requirements among clients within
the same industry, if a particular client requires additional data sourcing, we
can generally license data model components we have developed from prior
projects. We also offer data migration services to integrate data into our
network environment, and perform data integrity and acceptance testing to verify
that all data performs as intended within this environment.
eBusiness Process Integration. Our goals for this phase of the eBusiness
transformation process are to customize our repeatable solutions to meet our
clients' specific needs and to focus our clients on how they can best use their
new information technology resources to provide real-time information to
internal decision makers, business partners, customers and constituents. Our
Model Office is a working, integrated model of our solution based on best
practices and processes we have developed from hundreds of prior projects.
Working with the Model Office helps initiate an interactive process with us and
allows our clients to experiment with working solutions adopted by their
industry peers. This interaction allows us to perform what we call "gap
analysis" on two distinct but related levels. At the technology and systems
architecture level, we can identify gaps between the functionality provided by
our pre-packaged solution and our clients' requirements. As we identify these
gaps, we engineer, build, test and implement the additional features, components
and functionalities we need to complete our clients' solutions. To do so, we
combine third party hardware and software with our internally developed software
applications.
At the strategic level, we help our clients to understand the wider
organizational and cultural implications of their new technology systems as
these systems simplify, automate and expand current business processes. As our
clients identify these wider implications, we use our extensive industry
expertise to help our clients redesign their business processes to adapt to an
eBusiness environment and to prepare individuals within their organization for
this transformation. Gap analysis is a dynamic process -- as we redesign a
client's information technology infrastructure, organizations need new business
processes to use this technology, and as we redesign business processes, clients
identify new technology requirements.
Deployment. Our goal for the deployment phase is to transition our solution
from testing to implementation with minimal disruption to our client's
organization. This "change over" process requires extensive component,
integration and systems testing and application development to verify that the
solution conforms to design specifications and our client's business needs. We
provide system documentation and establish communications channels to support
deployment and administration of our solutions. Our training services teach
individuals to use their new information technology resources as intended.
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Exploiting the Digital Enterprise. We develop Internet, intranet and
extranet-based applications that allow decision makers, business partners,
suppliers and customers or constituents to exploit their greater access to
enterprise-wide, real-time data, including:
- intranet-based solutions that allow our clients to develop management
decision support tools that can capture and analyze data from a broader
variety of sources within the organization;
- extranet-based solutions that provide organizations and their business
partners and suppliers with automated, secure communications and
transactions systems that can replace paper-based ordering, invoicing and
billing processes and telephone-based sales support; and
- Internet-based solutions that expedite service delivery, such as
self-application and scheduling of services, provide online customer
service, such as outage and permit approval status updates, capture user
information to evaluate cross-selling opportunities and create positive
user experiences that enhance customer satisfaction.
We have recently introduced a variety of customer relationship management
programs and applications for the digital enterprise, such as:
- Internet-based customer care and customer interaction applications that
integrate voice, text and video-based customer data to supplement
traditional customer call center resources. We intend to develop and
write the integration software needed to support these applications and
integrate them with the client's database;
- Internet, intranet and extranet-based field sales automation applications
such as customer contact management applications. These applications will
allow sales and account managers to update customer information remotely
and give them and their entire sales teams access to real-time customer
information; and
- Internet, intranet and extranet-based integrated customer and market
intelligence applications designed to enable sales and account managers
to perform target marketing, identify cross-selling opportunities and
manage customer relationships.
We also conduct digital economy workshops that allow our clients to learn
how their industry peers are utilizing their information technology resources to
improve their business processes and expand their business opportunities.
SELECTED SERVICES
To help our clients build their digital enterprises, we offer the following
services:
- Program Management. These services provide standards and parameters to
control project quality, scope, schedule and cost. As part of our program
management service, we provide a detailed, written scope of work for all
project activities which formalizes acceptance of project scope and
controls changes to project scope.
- Business Process and Workflow Redesign. Through process and workflow
redesign workshops, we identify functional workflow diagrams and
associated system requirements for optimal system performance. We also
provide change management planning and communications planning to ensure
acceptance of new process design.
- Strategic Technology Consulting. We develop a phased IT implementation
solutions plan that gives our clients a detailed roadmap for rollout of
technological components. To do so, we assess how existing technologies
support future business visions and drivers and develop a schedule for
synchronizing system software implementation with infrastructure
technology deployment.
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- Database Modeling. We design a database model to address the required
functionality for our client's systems, transform the model into a
physical representation of the data and then create and configure the
client's database according to the data model requirements.
- Solutions Testing and Quality Assurance. We develop plans for and conduct
requirements validation, design review, code review, unit testing, system
testing, integration testing, regression testing, acceptance testing and
operational testing.
- Solutions Deployment. We develop a work process cut-over plan to ease
transition to the new system. This plan includes identification of new
roles and tasks within normal workflows that support new operations
processes and a strategy for transitioning new processes around
third-party relationships. We also develop a deployment impact strategy
to outline the necessary processes, tasks, communication, coordination
and logistical elements for a successful implementation.
- Solutions Training. We develop detailed plans for custom on-site
training, role-specific training, simulated use case scenarios and
self-guided, computer-based training, all intended to help system users
understand how the new system affects and can improve their work
processes.
- Operational Support. We provide a dual support environment at the client
site and through our Denver-based help desk and develop a client support
plan and problem reporting procedures. We also provide network
performance and monitoring support.
- Applications Hosting. In collaboration with our business partners, we
offer application hosting services and comprehensive agency services,
including ISP branding.
REPEATABLE SOFTWARE COMPONENT LIBRARY
We have developed an information technology infrastructure that supports
our internal computer network, Web site, intranet and extranet. A key component
of our knowledge base is a workbench of reusable software objects, templates and
frameworks from our client engagements which continues to grow as we complete
additional projects. This knowledge base, which enables us to reuse our
accumulated experience, is a critical resource for both our software engineers
and project managers. This real-time access to information enables our software
engineers to condense the delivery time and to mitigate the potential problems
of a project by identifying those techniques, components, technologies and
methodologies that have been successfully employed in similar systems. In
addition, by providing information on project progress and client needs, the
knowledge base helps project managers prepare for client meetings and project
reviews. Access to this resource is available to all of our employees through
our corporate intranet.
We continually evaluate new products to identify advanced technologies and
disseminate this information throughout our company. We believe that our
technology commitment allows our software engineers to employ the latest proven
software engineering tools, multi-tier systems and frameworks. By pre-screening
all of our tools and technologies, we are able to design advanced systems and
consistently deliver proven results on critical business projects. Our
technology professionals have industry leading experience in technologies
including XML, Java, C++, Internet application servers, Distributed Objects
including CORBA and DCom, and Relational and Object Database Management Systems.
CLIENTS
We target medium-sized and large organizations within the utilities and
local governments markets. For example, within the local government market, we
target cities with a population of at least 75,000 residents and counties with a
population of at least 100,000 residents. In the utility market, we target
utilities serving between 250,000 and 2 million utility customers. As of
December 31, 1999, we had approximately 60 ongoing client engagements. In 1999,
our five largest clients accounted for approximately 49% of our revenues, with
Cinergy Corp. accounting for 18% of our revenues. Our second largest clients
during that period were Alliant Energy Corporation and Citizens Utilities
Company, each of which accounted for 9% of our revenues. As a company, we have
completed over 270 information technology and
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systems integration engagements during the last five years, each of which
generated over $100,000 dollars in revenue.
We typically enter into fixed-price arrangements with our clients and we
plan to continue to do so in the future. These arrangements are generally
comprised of two components: a fixed price component covering initial design,
installation and maintenance services and an estimated price component covering
optional services which may be purchased by the client after the initial phase
has been completed.
In 1999, our ten largest clients in each of our utility and local
government markets, by revenue, were:
UTILITIES
Alliant Energy Corporation
Austin Energy
Central Illinois Light Company
Cinergy Corp.
Citizens Gas & Coke Utility
Citizens Utilities Company
Kentucky Utilities
Ontario Hydro
Piedmont Natural Gas Company
SIGCORP, Inc. (Southern Indiana Gas Corporation)
LOCAL GOVERNMENTS
City of Auckland (New Zealand)
City of Columbus (Ohio)
City of Indianapolis (Indiana)
City of Mesa (Arizona)
City of Portland (Oregon)
City of Tallahassee (Florida)
Denver Water Board (Colorado)
Eagle County (Colorado)
Grand Valley Metropolitan Council/REGIS
project (Michigan)
Mecklenburg County (North Carolina)
SELECTED CLIENT CASE STUDIES
The following case studies provide examples of the services we provide to
our clients.
Cinergy
Client: Cinergy Corp., created in 1994 through the merger of The Cincinnati
Gas & Electric Co., PSI Energy, Inc., The Union Light, Heat and Power Co. and
Lawrenceburg Gas Co., is one of the nation's largest diversified energy
companies. Its utility subsidiaries serve more than 1.4 million electric and
470,000 gas customers in Ohio, Indiana and Kentucky. Cinergy's international
business unit, Cinergy Global Resources, has assets in power generation,
transmission and distribution projects in the Czech Republic, Spain, the United
Kingdom, Zambia, Bangladesh, Estonia and the United States.
Challenge: Faced with combining the operations of the merged utility
companies and preparing for a highly competitive deregulated business
environment, Cinergy sought a business solution which would enhance customer
service, reduce operations and maintenance costs and improve the productivity
and effectiveness of its work force.
Solution: We are delivering a mission-critical application initiative
called EDSIP, an acronym for Energy Delivery Systems Integration Program for
Cinergy's United States operations. EDSIP is designed to support streamlined
post-merger work processes and integrate and consolidate more than 40 previously
disparate information systems used by Cinergy's Energy Delivery business unit.
As Cinergy developed the vision and strategic plan for EDSIP, we conducted a
needs analysis and technical gap analysis, and developed and deployed a
technology implementation plan. The EDSIP initiative includes a geographic
information system, a work management system, a resource allocation/computer
aided dispatch system, a trouble call/outage management system, an energy
delivery asset system and a distribution planning system. Beginning with a
consulting assignment in 1996, we have developed a strategic systems
implementation plan for Cinergy that has led to a multi-year, multi-million
dollar engagement.
As a result of the success of the EDSIP project, we have contracted with
Cinergy to create a strategic technology deployment plan to help Cinergy compete
effectively in the Internet and deregulated utility
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economy. This engagement addresses high priority initiatives that are designed
to provide Cinergy with an additional competitive advantage in a 6 to 12 month
timeframe, and enable Cinergy to develop scaleable eBusiness applications to
respond to rapid business changes over the next 2 to 5 years.
Impact. The EDSIP project has eliminated multiple visits to job sites and
reduced service delivery times. The integrated solution has enabled
multi-tasking of the workforce and a decrease in job specialization. Information
technology support costs have been reduced through the replacement of over 30
software packages with five integrated technologies. An EDSIP business case,
which we developed jointly with Cinergy, projects substantial cost savings
through a combination of work consolidation, reduction in overtime pay and paper
processing, and improved productivity through cycle time reduction.
Alliant
Client: Alliant Energy Corporation was formed in 1997 through the merger of
IES Industries Inc., Interstate Power Co. and WPL Holdings, Inc. Through its
utility subsidiaries, Alliant provides electric, natural gas, water and steam
energy to more than one million customers in Iowa, Illinois, Minnesota and
Wisconsin. Anticipating progressive deregulation and enhanced competition,
Alliant has taken steps to position itself for continued growth and sustainable
long-term shareholder value, including the formation of Alliant Corporate
Services, Inc., which provides services to all the companies within the Alliant
family.
Challenge: Alliant's primary business challenge was to integrate three
separate business processes into one and to position the merged enterprise to
compete in a rapidly changing deregulated business environment.
Solution: We implemented a process improvement program called Vision
IMPACT. The project involved the design and deployment of an integrated
technology architecture to support energy delivery process redesign objectives.
Vision IMPACT integrates four major new information systems that support
distribution operations: outage management, work management, mobile work force
management/dispatch and geographic information management. Vision IMPACT also
integrates these new distribution operations systems with the legacy systems of
each of the pre-merger companies, including the materials management system,
customer information system, system planning and property accounting system.
Prior to the formation of Alliant, we were consulting with IES Industries
to develop its strategic systems integration plan. During and after the project,
Alliant retained Convergent Group to develop a strategy to integrate information
technology systems from the merger partners to support combined business
processes. Our IES Vision IMPACT project was a multi-year contract for a scope
of work in excess of $15 million. Our successful partnership with IES has
resulted in additional post-merger follow-on contracts with Wisconsin Power and
Light Company and Interstate Power Co. for a scope of work in excess of $6
million.
Impact: The Vision IMPACT integrated technologies were designed to provide
Alliant staff rapid access to the data and tools they need to respond more
efficiently to emergencies, answer customers' inquiries with more accurate and
timely information, eliminate work order backlog and increase employee safety.
Benefits include the ability to make real-time customer appointment commitments
and conduct automated energy outage analysis. In addition, information via
computer-aided dispatch with in-truck mobile data terminals for rapid customer
responses is now available.
City of Indianapolis/Marion County
Client: The joint City of Indianapolis/Marion County, Indiana government,
representing a population in excess of 1.0 million, embarked on an ambitious
effort to re-engineer and fully automate their core business processes in order
to serve their constituents in both the public and private sectors.
Challenge: The City/County needed to find a system that would lead to a
Web-based solution and would enable the public, developers and contractors to
more effectively and efficiently conduct business in Indianapolis. Permit and
inspection operations are information intensive. Developers, contractors and
others submit plans and application documents that must be examined,
distributed, approved and archived by city
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and county staff members. Complicating matters was the fact that information
required by these constituents was stored at multiple locations and in multiple
formats. Such processes often required months of submissions, resubmissions,
rescheduled appointments and downtime.
Solution: After conducting a review of current business processes, we
embarked on a six-year, $18 million partial outsourcing initiative designed to
bring critical city and county property data and government-provided services to
the desktops of the city's and county's employees and their local constituents
through solutions that are a piece of our "Government Gateway." In order to
provide a comprehensive solution which would enable the City/County to
streamline processes that impact the public, developers and contractors in
Indianapolis, we developed a technology infrastructure and Web-based
applications to deliver the right information to the right people at the right
time.
The integrated systems use a geographic information system (GIS) as a
central data hub. The system's data model links key operations to a specific
property, infrastructure or facility, and employees can use their desktop
computer to view accurate, updated information over the network and respond to
citizen or developer inquiries in real-time.
Impact: Two project application examples illustrate the business value we
have delivered:
- A "snowfighter" application can track the locations of snow plows,
determine optimal snow plow routes, issue work orders, calculate the cost
to clear city streets and create up-to-the-minute maps showing which
routes have been cleared most recently. The system can also be used to
answer inquiries from the public, such as the status of snow clearing
procedures in specific neighborhoods, and the information tracked by the
system will eventually be available to the public via the Internet.
- An integrated permitting application aimed at improving customer service
in one of the city's most visible areas improves efficiency, reduces
paperwork and cuts the waiting time for customers by as much as half as a
result of the ability to file, obtain, review and approve permit
applications electronically. This project now makes it possible to
complete an entirely Web-based system.
We have also deployed tools which maintain, analyze and report critical
data required by city and county organizations and provide enhanced data access
by both the general public and business communities. The system will ultimately
make it possible to provide information access to citizens of the city and
county via personal Web access or kiosks located in public buildings. Access to
the information will be delivered through Internet connections, thereby
providing a "Government Gateway" to a vast array of city and county information
and services.
Grand Valley Metropolitan Council/REGIS Agency
Client: The Grand Valley Metropolitan Council is a forum for the local
governments of 21 towns and counties in western Michigan, representing a
population in excess of one million, to discuss and collaborate on issues of
mutual interest. In 1996 the Council formed the Regional Geographic Information
System (GIS)/Regis agency, and with the assistance of Convergent Group created a
plan to develop one of the largest regional geographic information systems in
the country.
Challenge: The primary challenges faced by the Council were to eliminate
the inefficiencies surrounding the search for government information and to
eliminate the redundant procedures used to process and record map-related data
within the 21 government organizations.
Solution: We were initially engaged to develop a prototype application
system covering a limited geographical area. This prototype would demonstrate
how such a system could satisfy the integrated data management needs of a number
of government entities and personnel, including planning and development
departments, utilities (including water, sanitary sewer, storm sewer and
electric), assessors, public safety officials, parks and recreation employees,
clerks, engineers, and zoning planners.
After testing the prototype, the Council engaged us for a multi-year $7
million contract to develop the system for the entire 865-square-mile region.
When this system becomes fully operational in 2002, the
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network will have 15 to 20 servers and 300 to 500 workstations for accessing an
integrated database of geographic-based information. In addition, the Council
has selected us to implement a $5 million property tax administration system to
reengineer the processes by which property taxes are collected, administered and
distributed within 33 cities and townships in Kent County.
Impact: The system will enable government employees to work more
efficiently and to cooperate with each other on regional transportation and
planning projects. The system also enables standard data submission from
contractors, eliminates redundant data entry and decreases public request
response time. The system's cost-benefit estimate, developed jointly by
Convergent Group and the Council, projects substantial cost savings over the
next 15 years.
SALES AND MARKETING
We employ a team selling approach in which each member of our project team
treats each meeting with clients as an opportunity to showcase the full range of
services we offer. Project team members collaborate with business unit
professionals and management to identify prospects, conduct sales and manage
client relationships. Our sales teams' extensive industry contacts allow us to
generate sales leads at the highest management and information technology
decision-making levels. Our industry expertise allows us to generate sole source
sales opportunities in which clients approach us to define a solution for them
rather than inviting us to submit proposals to implement solutions they
developed themselves.
We generate substantial sole source repeat business from existing clients
who want to expand on prior service offerings and projects. To help develop this
potential, we assign senior executives to support and expand client
relationships. Existing clients are also a valuable sales channel for new
business. To expand our client base and develop awareness of our Digital Utility
and Government Gateway service offerings, we participate in industry trade
shows, publish industry specific articles and books authored by our senior
executives and market information about our services directly to senior
management and information technology executives at utilities and public sector
organizations. We recently launched an industry wide marketing campaign to
promote awareness of our Digital Utility and Government Gateway solutions.
COMPETITION
Although the market for eBusiness solutions is relatively new, it is
already highly competitive, and we often compete with the in-house technical
staff of our prospective clients. In addition, the market reflects an increasing
number of entrants that have introduced or developed products and services
similar to ours. Our target markets are rapidly evolving and are subject to
continuous technological change.
We compete on the basis of a number of factors, including the following:
- vertical industry knowledge;
- integrated strategy, technology and systems architectural design
services;
- technological innovation;
- quality, pricing and speed of service delivery; and
- understanding clients' strategies and needs.
We believe that we compete favorably in each of these areas and that our
client references, in-depth industry and business domain subject matter
expertise and repeatable, industry proven solutions, supported by our Model
Office, give us a competitive advantage over our potential competitors.
Nevertheless, existing or future competitors may develop or offer strategic
Internet services that provide significant technological, creative, performance,
price or other advantages over the services offered by us. See "Risk Factors --
Competition from bigger, more established competitors who have greater financial
resources could result in price reductions, reduced profitability and loss of
market share."
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Current and potential competitors include:
- Internet service firms such as AGENCY.COM, C-bridge Internet Solutions,
Inc., iXL Enterprises, Inc., Modem Media.Poppe Tyson, Proxicom, Inc.,
Razorfish, Inc., Sapient Corp., Scient Corp., Whitman-Hart and Viant
Corp.;
- systems integration firms such as Andersen Consulting, Cambridge
Technology Partners, Cap Gemini, Electronic Data Systems Corporation,
Navigant Consulting, Logica, SAIC, SAP Business Partners and WM-Data;
- management consulting firms such as Arthur D. Little, Boston Consulting
Group, Inc., McKinsey & Company and the consulting arms of the Big 5
accounting firms; and
- software and hardware vendors such as Hewlett-Packard, IBM and Oracle.
PEOPLE AND CULTURE
Professional Environment. Our success depends in substantial part upon our
ability to recruit, develop and retain strong technical professionals with deep
subject matter expertise within our core markets. We believe that the
combination of our fast-paced, entrepreneurial corporate culture, technically
challenging project work and our competitive compensation and incentive programs
will allow us to continue to attract world class professionals.
Employee Acquisition. Our recruitment efforts are central to our ability to
provide outstanding customer service to our clients. Our recruiting initiatives
include a significant employee referral program, direct recruitment, use of
third party vendors, Internet recruitment tools and campus recruitment. We
believe the uniqueness of our technology and our depth in our industries, as
well as our dynamic corporate culture, will continue to allow us to attract high
caliber employees.
Professional Development. We believe that providing our professionals with
challenging client assignments in conjunction with our more formal learning
initiatives, together with access to developing technologies, keeps our
employees on the cutting edge of technology. Our new employee programs allow new
hires to assimilate quickly into the Convergent culture and make an immediate
impact on our clients. Each of our professionals has a formal development plan
that is reviewed annually. This plan includes both technical and management
development learning to ensure that we are developing the future management of
our company.
Culture. We have a fast paced, entrepreneurial, intellectual culture which
reflects the core values of our founders. This continues to be very attractive
to the high caliber technical talent we seek. Our incentive programs tie
directly to achievement of annual individual and team objectives as well as to
corporate financial goals.
As of December 31, 1999, we had a total of 243 employees, including 167
technical professional services personnel and 76 marketing, sales and general
administration personnel. None of our employees are represented by labor unions,
and we consider our employee relations to be good.
INTELLECTUAL PROPERTY
Our success depends upon our proprietary components, frameworks,
methodologies and other intellectual property rights. We rely upon a combination
of trade secret, nondisclosure and other contractual arrangements, and copyright
and trademark laws, to protect our proprietary rights. None of our business
processes, applications or solutions are patented. We require all personnel to
enter into confidentiality agreements. We also generally require that our
consultants and clients enter into such agreements and we limit access to and
distribution of our proprietary information. If we fail to adequately protect
our intellectual property rights and proprietary information or if we become
involved in litigation relating to our intellectual property rights and
proprietary technology, our business could be harmed. Any actions we take may be
inadequate to protect our intellectual proprietary rights and other companies
may develop technologies that are similar or superior to our proprietary
technology.
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Our business generally involves the development of software applications
for specific client engagements. We also develop software application
frameworks. It is our strategy to retain significant ownership and marketing
rights to these software applications and application frameworks and to
incorporate any modifications to such frameworks into our repeatable solutions
package, which we then market and adapt through further customization for future
client projects. Although we believe that our products and services do not
infringe on the intellectual property rights of others and that we have all
rights needed to use the intellectual property employed in our business, we
could become subject to claims alleging infringement of third party intellectual
property rights in the future. Any such claims could subject us to costly
litigation and may require us to pay damages and develop non-infringing
intellectual property or acquire licenses to the related intellectual property,
potentially at substantial cost.
PROPERTY/FACILITIES
We currently lease approximately 73,000 square feet of space at our
headquarters in Englewood, Colorado under a lease that expires in September,
2009. We also maintain sales offices in Boston, Massachusetts; London, England
and Brisbane, Australia. We believe that we will be able to obtain additional
space on an as-needed basis at commercially reasonable rates.
LITIGATION
We are not a party to any lawsuit or proceeding that, in the opinion of our
management, is likely to harm our business.
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MANAGEMENT
The following table sets forth our directors, executive officers, their
ages and the positions held by them with us as of December 31, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Glenn E. Montgomery, Jr.(1)............... 48 Chairman, Chief Executive Officer and
President
Scott M. Schley(2)........................ 42 Executive Vice President, Finance,
Treasurer and Director
John A. Ramseur........................... 60 Executive Vice President, Corporate
Development
Larry J. Engelken......................... 50 Executive Vice President, Global Sales and
Secretary
Mark Shirman.............................. 41 Executive Vice President and Chief
Technology Officer
Bryan R. Mileger.......................... 39 Chief Financial Officer
Robert Sharpe(1)(2)....................... 56 Director
Jerry Murdock(1).......................... 41 Director
John W. Blend III(2)...................... 54 Director
</TABLE>
- ---------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
GLENN E. MONTGOMERY, JR., a founding partner of Convergent Group, has been
the Chairman of our Board of Directors and our President and Chief Executive
Officer since 1994. He had been President and Chief Executive Officer of
Convergent Group's predecessor, UGC Consulting, since 1985. Prior to joining UGC
Consulting, he served from 1982 to 1985 as an executive consultant with Kellogg
Corporation, an engineering management consulting firm. From 1977 to 1982, Mr.
Montgomery served as a projects director with MSE Corporation, a consulting and
engineering company, providing consulting, project planning, and management
expertise to GIS and land-related information system projects. Mr. Montgomery
holds both an M.S.E.S. degree in technology assessment from the School of
Environmental Affairs and a B.A. in computer mapping and geography from Indiana
University.
SCOTT M. SCHLEY has been Executive Vice President of Finance of Convergent
Group since February 2000, Treasurer since 1994 and a director since August
1999. From 1994 to February 2000, Mr. Schley also served as Chief Financial
Officer of Convergent Group. Prior to joining Convergent Group, he served as
Chief Financial Officer and Executive Vice President of Operations for the John
Madden Company, a commercial real estate developer, which he joined after
spending five years with a national public accounting firm. He holds a B.S. in
business administration and accounting from Colorado State University.
JOHN A. RAMSEUR has been Executive Vice President of Corporate Development
of Convergent Group since 1998, and is responsible for the development and
implementation of corporate growth, expansion and marketing strategies. Mr.
Ramseur joined Convergent Group in 1989 to lead a long-term consulting
assignment for IBM. He left in 1993 to become President of Smallworld, North
America, a software company, and after their initial public offering in 1997 he
returned to Convergent Group. He served as Chief Marketing Officer of Synercom
Technology, a software company, from 1983 until their initial public offering in
1986. Prior to joining Synercom, Mr. Ramseur was President of Utility Data
Corporation, a data services company.
LARRY J. ENGELKEN, a founding partner of Convergent Group, has been our
Executive Vice President -- Global Sales since 1997, and is responsible for
executive leadership of our sales, account development and account management
activities. Prior to founding Convergent Group in 1985, Mr. Engelken worked at
two global engineering design and construction services firms, as well as being
a Director and Executive Vice President of EGT, Inc., a data conversion services
and GIS application
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software company. He is past president of the Geospatial Information &
Technology Association (GITA). Mr. Engelken holds a B.S. degree in electrical
engineering from Kansas State University.
MARK SHIRMAN has been our Chief Technical Officer since October 1999. Prior
to joining Convergent Group, he was responsible for the Customer Relationship
Management and Interactive Web Services Solutions practices of Cambridge
Technology Partners. Before joining Cambridge Technology Partners in 1997, Mr.
Shirman served as Vice President of BSG, a global systems integration company,
where he managed product development and marketing. Prior to joining BSG in
1995, Mr. Shirman founded Innovative Information Systems, Inc., a client/server
integrator specializing in application development, network systems and
mainframe alternatives, and served as its Chief Executive Officer. Previously,
Mr. Shirman was with Andersen Consulting, where he served as a consultant. Mr.
Shirman holds an M.B.A. in finance from American University and a B.A. in
economics from Brandeis University.
BRYAN R. MILEGER joined Convergent Group in January 2000 and has been our
Chief Financial Officer since February 2000. Prior to joining Convergent Group,
he served as Director of Corporate Acquisitions and Alliances with Electronic
Data Systems Corporation. Mr. Mileger has worked in various capacities with
Electronic Data Systems during the past fifteen years, including in its Treasury
Department. Mr. Mileger holds an M.B.A. from Baylor University and a B.B.A. in
accounting from Abilene Christian University.
ROBERT SHARPE has been a director of Convergent Group since May 1998. In
1999, he retired from Electronic Data Systems Corporation, where he served in
various capacities from 1972 until his retirement, most recently as Corporate
Vice President responsible for EDS' corporate global pursuit team. Prior to his
position with the global pursuit team, Mr. Sharpe was in charge of North
American and international business development for EDS. Mr. Sharpe was named
Corporate Vice President in 1982, and during his tenure with EDS he also managed
the Industrial Division, Finance and Industrial Group, General Motors Operations
Group and Financial and Commercial Group. Mr. Sharpe has a B.S. in marketing and
management from the University of Illinois.
JERRY MURDOCK has been a director of Convergent Group since August, 1999.
He co-founded InSight Capital Partners in 1995 and is a general partner of the
firm. Mr. Murdock was formerly the managing general partner of the Aspen
Technology Group, a consulting firm which he founded in 1987. He was a
consultant to E.M. Warburg Pincus from 1989 to 1995. Mr. Murdock is a director
of Quest Software, Click Interactive, Hologix, MediaPassage, STC and
WarrantyCheck.com. He graduated from San Diego State University with a B.A. in
political science.
JOHN W. BLEND III has been a director of Convergent Group since August
1999. He currently consults with InSight Capital Partners and serves on the
boards of directors of a number of utility related technology companies. From
1985 to 1997, Mr. Blend served as President of Worldwide Sales and Marketing and
Director for Indus International, an enterprise asset management solutions
company. Mr. Blend has a B.A. in social sciences from Muhlenberg College.
Officers of Convergent Group serve at the discretion of the board of
directors and hold office until their successors are duly elected and qualified
or until their earlier resignation or removal. There are no family relationships
among any of our directors or executive officers.
DIRECTORS' TERMS
Upon completion of this offering, our board of directors will be divided
into three classes that serve staggered three-year terms, as follows:
<TABLE>
<CAPTION>
CLASS EXPIRATION BOARD MEMBER
- ----- ---------- ------------
<S> <C> <C>
Class I...................................... 2001 Scott M. Schley
Class II..................................... 2002 John Blend III, Robert Sharpe
Class III.................................... 2003 Glenn E. Montgomery, Jr.,
Jerry Murdock
</TABLE>
46
<PAGE> 52
As a result, approximately one-third of our board of directors will be
elected each year. Each director will hold office until the appropriate annual
meeting of stockholders, as determined by the year of such director's election
to the board of directors, and until his or her successor has been duly elected
and qualified.
COMMITTEES OF THE BOARD OF DIRECTORS
The board of directors has a compensation committee and an audit committee.
The compensation committee evaluates our compensation policies, determines
compensation for our executive officers and administers our stock option plans.
The members of the compensation committee are Glenn E. Montgomery, Jr., Robert
Sharpe and Jerry Murdock. The audit committee reviews the scope of our audit,
the engagement of our independent auditors and their audit reports. The audit
committee also meets with the financial staff to review accounting procedures
and reports. The audit committee currently consists of John Blend III, Robert
Sharpe and Scott M. Schley.
DIRECTOR COMPENSATION
Directors do not receive any cash compensation for serving as directors. We
pay all reasonable expenses incurred by our directors, including legal and
travel expenses, in connection with the performance of their duties as members
of our board of directors, including expenses incurred as a result of attending
meetings of the board of directors and of any committees thereof. However, in
its discretion, the board of directors in the future may determine to pay
directors a fixed fee for serving as a director and/or a fixed fee for
attendance at each meeting of the board of directors or a committee of the
board. Directors are also eligible to participate in our stock option plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to our recapitalization in August 1999, the compensation committee
consisted of Mr. Montgomery and a former shareholder of our company. Since the
recapitalization, the compensation committee has been comprised of Messrs.
Montgomery, Murdock and Sharpe, and has been responsible for executive
compensation decisions. Mr. Montgomery is the President and Chief Executive
Officer of our Company, and Mr. Murdock is a general partner of InSight Capital
Partners III, L.P. which, together with its affiliates, is our largest single
stockholder. No executive officer of the Company has served as a director or
member of the compensation committee of any other entity whose executive
officers served as a director or member of our compensation committee.
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<PAGE> 53
EXECUTIVE COMPENSATION
The following table sets forth, in accordance with the rules of the
Securities and Exchange Commission, information for the fiscal year ended
December 31, 1999 concerning compensation paid to our Chief Executive Officer
and our four other most highly compensated executive officers whose salary and
bonus exceeded $100,000 in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
1999 COMPENSATION --------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) OPTIONS/SAR(#) COMPENSATION
--------------------------- -------- -------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Glenn E. Montgomery, Jr...... $256,580 $416,496 $1,482,360(2) 1,510,839(7) $1,305,383(3)(4)
Chairman, Chief Executive
Officer and President
Larry J. Engelken............ 256,580 422,821 1,482,360(2) -- 813,383(3)
Executive Vice President,
Global Sales
Mark L. Epstein.............. 256,580 422,821 1,482,360(2) -- 813,383(3)
Executive Vice President
Scott M. Schley.............. 154,250 62,400 536,827(2) -- 246,000(4)
Executive Vice President,
Finance and Treasurer(5)
John A. Ramseur.............. 126,280 50,000 54,496(6) 672,284(7) --
Executive Vice President,
Corporate Development
</TABLE>
- ---------------
(1) The value of certain perquisites and other personal benefits is not included
in the amounts disclosed because it did not exceed for any officer in the
table above the lesser of either $50,000 or 10% of the total annual salary
and bonus reported for such officer.
(2) Reflects the value of common stock granted to the named executive officer in
connection with the recapitalization.
(3) Reflects $813,383 for termination of the named officer's employment
agreement at time of recapitalization.
(4) Reflects $492,000 in the case of Mr. Montgomery and $246,000 in the case of
Mr. Schley and represents a finance fee paid in connection with the
recapitalization.
(5) Mr. Schley also served as Chief Financial Officer during 1999.
(6) Reflects the value of common stock granted to Mr. Ramseur prior to the
recapitalization and the value of common stock granted to Mr. Ramseur in
connection with the recapitalization.
(7) Mr. Ramseur's options were granted prior to the recapitalization and
exercised in connection with the recapitalization. Mr. Montgomery's options
were granted subsequent to the recapitalization.
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<PAGE> 54
OPTION GRANTS DURING THE YEAR ENDED DECEMBER 31, 1999
The following tables set forth certain information concerning grants to
purchase shares of our common stock to each of the officers named in the summary
compensation table above during the year ended December 31, 1999.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENTAGE OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------
NAME GRANTED 1999 SHARE DATE 5% 10%
- ---- ---------- ------------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Glenn E. Montgomery, Jr. ................ 1,510,839(1) 22.4 0.046 12/30/09 -- --
Larry J. Engelken........................ -- -- -- -- -- --
Mark L. Epstein.......................... -- -- -- -- -- --
Scott M. Schley.......................... -- -- -- -- -- --
John A. Ramseur.......................... 608,806 9.1 0.013 1/19/09 -- --
63,478(2) 8/6/09
</TABLE>
- ---------------
(1) All options were immediately vested. Mr. Montgomery exercised these options
in January, 2000.
(2) All options which were granted prior to the recapitalization were exercised
in connection with the recapitalization. Mr. Ramseur sold 50% of the shares
he received on exercise in the recapitalization.
(3) These amounts represent hypothetical gains that could be achieved if the
respective options are exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration dates, based upon an assumed initial public offering price
of $ per share. These assumptions are not intended to forecast future
appreciation of our stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of our common stock and
overall market conditions. The potential realizable value computation does
not take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.
OPTION VALUES AS OF DECEMBER 31, 1999
The following table sets forth certain information concerning option
exercises by each of the officers named in the above summary compensation table.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
SHARES FISCAL YEAR-END YEAR-END(2)
ACQUIRED ON VALUE ---------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Glenn E. Montgomery,
Jr. .................. -- -- 1,510,839(1) -- -- --
Larry J. Engelken....... -- -- -- -- -- --
Mark L. Epstein......... -- -- -- -- -- --
Scott M. Schley......... -- -- -- -- -- --
John A. Ramseur......... 672,284(3) $76,471 -- -- -- --
</TABLE>
- ---------------
(1) Mr. Montgomery exercised these options in January, 2000.
(2) Based on an assumed initial public offering price of $ per share, less
the exercise price, multiplied by the number of shares underlying the
option.
(3) Options were exercised in January and August.
STOCK OPTION PLANS
The board of directors adopted, and our stockholders approved, our 1999
stock option plan. The plan provides for the grant of (i) options that qualify
as incentive stock options within the meaning of Section 422(a) of the Internal
Revenue Code of 1986, as amended, to certain employees and (ii) nonqualified
stock options to certain employees (including directors and officers who are our
49
<PAGE> 55
employees), directors and consultants. The total number of shares of Common
Stock for which options may be granted under the stock option plan is 14,231,152
shares. The stock option plan is administered by our compensation committee,
which determines to whom options are granted, the exercise prices, number and
other terms and conditions of exercise. The exercise price of incentive stock
options granted under the plan must be at least equal to the fair market value
of such shares on the date of grant, except that the exercise price of any
incentive stock option granted to any participant who owns stock possessing more
than 10% of the total combined voting power of our outstanding capital stock
must be at least equal to 110% of the fair market value of such shares on the
date of grant. The term of each incentive stock option granted pursuant to the
plan cannot exceed ten years, except that the term of any incentive stock option
granted to a participant who owns stock possessing more than 10% of the total
combined voting power of our outstanding capital stock or any option granted to
a non-employee director cannot exceed five years. The exercise price of
nonqualified stock options granted under the plan must not be less than the par
value of the shares subject to the option. No option granted under the plan is
transferable by the optionee other than by will or the laws of descent and
distribution and each option is exercisable during the lifetime of the optionee
only by such optionee. Options under the plan must either be exercised during
the term of the participant's employment with us, or during the three-month
period after such participant's date of termination if such termination is other
than for cause, unless the compensation committee extends such period. All
vesting of options ceases upon termination of employment, and options are
exercisable by a terminated employee only to the extent such options were
exercisable on the date of termination.
401(K) PLAN
Our 401(k) Plan is a defined contribution plan covering all full time
employees age 21 or older, and the plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974. Each year participants may
contribute up to 15% of their pretax annual compensation, up to a maximum of
$10,500. We match employee contributions dollar for dollar on the first 4% of
each employee's contribution and $0.50 on each dollar of the next 2%
contributed. Additional special amounts based on a percentage of compensation
and other discretionary amounts may be contributed at the option of our board of
directors. Contributions are subject to certain limitations.
The amounts of our contributions over the past five years are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- --------
<S> <C>
1995..................................................... $276,000
1996..................................................... $198,000
1997..................................................... $397,000
1998..................................................... $656,000
1999..................................................... $878,000
</TABLE>
EMPLOYMENT AGREEMENTS
Mr. Montgomery is employed under an Employment Agreement that expires on
December 31, 2002, pursuant to which he was entitled to receive $200,000 in base
salary on an annual basis commencing August 15, 1999. Mr. Montgomery's base
salary for 2000 is $225,000, with an annual increase of $25,000 each year
thereafter. Mr. Montgomery received a performance bonus under his current
employment agreement for the period commencing August 15, 1999 through December
31, 1999 equal to $35,375. He is eligible to receive annual performance bonuses
of up to $750,000 in 2000, $800,000 in 2001 and $825,000 in 2002, contingent
upon our successful attainment of certain revenue, bookings and EBITDA targets
established by our board of directors. The bonus amount is contingent upon the
extent to which we meet or exceed the financial targets, and in order for Mr.
Montgomery to receive the maximum bonus amounts, we must exceed the financial
targets by 30%. Up to $333,333 of Mr. Montgomery's annual bonus for these years
is payable in the form of immediately exercisable stock options, with an
exercise price equal to 25% of the fair market value of our common stock as of
December 31 of each such year. The remainder of Mr. Montgomery's bonus is
payable in cash. If Mr. Montgomery terminates his employment with good reason,
or if we terminate his employment after a change of control, we will be required
to
50
<PAGE> 56
purchase all shares of our common stock owned by Mr. Montgomery at the time of
his termination at their then fair market value.
Mr. Engelken and Mr. Epstein are each employed under an Employment
Agreement that expires on December 31, 2002, pursuant to which each was entitled
to receive $200,000 in base salary on an annual basis commencing August 15,
1999. Each executive's base salary in 2000 is $210,000, and will increase 5% per
year over the previous year's salary each year thereafter. Each executive is
also eligible to receive an incentive bonus, the amount of which is targeted at
50% of such executive's base salary. Two-thirds of the incentive bonus is based
upon our attainment of targeted revenue goals, and one-third of the incentive
bonus is based upon our attainment of targeted margin goals. We must achieve
more than 90% of the targeted revenues or targeted margins, whichever is being
tested during the period in question, for a bonus to be paid with respect to
that component. To the extent either bonus amount exceeds 100% of such
component's target, one-third of such excess will be payable in cash, and
two-thirds will be payable by the issuance of Nonqualified Stock Options at a
per share exercise price equal to 25% of the fair market value of our common
stock as of December 31 of such year. Messrs. Engelken and Epstein each received
a bonus under their current employment agreements for the period commencing
August 15, 1999 through December 31, 1999 of $41,700.
Mr. Schley is employed under an Employment Agreement that expires on
December 31, 2000, pursuant to which he was entitled to receive $168,000 in base
salary on an annual basis commencing August 15, 1999. Mr. Schley received
$63,000 in 1999 under this agreement. Mr. Schley's base salary in 2000 is
$176,400, and will increase 5% per year over the previous year's salary each
year thereafter. Mr. Schley is eligible to receive an incentive bonus targeted
at 50% of his base salary. Two-thirds of the incentive bonus is based upon our
attainment of targeted EBITDA goals and one-third of the incentive bonus is
based upon our attainment of targeted margin goals. We must achieve more than
90% of the targeted revenues or targeted margins, whichever is being tested
during the period in question, for a bonus to be paid with respect to that
component. To the extent either bonus amount exceeds 100% of such component's
target, one-third of such excess will be payable in cash and two-thirds will be
payable by the issuance of Nonqualified Stock Options, at a per share exercise
price equal to 25% of the fair market value of our common stock as of December
31 of such year. Mr. Schley received a bonus for 1999 under his current
employment agreement of $62,400.
Mr. Mileger is employed under an Employment Agreement that expires on
January 31, 2003, pursuant to which he is entitled to receive $150,000 in base
salary in 2000. Mr. Mileger's salary will increase to $162,500 upon the date of
his relocation to Denver, Colorado. In addition, Mr. Mileger received a $100,000
advance against his incentive bonus earned for 2000. The amount of the advance
will be offset against the amount of his incentive bonus, if any, earned in
2000. The advance is payable in eleven monthly installments, provided Mr.
Mileger remains employed by us during that period. Mr. Mileger is eligible to
receive an incentive bonus targeted at 100% of his base salary. Payment of the
bonus is dependent upon the attainment of certain performance goals established
by Mr. Mileger and us. We must achieve 90% of these performance goals, and Mr.
Mileger must remain employed by us as of the last day of the year, in order for
Mr. Mileger to be eligible to receive the bonus payment.
Mr. Shirman is employed under an Employment Agreement that expires on
December 31, 2002, pursuant to which he currently receives an annual base salary
of $200,000. In addition to his base salary, Mr. Shirman received a $180,000
signing bonus, payable in equal monthly installments over the first 12 months of
his employment, provided Mr. Shirman remains employed by us during that period.
Mr. Shirman is also entitled to receive a cost of living adjustment. Commencing
October 1, 2000, Mr. Shirman will be eligible to receive an incentive bonus
based upon our attainment of certain performance goals established by Mr.
Shirman and us. Mr. Shirman was also granted options to purchase 856,143 shares
of our common stock at a per share exercise price of $0.046, of which 226,626
options were immediately exercisable. Mr. Shirman's unvested options will vest
based on his continued employment with us and our achievement of certain
performance goals. Mr. Shirman may, in his discretion, allocate options to
purchase an additional 118,854 shares of common stock among himself and certain
of our employees who report directly to him.
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<PAGE> 57
CERTAIN TRANSACTIONS
1999 RECAPITALIZATION
On August 13, 1999 we consummated a recapitalization pursuant to an
agreement among us, certain of our then existing stockholders and certain
investors led by InSight Capital Partners III, L.P. and including UBS Capital II
LLC and affiliates of Goldman Sachs & Co. In connection with the
recapitalization, the investors acquired an approximately 63% controlling
interest in us through the purchase of shares of a new series of our voting
convertible participating preferred stock for a total purchase price of
approximately $45.5 million. As part of the recapitalization:
- we entered into a $25.0 million revolving line of credit with Fleet
National Bank, of which $22.0 million was borrowed in order to finance
the recapitalization;
- all shares of our then outstanding preferred stock and all shares of
common stock owned by our two largest non-employee stockholders were
purchased for a total purchase price of approximately $44.3 million;
- our employee stockholders, including the persons named in the summary
compensation table, received cash payments totaling $11.8 million in
respect of the purchase of a portion of their equity interest in us;
- we made cash payments totaling approximately $5.4 million to members of
our senior management, including some of the persons named in the summary
compensation table, in connection with the termination of their former
employment agreements, as fees in connection with the recapitalization
and to satisfy previously deferred bonus obligations to them;
- we issued 21,032,848 shares of our common stock and options to purchase
1,389,012 shares of our common stock, at an exercise price of $0.046 per
share, to certain of our employees, including the persons named in the
summary compensation table, in consideration for their continued
employment with us; and
- we loaned $2.0 million to our Chief Executive Officer.
The following table sets forth the sources and uses of funds for the
Recapitalization.
SOURCES AND USES
(in thousands)
<TABLE>
<S> <C>
SOURCES:
Investor proceeds......................................... 45,546
Line of credit borrowings................................. 22,000
------
Total sources..................................... 67,546
======
USES:
Retirement of preferred shareholder and two largest
non-employee common shareholders....................... 44,264
Buyout of employment agreements........................... 2,440
Legal and other finance fees.............................. 495
Fees paid to employees.................................... 738
Payment of previously deferred bonuses.................... 2,236
Payments to employee stockholders......................... 11,766
Loan to Chief Executive Officer........................... 2,000
------
Total uses........................................ 63,939
======
Net proceeds...................................... 3,607
</TABLE>
Under the recapitalization agreement, we agreed to indemnify the investors,
in the form of cash, additional shares of our stock, or a combination of both,
for breaches of representations, warranties and
52
<PAGE> 58
covenants we made to them in connection with their purchase of our capital
stock, including representations and warranties regarding our financial
condition, our liabilities and our client contracts, up to a maximum of $1.5
million in cash and $3.0 million in Series A Preferred stock, valued at $1.08
per share. Most of the representations and warranties under the recapitalization
agreement survive until the first anniversary of the recapitalization. The
obligation to indemnify the investors against environmental claims remains in
effect until the seventh anniversary of the closing of the recapitalization; the
obligations to indemnify the investors against tax-related and ERISA claims
remain in effect until the expiration of all applicable statutes of limitation;
and the obligation to indemnify the investors against claims made in connection
with certain representations and warranties relating to certain fundamental
corporate matters, such as our organization, our subsidiaries, our outstanding
stock and certain corporate approvals, remains in effect indefinitely. Also in
connection with the recapitalization, our continuing stockholders agreed to
elect two designees of the investors, currently Mr. John Blend III and Mr. Jerry
Murdock, to serve on our board of directors. This obligation to elect the
designees of the investors will terminate upon the closing of this offering.
INSIGHT CAPITAL PARTNERS TRANSACTION FEE
We agreed to pay InSight Capital Partners a one-time fee equal to one
percent (1%) of our market capitalization in our initial public offering, which
is payable in full upon the consummation of the public offering. Based on the
number of shares of common stock expected to be outstanding upon consummation of
this offering and assuming an initial public offering price of $ per share,
the fee payable to InSight Capital Partners will be approximately $
million.
In addition, we agreed to pay InSight Capital Partners a management fee
equal to $500,000 per year, for management and strategic advice rendered by
InSight Capital Partners throughout the year. As of December 31, 1999, we have
paid InSight $187,500 for their management and strategic advice. We will be
obligated to pay a pro-rata portion of the fee during 2000 until the
consummation of this offering, at which time our obligation to pay the fee will
terminate.
LOAN TO GLENN E. MONTGOMERY, JR.
On August 13, 1999, we extended a $2,000,000 loan to Glenn E. Montgomery,
Jr., evidenced by a promissory note. The interest rate on the loan is 5.9% per
annum, and Mr. Montgomery is required to make payments of principal and interest
to us in four equal installments of $652,685.27 on or before each of July 1,
2003, January 1, 2004, July 1, 2004 and August 13, 2004. Mr. Montgomery may
prepay the outstanding principal and accrued interest on the loan at any time
without penalty. If we experience a major capital event, including an initial
public offering, the entire unpaid principal amount and all accrued interest
under the loan shall immediately become due and payable. Mr. Montgomery will
repay this loan in connection with the consummation of the offering.
The loan to Mr. Montgomery is non-recourse. To secure the loan, Mr.
Montgomery executed a Stock Pledge Agreement whereby he pledged to us all shares
of our common stock owned by Mr. Montgomery. In addition, Mr. Montgomery's
obligations under the promissory note were initially guaranteed on a
non-recourse basis by GMJM Stock Partnership, Ltd. GMJM's obligations under the
guaranty are secured by a pledge to us of all shares of our common stock owned
by GMJM. The GMJM guaranty and pledge were released in January 2000 in
connection with the sale of the shares owned by GMJM.
1999/2000 ISSUANCE OF RESTRICTED STOCK TO CERTAIN DIRECTORS
On October 29, 1999 we issued 755,420 shares of common stock to each of
Robert Sharpe and John Blend III, members of our board of directors. The shares
vest at the rate of 94,427.5 shares per calendar quarter, effective on the last
day of such quarter, commencing September 30, 1999. If either director's service
as a member of our board is terminated, either for cause or voluntarily by such
director, all unvested shares are immediately forfeited back to us. In the event
of a termination of either director's service on the board for any other reason,
all unvested shares will immediately vest.
53
<PAGE> 59
STOCK SALE BY GLENN E. MONTGOMERY, JR.
Between January 15, 2000 and February 14, 2000, Glenn E. Montgomery, Jr.
sold 1,510,841 shares of preferred and common stock to three separate investor
groups. Total aggregate consideration for the transactions amounted to $6.0
million, or approximately $4.00 per share.
TERMINATION OF CONSULTING AGREEMENT
On November 19, 1999, the Company acquired 100% of the outstanding common
stock of an entity wholly owned by a former individual shareholder of the
Company for the sole purpose of terminating an existing consulting agreement
with the individual shareholder. Among other things, the consulting agreement,
which had a remaining term of approximately five years, obligated us to pay a
minimum monthly consulting fee of $14,000, quarterly incentive payments of
$25,000 and a finance fee equal to 8% of the gross proceeds received by us from
a major capital event, less all fees, discounts and commissions paid to any
investment bankers, underwriters, brokers and/or dealers associated with the
transaction, but with such fee equal to at least 2% of the gross proceeds. The
outstanding capital stock was acquired by us for $3,920,000 in cash and was
expensed during 1999.
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<PAGE> 60
PRINCIPAL AND SELLING STOCKHOLDERS
The following table provides certain information regarding the beneficial
ownership of our common stock as of December 31, 1999 and as adjusted to reflect
the sale of the shares of our common stock offered in this offering, by:
- each person or entity known by us to beneficially own 5% or more of our
common stock;
- each of our directors;
- each executive officer named in the summary compensation table;
- all executive officers and directors as a group; and
- each selling stockholder.
Unless otherwise indicated, the address of each person named in the table
below is c/o Convergent Group Corporation, 6399 South Fiddler's Green Circle,
Suite 600, Englewood, Colorado 80111. The amounts and percentages of common
stock beneficially owned are reported on the basis of regulations of the
Securities and Exchange Commission governing the determination of beneficial
ownership of securities. Under the rules of the Commission, a person is deemed
to be a "beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose of or to
direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days. Under these rules, more than one person may
be deemed a beneficial owner of the same securities and a person may be deemed
to be a beneficial owner of securities as to which such person has no economic
interest. The information set forth in the following table is based on the
number of shares of Common Stock outstanding as of December 31, 1999, assuming
the conversion of all shares of our preferred stock into common stock upon
completion of this offering. The table assumes that the underwriters'
over-allotment option has not been exercised and excludes any shares purchased
in this offering by the respective beneficial owner.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BEFORE OFFERING
-----------------------------------------------------
COMMON STOCK BENEFICIAL
UNDERLYING OWNERSHIP
OPTIONS AFTER OFFERING
COMMON STOCK EXERCISABLE --------------
NAME OF BENEFICIAL OWNER OUTSTANDING(1) WITHIN 60 DAYS TOTAL PERCENT PERCENT
- ------------------------ -------------- -------------- ---------- ------- --------------
<S> <C> <C> <C> <C> <C>
Entities affiliated with Insight Capital Partners(2).... 15,920,106 -- 15,920,106 22.9%
UBS Capital II LLC(3)................................... 15,920,076 -- 15,920,076 22.9%
Entities affiliated with GS Private Equity
Partners(4)........................................... 4,608,379 -- 4,608,379 6.6%
Glenn E. Montgomery, Jr................................. 6,550,185 -- 6,550,185 9.4%
Scott M. Schley......................................... 1,694,854 -- 1,694,854 2.4%
Mark L. Epstein(5)...................................... 6,550,187 -- 6,550,187 9.4%
Larry J. Engelken(6).................................... 5,305,537 -- 5,305,537 7.6%
John A. Ramseur......................................... 776,034 -- 776,034 1.1%
Robert Sharpe(7)........................................ 1,568,764 -- 1,568,764 2.3%
John Blend III(8)....................................... 16,675,526 -- 16,675,526 24.0%
Jerry Murdock(8)........................................ 15,920,106 -- 15,920,106 22.9%
All executive officers and directors as a group (9
persons)(9)........................................... 32,797,526 -- 32,797,526 47.2% (10)
</TABLE>
- ---------------
(1) Assuming the conversion of all outstanding shares of Series A Preferred
Stock into Common Stock, on a fully diluted basis.
(2) Consists of 11,392,380 shares held by Insight Capital Partners III, L.P.,
2,822,094 shares held by Insight Capital Partners III (Cayman), L.P., and
1,705,632 shares held by Insight Capital Partners III (Co-Investors), L.P.
The address of Insight Capital Partners III, L.P. and Insight Capital
Partners (Co-Investors), L.P. is 527 Madison Avenue, 10th Floor, New York,
New York 10022. The address of Insight Capital Partners (Cayman) III, L.P.
is c/o W.S. Walker & Company, Walker House, P.O. Box 265GT, Mary Street,
Georgetown, Grand Cayman, Cayman Islands.
55
<PAGE> 61
(3) The address of UBS Capital II LLC is 299 Park Avenue, New York, New York
10171.
(4) Consists of 1,577,569 shares held by GS Private Equity Partners II, L.P.,
816,918 shares held by GS Private Equity Partners II Offshore, L.P.,
1,653,515 shares held by GS Private Equity Partners III, L.P., 385,475
shares held by GS Private Equity Partners III Offshore, L.P. and 174,902
shares held by NBK/GS Private Equity Partners, L.P. The address for each
entity listed in this footnote 4 is as follows: One New York Plaza, New
York, New York 10004.
(5) Shares held by a trust.
(6) Shares held by Mr. Engelken, his wife Holly Storm-Engelken and six trusts.
(7) Shares held by two trusts for the benefit of Mr. Sharpe's children of which
Mr. Sharpe is the trustee.
(8) Includes the shares held by entities affiliated with InSight Capital
Partners. The address of Messrs. Blend and Murdock is c/o Insight Capital
Partners, 527 Madison Avenue, 10th Floor, New York, New York 10022. Messrs.
Blend and Murdock are partners of Insight Capital Partners and each
disclaims beneficial ownership of the shares held by Insight Capital
Partners except to the extent of their respective pecuniary interests.
(9) Includes all shares held by entities affiliated with certain directors as
described in note (8) above.
(10) If the underwriters' over-allotment option to purchase up to
additional shares is exercised in full, our officers and directors will
sell an aggregate of additional shares as follows: .
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, our capital stock will consist of
125,000,000 shares of common stock, $0.001 par value per share, and 75,000,000
shares of preferred stock, $0.001 par value per share. As of December 31, 1999,
and giving effect to the conversion of all outstanding shares of our preferred
stock into common stock upon the closing of this offering, there were
outstanding 69,477,333 shares of common stock held by 134 stockholders of
record. In addition, there were outstanding options to purchase an aggregate of
6,346,472 shares of common stock.
The following description of our capital stock, provisions of our restated
certificate of incorporation and our amended bylaws and certain provisions of
Delaware law are summaries thereof and are qualified in their entirety by
reference to the Delaware General Corporation Law, and our restated certificate
of incorporation and our amended bylaws. Copies of our restated certificate of
incorporation and amended bylaws have been filed with the Commission as exhibits
to our registration statement, of which this prospectus forms a part.
COMMON STOCK
The holders of our common stock are entitled to dividends as our board of
directors may declare from time to time from funds legally available therefor,
subject to the preferential rights of the holders of our preferred stock, if
any. The holders of our common stock are entitled to one vote per share on any
matter to be voted upon by stockholders. Our restated certificate of
incorporation does not provide for cumulative voting in connection with the
election of directors, and, accordingly, holders of more than 50% of the shares
voting will be able to elect all of the directors. No holder of our common stock
will have any preemptive right to subscribe for any shares of capital stock
issued in the future.
Upon any voluntary or involuntary liquidation, dissolution, or winding up
of our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment to creditors and subject to prior
distribution rights of our preferred stock, if any. All of the outstanding
shares of common stock are, and the shares offered by us will be, fully paid and
non-assessable.
56
<PAGE> 62
PREFERRED STOCK
As of the closing of this offering, no shares of our preferred stock will
be outstanding. Under our restated certificate of incorporation, our board of
directors, without further action by our stockholders, will be authorized to
issue shares of preferred stock in one or more classes or series. The board may
fix the rights, preferences and privileges of each such class or series of
preferred stock, along with any limitations or restrictions, including voting
rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences of each class or series of preferred stock. The
preferred stock could have voting or conversion rights that could adversely
affect the voting power or other rights of holders of our common stock. The
issuance of preferred stock could also have the effect, under certain
circumstances, of delaying, deferring or preventing a change of control of
Convergent Group. We currently have no plans to issue any shares of preferred
stock.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an "interested stockholder," unless the business combination is approved
in a prescribed manner. A "business combination" includes certain mergers, asset
sales, and other transactions resulting in a financial benefit to the
"interested stockholder." Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within the past three years did own, 15% of the corporation's voting stock.
OTHER CHARTER AND BY-LAW PROVISIONS
Some provisions of our restated certificate of incorporation and amended
bylaws could have anti-takeover effects. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
corporate policies formulated by our board of directors. In addition, these
provisions also are intended to ensure that our board of directors will have
sufficient time to act in what the board of directors believes to be in the best
interests of us and our stockholders. These provisions also are designed to
reduce our vulnerability to an unsolicited proposal for our takeover that does
not contemplate the acquisition of all of our outstanding shares or an
unsolicited proposal for the restructuring or sale of all or part of Convergent
Group. The provisions are also intended to discourage certain tactics that may
be used in proxy fights. However, these provisions could delay or frustrate the
removal of incumbent directors or the assumption of control of us by the holder
of a large block of common stock, and could also discourage or make more
difficult a merger, tender offer, or proxy contest, even if such event would be
favorable to the interest of our stockholders.
Classified Board of Directors
Our restated certificate of incorporation will provide for our board of
directors to be divided into three classes of directors, with each class as
nearly equal in number as possible, serving staggered three-year terms, other
than directors who may be elected by holders of any preferred stock we may issue
in the future. As a result, approximately one-third of our board of directors
will be elected each year. The classified board provision will promote the
continuity and stability of our board of directors and our business strategies
and policies as determined by our board of directors. The classified board
provision could have the effect of discouraging a third party from making an
unsolicited tender offer or otherwise attempting to obtain control of us without
the approval of our board of directors. In addition, the classified board
provision could delay stockholders who do not like the policies of our board of
directors from electing a majority of our board of directors for two years.
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<PAGE> 63
No Stockholder Action by Written Consent; Special Meetings
Our restated certificate of incorporation will provide that stockholder
action can only be taken at an annual or special meeting of shareholders and
prohibits shareholder action by written consent in lieu of meeting. Our amended
bylaws provide that special meetings of shareholders may be called only by our
board of directors or our Chairman or Chief Executive Officer. Our stockholders
are not permitted to call a special meeting of stockholders or to require that
our board of directors call a special meeting.
Advance Notice Requirements for Shareholder Proposals and Director Nominees
Our amended bylaws will establish an advance notice procedure for our
stockholders to make nominations of candidates for election as directors or to
bring other business before an annual meeting of our stockholders. The
stockholder notice procedure provides that only persons who are nominated by, or
at the direction of, our board of directors or by a stockholder who has given
timely written notice to our Secretary prior to the meeting at which directors
are to be elected will be eligible for election as our directors. The
stockholder notice procedure also provides that at an annual meeting only such
business may be conducted as has been brought before the meeting by, or at the
direction of, our board of directors or by a stockholder who has given timely
written notice to our Secretary of such stockholder's intention to bring such
business before such meeting. Under the stockholder notice procedure, if a
stockholder desires to submit a proposal or nominate persons for election as
directors at an annual meeting, the stockholder must submit written notice not
less than 90 days nor more than 120 days prior to the first anniversary of the
previous year's annual meeting. In addition, under the stockholder notice
procedure, a stockholder's notice proposing to nominate a person for election as
a director or relating to the conduct of business other than the nomination of
directors must contain certain specified information. If the chairman of a
meeting determines that business was not properly brought before the meeting in
accordance with the stockholder notice procedure, such business shall not be
discussed or transacted.
Number of Directors; Removal; Filling Vacancies
Our restated certificate of incorporation and amended bylaws will provide
that our board of directors will consist of not less than 3 nor more than 15
directors, other than directors elected by holders of our preferred stock, the
exact number to be fixed from time to time by resolution adopted by our
directors. Further, subject to the rights of the holders of any series of our
preferred stock, if any, our restated certificate of incorporation and amended
bylaws will authorize our board of directors to elect additional directors under
specified circumstances and fill any vacancies that occur in our board of
directors by reason of death, resignation, removal, or otherwise. A director so
elected by our board of directors to fill a vacancy or a newly created
directorship holds office until the next election of the class for which such
director has been chosen and until his successor is elected and qualified.
Subject to the rights of the holders of any series of our preferred stock, if
any, our restated certificate of incorporation and amended bylaws will also
provide that directors may be removed only for cause and only by the affirmative
vote of holders of 66 2/3% of the voting power of the then outstanding shares of
stock entitled to vote generally in the election of directors, voting together
as a single class. The effect of these provisions is to preclude a stockholder
from removing incumbent directors without cause and simultaneously gaining
control of our board of directors by filling the vacancies created by such
removal with its own nominees.
RESTATED CERTIFICATE OF INCORPORATION
The provisions of our restated certificate of incorporation that would have
anti-takeover effects as described above will be subject to amendment,
alteration, repeal, or recession by the affirmative vote of the holders of not
less than two-thirds (66 2/3%) of the outstanding shares of voting securities.
This requirement will make it more difficult for stockholders to make changes to
the provisions in our restated certificate of incorporation which could have
anti-takeover effects by allowing the holders of a minority of the voting
securities to prevent the holders of a majority of voting securities from
amending these provisions of our restated certificate of incorporation.
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<PAGE> 64
AMENDED BYLAWS
Our restated certificate of incorporation will provide that our amended
bylaws are subject to adoption, amendment, alteration, repeal, or recession
either by our board of directors without the assent or vote of our stockholders,
or by the affirmative vote of the holders of not less than two-thirds (66 2/3%)
of the outstanding shares of voting securities. This provision makes it more
difficult for stockholders to make changes in our amended bylaws by allowing the
holders of a minority of the voting securities to prevent the holders of a
majority of voting securities from amending our amended bylaws.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our restated certificate of incorporation includes a provision that
eliminates the personal liability of our directors for monetary damages for
breach of fiduciary duty as a director, except for liability:
- for any breach of the director's duty of loyalty to us or to our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or
- for any transaction from which the director derived an improper personal
benefit.
These provisions are permitted under Delaware law.
We have obtained directors' and officers' insurance for our directors,
officers and some employees for specified liabilities.
The limitation of liability and indemnification provisions in our amended
and restated certificate of incorporation and amended bylaws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty. They may also have the effect of reducing the likelihood of
derivative litigation against directors and officers, even though an action of
this kind, if successful, might otherwise benefit us and our stockholders.
Furthermore, a stockholder's investment may be adversely affected to the extent
we pay the costs of settlement and damage awards against directors and officers
pursuant to these indemnification provisions. However, we believe that these
indemnification provisions are necessary to attract and retain qualified
directors and officers.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees regarding which indemnification is sought,
nor are we aware of any threatened litigation that may result in claims for
indemnification.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is .
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<PAGE> 65
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock, and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of our common stock in the public
market or the perception that these sales could occur could adversely affect
prevailing market prices of our common stock and could also adversely affect our
ability to raise capital at a time and on terms favorable to us.
Upon completion of this offering, we will have outstanding a total of
shares of our common stock. Of these shares, all of the shares sold in
this offering will be freely tradable without restriction or further
registration under the Securities Act, unless such shares are held by our
affiliates as that term is defined in Rule 144 under the Securities Act. The
remaining 69,477,333 shares of common stock held by existing stockholders are
restricted securities as that term is defined in Rule 144 under the Securities
Act. Restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rule 144 or Rule 701
under the Securities Act. These rules are summarized below.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ----
<S> <C>
After 180 days from the date of this prospectus (subject to
volume limitations)
Upon the filing of a registration statement to register
shares of common stock issuable upon the exercise of options
granted under our stock option plans.
At various times after 180 days from the date of this
prospectus.
</TABLE>
LOCK-UP AGREEMENTS
All of our officers, directors and stockholders have agreed, subject to
certain exceptions, not to offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock or any options or warrants to purchase any shares of common stock,
or any securities convertible into or exchangeable for shares of common stock
owned as of the date of this prospectus or later acquired directly by such
holders or with respect to which they have the power of disposition, without the
prior written consent of FleetBoston Robertson Stephens Inc., for a period of
180 days from the date of this prospectus. However, FleetBoston Robertson
Stephens Inc. may, in its sole discretion and at any time without notice,
release all or any portion of securities subject to these agreements not to sell
shares. There are no existing agreements between the representatives of the
underwriters and any of our stockholders providing consent to the sale of shares
prior to the expiration of the above period.
RULE 144
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated) including an affiliate, who has
beneficially owned shares of our common stock for at least one year can sell
within any three-month period commencing 90 days after the date of this
prospectus, a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding
(approximately shares immediately after this offering); or
- the average weekly trading volume in our common stock during the four
calendar weeks preceding the filing of a notice on Form 144 with respect
to the sale.
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<PAGE> 66
Sales under Rule 144 are also subject to manner of sale provisions and notice
requirements and to the availability of public information about us. In
addition, under Rule 144(k), a person who is not one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, can sell such shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
RULE 701
In general, under Rule 701, any of our employees, directors, consultants or
advisors who purchase shares from us in connection with a compensatory stock
option plan or other written agreement are eligible to resell these shares 90
days after the date of this offering in reliance on Rule 144, without compliance
with certain restrictions contained in Rule 144, including the holding period.
However, the holders of our outstanding options have also executed lock-up
agreements as discussed above.
After this offering, we intend to register an aggregate of 14,231,152
shares of common stock which may be issued under our stock option plan. Shares
issued upon exercise of options after the effective date of the registration
statement on Form S-8 will be eligible for resale in the public market without
restriction, subject to Rule 144 limitations applicable to affiliates and the
lock-up agreements noted above.
REGISTRATION RIGHTS
Following the offering, holders of 41,978,689 shares of our common stock
will be entitled to request an unlimited number of demand registrations of these
shares of common stock under the Securities Act, provided that holders of a
majority of such shares of common stock then outstanding make such request.
Commencing 180 days after the consummation of this offering, holders of
68,878,299 shares of our common stock, including the foregoing shares, will have
certain piggyback registration rights in the event we intend to register shares
of our common stock under the Securities Act. In addition, at any time after we
have qualified for a registration pursuant to Form S-3, a majority of holders of
these shares shall have the right to request an unlimited number of
registrations of their common stock, subject to certain conditions and
limitations. If and whenever we are under an obligation to effect the filing and
maintenance of a registration statement, we are required to use our best efforts
to effect such registration, subject to certain conditions and limitations. We
are required to pay most of the expenses related to these registrations,
excluding underwriting commissions and discounts.
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<PAGE> 67
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and SoundView Technology Group, Inc., have entered into an
underwriting agreement with us and the selling stockholders to purchase the
number of shares of common stock listed opposite their respective names below.
The underwriters are obligated to purchase and pay for all of the shares if any
are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens, Inc. .......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
SoundView Technology Group, Inc. ...........................
--------
Total.............................................
========
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of our common stock to the public at the public offering price
located on the cover page of this prospectus and to certain dealers at that
price less a concession of not in excess of $ per share, of which $ may
be reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No reduction in this price will change the amount of proceeds
to be received by us and the selling stockholders as indicated on the cover page
of this prospectus.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
Over-Allotment Option. We and the selling stockholders have granted to the
underwriters options, exercisable during the 30-day period after the date of
this prospectus, to purchase up to additional shares and
additional shares, respectively, of common stock to cover over-allotments, if
any, at the same price per share as we will receive for the shares that the
underwriters have agreed to purchase. To the extent that the underwriters
exercise these options, each of the underwriters will have a firm commitment to
purchase approximately the same percentage of such additional shares that the
number of shares of common stock to be purchased by it shown in the above table
represents as a percentage of the shares offered by this prospectus. If
purchased, the additional shares will be sold by the underwriters on the same
terms as those on which the shares are being sold. We and the selling
stockholders will be obligated, under these options, to sell shares to the
extent the options are exercised. The underwriters may exercise the options only
to cover over-allotments made in connection with the sale of the shares of
our common stock offered by this prospectus.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment options.
<TABLE>
<CAPTION>
WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT
PER SHARE OPTION OPTION
--------- -------------- --------------
<S> <C> <C> <C>
Assumed public offering price......................... $ $ $
Underwriting discounts and commissions................
Proceeds, before expenses, to us......................
Proceeds, before expenses, to selling stockholders....
</TABLE>
The expenses of the offering, other than underwriting discounts and
commissions, payable by us are estimated at $ . FleetBoston Robertson
Stephens Inc. expects to deliver the shares of common stock to purchasers on
, 2000.
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<PAGE> 68
Directed Share Program. The underwriters have reserved up to five percent
of the common stock offered for sale in this offering, at the initial public
offering price, to directors, officers, employees, business associates and
persons otherwise connected to Convergent Group. The number of shares of common
stock available for sale to the general public will be reduced to the extent
these individuals purchase reserved shares. Any reserved shares which are not
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered in this offering.
Internet Distribution. A prospectus in electronic format is being made
available on an Internet Web site maintained by Wit SoundView's affiliate, Wit
Capital Corporation. In addition, other dealers purchasing shares from Wit
SoundView in this offering have agreed to make a prospectus in electronic format
available on Web sites maintained by each of these dealers. Other than the
prospectus in electronic format the information on Wit Capital's Web site and
any information contained on any other Web site maintained by Wit Capital is not
part of the prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or any underwriter in
its capacity as underwriter and should not be relied upon by investors.
Indemnity. The underwriting agreement contains covenants of indemnity
between the underwriters, us and the selling stockholders against certain civil
liabilities, including liabilities under the Securities Act, and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.
Agreements Not to Sell Shares. All of our officers, directors and
stockholders have agreed, subject to limited exceptions, not to offer to sell,
contract to sell, or otherwise sell, dispose of, loan, pledge or grant any
rights with respect to any shares of common stock or any options or warrants to
purchase any shares of common stock, or any securities convertible into or
exchangeable for shares of common stock owned as of the date of this prospectus
or later acquired directly by such holders or with respect to which they have
the power of disposition, without the prior written consent of FleetBoston
Robertson Stephens Inc., for a period of 180 days from the date of this
prospectus. However, FleetBoston Robertson Stephens Inc. may, in its sole
discretion and at any time without notice, release all or any portion of
securities subject to these agreements not to sell shares. There are no existing
agreements between the representatives of the underwriters and any of our
stockholders providing consent to the sale of shares prior to the expiration of
the above period.
Future Sales by Us. In addition, we have agreed that during the 180 days
after the date of this prospectus, we will not, without the prior written
consent of FleetBoston Robertson Stephens Inc., subject to certain exceptions
(a) consent to the disposition of any shares held by stockholders subject to
agreements not to sell shares prior to the expiration of the period set forth
above or (b) issue, sell, contract to sell, or otherwise dispose of, any shares
of common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance of
common stock upon the exercise of outstanding options, and the issuance of
options under existing stock option and incentive plans, provided such options
do not vest prior to the expiration of the 180-day period. See "Shares Eligible
for Future Sale."
Listing. We intend to apply to have our common stock approved for quotation
on the Nasdaq National Market under the symbol "CVGP".
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus has been determined through
negotiations among us, the selling stockholders and the representatives. Among
the factors considered in these negotiations were prevailing market conditions,
our financial information, market valuations of other companies that we and the
representatives believed to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
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<PAGE> 69
Stabilization. The representatives have advised us that, under Regulation M
under the Securities and Exchange Act of 1934, some participants in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of our common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or the purchase
of the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with this offering. A "penalty bid"
is an arrangement permitting the representatives to reclaim the selling
concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by the
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be passed
upon for us by O'Sullivan Graev & Karabell, LLP, New York, New York and for the
underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. An investment partnership of O'Sullivan Graev & Karabell, LLP
is a limited partner of InSight Capital Partners III (Co-Investors), L.P., one
of our stockholders.
EXPERTS
The consolidated financial statements of Convergent Group Corporation as of
December 31, 1998 and 1999 and for each of the years in the three year period
ended December 31, 1999 included in this prospectus have been include in
reliance upon the report of Grant Thornton, LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 (including exhibits and
schedules) with the SEC. This prospectus, which forms a part of that
registration statement, does not contain all of the information included in the
registration statement. Certain information is omitted and you should refer to
the registration statement and its exhibits. With respect to references made in
this prospectus to any contract or other document, such references are not
necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
review a copy of the registration statement at the SEC's public reference room
in Washington, D.C., and at the SEC's regional offices in Chicago, Illinois and
New York, New York. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings and
the registration statement can also be reviewed by accessing the SEC's Internet
site at http://www.sec.gov. As a result of this offering, we will become subject
to the information and reporting requirements of the Securities Exchange Act
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. Upon approval of the common stock for the
quotation on the Nasdaq National Market, such reports, proxy and information
statements and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
64
<PAGE> 70
CONVERGENT GROUP CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Consolidated Financial Statements:
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Operations..................... F-4
Consolidated Statements of Stockholders' Equity
(Deficit).............................................. F-5
Consolidated Statements of Cash Flows..................... F-6
Notes to Consolidated Financial Statements................ F-8
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Convergent Group Corporation
We have audited the accompanying consolidated balance sheets of Convergent
Group Corporation as of December 31, 1998 and 1999, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Convergent
Group Corporation and subsidiaries as of December 31, 1998 and 1999, and the
consolidated results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1999 in conformity with
generally accepted accounting principles.
Grant Thornton LLP
Denver, Colorado
February 8, 2000, (except for Note J, as to which
the date is February 16, 2000)
F-2
<PAGE> 72
CONVERGENT GROUP CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 4,958 $ 1,596
Accounts receivable (net of allowance for doubtful
accounts of $156 and $43, respectively)................. 4,578 9,181
Unbilled revenues......................................... 3,269 6,351
Other..................................................... 226 417
-------- --------
13,031 17,545
Deferred tax asset........................................ 1,964 3,400
Prepaid expenses and other................................ 221 578
-------- --------
Total current assets................................ 15,216 21,523
PROPERTY AND EQUIPMENT, AT COST (net of accumulated
depreciation and amortization of $4,152 and $4,963,
respectively)............................................. 2,725 3,102
LOAN RECEIVABLE FROM RELATED PARTY.......................... -- 2,046
OTHER ASSETS................................................ 36 36
-------- --------
Total assets........................................ $ 17,977 $ 26,707
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable.......................................... $ 2,015 $ 2,346
Note payable.............................................. 500 40
Deferred revenue.......................................... 5,463 2,182
Accrued liability for anticipated contract costs.......... 1,648 1,949
Accrued compensation and related expense.................. 3,592 2,128
Accrued project related costs............................. 2,191 5,619
Other accrued expenses.................................... 297 1,327
-------- --------
Total current liabilities........................... 15,706 15,591
NON-CURRENT LIABILITIES:
Accrued liability for anticipated contract costs.......... 1,108 171
Accrued compensation and related expenses................. 1,076 227
Long-term loan (net of deferred acquisition costs)........ -- 21,753
-------- --------
Total liabilities................................... 17,890 37,742
MANDATORILY REDEEMABLE PREFERRED STOCK ($0.10 par value
with a liquidation preference of $40,541)............... 40,541 --
Series A Convertible Exchangeable (5,725 and -0- shares
authorized, issued and outstanding).................... -- --
Series B Exchangeable (39,000 and -0- shares authorized;
34,816 and -0- shares issued
and outstanding)...................................... -- --
COMMITMENTS
STOCKHOLDERS' EQUITY (DEFICIT):
Series A convertible preferred stock ($.001 par value;
75,000,000 shares authorized; -0- and 41,978,689 shares
issued and outstanding)................................ -- 42
Class A common stock ($0.001 par value; 25,740,960 and
-0- shares authorized; 18,386,400 and -0- shares issued
and outstanding)....................................... 18 --
Class B common stock ($0.001 par value; 1,336,680 and
-0- shares authorized; -0- shares issued and
outstanding)........................................... -- --
Common stock ($0.001 par value; 125,000,000 shares
authorized; 11,983,500 and 27,498,644 shares issued and
outstanding)........................................... 12 28
Additional paid-in capital.............................. 6,866 46,864
Deferred compensation................................... (22) (5,397)
Accumulated deficit..................................... (47,632) (52,882)
Accumulated other comprehensive income.................. 304 310
-------- --------
Total stockholders' equity (deficit)................ (40,454) (11,035)
-------- --------
Total liabilities and stockholders' equity
(deficit)........................................... $ 17,977 $ 26,707
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 73
CONVERGENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Integration, consulting and other services.......... $ 21,517 $ 28,957 $ 41,029
Subcontractor and other revenue..................... 19,339 18,458 25,581
----------- ----------- -----------
Total revenues.............................. 40,856 47,415 66,610
COST OF REVENUES:
Cost of integration, consulting and other
services......................................... 17,326 17,564 22,296
Cost of subcontractor and other revenue............. 13,010 13,959 20,205
----------- ----------- -----------
Total cost of revenue....................... 30,336 31,523 42,501
----------- ----------- -----------
Gross profit................................ 10,520 15,892 24,109
EXPENSES:
Selling, General and Administrative Expenses........ 11,574 12,123 16,855
Recapitalization Costs.............................. -- -- 7,098
Employee Stock Compensation Expense................. 8 12 2,231
Consulting Agreement Termination Costs.............. -- -- 3,920
Loss from Disposal of Assets........................ -- 93 --
Research and Development............................ 173 -- --
Gain from Restructuring............................. (1,218) (95) --
----------- ----------- -----------
10,537 12,133 30,104
----------- ----------- -----------
Operating income (loss)..................... (17) 3,759 (5,995)
OTHER INCOME (EXPENSE):
Interest income..................................... 82 176 176
Interest expense.................................... (1,170) (119) (778)
----------- ----------- -----------
Total other income (expense)................ (1,088) 57 (602)
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES..................... (1,105) 3,816 (6,597)
INCOME TAX BENEFIT.................................... -- 1,861 1,347
----------- ----------- -----------
NET INCOME (LOSS)..................................... (1,105) 5,677 (5,250)
PREFERRED STOCK ADJUSTMENTS........................... -- -- 20,816
----------- ----------- -----------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS.... $ (1,105) $ 5,677 $ 15,566
=========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE...................... $ (0.03) $ 0.19 $ 0.54
----------- ----------- -----------
EARNINGS (LOSS) PER COMMON SHARE ASSUMING DILUTION.... $ (0.03) $ 0.12 $ 0.25
----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING................... 32,468,695 30,270,735 28,857,030
----------- ----------- -----------
WEIGHTED AVERAGE SHARES OUTSTANDING ASSUMING
DILUTION............................................ 40,936,900 47,543,703 61,411,230
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 74
CONVERGENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS EXCEPT FOR SHARE DATA)
<TABLE>
<CAPTION>
NEW SERIES A CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK COMMON STOCK
------------------- -------------------- -------------------- -------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------- ------ ----------- ------ ----------- ------ ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1997............. -- $ -- 18,386,400 $ 18 10,458,184 $ 10 11,167,602 $11
Net loss................................ -- -- -- -- -- -- -- --
Foreign currency translation
adjustments........................... -- -- -- -- -- -- -- --
Comprehensive loss...................... -- -- -- -- -- -- -- --
Class B common stock acquired upon
disposition of subsidiary............. -- -- -- -- (10,458,184) (10) -- --
Exercise of stock options............... -- -- -- -- -- -- 38,229 --
Issuance of common stock for services... -- -- -- -- -- -- 615,359 1
---------- ---- ----------- ---- ----------- ---- ---------- ---
BALANCE AS OF DECEMBER 31, 1997........... -- -- 18,386,400 18 -- -- 11,821,190 12
Net income.............................. -- -- -- -- -- -- -- --
Foreign currency translation
adjustments........................... -- -- -- -- -- -- -- --
Comprehensive income.................... -- -- -- -- -- -- -- --
Purchase of common stock................ -- -- -- -- -- -- (6,375) --
Issuance of common stock for services... -- -- -- -- -- -- 160,781 --
Exercise of stock options............... -- -- -- -- -- -- 7,904 --
Issuance of employee options............ -- -- -- -- -- -- -- --
Purchase of option to reacquire stock... -- -- -- -- -- -- -- --
---------- ---- ----------- ---- ----------- ---- ---------- ---
BALANCE AS OF DECEMBER 31, 1998........... -- -- 18,386,400 18 -- -- 11,983,500 12
Net loss................................ -- -- -- -- -- -- -- --
Foreign currency translation
adjustments........................... -- -- -- -- -- -- -- --
Comprehensive loss...................... -- -- -- -- -- -- -- --
Purchase of common stock................ -- -- -- -- -- -- (3,476,729) (4)
Exercise of stock options............... -- -- -- -- -- -- 4,895,877 5
Issuance of common stock for services... -- -- -- -- -- -- 1,468,277 2
Issuance of convertible series A
preferred stock net of issuance costs
of $687............................... 41,978,689 42 -- -- -- -- -- --
Convert preferred A to class A common
stock................................. -- -- 2,085,000 2 -- -- -- --
Purchase of class A common stock........ -- -- (20,471,400) (20) -- -- -- --
Deferred compensation on stock grants
and options........................... -- -- -- -- -- -- 1,510,840 2
Stock option compensation expense....... -- -- -- -- -- -- -- --
Settlement of redeemable preferred at
less than redemption value............ -- -- -- -- -- -- -- --
Distribution to common stockholders..... -- -- -- -- -- -- -- --
Issuance of common stock for services... -- -- -- -- -- -- 11,116,879 11
---------- ---- ----------- ---- ----------- ---- ---------- ---
BALANCE AS OF DECEMBER 31, 1999........... 41,978,689 $ 42 -- $ -- -- $ -- 27,498,644 $28
========== ==== =========== ==== =========== ==== ========== ===
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
DEFERRED PAID-IN ACCUMULATED COMPREHENSIVE COMPREHENSIVE
COMPENSATION CAPITAL DEFICIT INCOME INCOME
------------ ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 1, 1997............. $ (22) $ 6,981 $(52,204) $292
Net loss................................ -- -- (1,105) -- $(1,105)
Foreign currency translation
adjustments........................... -- -- -- (11) (11)
-------
Comprehensive loss...................... -- -- -- -- (1,116)
-------
Class B common stock acquired upon
disposition of subsidiary............. -- (121) -- --
Exercise of stock options............... -- -- -- --
Issuance of common stock for services... -- 7 -- --
------- -------- -------- ----
BALANCE AS OF DECEMBER 31, 1997........... (22) 6,867 (53,309) 281
Net income.............................. -- -- 5,677 -- 5,677
Foreign currency translation
adjustments........................... -- -- -- 23 23
-------
Comprehensive income.................... -- -- -- -- 5,700
-------
Purchase of common stock................ -- (1) -- --
Issuance of common stock for services... -- 2 -- --
Exercise of stock options............... -- 1 -- --
Issuance of employee options............ -- 12 -- --
Purchase of option to reacquire stock... -- (15) -- --
------- -------- -------- ----
BALANCE AS OF DECEMBER 31, 1998........... (22) 6,866 (47,632) 304
Net loss................................ -- -- (5,250) -- (5,250)
Foreign currency translation
adjustments........................... -- -- -- 6 6
-------
Comprehensive loss...................... -- -- -- -- (5,244)
-------
Purchase of common stock................ -- (1,466) -- --
Exercise of stock options............... -- 103 -- --
Issuance of common stock for services... 22 102 -- --
Issuance of convertible series A
preferred stock net of issuance costs
of $687............................... -- 44,817 -- --
Convert preferred A to class A common
stock................................. -- 5,723 -- --
Purchase of class A common stock........ -- (30,245) -- --
Deferred compensation on stock grants
and options........................... (6,090) 6,088 -- --
Stock option compensation expense....... 693 -- -- --
Settlement of redeemable preferred at
less than redemption value............ -- 20,816 -- --
Distribution to common stockholders..... -- (7,341) -- --
Issuance of common stock for services... -- 1,401 -- --
------- -------- -------- ----
BALANCE AS OF DECEMBER 31, 1999........... $(5,397) $ 46,864 $(52,882) $310
======= ======== ======== ====
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 75
CONVERGENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ( loss).......................................... $(1,105) $ 5,677 $ (5,250)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 1,350 1,235 1,407
Deferred income taxes..................................... -- (1,964) (1,437)
Provision for bad debts (recovery)........................ 45 (542) (113)
Gain from CGAP dissolution................................ (792) -- --
Gain from restructuring................................... (773) (95) --
Loss on disposal of fixed assets.......................... 637 93 --
Stock and options issued as compensation.................. 8 12 2,231
Changes in operating assets and liabilities:
Receivables and unbilled revenues...................... 3,447 48 (7,571)
Prepaid expenses and other assets...................... 469 555 (548)
Accounts payable and accrued expenses.................. (1,084) 28 2,476
Accrual for anticipated contract costs................. 1,749 (573) (636)
Accrual for restructuring.............................. (2,719) (147) --
Unearned revenue and customer deposits................. 1,477 (446) (3,281)
------- ------- --------
Net cash provided by (used in) operating
activities...................................... 2,709 3,881 (12,722)
INVESTING ACTIVITIES
Purchase of property and equipment........................ (555) (1,025) (1,761)
FINANCING ACTIVITIES
Repayment of note payable................................. -- -- (500)
Note receivable from a shareholder........................ -- -- (2,046)
Issuance of stock......................................... -- 2 --
Acquisition of options to repurchase stock................ -- (15) --
Borrowing line of credit.................................. -- -- 1,000
Paydown line of credit.................................... (1,000) -- (1,000)
Borrowing on revolving credit loan agreements............. -- -- 24,000
Payments on revolving credit loan agreements.............. -- -- (2,000)
Payments on debt obligations.............................. (806) -- --
Deferred loan acquisition costs........................... -- -- (270)
Purchase of common stock.................................. -- -- (1,430)
Distribution to common stockholders....................... -- -- (7,341)
Exercise of stock options................................. -- -- 108
Purchase of redeemable preferred stock and class A common
stock.................................................. -- -- (44,265)
Issuance of convertible preferred stock net of issuance
costs of $687.......................................... -- -- 44,859
------- ------- --------
Net cash provided by (used in) financing
activities...................................... (1,806) (13) 11,115
------- ------- --------
Effect of exchange rate changes on cash and cash
equivalents............................................... (11) 23 6
------- ------- --------
Net increase (decrease) in cash and cash equivalents........ 337 2,866 (3,362)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 1,755 2,092 4,958
------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 2,092 $ 4,958 $ 1,596
======= ======= ========
</TABLE>
F-6
<PAGE> 76
CONVERGENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest.................... $ 109 $ 119 $ 559
======= ======= ========
NONCASH ACTIVITIES:
Issuance of note payable in exchange for software
licenses............................................... $ -- $ 500 $ --
======= ======= ========
Issuance of note payable in exchange for stock
repurchase............................................. $ -- $ -- $ 40
======= ======= ========
Conversion of notes payable into Series A Preferred Stock
as a result of the restructuring agreement............. $ -- $(4,725) $ --
======= ======= ========
Dissolution of CGAP
Fair value of tangible and intangible assets returned
to CGAP.............................................. $ 5,280 $ -- $ --
Relief of liabilities related to CGAP.................. (5,940) -- --
Cancellation of Class B Common Stock................... (13) -- --
Reduction of additional paid-in capital................ (119) -- --
------- ------- --------
$ (792) $ -- $ --
======= ======= ========
Settlement of accounts receivable as a result of the
restructuring agreement................................ $ 268 $ -- $ --
Reduction of notes payable as a result of the
restructuring agreement................................ (1,041) -- --
------- ------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 77
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
1. Organization and Purpose
Convergent Group Corporation (the Company) was incorporated on April 9,
1994, in the state of Delaware. On the incorporation date, the Company acquired
all of the outstanding preferred and common stock of Graphic Data Systems
Corporation (GDS) and Utility Graphics Consultants Corporation (UGC). On
February 5, 1996, the Company, through a newly formed, wholly-owned subsidiary,
Convergent Group Asia Pacific Pty. Ltd. (CGAP), acquired the business and
related net assets of ARC Systems Pty. Ltd. (ARC Systems), an Australian Limited
Company. CGAP was subsequently disposed of in April 1997 (see Note M).
The Company provides professional services that enable its utility and
local government clients to implement Internet-based eBusiness solutions. The
Company combines the use of existing and emerging digital technologies with its
business expertise in the utility and local government sectors to deliver
solutions that address its clients' mission-critical business problems. These
eBusiness transformation solutions help clients integrate data from various
isolated sources to create a single, Web-based point of entry through which
internal decision-makers, business partners, suppliers, customers and
constituents can access business information on a real-time basis. The Company's
solutions help its clients increase revenues, reduce costs, improve customer
services, ensure service reliability, improve resource management and exploit
their information assets.
2. Recapitalization
On August 13, 1999 pursuant to a Recapitalization Agreement between the
Company and certain institutional investors, the Company acquired all of its
then outstanding shares of redeemable Series A and Series B Convertible
Exchangeable Preferred Stock and all of it Class A Common Stock for an aggregate
of $44,265,000. As part of the recapitalization, the Company issued 41,978,689
shares of Convertible Participating Preferred Stock, par value $0.001, to the
institutional investors for $44,859,000 net of issuance costs. All classes of
stock have been canceled and are no longer authorized except for common stock
and Convertible participating Preferred Stock.
As part of the recapitalization the Company recorded, to reflect the
substance of the transaction, a distribution of $7,341,000 to Common
shareholders of record on August 13, 1999, redemption of shares in the amount of
$912,000, cash compensation of $3,520,000 and the issuance of 11,116,879 net
shares of common stock to employees for services.
The Company incurred a total of $13,249,000 in expenses associated with the
recapitalization, including recapitalization costs, employee stock compensation
expense, and consulting agreement termination costs, all of which were either
noncash items or were funded from the new investor proceeds. Additionally, the
Company recognized $20,816,000 as income available to common shareholders as a
result of the redemption of the redeemable preferred stock at less than the
redemption value.
3. Basis of Consolidation
The consolidated financial statements include the accounts of the Company
and all subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
F-8
<PAGE> 78
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. Foreign Currency Translation
Assets and liabilities of foreign subsidiaries are translated to U.S.
dollars at year-end exchange rates. Income and expense items are translated at
average exchange rates prevailing during the period. Translation adjustments
resulting from translating the accounts of the Company's foreign subsidiaries
from the functional currency to U.S. dollars are accumulated in a separate
component of stockholders' equity. Exchange gains (losses) resulting from
foreign currency transactions are included in the consolidated statement of
operations. The Company recorded transaction exchange losses of $(55,000),
$(128,000), and $(21,000) for the years ended December 31, 1997, 1998 and 1999,
respectively.
5. Depreciation and Amortization of Property and Equipment
Depreciation of property and equipment is provided on the straight-line
basis over the estimated useful life of three to seven years. Leasehold
improvements are amortized over the life of the related lease.
6. Cash and cash equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid cash investments with an original maturity of three months or less
to be cash equivalents.
7. Common Stock Split
On January 2, 1997, all classes of Common Stock were split 470 for one,
with par value remaining at $0.01 per share. On August 13, 1999, the Company
recorded a Common Stock split on a 7.8 for one basis. All share amounts have
been restated to retroactively reflect the stock splits.
8. Revenue Recognition
Revenue under systems integration and services contracts is recognized on
the basis of the estimated percentage of completion of services rendered or when
the services have been performed and accepted. Cost of revenue under such
contracts is charged based on current estimated total costs. Revenue from the
sale of software licenses and hardware products, including items sold on system
integration contracts, are recognized at the time of delivery and acceptance
unless significant future obligations exist. When management believes the cost
of completing a contract will exceed the contract-related revenue, the full
amount of the anticipated contract loss is immediately recognized.
The Company has a history of making dependable estimates of the extent of
progress towards completion, contract revenue, and contract costs on its
long-term contracts. However, due to uncertainties inherent in the estimation
process, actual results could differ from those estimates.
Software and hardware maintenance under customer support agreements are
recorded as unearned maintenance fees and recognized as revenue ratably over the
contract period.
9. Concentration of Credit Risk
The Company sells services and products to customers primarily in the
United States with continuing maintenance and support services with established
customers in the United Kingdom through April 2000. The Company performs ongoing
credit evaluations of customers and generally does not require collateral.
Receivables generally are due within 30 to 45 days. Primarily as a result of the
restructuring (see Note M) the Company realized credit losses outside of North
America of $614,000 in 1997. Ongoing credit losses in North America during 1997,
1998, and 1999, which have not been significant, have been within management's
expectations. At December 31, 1999, three of the Company's customers had
outstanding balances that accounted for approximately 38% of total accounts
receivable.
F-9
<PAGE> 79
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The allowance for doubtful accounts was $698,000, $156,000 and $43,000 at
December 31, 1997, 1998 and 1999, respectively.
10. Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the balance sheet dates and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
11. Estimated Fair Value Information
Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosure
about Fair Value of Financial Instruments, requires disclosure of the estimated
fair value of an entity's financial instrument assets and liabilities, as
defined, regardless of whether recognized in the financial statements of the
reporting entity. The fair value information does not purport to represent the
aggregate net fair value of the Company.
The estimated fair value of the Company's cash and cash equivalents,
accounts receivable and payable and short-term notes payable approximates the
carrying amounts at December 31, 1998 and 1999 due principally to their
short-term maturities. Loan receivable from related party has an estimated fair
value which approximates the carrying value due to the anticipated short-term
duration of the loan. The estimated fair value of the long-term loan
approximates carrying value as the interest rate is considered to approximate
the market rate.
The Company believes that it is not practical to estimate a fair market
value different from the redeemable cumulative preferred stock's carrying value
of $40,541 at December 31, 1998, as this security has numerous features unique
to this security as described in Note H.
12. External Marketing and Advertising Costs
The Company expenses external marketing and advertising costs as incurred.
These expenses were approximately $415,000, $638,000, and $1,103,000 for the
years ended December 31, 1997, 1998 and 1999, respectively.
13. Income Taxes
The Company provides for income tax expense in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income
Taxes. Under SFAS 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the differences between financial reporting and tax basis of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
14. Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), Reporting Comprehensive Income. SFAS 130 establishes standards for
reporting and display of comprehensive income and its components.
F-10
<PAGE> 80
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. Reclassifications
Certain financial statement reclassifications have been made in 1997 and
1998 to conform to presentations used in 1999.
16. Recent Accounting Pronouncements
There have been no recent accounting pronouncements that have had or are
expected to have a material effect on the Company's financial position or
results of operations.
17. Earnings Per Share
The Company computes earnings per share in accordance with SFAS No. 128,
Earnings per Share (SFAS 128). Under the provisions of SFAS No. 128, basic and
diluted net loss per share is computed by dividing the net income or loss
available to common stockholders for the period by the weighted average number
of shares of Common Stock outstanding during the period. The calculation of
diluted net income or loss per share excludes potential common shares if the
effect is antidilutive. Potential common shares are composed of Common Stock
issuable upon the exercise of stock options and upon conversion of Series A and
Series B mandatorily Redeemable Preferred Stock and Series A Convertible
Preferred Stock.
The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except share data):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Numerator:
Earnings (loss) from continuing operations..... $ (1,105) $ 5,677 $ (5,250)
Preferred stock adjustments.................... -- -- 20,816
---------- ---------- ----------
Numerator for basic earnings (loss) per share
and earnings (loss) per share assuming
dilution -- income (loss) available to
common shareholders......................... $ (1,105) $ 5,677 $ 15,566
========== ========== ==========
Denominator:
Denominator for basic earnings per
share-weighted average shares............... 32,468,695 30,270,735 28,857,030
Potential dilutive common shares -- employee
stock options and conversion of preferred
stock....................................... 8,468,205 17,272,968 32,554,200
---------- ---------- ----------
Denominator for diluted earnings (loss) per
share -- adjusted weighted-average shares
and assumed conversions..................... 40,936,900 47,543,703 61,411,230
========== ========== ==========
Basic earnings (loss) from continuing
operations per common share................. $ (0.03) $ 0.19 $ 0.54
========== ========== ==========
Earnings (loss) from continuing operations per
common share -- assuming dilution........... $ (0.03) $ 0.12 $ 0.25
========== ========== ==========
</TABLE>
NOTE B -- INCOME TAXES
The Company accounts for income taxes under the liability method. Deferred
taxes are provided based upon the tax rate at which items of income and expense
are expected to be settled in the Company's tax return.
F-11
<PAGE> 81
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (benefit) for income taxes included the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal............................................... $ -- $ 94 $ 90
State................................................. -- 9 --
------- ------- -------
-- 103 90
------- ------- -------
Deferred
Federal............................................... -- (1,793) (1,309)
State................................................. -- (171) (128)
------- ------- -------
-- (1,964) (1,437)
------- ------- -------
Total
Federal............................................... -- (1,699) (1,219)
State................................................. -- (162) (128)
------- ------- -------
$ -- $(1,861) $(1,347)
======= ======= =======
</TABLE>
A reconciliation between the expected federal income tax expense computed
by applying the Federal Statutory rate to income before income taxes and the
actual benefit from taxes on income for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision (benefit) for income taxes at statutory
rate.................................................. $ (431) $ 1,488 $ (789)
Change in valuation reserve............................. 1,475 (3,367) (379)
Change in prior year estimate........................... (747) -- --
Other................................................... (297) 18 (179)
------- ------- -------
$ -- $(1,861) $(1,347)
======= ======= =======
</TABLE>
F-12
<PAGE> 82
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows at December 31:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards:
Domestic........................................... $ 11,739 $ 10,414 $ 12,922
International...................................... 2,874 3,142 2,937
Deferred income...................................... 12 -- --
Liability for anticipated contract costs............. 37 274 196
Organization costs................................... 21 2 --
Book over tax depreciation and amortization
domestic........................................... 2,105 2,043 1,873
Book over tax depreciation international............. 148 -- --
Restructuring accrual:
Domestic........................................... 6 -- --
International...................................... 1,931 1,931 1,931
Executive bonuses.................................... 1,231 1,047 27
Miscellaneous accruals and other..................... 378 226 250
-------- -------- --------
Total deferred tax assets.................. 20,482 19,079 20,136
Valuation allowance for deferred tax assets.......... (20,482) (17,115) (16,736)
-------- -------- --------
Net deferred tax assets/liabilities.................. $ -- $ 1,964 $ 3,400
======== ======== ========
</TABLE>
The domestic income tax net operating loss carryforwards of approximately
$33,134,000 resulting from operations, if not utilized, will expire as follows
(in thousands):
<TABLE>
<S> <C>
2008....................................................... 1,323
2009....................................................... 6,253
2010....................................................... 807
2011....................................................... 9,702
2012....................................................... 8,775
2019....................................................... 6,274
-------
$33,134
=======
</TABLE>
Certain changes in stock ownership can result in a tax law limitation on
the amount of net operating loss that can be utilized each year. The Company
determined it has undergone such an ownership change as defined under Section
382 of the Internal Revenue Code. As a result, utilization of net operating
losses will be limited to approximately $3,800,000 per year. The international
income tax net operating loss carryforward, primarily resulting from the
Company's operations in the United Kingdom, of approximately $7,000,000 will
carry forward indefinitely, if not utilized. Realization of the United Kingdom
net loss carryforwards are subject to the generation of future operating profits
in the United Kingdom. Payments on income taxes during the year ended December
31, 1999 were immaterial.
F-13
<PAGE> 83
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE C -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Computer hardware and software.............................. $ 5,072 $ 6,178
Furniture and equipment..................................... 1,231 1,648
Leasehold improvements...................................... 574 239
------- -------
6,877 8,065
Less accumulated depreciation and amortization.............. (4,152) (4,963)
------- -------
$ 2,725 $ 3,102
======= =======
</TABLE>
NOTE D -- DEFINED CONTRIBUTION PLANS
The Company maintains a defined contribution plan (the Plan) intended to
qualify under Section 401(k) of the Internal Revenue Code of 1986, as amended.
All regular, full-time United States employees, as defined in the Plan,
including officers and directors who are also employees of the subsidiaries, are
eligible to participate in the Plan. The Company may make discretionary matching
contributions to the Plan. For the year ended December 31, 1997, eligible
employees were entitled to a 1.75% effective match of qualified wages through
May 1997 and a 5.0% effective match of qualified wages for the balance of the
year and for the years ended December 31, 1999 and 1998. The total contributions
by the Company to the Plan on behalf of participating employees were
approximately $397,000, $656,000 and $878,000 for the years ended December 31,
1997, 1998 and 1999, respectively.
NOTE E -- COMMITMENTS
The Company leases office facilities and equipment under noncancelable
operating lease agreements. Rent expense was approximately $1,150,000,
$1,114,000, and $1,522,000 for the years ended December 31, 1997, 1998 and 1999
respectively. During 1998, the Company decided not to exercise its option to
renew the existing lease of the Company's headquarters and, in September 1999,
signed a new office lease agreement for approximately 73,000 square feet of
office space to house the Company's headquarters and operations which began
September 1999. The lease agreement has a term of 10 years with additional
options for extension and provides options to lease additional space. The
Company has an obligation to rent additional office space of at least 12,000
square feet but limited to 20,000 square feet at the current facility on or
before October 1, 2000. The Company expects to meet its minimum obligation for
additional office space.
Future minimum rental commitments relating to these leases are as follows
(in thousands):
<TABLE>
<S> <C>
2000...................................................... $ 2,145
2001...................................................... 2,084
2002...................................................... 2,003
2003...................................................... 1,937
2004...................................................... 1,973
Thereafter................................................ 9,828
-------
$19,970
=======
</TABLE>
F-14
<PAGE> 84
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- BANK LINE OF CREDIT
At December 31, 1998, the Company had a three-year Credit and Security
Agreement with a financial institution, providing the Company with secured
borrowings of up to $3,000,000, none of which was outstanding at December 31,
1998. During 1999, the Credit and Security Agreement was replaced with a
Revolving Credit Loan Agreement described in Note G.
NOTE G -- LONG-TERM DEBT
On August 12, 1999, the Company entered into a four-year Revolving Credit
Loan Agreement (Agreement) with a financial institution, providing the Company
with borrowings of up to $25,000,000, $22,000,000 of which was outstanding at
December 31, 1999. The proceeds were used, principally, to acquire certain
redeemable preferred stock and the Class A common stock in the recapitalization.
Borrowings under the Agreement are secured by all of the assets of the Company.
At the Company's election, interest on borrowings is based on either the London
Interbank Rate plus 2.5% or the prime rate plus 0.75%. At December 31, 1999, the
Company elected a 180-day LIBOR base on $20,000,000 and prime rate on the
remainder of the outstanding balance. The effective interest rate on borrowings
at December 31, 1999 is 8.45%. The Company is subject to certain financial
ratios, including minimum interest coverage, debt service and current asset
ratios and limitations on additional debt pursuant to the Agreement which are
adjusted periodically based on the financial performance of the Company. At
December 31, 1999, the Company was in compliance with all such covenants.
NOTE H -- MANDATORILY REDEEMABLE PREFERRED STOCK
Prior to redemption (Note A2), holders of the Company's Series A
Convertible Exchangeable Preferred Stock had the right to convert shares of the
Series A Convertible Exchangeable Preferred Stock into Class B Common Stock upon
notice to the Company.
The holders of Preferred Stock were entitled to receive annual dividends at
the rate of 3% of the Preferred Stock issue price for Series A Convertible
Exchangeable Preferred Stock and 5% of the Preferred Stock issue price for
Series B Exchangeable Preferred Stock. The dividends were payable to the extent
of available cash (as defined in the Company's Certificate of Designations) in
arrears on June 30 for each year beginning June 30, 1998, and continuing until
the preferred shares have been redeemed, converted to Common Stock, or exchanged
for a note. The amount of any specified dividend in excess of available cash, as
defined, was forgiven and was not cumulative. For purposes of dividend payments
and mandatory redemptions of preferred stock, available cash is defined as cash
in excess of $5 million. There were no dividends payable for the measurement
periods ending December 31, 1998 and 1997, as cash did not exceed the available
cash threshold as defined in the Agreement.
The Company's outstanding Preferred Stock at December 31, 1998 had an
aggregate liquidation preference of $40,541,000 over the Company's Common Stock
and had no voting rights relating to the election of the Company's Board of
Directors. Redemption of the outstanding Preferred Stock was required to begin
by the Company on June 30, 2001, and continue on each June 30 thereafter until
all shares of Preferred Stock had been redeemed, provided that no shares of
Series A Convertible Exchangeable Preferred Stock were redeemed, whether by
mandatory redemption or by optional redemption, until all outstanding shares of
Series B Exchangeable Preferred Stock were redeemed or otherwise acquired by the
Company and canceled.
F-15
<PAGE> 85
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The annual aggregate scheduled share redemption commitment at December 31,
1998 was as follows (in thousands):
<TABLE>
<S> <C>
2001...................................................... $ 3,000
2002...................................................... 3,000
Thereafter................................................ 34,541
-------
$40,541
=======
</TABLE>
In 1998, the Company entered into a Restructuring Agreement (the Agreement)
with the preferred stockholder, certain Company officers and directors, and
certain creditors.
The principal attributes of the Agreement were to provide for the
conversion of $4,725,000 of debt owed to the preferred stockholder to 4,725
shares of Series A Preferred Stock and to mutually release claims and
liabilities arising from events up through the date of the Agreement among all
parties.
NOTE I -- CONVERTIBLE PARTICIPATING PREFERRED STOCK
In its Restated Certificate of Incorporation dated August 13, 1999, the
Company authorized 75 million shares of preferred stock, $0.001 par value per
share, designated as Series A Convertible Participating Preferred Stock
(Convertible Preferred). The Convertible Preferred carries a liquidation
preference of approximately $34 million and participates on an as converted
basis with Common Stock on voting and dividend rights. The Convertible Preferred
may be converted to Common Stock on a one share for one share basis at the
election of the holder which provide antidilutive conversion features. The
Convertible Preferred is mandatorily convertible to Common Stock of the Company
upon the consummation of the first underwritten public offering for the account
of the Company pursuant to a registration statement filed under the Securities
Act of 1933, as amended with aggregate proceeds (net of underwriting discounts
and commissions) to the Company of not less than $25,000,000.
NOTE J -- STOCK OPTION PLAN
On August 13, 1999, the Company's Board of Directors adopted the Convergent
Group Corporation 1999 Stock Option Plan (the 1999 Plan) which provides for the
issuance of options to purchase up to 8,943,212 shares of the Company's Common
Stock to any employee at the discretion of the Board of Directors. The Company
reserved 14,231,152 shares of its authorized Common Stock under the 1999 Plan.
For the period ended December 31, 1999, the Company granted options to purchase
7,776,228 shares of Common Stock under the 1999 Plan to employees, of which
2,115,176 vested immediately and the remainder vest either 20% on the grant date
anniversary each year for five years or ratably on the grant date anniversary
over three years.
On December 20, 1996, the Company's Board of Directors adopted the
Convergent Group Corporation 1996 Stock Option Plan (the 1996 Plan), which
provided for the issuance of options to purchase up to 2,557,916 shares of the
Company's Common Stock to any employee at the discretion of the Board of
Directors. During the years ended December 31, 1997, 1998 and 1999, the Company
granted options to purchase 959,363, 995,495, and 1,219,840 shares of common
stock under the 1996 Plan to employees, of which 283,432, 270,843 and -0- vested
immediately, and the remainder vest 20% on the grant date anniversary each year
for five years. All options granted had an exercise price of $0.10 per share and
ten-year terms. All options outstanding under the 1996 Plan became immediately
exercisable upon the change of control (as defined in the 1996 Plan) and were
exercised on or before August 13, 1999, and converted to Common Stock.
F-16
<PAGE> 86
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options. The Options
generally have a term of 10 years when issued and vest over three to five years.
Had compensation cost for the Plan been determined based on the fair value of
the Options at the grant date consistent with the method of Statement of
Financial Accounting Standards 123, Accounting for Stock-Based Compensation, the
Company's net income (loss) and basic and diluted earnings (loss) per common
share would have been (in thousands except share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1998 1999
------- ------ -------
<S> <C> <C> <C>
Net income (loss) available to common shareholder
As reported.............................................. $(1,105) $5,677 $15,566
Pro forma................................................ $(1,105) $5,677 $15,689
Basic earnings (loss) per common share
As reported.............................................. $ (0.03) $ 0.19 $ 0.54
Pro forma................................................ $ (0.03) $ 0.19 $ 0.54
Diluted earnings (loss) per share
As reported.............................................. $ (0.03) $ 0.12 $ 0.25
Pro forma................................................ $ (0.03) $ 0.12 $ 0.26
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions for grants used in 1997, 1998 and 1999: no expected dividends;
expected volatility of 0%; risk-free interest rate of 6%; and expected lives of
five years.
The following table summarizes the activity of the Company's 1999 Stock
Option Plan:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
Outstanding at January 1, 1999........................... -- $ --
Granted.................................................. 7,776,228 0.046
Exercised................................................ (1,359,756) 0.046
Canceled................................................. (70,000) 0.046
---------- ------
Outstanding at December 31, 1999......................... 6,346,472 $0.046
---------- ------
Total Exercisable at December 31, 1999................... 6,346,472 $0.046
========== ======
(Weighted average fair value of options granted during 1999 was $0.72)
</TABLE>
F-17
<PAGE> 87
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the activity of the Company's 1996 Stock
Option Plan:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
SHARES PER SHARE
---------- ----------------
<S> <C> <C>
OUTSTANDING AT JANUARY 1, 1997.............................. 712,187 $.01
Granted................................................... 959,363 .01
Exercised................................................. (38,142) .01
Canceled.................................................. (118,440) .01
---------- ----
OUTSTANDING AT DECEMBER 31, 1997............................ 1,514,968 $.01
---------- ----
Total exercisable at December 31, 1997...................... 603,387 $.01
========== ====
(Weighted average fair value of options granted during 1997 was $0.01)
Outstanding at January 1, 1998............................ 1,514,968 $.01
Granted................................................... 995,495 .01
Exercised................................................. (7,886) .01
Canceled.................................................. (105,851) .01
---------- ----
OUTSTANDING AT DECEMBER 31, 1998............................ 2,396,726 .01
---------- ----
Total exercisable at December 31, 1998...................... 985,049 $.01
========== ====
(Weighted average fair value of options granted during 1998 was $0.06)
Outstanding at January 1, 1999............................ 2,396,726 $.01
Granted................................................... 1,219,840 .07
Exercised................................................. (3,455,829) .02
Canceled.................................................. (160,737) .01
---------- ----
OUTSTANDING AT DECEMBER 31, 1999............................ -- $ --
========== ====
</TABLE>
The following information applies to stock options outstanding at December
31, 1999:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
RANGE OF OPTIONS WEIGHTED AVERAGE REMAINING
EXERCISE PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE
- --------------- ----------- ---------------- ----------------
<S> <C> <C> <C>
$0.046 6,346,472 $0.046 8.76
</TABLE>
The following information applies to options exercisable at December 31,
1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE OPTIONS EXERCISE PRICE
- ----- --------- --------------
<S> <C> <C>
$0.046.. 6,346,472 $0.046
</TABLE>
The Company recorded compensation expense of $693,470 in 1999 related to
stock options issued at prices below fair market value. Compensation expense of
$5,252,611 will be recognized in future periods as these options vest over 3 to
5 years or on the occurrence of certain future events.
In accordance with the Plan agreement, these options may be exercised prior
to vesting. However, unvested shares are returnable to the Company upon
termination of employment at the exercise price.
NOTE K -- EMPLOYMENT AGREEMENTS WITH OFFICERS
At the formation of Convergent Group Corporation, certain Company officers
entered into long-term employment contracts. The contracts were for a period of
ten years and, among other things, provide for
F-18
<PAGE> 88
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
base salaries, minimum annual bonuses subject to the Company's financial
performance as determined by the Compensation Committee, other special benefits,
and the prohibition of the officer owning or working for a competitive entity
for a period of three years after termination of the officer's employment with
the Company.
On August 13, 1999, pursuant to the Recapitalization Agreement between
Convergent Group Corporation and certain investors in the Company's new Series A
Convertible Participating Preferred Stock, the long-term employment contracts
were terminated for $2,440,000. The Company then entered into long-term
employment contracts with certain Company officers. The contracts are for a
period of four years and provide for base salaries and minimum annual bonuses.
At December 31, 1998 and 1999, $1,384,000 and $127,000, respectively is
included in accrued compensation and related expenses for bonuses to such
officers related to performance for the year then ended.
NOTE L -- ACCRUED LIABILITY FOR ANTICIPATED CONTRACT COSTS
The accrued liability for anticipated contract costs consists of accruals
for goods and services to be provided with regard to contracts where components
of the contracts result in varying profit margins during the contract
performance period and in accordance with the percentage of completion method of
accounting, costs associated with future performance are accrued to reflect such
margins at the overall expected margin at the completion of the contract. The
long-term portion of the accrual represents costs that the Company expects to
incur beyond the subsequent fiscal year.
NOTE M -- RESTRUCTURING COSTS
In December 1996, the Company adopted a plan to phase out GDS software
research and development and focus on the delivery of system integration and
consulting services.
As a result of the decision to phase out any further investments in GDS
software research and development, certain assets including purchased software,
property and equipment, inventory, accounts receivable and goodwill became
impaired. The Company also became obligated under the terms of existing
contracts to perform substantial services to migrate several customers to other
software platforms. The Company also had contractual obligations under existing
leases for space no longer used in operations as a result of the restructuring,
and for employee termination and other costs directly attributable to the
restructuring.
At December 31, 1997 an accrual of approximately $957,000 remained on the
Company's financial statements to allow fulfillment of its obligations resulting
from the restructuring. At December 31, 1998, the Company had fulfilled all
contractual obligations to customers as a result of the restructuring and
reversed the remaining accrual of approximately $95,000.
In April 1997, the Company sold to Informatix assets associated with the
GDS product development business. Certain employees involved with product
development also transferred to Informatix. Payment terms for the $1,750,000
sale were $1,000,000 at closing, $500,000 due December 31, 1997, and $250,000
due December 31, 1998. The impact of this sale was reflected as a recovery
against the Company's restructuring costs. As of December 31, 1998 all amounts
had been collected.
In a transaction concurrent with the asset sale, the Company and Informatix
entered into an ongoing maintenance agreement. For a three-year term, Informatix
will provide software development, support and maintenance services necessary to
support the ongoing customer maintenance support services. In exchange for such
services, the Company will pay $100,000 per month for the first year and $65,000
per month for the final two years of the agreement. With this agreement in
place, the Company continued to
F-19
<PAGE> 89
CONVERGENT GROUP CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
provide first line customer maintenance support, but had effectively out-sourced
the remaining maintenance to which it has committed. The Company subsequently
agreed to transfer first line maintenance support to Informatix effective April
2000.
On February 5, 1996, the Company merged with the business and related net
assets of ARC Systems through a newly formed, wholly owned subsidiary, CGAP, an
Australian company.
Discontinuance of the GDS product development business eliminated the
strategic benefits of the merger with CGAP. As a result, in April 1997, the
merger was reversed with no future obligation to the Company.
NOTE N -- MAJOR CUSTOMERS
A significant portion of the Company's business resulted from contracts
with major customers. Major customers accounted for approximately 12%, 13% and
27% of the Company's total revenue for the year ended December 31, 1997, 10%,
15%, and 20% for the year ended December 31, 1998 and 9%, 9%, and 18% for the
year ended December 31, 1999.
NOTE O -- RELATED PARTY TRANSACTIONS
During August 1999 as part of the recapitalization, the Company loaned
$2,000,000 to an officer of the Company, secured by a Stock Pledge Agreement and
Guarantee Agreement. The loan carries an interest rate of 5.9% and is payable in
four equal installments beginning July 1, 2003. However, if the Company
experiences a major capital event, such as a sale of all or substantially all of
its assets, a merger, or an initial public offering, the entire unpaid principal
amount and all accrued interest become immediately due and payable.
As part of its recapitalization, the Company entered into an agreement with
one of its institutional investors providing for an annual management fee of
$500,000 for management and strategic advice. In addition, the agreement
provides for payment of a fee equal to 1% of the implied equity value of the
Company in a transaction which results in either a sale of the Company which is
approved by the holders of more than 50% of the then outstanding stock of the
Company or a public offering. The agreement terminates upon the earlier of an
initial public offering in which the Company raises net proceeds of at least $25
million or at such time as the shares held by the investor falls below certain
thresholds.
On November 19, 1999, the Company acquired 100% of the outstanding common
stock of an entity wholly owned by a former individual shareholder of the
Company for the sole purpose of terminating an existing Consulting Agreement
with the individual shareholder. Among other things, the Consulting Agreement,
which had a remaining term of approximately five years, obligated the Company to
minimum monthly consulting fees of $14,000, quarterly incentive payments of
$25,000, and a finance fee equal to 8% of the net proceeds received by the
Company from a major capital event. The outstanding common stock was acquired by
the Company for $3,920,000 in cash and was expensed during 1999.
F-20
<PAGE> 90
[CONVERGENT GROUP LOGO]
<PAGE> 91
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except
for the SEC and NASD filing fees.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 30,360
--------
NASD filing fee............................................. $ 12,000
--------
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer agent fees......................................... *
Miscellaneous fees and expenses............................. *
--------
Total............................................. $ *
========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors,
officers and certain other persons in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act").
The Registrant's restated certificate of incorporation and amended by-laws
provide that, to the fullest extent permitted by the laws of the state of
Delaware, no director will be personally liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Furthermore, the Registrant's restated certificate of incorporation provides
that, except as prohibited by law, each of the Registrant's directors and
officers is entitled to be indemnified by the Registrant against all expenses
and liability incurred in connection with any legal proceeding brought against
him or her by virtue of his or her position as a director or officer. This right
to indemnification may extend to a person serving as an employee or other
representative of the Registrant or a subsidiary of the Registrant. A person
entitled to indemnification is entitled to have the Registrant advance to him or
her the expenses of a legal proceeding brought against him or her.
These provisions of the restated certificate of incorporation and the
amended by-laws do not eliminate the fiduciary duties of the directors and
officers of the Registrant, and in appropriate circumstances, equitable remedies
such as injunctive or other forms of relief will remain available under Delaware
law. In addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Registrant for acts or omissions
not in good faith or involving intentional misconduct, for knowing violations of
law, and for dividends or approval of stock repurchases or redemption's that are
unlawful under Delaware law. The provision does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
The Delaware General Corporation Law also allows the Registrant to purchase
insurance covering the Registrant's directors and officers against liability
asserted against them in their capacity as directors and officers. The
Underwriting Agreement also provides for the indemnification of officers,
directors and controlling persons of the Registrant against certain liabilities.
II-1
<PAGE> 92
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Common Stock and Preferred Stock. Set forth in chronological order is
information regarding shares of common stock and preferred stock issued and
options granted by the Registrant since January 1997. All share numbers have
been adjusted to reflect a 470 for 1 stock split effected in October, 1997 and a
7.83 for 1 stock split effected in August, 1999. Further included is the
consideration, if any, received by the Registrant for such shares and options
and information relating to the section of the Securities Act of 1933, as
amended (the "Securities Act"), or rule of the Securities and Exchange
Commission under which exemption from registration was claimed.
1. In June, 1997, the Registrant issued 196,194 shares of common stock to
an employee upon exercise of an option for an aggregate purchase price of
$2,505.
2. In October, 1997, the Registrant issued 38,171 shares of common stock to
an employee upon exercise of an option for an aggregate purchase price of $488.
3. In January, 1998, the Registrant issued 4,725 shares of Series A
Preferred Stock to Electronic Data Systems Corporation in satisfaction of
obligations owed to them totaling $4,725,000.
4. In January, 1998, the Registrant issued 167,813 shares of common stock
as a stock grant to an employee.
5. In March, 1998, the Registrant issued 1,527 shares of common stock to an
employee upon exercise of an option for an aggregate purchase price of $20.
6. In May, 1998, the Registrant issued 3,915 shares of common stock to an
employee upon exercise of an option for an aggregate purchase price of $50.
7. In January, 1999, the Registrant issued 608,805 shares of common stock
to an employee upon exercise of an option for an aggregate purchase price of
$7,775.
8. In February, 1999, the Registrant issued 783,000 shares of common stock
as a stock grant to two trusts for the benefit of the children of a director.
9. In March, 1999, the Registrant issued 78,300 shares of common stock as a
stock grant to an employee.
10. In August, 1999, the Registrant issued 510,814 shares of common stock
as a stock grant to an employee.
11. In August, 1999, the Registrant issued 2,841,502 shares of common stock
to 67 employees upon exercise of options for an aggregate purchase price of
$36,290.
12. In August 1999, the Registrant issued 32,530,778 shares of New Series A
Preferred Stock to 13 investors for $1.08 per share, for an aggregate purchase
price of $35,294,767.51.
13. In August 1999, the Registrant issued 9,447,911 shares of New Series A
Preferred Stock to certain existing shareholders and employees in exchange for
9,447,911 shares of common stock.
14. In August 1999, the Registrant issued 20,277,440 shares of common stock
as a stock grant to certain existing shareholders and employees.
15. Between August 14, 1999 and December 31, 1999, the Registrant issued
612,308 shares of common stock to five employees upon exercise of options for an
aggregate purchase price of $28,166.
16. In September, 1999, the Registrant issued 755,420 shares of common
stock as a stock grant to four employees.
17. In October, 1999, the Registrant issued 1,510,840 shares of common
stock as a stock grant to a director and to two trusts for the benefit of the
children of a director.
II-2
<PAGE> 93
18. Between January 1, 2000 and February 16, 2000, the Registrant issued
513,197 shares of common stock to 29 employees upon exercise of options for an
aggregate exercise price of $23,607.
19. In January 2000, the Registrant issued 254,506 shares of New Series A
Preferred Stock to GMJM Stock Partnership, Ltd. in exchange for 254,506 shares
of common stock.
Options. The Registrant from time to time has granted stock options to
employees, directors and consultants. The following table sets forth certain
information regarding such grants.
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
January 1, 1997 to December 31, 1997........................ 960,099 $0.013
January 1, 1998 to December 31, 1998........................ 996,258 $0.013
January 1, 1999 to August 13, 1999.......................... 1,234,971 $0.013
August 14, 1999 to December 31, 1999........................ 7,698,954 $0.046
January 1, 2000 to February 16, 2000........................ 1,968,221 $0.046
</TABLE>
All of the above-described issuances were exempt from registration (i)
pursuant to Section 4(2) of the Securities Act, or Regulation D promulgated
thereunder, as transactions not involving a public offering or (ii) Rule 701
promulgated under the Securities Act or (iii) as transactions not involving a
sale of securities. No underwriters were involved in connection with the sales
of securities referred to in this Item 15.
II-3
<PAGE> 94
ITEM 16(a). EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 -- Form of Underwriting Agreement.*
3.1 -- Restated Certificate of Incorporation of the Registrant.
3.2 -- Amended and Restated Certificate of Incorporation of the
Registrant, to be effective immediately prior to the
closing of this offering.*
3.3 -- By-Laws of the Registrant, including all amendments
thereto.
3.4 -- Amended By-Laws of the Registrant, to be effective
immediately prior to the closing of this offering.*
4.1 -- Specimen common stock certificate. *
4.2 -- Credit Agreement with Fleet Bank.
5 -- Opinion of O'Sullivan Graev & Karabell, LLP.*
10.1 -- Recapitalization Agreement, dated as of August 13, 1999,
by and among the Registrant, certain shareholders of the
Registrant, Scott M. Schley as the Shareholder's
representative, InSight Capital Partners III, L.P. as the
Investor's representative and the Investors party
thereto.
10.2 -- Stock Purchase and Redemption Agreement, dated as of
August 13, 1999, by and among the Registrant, certain
shareholders of the Registrant, Scott M. Schley as the
shareholder's representative, InSight Capital Partners
III, L.P. as the Investor's representative and the
Investors party thereto.
10.3 -- 1999 Stock Option Plan, including Amendment No. 1
thereto.
10.4 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Glenn E. Montgomery, Jr..
10.5 -- Registration Rights Agreement, dated as of August 13,
1999 by and among the Registrant, the Investors and the
continuing shareholders of the Registrant.
10.6 -- Stock Pledge Agreement, dated as of August 13, 1999, by
and between Glenn E. Montgomery, Jr. and the Registrant.
10.7 -- Agreement, dated as of August 13, 1999, by Glenn E.
Montgomery, Jr., GMJM Stock Partnership, Ltd., InSight
Capital Partners III, L.P. and the Registrant.
10.8 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Mark L. Epstein.
10.9 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Larry J. Engelken.
10.10 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Scott M. Schley.
10.11 -- Employment Agreement, dated as of October 11, 1999,
between the Registrant and Mark Shirman, including
Amendment No. 1 thereto.
10.12 -- Employment Agreement, dated as of January 7, 2000,
between the Registrant and Bryan R. Mileger.
10.13 -- Restricted Stock Agreement, dated as of October 29, 1999,
between the Registrant and John Blend.
10.14 -- Restricted Stock Agreement, dated as of October 29, 1999,
between the Registrant and Robert Sharpe.
10.15 -- Form of Agreement used between the Registrant and its
clients.
</TABLE>
II-4
<PAGE> 95
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.16 -- Office Lease, dated August 28, 1998, between the
Registrant and Fiddler's Green Center for real property
located at 6399 South Fiddler's Green Circle, Suite 600,
Englewood, CO 80111.
21 -- Subsidiaries of the Registrant.
23.1 -- Consent of Grant Thornton, LLP.
23.2 -- Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5).*
24 -- Powers of Attorney (included on signature pages).
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 16(b). EXHIBITS AND FINANCIAL STATEMENTS
The following financial statement schedule is filed herewith accompanied by
a report of independent accountants for such schedule:
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant 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, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
II-5
<PAGE> 96
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunder duly authorized, in the City of New York, Statement of
New York, on February 17, 2000.
CONVERGENT GROUP CORPORATION
By:/s/ GLENN E. MONTGOMERY, JR.
----------------------------------
Glenn E. Montgomery, Jr.
Chairman and Chief Executive
Officer
We, the undersigned directors and/or officers of Convergent Group
Corporation (the "Registrant"), hereby severally constitute and appoint Glenn E.
Montgomery, Jr., Scott M. Schley and Bryan R. Mileger, and each of them
individually, with full powers of substitution and resubstitution, our true and
lawful attorneys, with full powers to each of them to sign for us, in our names
and in the capacities indicated below, the Registration Statement on Form S-1
filed with the Securities and Exchange Commission, and any and all amendments to
said Registration Statement (including post-effective amendments), and any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, in connection with the registration under the Securities Act
of 1933, as amended, of equity securities of the Registrant, and to file or
cause to be filed the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys, and each of them, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or could
do in person, and hereby ratifying and confirming all that said attorneys, and
each of them, or their substitute or substitutes, shall do or cause to be done
by virtue of this Power of Attorney. This power of attorney may be executed in
counterparts.
Pursuant to the requirements of the Securities Acts of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ GLENN E. MONTGOMERY, JR. Chairman of the Board and February 17, 2000
- ----------------------------------------------------- Chief Executive Officer
Glenn E. Montgomery, Jr. (Principal Executive
Officer)
/s/ BRYAN R. MILEGER Chief Financial Officer February 17, 2000
- ----------------------------------------------------- (Principal Financial
Bryan R. Mileger Officer and Principal
Accounting Officer)
/s/ SCOTT M. SCHLEY Executive Vice President of February 17, 2000
- ----------------------------------------------------- Finance, Treasurer and
Scott M. Schley Director
/s/ ROBERT SHARPE Director February 17, 2000
- -----------------------------------------------------
Robert Sharpe
/s/ JOHN W. BLEND Director February 17, 2000
- -----------------------------------------------------
John W. Blend III
/s/ JERRY MURDOCK Director February 17, 2000
- -----------------------------------------------------
Jerry Murdock
</TABLE>
II-6
<PAGE> 97
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1 -- Form of Underwriting Agreement.*
3.1 -- Restated Certificate of Incorporation of the Registrant.
3.2 -- Amended and Restated Certificate of Incorporation of the
Registrant, to be effective immediately prior to the
closing of this offering.*
3.3 -- By-Laws of the Registrant, including all amendments
thereto.
3.4 -- Amended By-Laws of the Registrant, to be effective
immediately prior to the closing of this offering.*
4.1 -- Specimen common stock certificate. *
4.2 -- Credit Agreement with Fleet Bank.
5 -- Opinion of O'Sullivan Graev & Karabell, LLP.*
10.1 -- Recapitalization Agreement, dated as of August 13, 1999,
by and among the Registrant, certain shareholders of the
Registrant, Scott M. Schley as the Shareholder's
representative, InSight Capital Partners III, L.P. as the
Investor's representative and the Investors party
thereto.
10.2 -- Stock Purchase and Redemption Agreement, dated as of
August 13, 1999, by and among the Registrant, certain
shareholders of the Registrant, Scott M. Schley as the
shareholder's representative, InSight Capital Partners
III, L.P. as the Investor's representative and the
Investors party thereto.
10.3 -- 1999 Stock Option Plan, including Amendment No. 1
thereto.
10.4 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Glenn E. Montgomery, Jr..
10.5 -- Registration Rights Agreement, dated as of August 13,
1999 by and among the Registrant, the Investors and the
continuing shareholders of the Registrant.
10.6 -- Stock Pledge Agreement, dated as of August 13, 1999, by
and between Glenn E. Montgomery, Jr. and the Registrant.
10.7 -- Agreement, dated as of August 13, 1999, by Glenn E.
Montgomery, Jr., GMJM Stock Partnership, Ltd., InSight
Capital Partners III, L.P. and the Registrant.
10.8 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Mark L. Epstein.
10.9 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Larry J. Engelken.
10.10 -- Employment Agreement, dated as of August 13, 1999,
between the Registrant and Scott M. Schley.
10.11 -- Employment Agreement, dated as of October 11, 1999,
between the Registrant and Mark Shirman, including
Amendment No. 1 thereto.
10.12 -- Employment Agreement, dated as of January 7, 2000,
between the Registrant and Bryan R. Mileger.
10.13 -- Restricted Stock Agreement, dated as of October 29, 1999,
between the Registrant and John Blend.
10.14 -- Restricted Stock Agreement, dated as of October 29, 1999,
between the Registrant and Robert Sharpe.
10.15 -- Form of Agreement used between the Registrant and its
clients.
</TABLE>
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.16 -- Office Lease, dated August 28, 1998, between the
Registrant and Fiddler's Green Center for real property
located at 6399 South Fiddler's Green Circle, Suite 600,
Englewood, CO 80111.
21 -- Subsidiaries of the Registrant.
23.1 -- Consent of Grant Thornton, LLP.
23.2 -- Consent of O'Sullivan Graev & Karabell, LLP (included in
Exhibit 5).*
24 -- Powers of Attorney (included on signature pages).
27 -- Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CONVERGENT GROUP CORPORATION
CONVERGENT GROUP CORPORATION, a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation
Law"), does hereby certify as follows:
1. The name of the corporation is Convergent Group Corporation
(hereinafter the "Corporation").
2. The Corporation's original Certificate of Incorporation was
initially filed with the Secretary of State of Delaware on April 7, 1994.
3. By action taken by Consent Certificate of the Board of Directors of
the Corporation and by a Consent Certificate of Stockholders of the Corporation
and duly executed and adopted in accordance with Section 228 of the Corporation
Law, the Restated Certificate of Incorporation of the Corporation is duly
adopted, in accordance with Sections 242 and 245 of the Corporation Law, by the
Board of Directors and the stockholders of the Corporation, with notice thereof
being duly given to all nonconsenting stockholders of the Corporation.
<PAGE> 2
ARTICLE I
The name of the corporation is Convergent Group Corporation (the
"Corporation").
ARTICLE II
The purpose for which the Corporation is organized is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE III
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 200,000,000, consisting of (a)
125,000,000 shares of common stock, par value $0.001 per share (the "Common
Stock"), and (b) 75,000,000 shares of preferred stock, $0.001 par value per
share, all of which shares of preferred stock shall be designated as Series A
Convertible Participating Preferred Stock, (the "Series A Preferred Stock").
Upon the effectiveness of this Restated Certificate of Incorporation, each
authorized share (including outstanding shares) of Common Stock of the
Corporation, par value $0.01 per share, shall be changed and reclassified into
7.83 shares of Common Stock.
The designations, powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations and
restrictions thereof in respect of the Series A Preferred Stock and the Common
Stock are as follows:
A. SERIES A PREFERRED STOCK
1. DIVIDENDS.
When, as, and if declared by the Board out of funds legally available
for that purpose, the holders of Series A Preferred Stock shall be entitled to
share in any dividends declared and paid or set aside for the Common Stock on a
ratable basis based upon the number of shares of Common Stock into which the
Series A Preferred Stock is then convertible (as determined in Section A. 5).
2. LIQUIDATION.
(a) Upon a Liquidation, after payment or provision for payment of
the debts and other liabilities of the Corporation, the holders of Series A
Preferred Stock shall be entitled to receive, out of the remaining assets of the
Corporation available for distribution to its stockholders, with respect to each
share of Series A Preferred Stock, an amount equal to the
-2-
<PAGE> 3
Liquidation Amount for each such share before any distribution shall be made to
the holders of any other class of capital stock of the Corporation.
(b) If, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of Series A Preferred Stock the full Liquidation Amounts to which they
shall be entitled, the holders of Series A Preferred Stock shall share pro rata
in any distribution of assets in accordance with their respective full
Liquidation Amounts and the amount of Series A Preferred Stock, as applicable,
owned by each such stockholder.
(c) Upon any Liquidation, after payment or provision for payment
in full of all Liquidation Amounts, the holders of Common Stock and Series A
Preferred Stock (participating on an as converted basis) shall be entitled to
share pro rata in the distribution of the remaining assets of the Corporation.
3. REDEMPTION. Shares of Series A Preferred Stock shall not be
redeemable by the holders thereof or the Corporation at any time.
4. VOTING RIGHTS.
(a) Except as otherwise provided herein or required by applicable
law, the holder of each share of Series A Preferred Stock shall be entitled to
the number of votes equal to the number of shares of Common Stock into which
such share is then convertible (as determined in accordance with Section A. 5)
on all matters submitted to the holders of the Corporation's Common Stock for
their approval, and otherwise in the same manner and with the same effect as the
holders of Common Stock. Except as otherwise provided herein or required by
applicable law, holders of Common Stock and Series A Preferred Stock shall vote
together on all such matters as a single class.
(b) The Corporation shall not, without the affirmative consent or
approval of the holders of two-thirds of the shares of Series A Preferred Stock
then outstanding:
(i) in any manner authorize, create, designate, issue or sell
any class or series of capital stock (including any shares of treasury
stock) or rights, options, warrants or other securities directly or
indirectly convertible into or exercisable or exchangeable for capital
stock or any debt security which by its terms is directly or indirectly
convertible into or exchangeable for any equity security or has any
other equity feature or any security that is a combination of debt and
equity, which, in each case, as to the payment of dividends,
distribution of assets or redemptions, including, without limitation,
distributions to be made upon a Liquidation, is pari passu with or is
senior to the Series A Preferred Stock or which in any manner adversely
affects the holders of the Series A Preferred Stock;
(ii) in any manner alter or change the terms, designations,
powers, preferences or relative, participating, optional or other
special rights, or the qualifications, limitations or restrictions, of
the Series A Preferred Stock;
-3-
<PAGE> 4
(iii) reclassify the shares of any class or series of capital
stock into shares of any class or series of capital stock;
(iv) take any action to cause any amendment, alteration or
repeal of any of the provisions of (A) the Restated Certificate of
Incorporation or (B) the By-laws, if such amendment, alteration or
repeal would have an adverse effect on the rights of the holders of the
Series A Preferred Stock.
5. OPTIONAL CONVERSION.
(a) Upon the terms set forth in this Section A. 5, each holder of
each share of Series A Preferred Stock shall have the right, at such holder's
option, at any time and from time to time, to convert such share into the number
of fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (A) the Series A Original Cost by (B) the Conversion Price
(as defined below), as last adjusted and then in effect, by surrender of the
certificate representing such share. The conversion price (the "Conversion
Price") per share at which shares of Common Stock shall be issuable upon
conversion of shares of Series A Preferred Stock shall be the Series A Original
Cost, as such Conversion Price may be adjusted pursuant to Section A. 5(d)
below. The holder of any shares of Series A Preferred Stock may exercise the
conversion right pursuant to this Section A. 5(a) by delivering to the
Corporation the certificate for the shares to be converted, duly endorsed or
assigned in blank or to the Corporation (if required by it), accompanied by
written notice stating that the holder elects to convert such shares and stating
the name or names (with address) in which the certificate or certificates for
the shares of Common Stock are to be issued. Conversion shall be deemed to have
been effected on the date when such delivery is made (the "Conversion Date").
(b) As promptly as practicable after the conversion of any shares
of Series A Preferred Stock into Common Stock under Section A. 5(a) above, the
Corporation shall issue and deliver to or upon the written order of such holder,
to the place designated by such holder, a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled, and a
cash amount in respect of any fractional interest in a share of Common Stock as
provided in Section A. 5(c) below. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become a
stockholder of record on the Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event such person shall be deemed
to have become a stockholder of record on the next succeeding date on which the
transfer books are open, but the Conversion Price shall be that in effect on the
Conversion Date, and the rights of the holder of the shares of Series A
Preferred Stock so converted shall cease on the Conversion Date. Upon conversion
of only a portion of the number of shares covered by a certificate representing
shares of Series A Preferred Stock surrendered for conversion, the Corporation
shall issue and deliver to or upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the Corporation, a
new certificate covering the number of shares of Series A Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(c) Upon conversion, the Corporation (unless otherwise requested
by the holder of Series A Preferred Stock subject to conversion) will issue
fractional shares of its
-4-
<PAGE> 5
Common Stock, as applicable, and shall not distribute cash in lieu of such
fractional shares. The number of full shares of Common Stock issuable upon
conversion of any Series A Preferred Stock shall be computed on the basis of the
aggregate number of shares of Series A Preferred Stock to be converted. If
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any such shares of Stock are not issued, the Corporation shall pay
a cash adjustment in respect of such fractional interest in an amount equal to
the product of (i) the price of one share of Common Stock as determined in good
faith by the Board and (ii) such fractional interest.
(d) The Conversion Price for each share of Series A Preferred
Stock shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall, at any time or from time to
time after the Original Issuance Date, issue any shares of Common Stock
(or be deemed to have issued shares of Common Stock as provided
herein), other than Excluded Stock, without consideration or for a
consideration per share less than the applicable Conversion Price for
such Series A Preferred Stock, in effect immediately prior to the
issuance of such Common Stock, then such Conversion Price, as in effect
immediately prior to each such issuance, shall forthwith be lowered to
a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of (x) the total number
of shares of Common Stock outstanding on a fully-diluted basis
(including all outstanding Common Stock Equivalents) immediately
prior to such issuance, multiplied by such Conversion Price in
effect immediately prior to such issuance, and (y) the
consideration received by the Corporation upon such issuance; by
(B) the total number of shares of Common Stock
outstanding on a fully-diluted basis (including all outstanding
Common Stock Equivalents) immediately after the issuance of such
Common Stock.
(ii) For the purposes of any adjustment of a Conversion Price
pursuant to clause (i) above, the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock for cash
in a public offering or private placement, the consideration shall
be deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or placement fees payable by
the Corporation to any underwriter or placement agent in
connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value
thereof as determined in good faith by the Board, irrespective of
any accounting treatment.
(C) In the case of the issuance of options to purchase
or rights to subscribe for Common Stock, securities by their terms
convertible into or
-5-
<PAGE> 6
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities except
for options to acquire Excluded Stock:
(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be
deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in Section
A. 5(d)(ii)(A) and Section A. 5(d)(ii)(B) above), if any,
received by the Corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such
options or rights for the Common Stock covered thereby;
(2) the aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities or upon
the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to
have been issued at the time such securities, options, or
rights were issued and for a consideration equal to the
consideration received by the Corporation for any such
securities and related options or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange
of such securities or the exercise of any related options or
rights (the consideration in each case to be determined in
the manner provided in Section A. 5(d)(ii)(A) and Section A.
5(d)(ii)(B) above);
(3) on any change in the number of shares or
exercise price of Common Stock deliverable upon exercise of
any such options or rights or conversions of or exchanges for
such securities, other than a change resulting from the
antidilution provisions thereof, the Conversion Price shall
forthwith be readjusted to the Conversion Price as would have
been obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to
such change or options or rights related to such securities
not converted prior to such change been made upon the basis
of such change; and
(4) on the expiration of any such options or
rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related
to such convertible or exchangeable securities, the
Conversion Price shall forthwith be readjusted to the
Conversion Price as would have been obtained had the
adjustment made upon the issuance of such options, rights,
securities or options or rights related to such securities
been made upon the basis of the issuance of only the number
of shares of Common Stock actually issued upon the exercise
of such options or rights, upon the conversion or exchange of
such securities, or upon the exercise of the options
-6-
<PAGE> 7
or rights related to such securities and subsequent
conversion or exchange thereof.
(iii) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for
the determination of holders of Common Stock entitled to receive such
stock dividend, subdivision or split-up, the Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of Series A Preferred Stock shall
be increased in proportion to such increase in outstanding shares.
(iv) If, at any time after the Original Issuance Date, the
number of shares of Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock, then, following
the record date for such combination, the Conversion Price shall be
appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of Series A Preferred Stock shall
be decreased in proportion to such decrease in outstanding shares.
(v) In the event of any capital reorganization of the
Corporation, any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no par value or
from no par value to par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or any consolidation
or merger of the Corporation, each share of Series A Preferred Stock
shall after such reorganization, reclassification, consolidation, or
merger be convertible into the kind and number of shares of stock or
other securities or property of the Corporation or of the corporation
resulting from such consolidation or surviving such merger to which the
holder of the number of shares of Common Stock deliverable (immediately
prior to the time of such reorganization, reclassification,
consolidation or merger) upon conversion of such share of Series A
Preferred Stock would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this
clause shall similarly apply to successive reorganizations,
reclassifications, consolidations or mergers.
(vi) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such Conversion Price; provided, that any adjustments not
required to be made by virtue of this sentence shall be carried forward
and taken into account in any subsequent adjustment. All calculations
under Sections A. 5(d)(i) through A. 5(d)(v) above shall be made to the
nearest one hundredth (1/100) of a cent or the nearest one tenth (1/10)
of a share, as the case may be.
(vii) In any case in which the provisions of this Section A.
5(d) shall require that an adjustment shall become effective
immediately after a record date of an event, the Corporation may defer
until the occurrence of such event (A) issuing to the holder of any
share of Series A Preferred Stock converted after such record date and
-7-
<PAGE> 8
before the occurrence of such event the shares of capital stock
issuable upon such conversion by reason of the adjustment required by
such event in addition to the shares of capital stock issuable upon
such conversion before giving effect to such adjustments, and (B) if
applicable, paying to such holder any amount in cash in lieu of a
fractional share of capital stock; provided, however, that the
Corporation shall deliver to such holder an appropriate instrument
evidencing such holder's right to receive such additional shares and
such cash.
(viii) Whenever the Conversion Price shall be adjusted as
provided in Section A. 5(d)(iv), the Corporation shall make available
for inspection during regular business hours, at its principal
executive offices or at such other place as may be designated by the
Corporation, a statement, signed by its chief financial officer,
showing in detail the facts requiring such adjustment and the
Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent by
first class certified mail, return receipt requested and postage
prepaid, to each holder of Series A Preferred Stock affected by the
adjustment at such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and may
be included as part of any notice required to be mailed under the
provisions of Section A. 5(d)(ix) below.
(ix) If the Corporation shall propose to take any action of
the types described in this Section A. 5(d)(iii), (iv) or (v), the
Corporation shall give notice to each holder of shares of Series A
Preferred Stock, which notice shall specify the record date, if any,
with respect to any such action and the date on which such action is to
take place. Such notice shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such
notice) on the Conversion Price and the number, kind or class of shares
or other securities or property which shall be deliverable or
purchasable upon the occurrence of such action or deliverable upon
conversion of shares of Series A Preferred Stock. In the case of any
action which would require the fixing of a record date, such notice
shall be given at least ten (10) days prior to the date so fixed, and
in case of all other action, such notice shall be given at least twenty
(20) days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, shall not affect the legality or
validity of any such action.
(x) The Corporation shall at all times keep reserved, free
from preemptive rights, out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of
Series A Preferred Stock, sufficient shares of Common Stock to provide
for the conversion of all outstanding shares of Series A Preferred
Stock.
(xi) Without duplication of any other adjustment provided for
in this Section A. 5, at any time the Corporation makes or fixes a
record date for the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, provision shall be
made so that each holder of Series A Preferred Stock shall receive
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<PAGE> 9
upon conversion thereof, in addition to the shares of Common Stock
receivable thereupon, the number of securities of the Corporation which
it would have received had its shares of Series A Preferred Stock been
converted into shares of Common Stock on the date of such event and had
such holder thereafter, during the period from the date of such event
to and including the date of conversion, retained such securities
receivable by it pursuant to this paragraph during such period, subject
to the sum of all other adjustments called for during such period under
this Section A. 5 with respect to the rights of such holder of Series A
Preferred Stock.
(xii) In the event that holders of at least two-thirds of the
then outstanding Series A Preferred Stock (voting as a class), consent
in writing to limit, or waive in its entirety, any anti-dilution
adjustment to which the holders of the such series of Series A
Preferred Stock would otherwise be entitled hereunder, the Corporation
shall not be required to make any adjustment whatsoever with respect to
such series of Series A Preferred Stock in excess of such limit or at
all, as the terms of such consent may dictate.
(xiii) The Corporation will not, by amendment of its Restated
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section A. 5(d) and in the
taking of all such action as may be necessary or appropriate in order
to protect the exercise rights of the holders of Series A Preferred
Stock against impairment.
(xiv) The computations of all amounts under this Section A.
5(d) shall be made assuming all other anti-dilution or similar
adjustments to be made to the terms of all other securities resulting
from the transaction causing an adjustment pursuant to this Section A.
5(d) have previously been made so as to maintain the relative economic
interest of the Series A Preferred Stock, vis a vis all other
securities issued by the Corporation.
(xv) The Corporation shall take or cause to be taken such
steps as shall be necessary to ensure that the par value per share of
Common Stock is at all time less than or equal to the Conversion Price.
6. MANDATORY CONVERSION.
(a) Upon the consummation of the first underwritten public
offering for the account of the corporation of Common Stock pursuant to a
registration statement on Form S-1 (or its successor Form) filed under the
Securities Act of 1933, as amended, with aggregate proceeds (net of underwriting
discounts and commissions) to the Corporation of not less than $25,000,000 (a
"Qualified Public Offering"), each share of Series A Preferred Stock then
outstanding shall, by virtue of and simultaneously with such Qualified Public
Offering, be deemed automatically converted (a "Mandatory Conversion") into the
number of fully paid and
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<PAGE> 10
nonassessable shares of Common Stock equal to the quotient obtained by dividing
(A) the Series A Original Cost by (B) the Conversion Price, as last adjusted and
then in effect.
(b) As promptly as practicable after the date of consummation of
any Qualified Public Offering and the delivery to the Corporation of the
certificate or certificates for the shares of Series A Preferred Stock which
have been converted, duly endorsed or assigned in blank to the Corporation (if
required by it), the Corporation shall issue and deliver to or upon the written
order of each holder of Series A Preferred Stock to the place designated by such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder is entitled. The person in whose name the certificate or
certificates for Common Stock are to be issued shall be deemed to have become a
stockholder of record on the date of such Qualified Public Offering and on such
date the shares of Series A Preferred Stock shall cease to be outstanding,
whether or not the certificates representing such shares have been received by
the Corporation.
(c) The provisions set forth in Section A.5(c) and Section A.5(d)
shall apply to the conversion of Series A Preferred Stock pursuant to this
Section A.6 in the same manner as they apply to the conversion of Series A
Preferred Stock pursuant to Section A.5(a).
7. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
(a) "Affiliate" has the meaning ascribed to it in Rule 12(b)(2)
promulgated under the Securities Exchange Act of 1934, as amended.
(b) "Board" shall mean the Board of Directors of the Corporation.
(c) "By-Laws" means the By-Laws of the Corporation, as amended.
(d) "Common Stock Equivalent" shall mean all shares of Common
Stock outstanding and all shares of Common Stock issuable (without regard to any
present restrictions on such issuance) upon the conversion, exchange or exercise
of all debt or equity securities of the Corporation that are directly or
indirectly convertible, exchangeable or exercisable for Common Stock and all
Common Stock appreciation rights, phantom Common Stock rights and other rights
to acquire, or to receive or to be paid amounts of, the Common Stock.
(e) "Conversion Date" has the meaning set forth in Article II,
Section 5(a).
(f) "Conversion Price" has the meaning set forth in Article II,
Section 5(a).
(g) "Director" means a member of the Board.
(h) "Excluded Stock" shall mean (i) up to 8,943,212 (as adjusted
equitably for stock dividends, stock splits, combinations, etc.) shares of
Common Stock issuable upon the exercise of stock options granted to officers and
employees of the Corporation or its subsidiaries pursuant to one or more
incentive stock option plans approved by the Board, (ii) 20,277,440
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<PAGE> 11
shares of Common Stock issued to existing stockholders of the Corporation
pursuant to that certain Recapitalization Agreement by and among the Corporation
and the parties named therein dated August __, 1999, (iii) shares of Common
Stock issued upon conversion of shares of Series A Preferred Stock, (iv) shares
of Common Stock issued upon the exercise or conversion of Common Stock
Equivalents issued to lenders to the Corporation in connection with any debt
financing, (v) shares of Common Stock issued by the Corporation in connection
with an acquisition of all or substantially all of the capital stock or assets
of another Person (whether by way of merger, consolidation, recapitalization or
otherwise), (vi) shares issuable upon the exercise of options granted to Glenn
E. Montgomery, Jr. ("Montgomery"), Mark L. Epstein, Larry J. Engelken and Scott
M. Schley pursuant to the Employment Agreements between the Corporation and each
of the foregoing, and (vii) up to 509,012 shares of Series A Preferred Stock
issued in exchange for shares of Common Stock pursuant to that certain Agreement
dated August __, 1999, by and among the Corporation, Montgomery, GMJM Stock
Partnership, Ltd., and InSight Capital Partners III, L.P.
(i) "Gross Proceeds" means a fraction: (I) the numerator of which
is the implied equity (i.e., net of indebtedness) valuation of the Corporation
in a Liquidity Event and (II) the denominator of which is the number of all
Common Stock Equivalents (assuming the conversion of all shares of Series A
Preferred Stock into the number of shares of Common Stock into which such shares
are then convertible in accordance with Section III. A.5(d)) outstanding at the
time of such Liquidity Event.
(j) "Liquidation" shall mean any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation or a
Liquidity Event.
(k) "Liquidation Amount" shall mean, with respect to each share of
Series A Preferred Stock, seventy-five percent (75%) of the Series A Original
Cost; provided, however, that the Liquidation Amount shall decrease in direct
inverse relation to Gross Proceeds where Gross Proceeds equal between three and
six times the Series A Original Cost, such that where Gross Proceeds equal three
times the Series A Original Cost, the Liquidation Amount shall be seventy-five
percent (75%) of the Series A Original Cost, and where Gross Proceeds equal six
times the Series A Original Amount, the Liquidation Amount shall be zero. In a
Liquidation in which Gross Proceeds exceed six times the Series A Original Cost,
the Liquidation Amount shall be zero. For the avoidance of doubt, if the Series
A Original Cost equals ten (10) and Gross Proceeds equals forty-five (45) (or
four and one half times the Series A Original Cost), then the Liquidation Amount
would equal $3.75 (or 37.5% of the Series A Original Cost).
(l) "Liquidity Event" shall mean (i) the sale or license of all or
substantially all of the Corporation's assets to a Person who is not an
Affiliate of the Corporation, (ii) the sale or transfer of the outstanding
capital stock of the Corporation to one or more Persons who are not Affiliates
of the Corporation, or (iii) the merger or consolidation of the Corporation with
or into another Person who is not an Affiliate of the Corporation, in each case
in clauses (ii) and (iii) above under circumstances in which the holders of the
outstanding capital stock of the Corporation immediately prior to such
transaction own less than a majority in voting power of the outstanding capital
stock of the Corporation or the surviving or resulting corporation or acquirer,
as the case may be, immediately following such transaction. A sale (or multiple
related
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<PAGE> 12
sales) of one or more subsidiaries of the Corporation (whether by way of merger,
consolidation, reorganization or sale of all or substantially all capital stock)
which constitutes a sale of all or substantially all of the consolidated assets
of the Corporation shall be deemed a Liquidity Event.
(m) "Original Issuance Date" for the Series A Preferred Stock
means the date of original issuance of the first share of the Series A Preferred
Stock.
(n) "Mandatory Conversion" had the meaning set forth in Article
II, Section 6(a).
(o) "Person" shall be construed broadly to include any natural
person, partnership, corporation, unincorporated association, limited liability
company, joint stock company, trust or joint venture.
(p) "Qualified Public Offering" has the meaning set forth in
Article II, Section 6(a).
(q) "Restated Certificate of Incorporation" means this Restated
Certificate of Incorporation.
(r) "Series A Original Cost" means, with respect to each share of
Series A Preferred Stock, $1.085, plus all accrued but unpaid dividends on such
share of Series A Preferred Stock.
B. COMMON STOCK
Each holder of shares of Common Stock shall be entitled to one vote for
each share of Common Stock held on all matters as to which holders of Common
Stock shall be entitled to vote. Except for and subject to those rights
expressly granted to the holders of the Series A Preferred Stock, or except as
may be provided by the laws of the State of Delaware, the holders of Common
Stock shall have with the holders of Series A Preferred Stock all other rights
of stockholders including, but not by way of limitation, (i) the right to
receive dividends in accordance with, when and as declared by the Board out of
assets legally available therefor and (ii) in the event of any distribution of
assets upon a Liquidation or otherwise, the right upon payment of the
Liquidation Amount to the holders of Series A Preferred in accordance with
Section A. 2, to receive with the holders of Series A Preferred Stock (on an as
converted basis) all the assets and funds of the Corporation remaining after the
payment of all Liquidation Amounts payable upon a Liquidation as herein
provided.
ARTICLE IV
The business and affairs of the Corporation shall be managed by or
under the direction of the Board, and the directors need not be elected by
ballot unless required by the By-laws of the Corporation.
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<PAGE> 13
ARTICLE V
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board is expressly authorized to make, amend
and repeal the By-laws of the Corporation with the consent of the holders of at
least 67% of the Series A Preferred Stock.
ARTICLE VI
No Director shall be liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
Corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
Corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The Corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the Corporation the power to indemnify.
ARTICLE VII
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The Corporation's registered agent at such address is The Corporation Trust
Company.
ARTICLE VIII
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the state of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Delaware General Corporation Law, order a meeting of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
the Corporation, as the case may be, to be summoned in such matter as the said
court directs. If a majority in number representing 3/4 in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Corporation, as the case
may be, and also on the Corporation.
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<PAGE> 14
AMENDMENTS
Subject to the conditions set forth herein, the Corporation reserves
the right to amend, alter, change or repeal any provision contained in this
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by law, and all rights and powers conferred herein on stockholders, directors
and officers are subject to this reserved power.
IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer
of the Corporation, for the purpose of restating the Certificate of
Incorporation of the Corporation pursuant to Sections 242 and 245 of the General
Corporation Law of the State of Delaware, does make and file this Restated
Certificate of Incorporation, hereby declaring and certifying that the facts
herein stated are true, and accordingly have hereunto set my hand this 13th day
of August, 1999.
CONVERGENT GROUP CORPORATION
By: /s/ GLENN E. MONTGOMERY, JR.
-------------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
Attest:
/s/ LARRY J. ENGELKEN
------------------------------
Name: Larry J. Engelken
Title: Secretary
DENVER:0936253.04
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<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
CONVERGENT GROUP CORPORATION
a Delaware corporation
(the "Company")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
ARTICLE I.
<S> <C>
OFFFICES ............................................... -1-
Section 1.1. Registered Office .................... -1-
Section 1.2. Additional Offices ................... -1-
ARTICLE II.
STOCKHOLDERS MEETINGS .................................. -1-
Section 2.1. Annual Meetings ...................... -1-
Section 2.2. Special Meetings ..................... -1-
Section 2.3. Notices .............................. -1-
Section 2.4. Quorum ............................... -2-
Section 2.5. Voting of Shares ..................... -2-
Section 2.5.1. Voting Lists .................. -2-
Section 2.5.2. Votes Per Share ............... -2-
Section 2.5.3. Proxies ....................... -2-
Section 2.5.4. Required Vote ................. -3-
Section 2.6. Consents in Lieu of Meeting .......... -3-
ARTICLE III.
DIRECTORS .............................................. -3-
Section 3.1. Purpose .............................. -3-
Section 3.2. Number ............................... -3-
Section 3.3. Election ............................. -3-
Section 3.4. Vacancies ............................ -3-
Section 3.5. Removal .............................. -4-
Section 3.6. Compensation ......................... -4-
ARTICLE IV.
BOARD MEETINGS ......................................... -4-
Section 4.1. Annual Meetings ...................... -4-
Section 4.2. Regual Meetings ...................... -4-
Section 4.3. Special Meetings ..................... -4-
Section 4.4. Quorum. Required Vote ................ -5-
Section 4.5. Consent In Lieu of Meeting ........... -5-
ARTICLE V.
COMMITTEES OF DIRECTORS; COMPENSATION COMMITTEE ........ -5-
Section 5.1. Establishment ........................ -5-
Section 5.2. Available Powers ..................... -5-
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 5.3. Unavailable Powers........................................... -5-
Section 5.4. Alternate Members............................................ -6-
Section 5.5. Compensation Committee....................................... -6-
Section 5.6. Procedures................................................... -6-
ARTICLE VI.
OFFICERS........................................................................... -7-
Section 6.1. Elected Officers............................................. -7-
Section 6.1.1. Chairman of the Board............................. -7-
Section 6.1.2. Chief Executive Officer........................... -7-
Section 6.1.3. President......................................... -8-
Section 6.1.4. Vice Presidents................................... -8-
Section 6.1.5. Secretary......................................... -8-
Section 6.1.6. Assistant Secretaries............................. -8-
Section 6.1.7. Treasurer......................................... -8-
Section 6.1.8. Assistant Treasurer............................... -8-
Section 6.1.9. Divisional Officers............................... -9-
Section 6.2. Election..................................................... -9-
Section 6.3. Appointed Officers........................................... -9-
Section 6.4. Multiple Officeholders, Stockholder and Director Officers.... -9-
Section 6.5. Compensation, Vacancies...................................... -9-
Section 6.6. Additional Powers and Duties................................. -9-
Section 6.7. Removal...................................................... -10-
ARTICLE VII.
SHARE CERTIFICATES................................................................. -10-
Section 7.1. Entitlement to Certificates.................................. -10-
Section 7.2. Multiple Classes of Stock.................................... -10-
Section 7.3. Signatures................................................... -10-
Section 7.4. Issuance and Payment......................................... -10-
Section 7.5. Lost Certificates............................................ -11-
Section 7.6. Transfer of Stock............................................ -11-
Section 7.7. Registered Stockholders...................................... -11-
ARTICLE VIII.
INDEMNIFICATION.................................................................... -11-
Section 8.1. General...................................................... -11-
Section 8.2. Actions by or in the Right of the Company.................... -12-
Section 8.3. Indemnification Against Expenses............................. -12-
Section 8.4. Board Determinations......................................... -12-
Section 8.5. Advancement of Expenses...................................... -12-
Section 8.6. Nonexclusive................................................. -13-
Section 8.7. Insurance.................................................... -13-
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Section 8.8. Certain Definitions....................................... -13-
Section 8.9. Change in Governing Law................................... -13-
ARTICLE IX.
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS............................... -14-
Section 9.1. Validity; Disclosure and Approval......................... -14-
Section 9.2. Exclusive................................................. -14-
ARTICLE X.
MISCELLANEOUS................................................................. -14-
Section 10.1. Place of Meetings......................................... -14-
Section 10.2. Fixing Record Dates....................................... -14-
Section 10.3. Means of Giving Notice.................................... -15-
Section 10.4. Waiver of Notice.......................................... -15-
Section 10.5. Attendance via Communications Equipment................... -16-
Section 10.6. Dividends................................................. -16-
Section 10.7. Reserves.................................................. -16-
Section 10.8. Reports to Stockholders................................... -16-
Section 10.9. Contracts and Negotiable Instruments...................... -16-
Section 10.10. Fiscal Year............................................... -17-
Section 10.11. Seal...................................................... -17-
Section 10.12. Books and Records......................................... -17-
Section 10.13. Resignation............................................... -17-
Section 10.14. Surety Bonds.............................................. -17-
Section 10.15. Proxies in Respect of Securities of Other Corporations.... -17-
Section 10.16. Amendments................................................ -18-
Section 10.17. Actions Requiring Approval of Class A Directors........... -18-
</TABLE>
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<PAGE> 5
BYLAWS
ARTICLE I.
OFFICES
Section 1.1 Registered Office.
The registered office of the Company within the State of Delaware shall be
located at either (i) the principal place of business of the Company in the
State of Delaware or (ii) the office of the corporation or individual acting as
the Company's registered agent in Delaware.
Section 1.2 Additional Offices.
The Company may, in addition to its registered office in the State of Delaware,
have such other offices and places of business, both within and without the
State of Delaware, as the Board of Directors of the Company (the"Board") may
from time to time determine or as the business and affairs of the Company may
require.
ARTICLE II.
STOCKHOLDERS MEETINGS
Section 2.1 Annual Meetings.
Annual meetings of stockholders shall be held at a place and time on any weekday
which is not a holiday and which is not more that 120 days after the end of the
fiscal year of the Company as shall be designated by the Board and stated in the
notice of the meeting, at which the stockholders shall elect the directors of
the Company and transact such other business as may properly be brought before
the meeting.
Section 2.2 Special Meetings.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by law or by the certificate of incorporation, (i) may be
called by the chairman of the board or the president and (ii) shall be called
by the president or secretary or by any member of the Board at the request in
writing of a majority of the Board or stockholders owning capital stock of the
Company representing at least 15 percent of the outstanding shares of the
Company's Class A Common Stock (so long as any such shares are outstanding) and
Common Stock. Such request of the Board or the stockholders shall state the
purpose or purposes of the proposed meeting.
Section 2.3 Notices.
Written notice of each stockholders' meeting stating the place, date and hour of
the meeting shall be given to each stockholder entitled to vote thereat by or at
the direction of the officer calling such meeting not less that ten (10) nor
more than sixty (60) days before the date of the meeting . If said notice is for
a stockholders meeting other than an annual meeting, it shall in addition state
the purpose or purposes for which said meeting is called, and the business
transacted at such
<PAGE> 6
meeting shall be limited to the matters so stated in said notice and any
matters reasonably related thereto.
Section 2.4. Quorum.
The presence at a stockholders' meeting of the holders, present in person or
represented by proxy, of capital stock of the Company representing a majority of
the votes of each class of capital stock of the Company entitled to vote thereat
shall constitute a quorum at such meeting for the transaction of business except
as otherwise provided by law, the certificate of incorporation or these Bylaws.
If a quorum shall not be present or represented at any meeting of the
stockholders, a majority of the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such reconvened meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the reconvened meeting, a notice of said meeting shall
be given to each stockholder entitled to vote at said meeting. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 2.5. Voting of Shares.
Section 2.5.1. Voting Lists.
The officer or agent who has charge of the stock ledger of the Company shall
prepare, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote thereat arranged in alphabetical order
and showing the address and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any such stockholder,
for any purpose germane to the meeting, during ordinary business hours for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The original stock transfer books shall be prima
facie evidence as to who are the stockholders entitled to examine such list or
transfer books or to vote at any meeting of stockholders. Failure to comply with
the requirements of this section shall not affect the validity of any action
taken at said meeting.
Section 2.5.2. Votes per Share.
Unless otherwise provided in the certificate if incorporation, each stockholder
shall be entitled to one vote in person or by proxy at every stockholders
meeting for each share of capital stock held by such stockholder. Fractional
shares shall be entitled to proportionate voting rights.
Sections 2.5.3. Proxies.
Every stockholder entitled to vote at a meeting or to express consent or dissent
without a meeting or a stockholder's duly authorized attorney-in-fact may
authorize another person or persons to act for him by proxy. Each proxy shall be
in writing, executed by the stockholder giving the proxy or by his duly
authorized attorney, which writing may take the form of an agreement
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among certain stockholders with respect to the voting of their shares. No proxy
shall be voted on or after three (3) years from its date, unless the proxy
provides for a longer period. Unless and until voted, every proxy shall be
revocable at the pleasure of the person who executed it, or his legal
representatives or assigns, except in those cases where an irrevocable proxy
permitted by statue has been given.
Section 2.5.4. Required Vote.
When a quorum is present at any meeting, the vote of the holders, present in
person or represented by proxy, of capital stock of the Company representing a
majority of the votes of all capital stock of the Company entitled to vote
thereat shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of law or the certificate of
incorporation or these Bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 2.6. Consents in Lieu of Meeting.
Any action required to be or which may be taken at any meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt, written
notice of the action taken by means of any such consent which is other than
unanimous shall be given to those stockholders who have not consented in
writing.
ARTICLE III.
DIRECTORS
Section 3.1. Purpose.
The business of the Company shall be managed by or under the direction of the
Board, which may exercise all such powers of the Company and do all such lawful
acts and things as are not by law, the certificate of incorporation or these
Bylaws directed or required to be exercised or done by the stockholders.
Directors need not be stockholders or residents of the State of Delaware.
Section 3.2. Number.
The number of directors constituting the Board shall, following the initial
issuance of shares of capital stock of the Company, never be less than five and
shall be determined by resolution of the Board.
Section 3.3. Election.
Directors shall be elected by the stockholders by plurality vote at an annual
stockholders meeting, except as may otherwise be provided in these Bylaws or
the certificate of incorporation, and each director shall hold office until his
successor has been duly elected and qualified.
Section 3.4. Vacancies.
Except as may otherwise be provided in the certificate of incorporation,
vacancies and newly-created directorships resulting from any increase in the
authorized number of directors may be
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filled by a majority of the directors then in office, though less than a quorum,
or by a sole remaining director, and the directors so chosen shall hold office
until their successors are duly elected and qualified. If there are no
directors in office, then an election of directors may be held in the manner
provided by law. No decrease in the size of the Board shall serve to shorten
the term of an incumbent director.
Section 3.5. Removal.
Unless otherwise restricted by law, the certificate of incorporation or these
Bylaws, any director or the entire Board may be removed, with or without cause,
by a majority vote of the shares entitled to vote at an election of the
directors to be removed, if notice of the intention to act upon such matter
shall have been given in the notice calling such meeting.
Section 3.6. Compensation.
Unless otherwise restricted by the certificate of incorporation or these Bylaws,
the Board shall have the authority to fix the compensation of directors by
unanimous vote of all directors on the Board. The directors may be reimbursed
their expenses, if any, of attendance at each meeting of the Board and may be
paid either a fixed sum for attendance at each meeting of the Board or a stated
salary as director. No such payment shall preclude any director from serving
the Company in any other capacity and receiving compensation therefor. Members
of committees of the Board may be allowed like compensation for attending
committee meetings.
ARTICLE IV.
BOARD MEETINGS
Section 4.1. Annual Meetings.
The Board shall meet as soon as practicable after the adjournment of each
annual stockholders' meeting at the place of the stockholders' meeting. No
notice to the directors shall be necessary to legally convene this meeting,
provided a quorum is present.
Section 4.2. Regular Meetings.
Regularly scheduled, periodic meetings of the Board may be held without notice
at such times and places as shall from time to time be determined by resolution
of the Board and communicated to all directors.
Section 4.3. Special Meetings.
Special meetings of the Board (i) may be called by the chairman of the board or
president and (ii) shall be called by the president or secretary on the written
request of two directors or the sole director, as the case may be, or by
holders of at least 15 percent of the outstanding shares of common stock of all
classes. Notice of each special meeting of the Board shall be given, either
personally or as hereinafter provided, to each director at least 24 hours
before the meeting if such notice is delivered personally or by means of
telephone, telegram, telex or facsimile transmission and delivery; two days
before the meeting if such notice is delivered by recognized express
delivery service; and three days before the meeting if such notice is delivered
through the United States mail. Any and all business may be transacted at a
special meeting which may be transacted at a regular meeting of the Board.
Except as may be otherwise
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<PAGE> 9
expressly provided by law, the certificate of incorporation or these Bylaws,
neither the business to be transacted at, nor the purpose of, any special
meeting need be specified in the notice or waiver of notice of such meeting.
Section 4.4. Quorum. Required Vote.
A majority of the directors shall constitute a quorum for the transaction of
business at any meeting of the Board, and the act of a majority of the
directors present at any meeting at which there is a quorum shall be the act of
the Board, except as may be otherwise specifically provided by law, the
certificate of incorporation or these Bylaws. If a quorum shall not be present
at any meeting, a majority of the directors present may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum is present.
Section 4.5. Consent in Lieu of Meeting.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the
Board or any committee thereof may be taken without a meeting, if all members
of the Board or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
or committee.
ARTICLE V.
COMMITTEES OF DIRECTORS; COMPENSATION COMMITTEE
Section 5.1. Establishment.
The Board may, by resolution approved by the unanimous vote of all directors on
the Board, establish, name or dissolve one or more committees, each committee to
consist of one or more of the directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board when required.
Section 5.2. Available Powers.
Any committee established pursuant to these Bylaws--but only to the extent
provided in these Bylaws or the resolution of the Board establishing such
committee or otherwise delegating specific power and authority to such committee
and as limited by law, the certificate of incorporation and these Bylaws--shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Company, and may authorize the
seal of the Company to be affixed to all papers which may require it. Without
limiting the foregoing, such committee may--but only to the extent authorized
in the resolution or resolutions providing for the issuance of shares of stock
adopted by the Board as provided in Section 151(a) of the General Corporation
Law of the State of Delaware--fix any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the Company or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Company.
Section 5.3. Unavailable Powers.
No committee of the Board shall have the power or authority to amend the
certificate of incorporation (except in connection with the issuance of capital
stock as provided in the previous
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<PAGE> 10
section); adopt an agreement of merger or consolidation; recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
Company's property and assets, a dissolution of the Company or a revocation of
such a dissolution; amend the Bylaws of the Company; or, unless the resolution
establishing such committee or the certificate of incorporation expressly so
provides, declare a dividend, authorize the issuance of stock or adopt a
certificate of ownership and merger.
Section 5.4. Alternate Members.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in the place of any such
absent or disqualified member.
Section 5.5. Compensation Committee.
So long as there are outstanding any shares of Class A Common Stock and any
shares of Series A Preferred Stock or Series B Preferred Stock, there shall be a
compensation committee (the "Compensation Committee") consisting of three
members, one of whom shall be selected by the Class A Directors, one of whom
shall be selected by the Common Directors, and the third member shall be elected
by the holders of a majority of the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock, voting together as a class. The
Compensation Committee shall not be a committee of the Board but shall be
generally governed by the provisions of this Article V relating to Board
committees, except to the extent that board membership shall not be a requisite
for Compensation Committee membership. The Compensation Committee shall have
the power and authority to recommend, subject to Board approval, any and all
discretionary bonuses and similar compensation arrangements for all officers and
employees of the Company who receive annual salaried compensation in any one
year in excess of $150,000; provided that the Compensation Committee shall not
have the power or authority to change any bonus or compensation arrangement
required to be paid pursuant to any written employment agreement approved by the
unanimous vote of all members of the Board. Notwithstanding any provision in
Section 5.6 of these Bylaws, meetings of the Compensation Committee require
all three members to constitute a quorum for the transaction of business, and
the act of a majority of the members present at any meeting at which such quorum
is present shall be the act of the Compensation Committee of the Company. The
Board shall have the power to review and approve or disapprove discretionary
bonuses and similar compensation arrangements as are recommended for such
officers and employees by the Compensation Committee but shall not increase any
such bonus or arrangement or authorize any such bonus or arrangement not
recommended by the Compensation Committee. This Section 5.5 is for the benefit
of the holders of the Series A and Series B Preferred Stock and shall not be
amended or modified without the prior approval of holders of the majority of
outstanding shares of the Series A and Series B Preferred Stock, voting together
as a class.
Section 5.6. Procedures.
Time, place and notice, if any, of meetings of a committee shall be determined
by such committee. At meetings of a committee, a majority of the number of
members designated by the Board shall constitute a quorum for the transaction of
business. The act of a majority of the
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<PAGE> 11
members present at any meeting at which a quorum is present shall be the act of
the committee, except as otherwise specifically provided by law, the
certificate of incorporation or these Bylaws. If a quorum is not present at a
meeting of a committee, the members present may adjourn the meeting from time
to time, without notice other than an announcement at the meeting, until a
quorum is present.
ARTICLE VI.
OFFICERS
Section 6.1. Elected Officers.
The Board shall elect a president, a treasurer and a secretary (collectively,
the "Required Officers") having the respective duties enumerated below and may
elect such other officers having the titles and duties set forth below which are
not reserved for the Required Officers or such other titles and duties as the
Board may by resolution from time to time establish:
Section 6.1.1. Chairman of the Board.
The Board of Directors shall elect a chairman of the board and may elect a
co-chairman of the board, in which event each co-chairman shall have all the
powers and duties of the chairman except to the extent otherwise determined by
resolution of the Board. The chairman of the board, or in his absence, the
president, shall preside when present at all meetings of the stockholders and
the Board. The chairman of the board shall advise and counsel the president and
other officers and shall exercise such powers and perform such duties as shall
be assigned to or required of him from time to time by the Board or these
Bylaws. The chairman of the board may execute bonds, mortgages and other
contracts requiring a seal under the seal of the Company, except where required
or permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board to some
other officer or agent of the Company. The chairman of the board may delegate
all or any of his powers or duties to the president or the chief executive
officer, if and to the extent deemed by the chairman of the board to be
desirable or appropriate.
Section 6.1.2. Chief Executive Officer.
The chief executive officer of the Company shall be responsible for the
Company's relationships with other corporations and entities, and promoting the
Company's long-term business objectives and the goals as outlined in the
Company's Mission Statement. The chief executive officer shall have, subject to
the supervision and direction of the Board of Directors and of the Executive
Committee, such powers as are vested in him by the Board of Directors, by the
Bylaws or which usually attach or pertain to such office. He shall preside at
meetings of the Executive Committee. He may sign and execute all authorized
bonds, loans, notes, deeds, mortgages, contracts or other obligations in the
name of the Company and he shall be ex officio a member of all standing
committees except the Compensation Committee, unless appointed in compliance
with Section 5.5 hereof. In the absence of the chairman of the board and the
president, he shall preside at meetings of the Stockholders.
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Section 6.1.3. President.
The president shall have general and active management of the business of the
Company and shall see that all orders and resolutions of the Board are carried
into effect. In the absence of the chairman of the board or in the event of his
inability or refusal to act, the president shall perform the duties and
exercise the powers of the chairman of the board.
Section 6.1.4. Vice Presidents.
In the absence of the president or in the event of his inability or refusal to
act, the vice president (or in the event there be more than one vice president,
the vice presidents in the order designated by the Board, or in the absence of
any designation, then in the order of their election or appointment) shall
perform the duties of the president, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the president. The vice
presidents shall perform such other duties and have such other powers as the
Board may from time to time prescribe.
Section 6.1.5. Secretary.
The secretary shall attend all meetings of the stockholders, the Board and (as
required) committees of the Board and shall record all the proceedings of such
meetings in books to be kept for that purpose. He shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board and shall perform such other duties as may be prescribed by the Board or
the president. He shall have custody of the corporate seal of the Company and
he, or an assistant secretary, shall have authority to affix the same to any
instrument requiring it, and when so affixed, it may be attested by his
signature or by the signature of such assistant secretary. The Board may give
general authority to any other officer to affix the seal of the Company and to
attest the affixing thereof by his signature.
Section 6.1.6. Assistant Secretaries.
The assistant secretary, or if there be more than one, the assistant
secretaries in the order determined by the Board (or if there be no such
determination, then in the order of their election or appointment) shall, in
the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the Board may from time
to time prescribe.
Section 6.1.7. Treasurer.
Unless the Board by resolution otherwise provides, the treasurer shall be the
chief accounting and financial officer of the Company. The Treasurer shall have
the custody of the corporate funds and securities, shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Company and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Company in such depositories as may be designated by the Board. He
shall disburse the funds of the Company as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the president and
the Board, at its regular meetings, or when the Board so requires, an account of
all his transactions as treasurer and of the financial condition of the Company.
Section 6.1.8. Assistant Treasurer.
The assistant treasurer, or if there shall be more than one, the assistant
treasurers in the order determined by the Board (or if there be no such
determination, then in the order of their election
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or appointment) shall, in the absence of the treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
treasurer and shall perform such other duties and have such other powers as the
Board may from time to time prescribe.
Section 6.1.9. Divisional Officers.
Each division of the Company, if any, may have a president, secretary, treasurer
or controller and one or more vice presidents, assistant secretaries, assistant
treasurers and other assistant officers. Any number of such offices may be held
by the same person. Such divisional officers will be appointed by, report to
and serve at the pleasure of the Board and such other officers that the Board
may place in authority over them. The officers of each division shall have such
authority with respect to the business and affairs of that division as may be
granted from time to time by the Board, and in the regular course of business of
such division may sign contracts and other documents in the name of the division
where so authorized; provided that in no case and under no circumstances shall
an officer of one division have authority to bind any other division of the
Company except as necessary in the pursuit of the normal and usual business of
the division of which he is an officer.
Section 6.2. Election.
All elected officers shall serve until their successors are duly elected and
qualified or until their earlier death, disqualification, retirement,
resignation or removal from office.
Section 6.3. Appointed Officers.
The Board may also appoint or delegate the power to appoint such other officers,
assistant officers and agents, and may also remove such officers and agents or
delegate the power to remove same, as it shall from time to time deem
necessary, and the titles and duties of such appointed officers may be as
described in Section 6.1 for elected officers; provided that the officers and
any officer possessing authority over or responsibility for any functions of the
Board shall be elected officers.
Section 6.4. Multiple Officeholders, Stockholder and Director Officers.
Any number of offices may be held by the same person, unless the certificate of
incorporation or these Bylaws otherwise provide. Officers need not be
stockholders or residents of the State of Delaware. Officers, such as the
chairman of the board, possessing authority over or responsibility for any
function of the Board must be directors.
Section 6.5. Compensation. Vacancies.
Subject to the authority of the Compensation Committee in Section 5.5 hereof,
the compensation of elected officers shall be set by the Board. The Board shall
fill any vacancy in an elected office. The compensation of appointed officers
and the filling of vacancies in appointed offices may be delegated by the Board
to the same extent as permitted by these Bylaws for the initial filling of such
offices.
Section 6.6. Additional Powers and Duties.
In addition to the foregoing especially enumerated powers and duties, the
several elected and appointed officers of the Company shall perform such other
duties and exercise such further powers as may be provided by law, the
certificate of incorporation or these Bylaws or as the
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Board may from time to time determine or as may be assigned to them by any
competent committee or superior officer.
Section 6.7. Removal
Any officer may be removed, either with or without cause, by a majority of the
directors at the time in office, at any regular or special meeting of the Board.
ARTICLE VII.
SHARE CERTIFICATES
Section 7.1. Entitlement to Certificates.
Every holder of the capital stock of the Company, unless and to the extent the
Board by resolution provides that any or all classes or series of stock shall
be uncertificated, shall be entitled to have a certificate, in such form as is
approved by the Board and conforms with applicable law, certifying the number
of shares owned by him.
Section 7.2. Multiple Classes of Stock.
If the Company shall be authorized to issue more than one class of capital
stock or more than one series of any class, a statement of the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall, unless the
Board shall by resolution provide that such class or series of stock shall be
uncertificated, be set forth in full or summarized on the face or back of the
certificate which the Company shall issue to represent such class or series of
stock; provided that, to the extent allowed by law, in lieu of such statement,
the face or back of such certificate may state that the Company will furnish a
copy of such statement without charge to each requesting stockholder.
Section 7.3. Signatures.
Each certificate representing capital stock of the Company shall be signed by
or in the name of the Company by (1) the chairman of the board, the president
or a vice president; and (2) the treasurer, an assistant treasurer, the
secretary or an assistant secretary of the Company. The signatures of the
officers of the Company may be facsimiles. In case any officer who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to hold such office before such certificate is issued, it may be issued
by the Company with the same effect as if he held such office on the date of
issue.
Section 7.4. Issuance and Payment.
Subject to the provisions of the law, the certificate of incorporation or these
Bylaws, shares may be issued for such consideration and to such persons as the
Board may determine from time to time. Shares may not be issued until the full
amount of the consideration has been paid, unless upon the face or back of each
certificate issued to represent any partly paid shares of capital stock there
shall have been set forth the total amount of the consideration to be paid
therefor and the amount paid thereon up to and including the time said
certificate is issued.
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Section 7.5. Lost Certificates.
The Board may direct new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Company alleged to
have been lost, stolen or destroyed upon the making of an affidavit of that fact
by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Company a bond in such sum as it may
direct as indemnity against any claim that may be made against the Company with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 7.6. Transfer of Stock.
Upon surrender to the Company or its transfer agent, if any, of a certificate
for shares duly endorsed or accompanied by proper evidence of succession,
assignation or authority to transfer and of the payment of all taxes applicable
to the transfer of said shares, the Company shall be obligated to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books; provided, however, that the Company
shall not be so obligated unless such transfer was made in compliance with
applicable state and federal securities laws.
Section 7.7. Registered Stockholders.
The Company shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends, vote and
be held liable for calls and assessments and shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any person other than such registered owner, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
ARTICLE VIII.
INDEMNIFICATION
Section 8.1. General.
The Company shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Company), by reason of the fact that
he is or was a director, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Company, and,
<PAGE> 16
with respect to any criminal action or proceeding, have reasonable cause to
believe that his conduct was unlawful.
Section 8.2. Actions by or in the Right of the Company.
The Company shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the Company to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint
venture or trust or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company unless and only to the extent
that the Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Section 8.3. Indemnification Against Expenses.
To the extent that a director, officer, employee or agent of the Company has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in sections 8.1 and 8.2, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Section 8.4. Board Determinations.
Any indemnification under sections 8.1 and 8.2 (unless ordered by a court)
shall be made by the Company only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he has met the applicable standard of
conduct set forth in sections 8.1 and 8.2. Such determination shall be made
(1) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
Section 8.5. Advancement of Expenses.
Expenses incurred by an officer or director in defending a civil or criminal
action, suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized by law or in this section. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
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Section 8.6. Nonexclusive.
The indemnification and advancement of expenses provided by, or granted pursuant
to, this section shall not be deemed exclusive of any other rights to which any
director, officer, employee or agent of the Company seeking indemnification or
advancement of expenses may be entitled under any other Bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent of the Company and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 8.7. Insurance.
The Company may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, or other enterprise,
against any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or not the Company would
have the power to indemnify him against such liability under the provisions of
the statutes, the Certificate of Incorporation or this section.
Section 8.8. Certain Definitions.
For purposes of this section, (a) references to "the Company" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued; (b) references to "other
enterprises" shall include employee benefit plans; (c) reference to "fines"
shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and (d) references to "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of the
Company which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to any employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in
this section.
Section 8.9. Change in Governing Law.
In the event of any amendment or addition to Section 145 of the General
Corporation Law of the State of Delaware or the addition of any other section
to such law which shall limit indemnification rights thereunder, the Company
shall, to the extent permitted by the General Corporation Law of the State of
Delaware, indemnify to the fullest extent authorized or permitted hereunder, any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of the corporation), by
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<PAGE> 18
reason of the fact that he is or was a director, officer, employee or agent of
the Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding.
ARTICLE IX.
INTERESTED DIRECTORS, OFFICERS AND STOCKHOLDERS
Section 9.1. Validity; Disclosure and Approval.
Any contract or other transaction, including without limitation employment
agreements with the Company (or amendments or modifications thereto), between
the Company and any of its directors, officers or stockholders (or any
corporation or firm in which any of them are directly or indirectly interested)
shall be valid only if the material facts of the relationship or the interest
of each such director, officer or stockholder is known or disclosed either (i)
to the Board and it nevertheless in good faith authorizes the contract or
transaction in advance by the unanimous vote of all directors on the Board or
(ii) to the stockholders and they nevertheless in good faith authorize the
contract or transaction in advance by the vote of holders of at least 60
percent of the shares entitled to vote thereon.
Section 9.2. Exclusive.
The provision of this Article IX shall apply to contracts and other
transactions between the Company and any of its directors, officers or
stockholders notwithstanding that such contract or transaction may in the
absence of such provisions be valid under applicable law.
ARTICLE X.
MISCELLANEOUS
Section 10.1. Place of Meetings.
All stockholders, directors and committee meetings shall be held at such place
or places, within or without the State of Delaware, as shall be designated from
time to time by the Board or such committee and stated in the notices thereof.
If no such place is so designated, said meetings shall be held at the principal
business office of the Company.
Section 10.2. Fixing Record Dates.
(a) In order that the Company may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board may fix, in advance, a record date, which
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more than sixty (60)
nor less than ten (10) days prior to any such action. If no record date is
fixed by the Board, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day
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<PAGE> 19
notice is given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned meeting.
(b) In order that the Company may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is adopted by the
Board, and which date shall not be more than ten days after the date upon which
the resolution fixing the record date is adopted by the Board. If no record
date has been fixed by the Board, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board is otherwise required, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Company by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent of
the Company having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Company's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board and prior action by the Board is
required, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board adopts the resolution taking such prior action.
(c) In order that the Company may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the board adopts the resolution relating thereto.
Section 10.3. Means of Giving Notice.
Whenever under law, the certificate of incorporation or these Bylaws, notice is
required to be given to any director or stockholder, such notice may be given
in writing and delivered personally, through the United States mail, by a
recognized express delivery service (such as Federal Express) or by means of
telegram, telex or facsimile transmission, addressed to such director or
stockholder at his address or telex or facsimile transmission number, as the
case may be, appearing on the records of the Company, with postage and fees
thereon prepaid. Such notice shall be deemed to be given at the time when the
same shall be deposited in the United States mail or with an express delivery
service or when transmitted, as the case may be. Notice of any meeting of the
Board may be given to a director by telephone and shall be deemed to be given
when actually received by the director.
Section 10.4. Waiver of Notice.
Whenever any notice is required to be given under law, the certificate of
incorporation or these bylaws, a written waiver of such notice, signed before
or after the date of such meeting by the person or persons entitled to said
notice, shall be deemed equivalent to such required notice.
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<PAGE> 20
All such waivers shall be filed with the corporate records. Attendance at a
meeting shall constitute a waiver of notice of such meeting, except where a
person attends for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.
Section 10.5 Attendance via Communications Equipment.
Unless otherwise restricted by law, the certificate of incorporation of these
Bylaws, members of the Board, any committee thereof or the stockholders may
hold a meeting by means of conference telephone or other communications
equipment by means of which all persons participating in the meeting can
effectively communicate with each other. Such participation in a meeting shall
constitute presence in person at the meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
Section 10.6. Dividends.
Dividends on the capital stock of the Company, paid in cash, property, or
securities of the Company and as may be limited by applicable law and applicable
provisions of the certificate of incorporation (if any), may be declared by the
Board at any regular or special meeting.
Section 10.7. Reserves.
Before payment of any dividend, there may be set aside out of any funds of the
Company available for dividends such sum or sums as the Board from time to
time, in its absolute discretion, think proper as a reserve or reserves to meet
contingencies, for equalizing dividends, for repairing or maintaining any
property of the Company, or for such other purpose as the Board shall determine
to be in the best interest of the Company; and the Board may modify or abolish
any such reserve in the manner in which it was created.
Section 10.8. Reports to Stockholders.
The Board shall present at each annual meeting of stockholders, and at any
special meeting of stockholders when called for by vote of the stockholders, a
statement of the business and condition of the Company.
Section 10.9. Contracts and Negotiable Instruments.
Except as otherwise provided by law or these Bylaws, any contract or other
instrument relative to the business of the Company may be executed and
delivered in the name of the Company and on its behalf by the chairman of the
board or the president; and the Board may authorize any other officer or agent
of the Company to enter into any contract or execute and deliver any contract
in the name and on behalf of the Company, and such authority may be general or
confined to specific instances as the Board may by resolution determine. All
bills, notes, checks or other instruments for the payment of money shall be
signed or countersigned by such officer, officers, agent or agents and in such
manner as are permitted by these Bylaws and/or as, from time to time, may be
prescribed by resolution (whether general or special) of the Board. Unless
authorized so to do by these Bylaws or by the Board, no officer, agent or
employee shall have any power or authority to bind the Company by any contract
or engagement, or to pledge its credit, or to render it liable pecuniarily for
any purpose or to any amount.
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<PAGE> 21
Section 10.10. Fiscal Year.
The fiscal year of the Company shall be fixed by resolution of the Board.
Section 10.11. Seal.
The seal of the Company shall be in such form as shall from time to time be
adopted by the Board. The seal may be used by causing it or a facsimile thereof
to be impressed, affixed or otherwise reproduced.
Section 10.12. Books and Records.
The Company shall keep correct and complete books and records of account and
shall keep minutes of the proceedings of its stockholders, Board and committees
and shall keep at its registered office or principal place of business, or at
the office of its transfer agent or registrar, a record of its stockholders,
giving the names and addresses of all stockholders and the number and class of
the shares held by each.
Section 10.13. Resignation.
Any director, committee member, officer or agent may resign by giving written
notice to the chairman of the board, the president or the secretary. The
resignation shall take effect at the time specified therein, or immediately if
no time is specified. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 10.14. Surety Bonds.
Such officers and agents of the Company (if any) as the president or the Board
may direct, from time to time, shall be bonded for the faithful performance of
their duties and for the restoration to the Company, in case or their death,
resignation, retirement, disqualification or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in their possession
or under their control belonging to the Company, in such amounts and by such
surety companies as the president or the Board may determine. The premiums on
such bonds shall be paid by the Company, and the bonds so furnished shall be in
the custody of the Secretary.
Section 10.15. Proxies in Respect of Securities of Other Corporations.
The chairman of the board, the president, any vice president or the secretary
may from time to time appoint an attorney or attorneys or an agent or agents for
the Company to exercise, in the name and on behalf of the Company, the powers
and rights which the Company may have as the holder of stock or other securities
in any other corporation to vote or consent in respect of such stock or other
securities, and the chairman of the board, the president, any vice president or
the secretary may instruct the person or persons so appointed as to the manner
of exercising such powers and rights; and the chairman of the board, the
president, any vice president or the secretary may execute or cause to be
executed, in the name and on behalf of the Company and under its corporate seal
or otherwise, all such written proxies or other instruments as he may deem
necessary or proper in order that the Company may exercise such powers and
rights.
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Section 10.16. Amendments.
Except as specifically provided in Section 5.5 hereof, these Bylaws may be
altered, amended, repealed or replaced by the stockholders, at any annual
stockholders meeting or at any special meeting of the stockholders if notice of
such alteration, amendment, repeal or replacement is contained in the notice of
such special meeting and such alteration, amendment, repeal or replacement is
approved by vote of holders of at least 85 percent of the shares entitled to
elect directors. if the power to adopt, amend, repeal or replace these Bylaws
is conferred upon the Board by the certificate of incorporation, the power of
the stockholders to so adopt, amend, repeal or replace these Bylaws shall not be
divested or limited thereby.
Section 10.17. Actions Requiring Approval of Class A Directors.
So long as any shares of Class A Common Stock are outstanding, the Company shall
not and shall not permit any of its subsidiaries to, directly or indirectly,
(a) create, incur, issue, assume or otherwise become
directly or indirectly liable with respect to any indebtedness for borrowed
money in one transaction or any series of related transactions in an aggregate
amount in excess of $2,000,000 in any calendar year;
(b) enter into any agreement, commitment or understanding
with respect to any capital expenditure in an amount in excess of $5,000,000;
(c) enter into any agreement, commitment or understanding
with respect to any lease transaction requiring, or reasonably expected to
require, aggregate expenditures by the Company or any subsidiary of the Company
of more than $5,000,000, regardless of the term of such lease;
(d) enter into any agreement, commitment or understanding
with respect to the acquisition of the capital stock or assets of any
corporation or business for a purchase price, including assumption of any
liabilities, in excess of $5,000,000;
(e) engage in a substantial transaction with any person, or
affiliate of such person, who holds 10% or more of the capital stock of the
Company or who is employed as a director or executive officer of the Company;
(f) authorize or issue, or increase the authorization of
any preferred stock, common stock, or any other capital stock of the Company;
(g) waive, amend, or replace all or a portion of any
employment contract of the four executive officers of the Company who receive
the highest levels of regularly-scheduled income from the Company; or
(h) enter into any agreement or commitment to do any of the
actions listed in this Section 10.17;
in each case, without the prior written approval of each Class A Director.
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<PAGE> 23
Amendment to the Bylaws
of Convergent Group Corporation
1. Amend Section 2.2 to read in its entirety as follows:
Section 2.2 Special Meetings.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by law or by the certificate of incorporation, (i) may be
called by the chairman of the board or by the president and (ii) shall be
called by the president or secretary or by any member of the Board at the
request in writing of a majority of the Board or stockholders owning capital
stock of the Company representing at least 15 percent of the outstanding
shares of the Company's Class A Common Stock (so long as any such shares
are outstanding), Class B Common Stock (so long as any such shares are
outstanding) and Common Stock. Such request of the Board or the stockholders
shall state the purpose or purposes of the proposed meeting.
2. Amend the second sentence of Section 4.3 to read in its entirety as
follows:
Notice of each special meeting of the Board shall be given either personally or
by means of telephone, telegram, telex or facsimile transmission and delivery,
to each director at least four days before the meeting; provided, however, that
if the chairman of the board, in his sole discretion, determines that an
emergency exists, such notice shall be given in the manner provided above at
least 24 hours before the meeting; provided further that in such event, each
director shall be provided the opportunity to participate by conference
telephone or by other communications equipment by means of which all persons
participating in the meeting can effectively communicate with each other.
3. Amend Section 5.5 to read in its entirety as follows:
Section 5.5 Compensation Committees.
(a) So long as there are outstanding any shares of Class A
Common Stock and any shares of Series A Preferred Stock or Series B Preferred
Stock, there shall be a compensation committee (the "Company Compensation
Committee") consisting of three members, one of whom shall be selected by the
Class A Directors, one of whom shall be selected by the Common Directors, and
the third member shall be elected by the holders of a majority of the
outstanding shares of Series A Preferred Stock and Series B Preferred Stock,
voting together as a class. The
<PAGE> 24
Company Compensation Committee shall not be a committee of the Board but shall
be generally governed by the provisions of this Article V relating to Board
committees, except to the extent that board membership shall not be a requisite
for Company Compensation Committee membership. The Company Compensation
Committee shall have the power and authority to recommend, subject to Board
approval, any and all discretionary bonuses and similar compensation
arrangements for all officers and employees of the Company who receive annual
salaried compensation in any one year in excess of $150,000 (U.S.); provided
that the Company Compensation Committee shall not have the power or authority
to change any bonus or compensation arrangement required to be paid pursuant to
any written employment agreement approved by the unanimous vote of all members
of the Board. Notwithstanding any provision in Section 5.6 of these Bylaws,
meetings of the Company Compensation Committee require all three members to
constitute a quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which such quorum is present shall be
the act of the Company Compensation Committee of the Company. The Board shall
have the power to review and approve or disapprove discretionary bonuses and
similar compensation arrangements as are recommended for such officers and
employees by the Company Compensation Committee but shall not increase any such
bonus or arrangement or authorize any such bonus or arrangement not recommended
by the Company Compensation Committee. This Section 5.5(a) is for the benefit
of the holders of the Series A and Series B Preferred Stock and shall not be
amended or modified without the prior approval of holders of the majority of
outstanding shares of the Series A and Series B Preferred Stock, voting
together as a class.
(b) So long as there are outstanding any shares of Class B
Common Stock, there shall be a compensation committee (the "CGAP Compensation
Committee") consisting of three members, one of whom shall be selected by the
Class A Directors, one of whom shall be selected by the Class B Directors, one
of whom shall be selected by the Common Directors; provided, however, that if
and when all outstanding shares of Series A Preferred Stock have been converted
into Class A Common Stock, the number of members of the CGAP Compensation
Committee shall be increased to four and the Class A Directors shall select two
members of the CGAP Compensation Committee. The CGAP Compensation Committee
shall not be a committee of the Board but shall be generally governed by the
provisions of this Article V relating to Board committees, except to the extent
that board membership shall not be a requisite for CGAP Compensation Committee
membership. The CGAP Compensation Committee shall have the power and authority
to recommend, subject to Board approval, any and all discretionary bonuses and
similar compensation arrangements for all officers and employees of Convergent
Group Asia Pacific Pty Ltd. and its subsidiaries who receive annual salaried
compensation in any one year in excess of $75,000 (Aus); provided that the CGAP
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<PAGE> 25
Compensation Committee shall not have the power or authority to change any bonus
or compensation arrangement required to be paid pursuant to any written
employment agreement approved by the unanimous vote of all members of the Board.
Notwithstanding any provision in Section 5.6 of these Bylaws, meetings of the
CGAP Compensation Committee require the presence of the representatives of the
Common Directors and the Class B Directors, and at least one representative of
the Class A Directors, to constitute a quorum for the transaction of business,
and the act of a majority of the members present at any meeting at which such
quorum is present shall be the act of the CGAP Compensation Committee of the
Company. The Board shall have the power to review and approve or disapprove
discretionary bonuses and similar compensation arrangements as are recommended
for such officers and employees by the CGAP Compensation Committee but shall not
increase any such bonus or arrangement or authorize any such bonus or
arrangement not recommended by the CGAP Compensation Committee. This Section
5.5(b) is for the benefit of the holders of the Class B Common Stock and shall
not be amended or modified without the prior approval of holders of the majority
of outstanding shares of the Class B Common Stock.
(c) The Company Compensation Committee and the CGAP Compensation
Committee shall be collectively referred to herein as the Compensation
Committee.
4. Amend Section 10.3 to read in its entirety as follows:
Section 10.3. Means of Giving Notice.
(a) Whenever under law, the certificate of incorporation or
these Bylaws, notice is required to be given to any director, such notice shall
be given either personally or by means of telephone, telegram, telex or
facsimile transmission and delivery, addressed to such director at his address
or telex or facsimile transmission number, as the case may be, appearing on the
records of the Company. Such notice shall be deemed to be given at the earliest
of (i) receipt or (ii) three days following deposit with an express delivery
service for personal delivery or transmission by telegram, telex or facsimile.
(b) Whenever under law, the certificate of incorporation or
these Bylaws, notice is required to be given to any stockholder, such notice may
be given in writing and delivered personally, through the United States mail, by
a recognized express delivery service (such as Federal Express) or by means of
telegram, telex or facsimile transmission, addressed to such stockholder at his
address or telex or facsimile transmission number, as the case may be, appearing
on the records of the Company, with postage and fees thereon prepaid. In the
case of notice to a stockholder, such notice shall be deemed to
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<PAGE> 26
be given at the earliest of (i) receipt, (ii) deposit with an express delivery
service for personal delivery or transmission by telegram, telex or facsimile,
or (iii) deposit in the United States mail.
<PAGE> 27
AMENDMENT TO THE BYLAWS
OF
CONVERGENT GROUP CORPORATION
A DELAWARE CORPORATION
Convergent Group Corporation adopts the following amendments to its Bylaws
effective as of January 28, 1998.
I. The first sentence of Section 2.4 shall be amended to read in its entirety
as follows:
The presence at a stockholders' meeting of the holders, present in person or
represented by proxy, of capital stock of the Company representing a majority of
the votes of each voting group of capital stock of the Company entitled to vote
at such meeting shall constitute a quorum at such meeting for the transaction of
business except as otherwise provided by law, the certificate of incorporation
or these Bylaws.
II. Section 3.2. shall be amended to read in its entirety as follows:
Section 3.2. Number.
The number of directors constituting the Board shall be three.
III. Section 4.4. shall be amended to read in its entirety as follows:
Section 4.4. Quorum; Required Vote.
(1) Except as is otherwise set forth herein, the presence of
all three of the directors shall be required in order to constitute a quorum at
any meeting of the Board. If a quorum shall not be present at any meeting, a
majority of the directors present at such meeting may adjourn the meeting. If
none of the directors are present, no meeting shall be deemed to have taken
place. If two consecutive Board meetings scheduled at least one week apart are
adjourned due to the absence of the same director, and both of the other
directors were present at such meetings, the absent director's absence at the
next Board meeting shall not result in the lack of a quorum, and the quorum for
such meeting shall be two directors, provided that: (i) both of the other
directors are present at such meeting, (ii) proper notice for such meeting was
given, and (iii) the date of such meeting is at least one week after the date of
the second adjourned meeting.
(2) The act of a majority of the directors present at any
meeting of the Board at which there is a quorum shall be the act of the Board,
except as may be otherwise specifically provided by law, the certificate of
incorporation, or these Bylaws. Notwithstanding the foregoing, (i) approval of
any single capital expenditure in excess of
<PAGE> 28
$500,000 and aggregate capital expenditures in any calendar year in excess of
five percent (5%) of the Company's gross revenues for the prior calendar year
and (ii) elections of officers of the Company shall require the unanimous
approval of all members of the Board. For purposes of this section, gross
revenues shall be as determined in the Company's audited financial statements
which shall be prepared by an independent certified public accountant.
IV. Section 5.5. shall be deleted in its entirety, and Section 5.6 shall be
renumbered as Section 5.5.
V. Section 6.1. shall be amended to read in its entirety as follows:
Section 6.1. Elected Officers.
The Board shall elect a president, a treasurer, and a secretary (collectively,
the "Required Officers") having the respective duties enumerated below and may
elect such other officers having the titles and duties set forth below which are
not reserved for the Required Officers or such other titles and duties as the
Board may by resolution from time to time establish. All elections of officers
shall require the unanimous approval of all members of the Board.
VI. The first sentence of Section 6.1.1. shall be amended to read in its
entirety as follows:
The Board of Directors shall elect a chairman of the board.
VII. The fourth sentence of Section 6.1.2. shall be amended to read in its
entirety as follows:
He may sign and execute all authorized bonds, loans, notes, deeds, mortgages,
contracts or other obligations in the name of the Company, and he shall be ex
officio a member of all standing committees.
VIII. The first sentence of Section 6.1.3. shall be amended to read in its
entirety as follows:
Unless otherwise directed by the Board, the president shall have responsibility
for and authority over the general and active management of the business of the
Company, which shall include, but not be limited to, directing and managing the
day-to-day affairs of the Company and hiring, firing and supervising all
employees of the Company. The president shall be responsible for ensuring that
all orders and resolutions of the Board are carried into effect.
IX. Section 6.1.4. shall be amended to add the following sentence at the
beginning of the paragraph:
Unless otherwise directed by the Board, the vice president(s) shall assist the
president in the general and active management of the business of the Company.
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<PAGE> 29
X. Section 6.3. shall be amended to read in its entirety as follows:
Section 6.3. Appointed Officers.
The Board may also appoint such other officers, assistant officers and agents,
and may also remove such officers and agents, as it shall from time to time deem
necessary, and the titles and duties of such appointed officers may be as
described in Section 6.1 for elected officers. All appointments of officers
shall require the unanimous approval of all members of the Board.
XI. Section 6.5. shall be amended to read in its entirety as follows:
Section 6.5. Compensation, Vacancies.
The compensation of elected officers shall be set by the Board, subject to any
employment agreements in effect from time to time with such officers. The Board
shall fill any vacancy in an elected office.
XII. Section 10.17 shall be deleted in its entirety.
3
<PAGE> 30
AMENDMENT TO THE BYLAWS
OF
CONVERGENT GROUP CORPORATION
A DELAWARE CORPORATION
Convergent Group Corporation adopts the following amendments to its
Bylaws effective as of August 13, 1999.
I. The first sentence of Section 2.2 shall be amended to read in its entirety as
follows:
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by law or by the certificate of incorporation, (i) may be
called by the chairman of the board or by the president and (ii) shall be called
by the president or secretary or by any member of the Board at the request in
writing of a majority of the Board.
II. Section 3.2. shall be amended to read in its entirety as follows:
Section 3.2. Number.
The number of directors constituting the Board shall initially be five,
and such number may be changed from time to time by resolution of the
Board.
III. Section 4.4. shall be amended to read in its entirety as follows:
Section 4.4. Quorum; Required Vote.
Section 4.4.1. Quorum.
Except as is otherwise set forth herein, the presence of a
majority of the directors shall be required in order to constitute a
quorum at any meeting of the Board. If a quorum shall not be present at
any meeting, a majority of the directors present at such meeting may
adjourn the meeting. If none of the directors are present, no meeting
shall be deemed to have taken place.
Section 4.4.2. Required Vote.
The act of a majority of the directors present at any meeting of
the Board at which there is a quorum shall be the act of the Board,
except as may be otherwise specifically provided by law, the
certificate of incorporation, or these Bylaws.
IV. Section 10.16. shall be amended to read in its entirety as follows:
Section 10.16. Amendments.
These Bylaws may be altered, amended, repealed or replaced by the
Board.
<PAGE> 1
EXHIBIT 4.2
LOAN AGREEMENT
BY AND BETWEEN
CONVERGENT GROUP CORPORATION
AND
FLEET NATIONAL BANK, AS AGENT AND A LENDER
AND
THE OTHER FINANCIAL INSTITUTIONS NOW OR
HEREAFTER PARTIES HERETO
$25,000,000 SECURED REVOLVING CREDIT LOAN
AUGUST 12,1999
(Loan Agreement - Fleet/Convergent)
<PAGE> 2
INDEX TO
LOAN AGREEMENT
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 1. DEFINITIONS AND ACCOUNTING AND OTHER TERMS ...................................... 1
SECTION 1.1. CERTAIN DEFINED TERMS ....................................................... 1
SECTION 1.2. ACCOUNTING TERMS ............................................................ 17
SECTION 1.3. OTHER TERMS ................................................................. 17
ARTICLE 2. AMOUNT AND TERMS OF THE LOANS ................................................... 18
SECTION 2.1. THE LOANS ................................................................... 18
Section 2.1.0. The Revolving Credit Loans .............................................. 18
SECTION 2.2. INTEREST AND FEES ON THE LOANS .............................................. 19
Section 2.2.1. Interest ................................................................ 19
Section 2.2.2. Fees .................................................................... 20
Section 2.2.3. Increased Costs - Capital ............................................... 21
SECTION 2.3. NOTATIONS ................................................................... 22
SECTION 2.4. COMPUTATION OF INTEREST ..................................................... 22
SECTION 2.5. TIME OF PAYMENTS AND PREPAYMENTS IN IMMEDIATELY AVAILABLE FUNDS ............. 23
Section 2.5.1. Time .................................................................... 23
Section 2.5.2. Setoff, etc. ............................................................ 24
Section 2.5.3. Unconditional Obligations and No Deductions ............................. 24
SECTION 2.6. PREPAYMENT AND CERTAIN PAYMENTS ............................................. 26
Section 2.6.1. Mandatory Payments ...................................................... 26
Section 2.6.2. Voluntary Prepayments ................................................... 28
Section 2.6.3. Prepayment of Libor Loans ............................................... 28
Section 2.6.4. Permanent Reduction of Revolving Credit Loan Commitment ................. 28
SECTION 2.7. PAYMENT ON NON-BUSINESS DAYS ................................................ 28
SECTION 2.8. USE OF PROCEEDS ............................................................. 28
SECTION 2.9. SPECIAL LIBOR LOAN PROVISIONS ............................................... 29
Section 2.9.1. Requests ................................................................ 29
Section 2.9.2. Libor Loans Unavailable ................................................. 29
Section 2.9.3. Libor Lending Unlawful .................................................. 30
Section 2.9.4. Additional Costs on Libor Loans ......................................... 30
Section 2.9.5. Libor Funding Losses .................................................... 32
Section 2.9.6. Banking Practices ....................................................... 32
Section 2.9.7. Borrower's Options on Unavailability or Increased Cost of Libor Loans ... 33
Section 2.9.8. Assumptions Concerning Funding of Libor Loans ........................... 33
ARTICLE 3. CONDITIONS OF LENDING ........................................................... 34
SECTION 3.1. CONDITIONS PRECEDENT TO THE REVOLVING CREDIT LOAN COMMITMENT AND TO
ALL LOANS ................................................................... 34
Section 3.1.1. The Revolving Credit Loan Commitment and Initial Loans .................. 34
Section 3.1.2. The Revolving Credit Loan Commitment and the Loans ...................... 37
ARTICLE 4. REPRESENTATIONS AND WARRANTIES .................................................. 37
SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE BORROWER .............................. 37
Section 4.1.1. Organization and Existence .............................................. 38
Section 4.1.2. Authorization and Absence of Defaults ................................... 38
Section 4.1.3. Acquisition of Consents ................................................. 38
Section 4.1.4. Validity and Enforceability ............................................. 38
</TABLE>
i
(Loan Agreement - Fleet/Convergent)
<PAGE> 3
<TABLE>
<S> <C>
Section 4.1.5. Financial Information ................................................... 38
Section 4.1.6. No Litigation ........................................................... 39
Section 4.1.7. Regulation U ............................................................ 39
Section 4.1.8. Absence of Adverse Agreements ........................................... 39
Section 4.1.9. Taxes ................................................................... 40
Section 4.1.10. ERISA .................................................................. 40
Section 4.1.11. Ownership of Properties ................................................ 40
Section 4.1.12. Accuracy of Representations and Warranties ............................. 41
Section 4.1.13. No Investment Company .................................................. 41
Section 4.1.14. Solvency, etc. ......................................................... 41
Section 4.1.15. Approvals .............................................................. 41
Section 4.1.16. Ownership Interests .................................................... 41
Section 4.1.17. Licenses, Registrations, Compliance with Laws, etc. .................... 41
Section 4.1.18. Principal Place of Business; Books and Records ......................... 42
Section 4.1.19. Subsidiaries ........................................................... 42
Section 4.1.20. Copyright .............................................................. 42
Section 4.1.21. Environmental Compliance ............................................... 42
Section 4.1.22. Material Agreements, etc. .............................................. 43
Section 4.1.23. Patents, Trademarks and Other Property Rights .......................... 43
Section 4.1.24. Related Transaction Documents .......................................... 43
Section 4.1.25. Material Adverse Effect ................................................ 43
Section 4.1.26. Year 2000 .............................................................. 43
ARTICLE 5. COVENANTS OF THE BORROWER ....................................................... 44
SECTION 5.1. AFFIRMATIVE COVENANTS OF THE BORROWER OTHER THAN REPORTING REQUIREMENTS ..... 44
Section 5.1.1. Payment of Taxes, etc. .................................................. 44
Section 5.1.2. Maintenance of Insurance ................................................ 44
Section 5.1.3. Preservation of Existence, etc. ......................................... 45
Section 5.1.4. Compliance with Laws, etc. .............................................. 45
Section 5.1.5. Visitation Rights ....................................................... 45
Section 5.1.6. Keeping of Records and Books of Account ................................. 45
Section 5.1.7. Maintenance of Properties, etc. ......................................... 45
Section 5.1.8. Post-Closing Items ...................................................... 45
Section 5.1.9. Other Documents, etc. ................................................... 45
Section 5.1.10. Minimum Interest Coverage Ratio ........................................ 46
Section 5.1.10(A). Minimum Profitability ............................................... 46
Section 5.1.11. Minimum Debt Service Coverage Ratio .................................... 46
Section 5.1.12. Maximum Ratio of Total Indebtedness for Borrowed Money to EBITDA ....... 46
Section 5.1.12(A). Minimum Quick Ratio ................................................. 46
Section 5.1.12(B). Receivables and Accrued Revenues .................................... 47
Section 5.1.13. Officer's Certificates and Requests .................................... 47
Section 5.1.14. Depository ............................................................. 47
Section 5.1.15. Chief Executive Officer ................................................ 47
Section 5.1.16. Notice of Purchase of Real Estate, Leases, etc. ........................ 47
Section 5.1.17. Additional Assurances .................................................. 48
Section 5.1.18. Appraisals ............................................................. 48
Section 5.1.19. Environmental Compliance ............................................... 48
Section 5.1.20. Remediation ............................................................ 48
Section 5.1.21. Site Assessments ....................................................... 48
Section 5.1.22. Indemnity .............................................................. 48
Section 5.1.23. Trademarks, Copyrights, etc. ........................................... 49
Section 5.1.24. Montgomery Loan ........................................................ 49
SECTION 5.2. NEGATIVE COVENANTS OF THE BORROWER .......................................... 49
Section 5.2.1. Liens, etc. ............................................................. 49
</TABLE>
ii
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<PAGE> 4
<TABLE>
<S> <C>
Section 5.2.2. Assumptions, Guaranties, etc. of Indebtedness of Other Persons .......... 50
Section 5.2.3. Acquisitions, Dissolution, etc. ......................................... 50
Section 5.2.4. Change in Nature of Business ............................................ 51
Section 5.2.5. Ownership ............................................................... 51
Section 5.2.6. Sale and Leaseback; Synthetic Leases .................................... 51
Section 5.2.7. Sale of Accounts, etc. .................................................. 51
Section 5.2.8. Indebtedness ............................................................ 52
Section 5.2.9. Other Agreements ........................................................ 53
Section 5.2.10. Payment or Prepayment of Equity or Subordinated Debt ................... 53
Section 5.2.11. Dividends, Payments and Distributions .................................. 53
Section 5.2.12. Investments in or to Other Persons ..................................... 54
Section 5.2.13. Transactions with Affiliates ........................................... 54
Section 5.2.14. Change of Fiscal Year .................................................. 54
Section 5.2.15. Subordination of Claims ................................................ 54
Section 5.2.16. Compliance with ERISA .................................................. 54
Section 5.2.17. [Intentionally Omitted] ................................................ 55
Section 5.2.18. Hazardous Material ..................................................... 55
Section 5.2.19. Other Restrictions on Liens or Dividends ............................... 55
Section 5.2.20. Limitation on Creation of Subsidiaries, etc. ........................... 55
SECTION 5.3. REPORTING REQUIREMENTS ...................................................... 55
ARTICLE 6. EVENTS OF DEFAULT ............................................................... 57
SECTION 6.1. EVENTS OF DEFAULT ........................................................... 57
ARTICLE 7. REMEDIES OF LENDERS ............................................................. 59
ARTICLE 8. AGENT ........................................................................... 59
SECTION 8.1. APPOINTMENT ................................................................. 59
SECTION 8.2. POWERS; GENERAL IMMUNITY .................................................... 60
Section 8.2.1. Duties Specified ........................................................ 60
Section 8.2.2. No Responsibility For Certain Matters ................................... 60
Section 8.2.3. Exculpatory Provisions .................................................. 60
Section 8.2.4. Agent Entitled to Act as Lender ......................................... 61
SECTION 8.3. REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR
APPRAISAL OF CREDITWORTHINESS ............................................... 61
SECTION 8.4. RIGHT TO INDEMNITY .......................................................... 61
SECTION 8.5. PAYEE OF NOTE TREATED AS OWNER .............................................. 61
SECTION 8.6. RESIGNATION BY AGENT ........................................................ 62
SECTION 8.7. SUCCESSOR AGENT ............................................................. 62
ARTICLE 9. MISCELLANEOUS ................................................................... 62
SECTION 9.1. CONSENT TO JURISDICTION AND SERVICE OF PROCESS .............................. 62
SECTION 9.2. RIGHTS AND REMEDIES CUMULATIVE .............................................. 63
SECTION 9.3. DELAY OR OMISSION NOT WAIVER ................................................ 63
SECTION 9.4. WAIVER OF STAY OR EXTENSION LAWS ............................................ 64
SECTION 9.5. AMENDMENTS, ETC. ............................................................ 64
SECTION 9.6. ADDRESSES FOR NOTICES, ETC. ................................................. 64
SECTION 9.7. COSTS, EXPENSES AND TAXES ................................................... 66
SECTION 9.8. PARTICIPATIONS .............................................................. 66
SECTION 9.9. BINDING EFFECT; ASSIGNMENT .................................................. 66
SECTION 9.10. ACTUAL KNOWLEDGE ........................................................... 66
SECTION 9.11. SUBSTITUTIONS AND ASSIGNMENTS .............................................. 67
SECTION 9.12. PAYMENTS PRO RATA .......................................................... 69
SECTION 9.13. INDEMNIFICATION ............................................................ 69
SECTION 9.14. CONFIDENTIAL INFORMATION ................................................... 70
</TABLE>
iii
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<PAGE> 5
<TABLE>
<S> <C>
SECTION 9.15. GOVERNING LAW .............................................................. 71
SECTION 9.16. SEVERABILITY OF PROVISIONS ................................................. 71
SECTION 9.17. HEADINGS ................................................................... 71
SECTION 9.18. COUNTERPARTS ............................................................... 71
</TABLE>
iv
(Loan Agreement - Fleet/Convergent)
<PAGE> 6
SCHEDULE OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
EXHIBIT 1.1 EQUITY INVESTMENTS, OWNERSHIP INTERESTS AND SUBSIDIARIES
EXHIBIT 1.2 RELATED TRANSACTION DOCUMENTS
EXHIBIT 1.4 FORM OF INTEREST RATE ELECTION
EXHIBIT 1.5 FORM OF REVOLVING CREDIT NOTE
EXHIBIT 1.8 PERMITTED ENCUMBRANCES
EXHIBIT 1.9 PRO RATA SHARES, AGENT'S AND LENDERS' NOTICE ADDRESSES AND WIRE
TRANSFER INSTRUCTIONS
EXHIBIT 1.10 FORM OF REQUEST
EXHIBIT 1.12 PROJECTIONS
EXHIBIT 2.1.0 FORM OF BORROWING BASE CERTIFICATE
EXHIBIT 3.1.1.8 PERMITTED INDEBTEDNESS AND CAPITALIZED LEASES
EXHIBIT 3.1.1.10 FORM OF COMPLIANCE CERTIFICATE
EXHIBIT 4.1.1 FOREIGN QUALIFICATIONS
EXHIBIT 4.1.2 AUTHORIZATIONS
EXHIBIT 4.1.3 CONSENTS
EXHIBIT 4.1.6 LITIGATION
EXHIBIT 4.1.8 ADVERSE AGREEMENTS
EXHIBIT 4.1.9 TAXES
EXHIBIT 4.1.11 REAL PROPERTY
EXHIBIT 4.1.17 GOVERNMENTAL PERMITS
EXHIBIT 4.1.20 COPYRIGHTS
EXHIBIT 4.1.21 HAZARDOUS WASTE
EXHIBIT 4.1.22 MATERIAL CONTRACTS
EXHIBIT 4.1.23 INTELLECTUAL PROPERTY
EXHIBIT 5.1.12(A) ELIGIBLE RECEIVABLES
EXHIBIT 5.2.2 GUARANTIES
EXHIBIT 5.2.12 EXISTING INVESTMENTS IN SUBSIDIARIES AND PARTNERSHIPS
EXHIBIT 5.2.13 TRANSACTIONS WITH AFFILIATES
EXHIBIT 9.11.1 FORM OF ASSIGNMENT AND ACCEPTANCE
</TABLE>
V
(Loan Agreement - Fleet/Convergent)
<PAGE> 7
LOAN AGREEMENT
CONVERGENT GROUP CORPORATION, a Delaware corporation with a principal
place of business at 6200 South Syracuse Way, Suite 200, Englewood,
Colorado 80111 (hereinafter the "Borrower"), FLEET NATIONAL BANK, a
national banking association organized under the laws of the United States
and having an office at One Federal Street, Boston, Massachusetts 02110
(hereinafter sometimes the "Agent" in its capacity as Agent for itself and
each of the other Lenders who now and/or hereafter become parties to this
Agreement pursuant to the terms of Section 9.11 hereof (the "Lenders"),
sometimes in each of its capacities "Fleet" and sometimes in its capacity
as a Lender, "Lender", and the Lenders, hereby agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING AND OTHER TERMS
Section 1.1. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Adjusted Libor Rate" means, with respect to any Libor Loan to be made
by the Lenders for the Interest Period applicable to such Libor Loan, the
interest rate per annum determined by the Agent (fixed throughout such
Interest Period (subject to adjustments for the Libor Rate Reserve
Percentage)) and rounded upwards, if necessary, to the next 1/16 of 1%)
which is equal to the quotient of (i) the rate of interest determined by
the Agent to be the average of the interest rates per annum at which Dollar
deposits in immediately available funds are offered to each Reference
Lender by first-class banks in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the Business Day on
which such Interest Period begins, in an amount approximately equal to the
principal amount of such Libor Loan, for a period of time equal to such
Interest Period and (ii) a number equal to the number one minus the Libor
Rate Reserve Percentage. The "Libor Rate Reserve Percentage" applicable to
any Interest Period means the average of the maximum effective rates
(expressed as a decimal) of the statutory reserve requirements (without
duplication, but including, without limitation, basic, supplemental,
marginal and emergency reserves) applicable to each Reference Lender during
such Interest Period under regulations of the Board of Governors of the
Federal Reserve System (or any successor), including without limitation
Regulation D or any other regulation dealing with maximum reserve
requirements which are applicable to each Reference Lender with respect to
its "Eurocurrency Liabilities", as that term may be defined from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) or are otherwise imposed by the Board of Governors of the
Federal Reserve System (or any successor) and which in any other respect
relate directly to the funding of loans bearing interest at rates based on
the interest rates at which Dollar deposits in immediately available funds
are offered to banks by first-class banks in the London interbank market.
If any Reference Lender fails to provide its offered quotation to the
Agent, the Adjusted Libor Rate shall be determined on the basis of the
offered quotation of the other Reference Lender. The Adjusted Libor Rate
shall be adjusted automatically on and as of the effective date of any
change in the Libor Rate Reserve Percentage.
"Advance" and "Advances" means the funding by any Lender of all or a
portion of the Loans in accordance with this Agreement.
(Loan Agreement - Fleet/Convergent)
<PAGE> 8
"Affiliate" means singly and collectively, the New Stockholders and
any Person (other than a Subsidiary) which, directly or indirectly, is in
control of, is controlled by, or is under common control with, the
Borrower. For purposes of this definition, a Person shall be deemed to be
"controlled by" another Person and "control" shall be deemed to exist if
the latter Person possesses, directly or indirectly, power either to (i)
vote 10% or more of the securities having ordinary voting power for the
election of directors of such Person or (ii) direct or cause the direction
of the management and policies of such Person whether by contract or
otherwise, and the legal representative, successor or assign of any such
Person.
"Agent" means Fleet or any other Person which is at the time in
question serving as the agent under the terms of Article 8 hereof and the
other Financing Documents.
"Agreement" means this loan agreement, as the same may from time to
time be amended.
"A.M." means a time from and including 12 o'clock midnight to and
excluding 12 o'clock noon on any Business Day using Eastern Standard
(Daylight Savings) time.
"Applicable Margin" means for each Libor Loan, two and one-half
percent (2.50%) per annum; provided, however, that if, at any time on or
after the receipt by the Agent of the Borrower's annual audited financial
statements for the Borrower's December 31, 1999 fiscal year and of the
Borrower's quarterly financial statements for each subsequent Borrower
fiscal quarter provided to the Agent by the Borrower pursuant to Sections
5.3.2 or 5.3.3 hereof, the ratio of (a) total Indebtedness for Borrowed
Money of the Borrower and its Subsidiaries on a consolidated basis as of
the last day of the most recently ended fiscal quarter of the Borrower to
(b) EBITDA for such fiscal quarter and for the three immediately preceding
Borrower fiscal quarters, (i) is less than 2.5:1.0, but greater than or
equal to 2.0:1.0 and if and so long as no Event of Default or Default
exists and is continuing, the Applicable Margin shall, subject to the last
sentence of this definition, be two and one-quarter percent (2.25%), or
(ii) is less than 2.0:1.0, but greater than or equal to 1.0:1.0 and if and
so long as no Event of Default or Default exists and is continuing, the
Applicable Margin shall, subject to the next-to-last sentence of this
definition, be two percent (2.00%), or (iii) less than 1.0:1.0 and if
and so long as no Event of Default or Default exists and is continuing, the
Applicable Margin shall, subject to the next-to-last sentence of this
definition, be one and one-half percent (1.50%); provided further, however,
that if on any date the Borrower would be entitled to an Applicable Margin
other than 2.50% except for the fact that a Default exists, the Applicable
Margin shall not change until the first to occur of (a) such Default
becoming an Event of Default and (b) waiver or cure of such Default, at
which time the Applicable Margin shall be adjusted or remain the same in
accordance with the provisions of this definition preceding this further
proviso.
Any change in the Applicable Margin required pursuant to the foregoing
shall become effective on the fifth Business Day after the Agent receives
the Borrower's financial statement for the Borrower's fiscal quarter or
year-end, as the case may be, in question; provided, however, that each of
the above-referenced interest rates shall remain in effect only so long as
Borrower qualifies therefor in accordance with this definition and provided
further, however, that interest rate reductions shall become final only on
the basis of Borrower's annual audited financial statements and in the
event that such annual audited financial statements establish that the
Borrower was not entitled to a rate reduction which was previously granted,
the Borrower shall, upon written demand by the Agent, repay to the Agent
for the account of each Lender an amount equal to the excess of interest at
the rate which should have been charged based on such annual audited
financial statements and the rate actually charged on the basis of
Borrower's quarterly financial statement(s) (provided that in the event of
a dispute as to the appropriate fiscal quarter
2
(Loan Agreement - Fleet/Convergent)
<PAGE> 9
as to which any adjustment should be allocated, the decision of the
independent accountants of the Borrower shall be made in accordance with
GAAP and shall be binding upon the Agent, the Lenders and the Borrower
absent manifest error); and provided further, however, that in the event
that Borrower fails to provide any financial statement on a timely basis in
accordance with Sections 5.3.2 or 5.3.3, any interest rate increase payable
as a result thereof shall be retroactively effective to the date on which
the financial statement in question should have been received by the Agent
in accordance with Section 5.3.2 or 5.3.3, and the Borrower shall pay any
amount due as a result thereof upon written demand from the Agent. The
Agent shall send the Borrower written acknowledgment of each change in the
Applicable Margin in accordance with the Agent's customary procedures as in
effect from time to time, but the failure to send such acknowledgment shall
have no effect on the effectiveness or applicability of the foregoing
provisions of this definition or Borrower's obligations with respect to
payment and calculation of interest on Libor Loans.
"Authorized Representative" means such senior personnel of the
Borrower as shall be duly authorized and designated in writing by the
Borrower to execute documents, instruments and agreements on its behalf and
to perform the functions of Authorized Representative under any of the
Financing Documents.
"Borrowed Money" means any obligation to repay funded Indebtedness,
any Indebtedness evidenced by notes, bonds, debentures, guaranties or
similar obligations including without limitation the Loans and any
Subordinated Indebtedness and any obligation to pay money under a
conditional sale or other title retention agreement, the net aggregate
rentals payable under any Capitalized Lease Obligation, any reimbursement
obligation for any letter of credit and any obligations in respect of
banker's and other acceptances or similar obligations.
"Borrower" has the meaning assigned in the first paragraph of this
Agreement.
"Borrowing Base" means, during each Borrower fiscal quarter, an amount
equal to the product of multiplication of (i) EBITDA for Borrower's most
recently ended fiscal quarter and the three immediately preceding Borrower
fiscal quarters and (ii) the maximum ratio of (a) total Indebtedness for
Borrowed Money to (b) EBITDA permitted under Section 5.1.12 for the
Borrower fiscal quarter in question; provided that for any Borrower fiscal
quarter included in such definition in which a Permitted Acquisition
occurred, EBITDA shall be calculated on a pro forma basis as described in
Section 5.2.3.
"Budget" has the meaning assigned to such term in Section 5.3.7.
"Business Condition" means the financial condition, business, assets,
liabilities and operations of a Person.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day on which banks in Boston, Massachusetts or New
York, New York are not authorized or required by applicable law to close;
and (ii) with respect to all notices and determinations in connection with,
and payments of principal and interest on, Libor Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by
and between banks in Dollar deposits in the London interbank market.
"Capital Expenditures" means all expenditures paid or incurred by the
Borrower or any Subsidiary in respect of (i) the acquisition, construction,
improvement or replacement of land, buildings, machinery, equipment, any
other fixed assets or leaseholds and (ii) to the extent related
3
(Loan Agreement - Fleet/Convergent)
<PAGE> 10
to and not included in (i) above, materials, contract labor and direct
labor, which expenditures have been or should be, in accordance with GAAP,
capitalized on the books of the Borrower or such Subsidiary. Where a fixed
asset is acquired by a lease which is required to be capitalized pursuant
to Statement of Financial Accounting Standards number 13 or any successor
thereto, the amount required to be capitalized in accordance therewith
shall be considered to be an expenditure in the year such asset is first
leased.
"Capitalized Lease Obligations" means all lease obligations which have
been or should be, in accordance with GAAP, capitalized on the books of the
lessee.
"Capitalized Software Development Costs" means the Borrower's and any
Subsidiaries' costs of software development which are capitalized on the
financial statements and books and records of the Person incurring such
costs.
"Cash Equivalent Investments" means any Investment in (i) direct
obligations of the United States or any agency, authority or
instrumentality thereof, or obligations guaranteed by the United States or
any agency, authority or instrumentality thereof, whether or not supported
by the full faith and credit of, a right to borrow from or the ability to
be purchased by the United States; (ii) commercial paper rated in the
highest grade by a nationally recognized statistical rating agency or
which, if not rated, is issued or guaranteed by any issuer with outstanding
long-term debt rated A or better by any nationally recognized statistical
rating agency; (iii) demand and time deposits with, and certificates of
deposit and bankers acceptances issued by, any office of the Agent, any
Lender or any other bank or trust company which is organized under the laws
of the United States or any state thereof and has capital, surplus and
undivided profits aggregating at least $500,000,000, the outstanding
long-term debt of which or of the holding company of which it is a
subsidiary is rated A or better by any nationally recognized statistical
rating agency, (iv) any short-term note which has a rating of MIG-2 or
better by Moody's Investors Service Inc. or a comparable rating from any
other nationally recognized statistical rating agency; (v) any municipal
bond or other governmental obligation (including without limitation any
industrial revenue bond or project note) which is rated A or better by any
nationally recognized statistical rating agency; (vi) any other obligation
of any issuer, the outstanding long-term debt of which is rated A or better
by any nationally recognized statistical rating agency; (vii) any
repurchase agreement with any financial institution described in clause
(iii) above, relating to any of the foregoing instruments and fully
collateralized by such instruments, (viii) shares of any open-end
diversified investment company that has its assets invested only in
investments of the types described in clause (i) through (vii) above at the
time of purchase and which maintains a constant net asset value per share;
and (ix) shares of any open-end diversified investment company registered
under the Investment Company Act of 1940, as amended, which maintains a
constant net asset value per share in accordance with regulations of the
Securities & Exchange Commission, has aggregate net assets of not less than
$50,000,000 on the date of purchase and either derives at least 95% of its
gross income from interest on or gains from the sale of investments of the
type described in clauses (i) through (vii), above or has at least 85% of
the weighted average value of its assets invested in investments of such
types; provided that the purchase of any shares in any particular
investment company shall be limited to an aggregate amount owned at any one
time of $500,000. Each Cash Equivalent Investment shall have a maturity of
less than one year at the time of purchase; provided that the maturity of
any repurchase agreement shall be deemed to be the repurchase date and not
the maturity of the subject security and that the maturity of any variable
or floating rate note subject to prepayment at the option of the holder
shall be the period remaining (including any notice period remaining)
before the holder is entitled to prepayment.
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<PAGE> 11
"Change of Control" means, at any time (A) prior to the completion of
a Qualified Initial Public Offering, any one of the following events: (i)
any change in the ownership of the Borrower such that the Stockholders
listed on Exhibit 1.1 as owning shares of capital stock of the Borrower on
the first Business- Day after the Closing Date in the aggregate own less
than 50.1% of the equity interests in the Borrower or (ii) any decrease in
any of the voting rights in the Borrower now held by said Stockholders such
that they cease to collectively hold 50.1% or more of the voting rights in
the Borrower or (iii) any change in the ownership of the Borrower such that
the InSight/UBS Stockholders in the aggregate own less than 20% of the
equity interests in the Borrower and (B) after completion of a Qualified
Initial Public Offering, (i) any "person" or "group" (each as used in
Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as
amended from time to time) other than the New Stockholders and their
Affiliates either (A) becomes the "beneficial owner" (as defined in Rule
l3d-3 of the Exchange Act), directly or indirectly, of voting capital stock
of the Borrower (or securities convertible into or exchangeable for such
voting capital stock) representing 20% or more of the combined voting power
of all voting capital stock of the Borrower (on a fully diluted basis) or
(B) otherwise has the ability, directly or indirectly, to elect a majority
of the board of directors of the Borrower; or (ii) during any period of up
to 24 consecutive months, after the Closing Date, individuals who at the
beginning of such 24-month period were directors of the Borrower shall
cease for any reason (other than (A) the death, disability or retirement of
a director or (B) the death, disability or retirement of an officer of the
Borrower that is serving as a director at such time so long as another
officer of the Borrower replaces such Person as a director) to constitute a
majority of the board of directors of the Borrower; or (iii) any Person or
two or more Persons acting in concert other than the New Stockholders and
their Affiliates shall have acquired by contract or otherwise, or shall
have entered into a contract or arrangement that, upon consummation
thereof, will result in its or their acquisition of the power to exercise,
directly or indirectly, a controlling influence on the management or
policies of the Borrower.
"Closing Date" means the date on which all of the conditions precedent
set forth in Section 3.1 of this Agreement have been satisfied and the Term
Loan is funded in accordance with this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commonly Controlled Entity" means a Person, whether or not
incorporated, which is under common control with the Borrower within the
meaning of section 414(b) or (c) of the Code.
"Consolidated Tangible Net Worth" means the excess of the total assets
of the Borrower and the Subsidiaries over Consolidated Total Liabilities,
excluding, however, from the determination of total assets the total book
value of all assets which would be classified as intangible assets under
GAAP, including, without limitation, goodwill, patents, trademarks, trade
names, copyrights and franchises, all determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Liabilities" means all liabilities of the Borrower
and the Subsidiaries which would, in accordance with GAAP on a consolidated
basis, be classified as liabilities of such Persons, including, without
limitation, the capitalized amount of Capitalized Lease Obligations and
fixed prepayments of, and sinking fund payment and reserves with respect
to, Indebtedness.
"Current Liabilities" means all liabilities of the Borrower and the
Subsidiaries which would, in accordance with GAAP on a consolidated basis,
be classified as current liabilities of
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<PAGE> 12
such Persons, including without limitation, all lease rental payments under
Capitalized Lease Obligations and fixed prepayments of, and sinking fund
payments and reserves with respect to, Indebtedness, in each case required
to be made within one year from the date of determination.
"Debt Service Coverage Ratio" means the ratio of (i) EBITDA minus all
Capital Expenditures paid during each Borrower fiscal quarter during the
period in question, and taxes payable during each Borrower fiscal quarter
during the period in question to (ii) Total Debt Service.
"Default" means an event or condition which with the giving of notice
or lapse of time or both would become an Event of Default.
"Discharged Rights and Obligations" shall have the meaning assigned to
such term in Section 9.11.4.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"EBITDA" means Net Income plus, to the extent accounted for in Net
Income, (i) Interest Expense, (ii) taxes, (iii) depreciation, (iv)
amortization, (v) without duplication other noncash charges and
non-recurring extraordinary costs incurred by the Borrower and any
Subsidiaries prior to September 30, 1999 in connection with closing of the
Loans and the Related Transactions, (vi) without duplication, for periods
ending on or prior to the Closing Date, quarterly compensation payments
expensed according to GAAP for the benefit of Murray T. Holland, Glenn E.
Montgomery, Jr., Mark L. Epstein and Larry J. Engelken in excess of the
compensation to be paid to them under their new employment agreements with
the Borrower effective on closing of the Related Transactions, if any (vii)
without duplication, other non-cash charges and non-cash non-recurring
extraordinary costs incurred by the Borrower in connection with closing
each Permitted Acquisition, (viii) an amount of reasonable cash charges and
cash non-recurring extraordinary costs incurred by the Borrower in
connection with closing each Permitted Acquisition, and (ix) other pro
forma reductions of expenses on the income statements of a Person acquired
in a Permitted Acquisition relating to excess compensation and related
items, less, to the extent accounted for in Net Income, (x) Capitalized
Software Development Costs, (xi) pro forma increases of expenses on the
income statements of a Person acquired in a Permitted Acquisition as may be
reasonably advisable to comply with sound business and investment
practices, and (xii) Permitted Acquisition earn out and other post-closing
purchase price payments for such period, all determined on an accrual and
consolidated basis in accordance with GAAP and all for the Borrower fiscal
quarter in question and the immediately preceding three Borrower fiscal
quarters.
"Effective Prime" means the Prime Rate plus three quarters percent
(.75%) per annum; provided, however, that if, at any time on or after the
receipt by the Agent of the Borrower's annual audited financial statements
for the Borrower's December 31, 1999 fiscal year and of the Borrower's
quarterly financial statements for each subsequent Borrower fiscal quarter
provided to the Agent by the Borrower pursuant to Sections 5.3.2 or 5.3.3
hereof, the ratio of (a) total Indebtedness for Borrowed Money of the
Borrower and its Subsidiaries on a consolidated basis as of the last day of
the most recently ended fiscal quarter of the Borrower to (b) EBITDA for
such fiscal quarter and for the three immediately preceding Borrower
fiscal quarters, (i) is less than 2.5:1.0, but greater than or equal to
2.0:1.0 and if and so long as no Event of Default or Default exists and is
continuing, Effective Prime shall, subject to the last sentence of this
definition, be the Prime Rate plus one-half percent (.50%), or (ii) is less
than 2.0:1.0, but greater than or equal to 1.0:1.0 and if and so long as
no Event of Default or Default exists and is continuing, Effective
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<PAGE> 13
Prime shall, subject to the next-to-last sentence of this definition, be
the Prime Rate plus one quarter percent (.25%), or (iii) is less than
1.0-1.0 and if and so long as no Event of Default or Default exists and is
continuing, Effective Prime shall, subject to the next-to-last sentence of
this definition, be the Prime Rate; provided, further, however, that if
on any date the Borrower would be entitled to an Effective Prime other than
the Prime Rate plus .75% except for the fact that a Default exists, the
Effective Prime shall not change until the first to occur of (a) such
Default becoming an Event of Default and (b) waiver or cure of such
Default, at which time the Effective Prime shall be adjusted or remain the
same in accordance with the provisions of this definition preceding this
further proviso.
Any change in Effective Prime required pursuant to the foregoing shall
become effective on the fifth Business Day after the Agent receives the
Borrower's financial statement for the Borrower's fiscal quarter or
year-end, as the case may be, in question; provided, however, that each of
the above-referenced interest rates shall remain in effect only so long as
Borrower qualifies therefor in accordance with this definition and provided
further, however, that interest rate reductions shall become final only on
the basis of Borrower's annual audited financial statements and in the
event that such annual audited financial statements establish that the
Borrower was not entitled to a rate reduction which was previously granted,
the Borrower shall, upon written demand by the Agent repay to the Agent for
the account of each Lender an amount equal to the excess of interest at the
rate which should have been charged based on such annual audited financial
statements and the rate actually charged on the basis of Borrower's
quarterly financial statement(s) (provided that in the event of a dispute
as to the appropriate fiscal quarter as to which any adjustment should be
allocated, the decision of the independent accountants of the Borrower
shall be made in accordance with GAAP and shall be binding upon the Agent,
the Lenders and the Borrower absent manifest error); and provided further,
however, that in the event that Borrower fails to provide any financial
statement on a timely basis in accordance with Section 5.3.2 or Section
5.3.3, any interest rate increase payable as a result thereof shall be
retroactively effective to the date on which the financial statement in
question should have been received by the Agent in accordance with Section
5.3.2 or 5.3.3, and the Borrower shall pay any amount due as a result
thereof upon written demand from the Agent. The Agent shall send the
Borrower written acknowledgment of each change in the Effective Prime in
accordance with the Agent's customary procedures as in effect from time to
time, but the failure to send such acknowledgment shall have no effect on
the effectiveness or applicability of the foregoing provisions of this
definition or Borrower's obligations with respect to payment and
calculation of interest on Prime Rate Loans.
"Eligible Receivables" means accounts receivable of the Borrower and
any Subsidiaries evidencing Indebtedness of Persons to the Borrower or a
Subsidiary for goods actually sold and delivered or services actually
performed in the ordinary course of business by the Borrower or a
Subsidiary to or for such Person, as to which goods or services no written
notice has been received by Borrower or such Subsidiary from such Person
that alleges a breach by the Borrower or such Subsidiary of its obligation
to deliver such goods and/or services and which accounts receivable have
been outstanding for less than ninety (90) days since their respective
invoicing dates, but excluding, however, (i) accounts receivable owing by
officers, directors, shareholders or employees of Borrower or a Subsidiary,
(ii) accounts receivable with respect to which goods are placed on
consignment, guaranteed sale, "bill and hold" or other terms by reason of
which the payment by the account debtor may be conditional, (iii) accounts
receivable owing by the United States or any agency, department or
instrumentality thereof unless such accounts are freely assignable to the
Agent under the United States Assignment of Claims Act and the Borrower or
a Subsidiary has separately assigned each such account to the Agent in
compliance with such Act, (iv) accounts receivable owing by the Borrower,
any Subsidiary or Affiliate of Borrower, (v)
7
(Loan Agreement - Fleet/Convergent)
<PAGE> 14
accounts receivable with respect to which Borrower or any Subsidiary or
Affiliate is liable to the account debtor for goods sold or services
provided to Borrower or any Subsidiary or Affiliate by such account debtor
to the extent of Borrower's or any Subsidiary's or Affiliate's liability to
such account debtor, (vi) accounts receivable which are due and payable to
Borrower or a Subsidiary from an account debtor located outside the United
States of America or Canada unless the Agent shall have, in its sole
discretion, specifically approved such receivable, (vii) any accounts
receivable as to which the account debtor has claimed in writing any setoff
or any dispute as to the amount owing by the account debtor to the extent
of the amount in dispute, (viii) any accounts receivable subject to any
Lien other than pursuant to the Security Documents, (ix) any accounts
receivable owing by any Person which is insolvent and/or the subject of any
bankruptcy, receivership or other insolvency proceeding, and (x) any
accounts receivable deemed uncollectible by the Agent in the Agent's
reasonable discretion exercised in good faith and based on an occurrence or
condition described in writing to the Borrower by the Agent which as to
account debtors as of the Closing Date shall constitute a change of
circumstances from those in effect on the Closing Date.
"Environmental Law" shall mean any statute, ordinance, code, law, or
regulation or any other requirement enacted or adopted by any Governmental
Authority relating to pollution or protection of public health, safety or
welfare or the environment, including without limitation (i) those relating
to emissions, discharges, releases or threatened releases of Hazardous
Materials into the environment (including ambient air, surface water,
ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials, (ii) the Clean Air Act, 42 U.S.C. Section
2001, et seq., the Federal Water Pollution Control Act, 33 U.S.C. Section
1247, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq.,
the Toxic Substance Control Act, 42 U.S.C. Section 2501, et seq., and any
state law counterparts, including the law of nuisance and strict liability.
"Equity" means the Investments in Dollars by the New Stockholders in
the Borrower, made on or prior to the date of this Agreement in the
aggregate amount of not less than $45,500,000 as set forth in Exhibit 1.1.
"Equity Documents" means, collectively, all documents entered into by
the Borrower, the Old Stockholders and/or any of the New Stockholders in
connection with the investment of the Equity.
"ERISA" means the Employee Retirement Income Security Act of 1974 as
amended from time to time.
"Events of Default" has the meaning assigned to that term in Section
6.1 of this Agreement.
"Exhibit" means, when followed by a letter, the exhibit attached to
this Agreement bearing that letter and by such reference fully incorporated
in this Agreement.
"Facility Fee" means, the facility fee payable by the Borrower in
accordance with Section 2.2.2.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/16th of 1%) equal to the weighted
average of the rates on overnight
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(Loan Agreement - Fleet/Convergent)
<PAGE> 15
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York, provided that (i) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next succeeding Business Day as so published, and (ii)
if no such rate is so published on such next succeeding Business Day, the
Federal Funds Rate for such day shall be the average rate quoted to the
Agent on such day on such transactions as determined by the Agent in its
discretion exercised in good faith.
"Fee Letter" means that certain side letter of even date with this
Agreement between the Borrower and the Agent regarding certain fees payable
by the Borrower.
"Financing Documents" means, collectively, this Agreement, each Note,
the Security Documents, the Fee Letter, the Post-Closing Letter, any Letter
of Credit, any Letter of Credit Agreement, any agreement with any Lender
providing any interest rate protection arrangement, foreign exchange,
overdraft or other banking or credit facility and each other agreement,
instrument or document now or hereafter executed in connection herewith or
therewith.
"GAAP" means generally accepted accounting principles in effect from
time to time in the United States of America.
"Governmental Authority" means the United States of America, any
state, commonwealth, territory, or possession thereof, and any political
subdivision or quasigovernmental authority of any of the same, including
any court, tribunal, department, bureau, commission or board.
"Hazardous Material" shall mean any substance or material defined or
designated as a hazardous or toxic waste, hazardous or toxic material,
hazardous or toxic substance, or other similar term, by any Environmental
Law.
"Indebtedness" means, as to any Person and whether recourse is secured
by or is otherwise available against all or only a portion of the assets of
such Person and whether or not contingent, but without duplication:
(i) every obligation of such Person for Borrowed Money.
(ii) every obligation of such Person issued or assumed as the
deferred purchase price of property or services (including without
limitation securities repurchase agreements and any earn-outs or
similar obligations with respect to Permitted Acquisitions, but
excluding trade accounts payable or accrued liabilities arising in the
ordinary course of business which are not overdue or which are being
contested in good faith);
(iii) every obligation of such Person under any lease (a
"synthetic lease") treated as an operating lease under GAAP and as a
loan or financing for United States income tax purposes;
(iv) all sales by such Person of (A) accounts or general
intangibles for money due or to become due, (B) chattel paper,
instruments or documents creating or evidencing a right to payment of
money or (C) other receivables (collectively "receivables"), whether
pursuant to a purchase facility or otherwise, other than in connection
with the disposition of the business operations of such Person
relating thereto or a disposition of defaulted receivables for
collection and not as a financing arrangement, and together with any
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(Loan Agreement - Fleet/Convergent)
<PAGE> 16
obligation of such Person to pay any discount, interest, fees, indemnities,
penalties, recourse, expenses or other amounts in connection therewith;
(v) every obligation of such Person (an "equity related purchase
obligation") to purchase, redeem, retire or otherwise acquire for value any
shares of capital stock of any class issued by such Person, any warrants,
options or other rights to acquire any such shares, or any rights measured
by the value of such shares, warrants, options or other rights;
(vi) every obligation of such Person under any forward contract,
futures contract, swap, option or other financing agreement or arrangement
(including, without limitation, caps, floors, collars and similar
agreements), the value of which is dependent upon interest rates, currency
exchange rates, commodities or other indices (a "derivative contract");
(vii) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor as a result of such Person's
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor; and
(viii) every obligation, contingent or otherwise, of such Person
guaranteeing, or having the economic effect of guarantying or otherwise
acting as surety for, any obligation of a type described in any of clauses
(i) through (vii) (the "primary obligation") of another Person (the
"primary obligor"), in any manner, whether directly or indirectly, and
including, without limitation, any obligation of such Person (A) to
purchase or pay (or advance or supply funds for the purchase of) any
security for the payment of such primary obligation, or (B) to purchase
property, securities or services for the purpose of assuring the payment of
such primary obligation, or (C) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such primary obligation.
The "amount" or "principal amount" of any Indebtedness at any time of
determination represented by (u) any Indebtedness, issued at a price that
is less than the principal amount at maturity thereof, shall be the amount
of the liability in respect thereof determined in accordance with GAAP, (v)
any Capitalized Lease shall be the principal component of the aggregate of
the rentals obligation under such Capitalized Lease payable over the term
thereof that is not subject to termination by the lessee, (w) any sale of
receivables shall be the amount of unrecovered capital or principal
investment of the purchaser (other than the Borrower or any of its
wholly-owned Subsidiaries) thereof, excluding amounts representative of
yield or interest earned on such investment, (x) any synthetic lease shall
be the stipulated loss value, termination value or other equivalent amount,
(y) any derivative contract shall be the maximum amount of any termination
or loss payment required to be paid by such Person if such derivative
contract were, at the time of determination, to be terminated by reason of
any event of default or early termination event thereunder, whether or not
such event of default or early termination event has in fact occurred and
(z) any equity related purchase obligation shall be the maximum fixed
redemption or purchase price thereof inclusive of any accrued and unpaid
dividends to be comprised in such redemption or purchase price.
10
(Loan Agreement - Fleet/Convergent)
<PAGE> 17
"Ineligible Securities" means Securities which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16
of the Banking Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.
"InSight/UBS Stockholders" means InSight Capital Partners III, L.P., a
Delaware limited partnership, InSight Capital Partners III (Cayman), a
company of limited liability under the law of the Cayman Islands, InSight
Capital Partners III (Co-Investors), L.P., a Delaware limited partnership,
UBS Capital II LLC, a Delaware limited liability company and any venture
capital or other fund controlled by, under common control with or
controlling any of the foregoing named entities.
"Interest Adjustment Date" means (i) as to any Prime Rate Loan to be
converted to a Libor Loan the Business Day elected by the Borrower in its
applicable Interest Rate Election, but being not less than three (3)
Business Days after the receipt by the Agent before 12:00 o'clock P.M. on a
Business Day of an Interest Rate Election electing the Libor Rate as the
interest rate on such Loan; and (ii) as to any Libor Loan, the last
Business Day of the Interest Period pertaining to such Libor Loan.
"Interest Expense" means, with respect to any fiscal quarter, the
aggregate amount required to be accrued by the Borrower and any
Subsidiaries in such fiscal quarter for interest, fees (excluding, however,
the Facility Fee being paid to the Agent on the Closing Date), charges and
expenses, however characterized, on its Indebtedness, including, without
limitation, all such interest, fees, charges and expenses required to be
accrued with respect to Indebtedness under the Financing Documents, all
determined in accordance with GAAP.
"Interest Period" means:
With respect to each Libor Loan:
(i) initially, the period commencing on the date of such Libor
Loan and ending one, two, three, six or such greater number of months
thereafter as may be acceptable to all of the Lenders and as the
Borrower may elect in the applicable Interest Rate Election and
subject to Section 2.9; and
(ii) thereafter, each period commencing on the last day of the
immediately preceding Interest Period applicable to such Libor Loan
and ending one, two, three, six or such greater number of months
thereafter as may be acceptable to all of the Lenders and as the
Borrower may elect in the applicable Interest Rate Election and
subject to Section 2.9;
provided that clauses (i) and (ii) of this definition are subject to
the following:
(A) any Interest Period (other than an Interest Period determined
pursuant to clause (C) below) which would otherwise end on a day which is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case
such Interest Period shall end on the immediately preceding Business Day;
(B) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall,
subject to clause (C) below, end on the last Business Day of a calendar
month; and
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<PAGE> 18
(C) no Interest Period shall end after the Revolving Credit Repayment
Date; and
(D) with respect to all Libor Loans, no more than six (6) Interest
Periods may be in effect at any time.
"Interest Rate Election" means the Borrower's irrevocable telecopied
or telephonic notice of election, which shall be promptly confirmed by a
written notice of election that Effective Prime or the Libor Rate shall
apply to all or any portion of the Loans, which shall, subject to this
Agreement, be effective on the next Interest Adjustment Date, such
telecopied or telephonic notice and written confirmation thereof to be in
the form of Exhibit 1.4 and to be received by the Agent prior to
12:00 o'clock P.M. on a Business Day and at least three (3) Business Days
prior to an Interest Adjustment Date in the case of a Libor Loan, and by
12:00 p.m. on an Interest Adjustment Date in the case of a Prime Rate Loan
(or four (4) Business Days in the case of an Interest Rate Election as to
which the consent of the Lenders is required), each such Interest Rate
Election, subject to the terms of this Agreement to apply to the Advance or
the Loan referred to in such Interest Rate Election or to effect a change
in the interest rate on the applicable portion of the Loans then
outstanding, as applicable, with respect to which such Interest Rate
Election was made, such change to occur on the Interest Adjustment Date
next succeeding receipt of such Interest Rate Election by the Agent. Any
Interest Rate Election received by the Agent after 12 o'clock P.M. on a
Business Day shall be deemed, for all purposes of this Agreement to have
been received prior to 12 o'clock P.M. on the next succeeding Business Day.
"Investment" means any investment in any Person whether by means of a
purchase of capital stock, notes, bonds, debentures or other evidences of
Indebtedness and/or by means of a capital or partnership contribution,
loan, deposit, advance or other means, excluding amounts due from customers
for services or products delivered or sold in the ordinary course of
business.
"Lender" means Fleet, or any financial institution which hereafter
becomes a party hereto pursuant to the terms of Section 9.11, each in their
individual capacity, and "Lenders" means Fleet and each of such financial
institutions.
"Letter of Credit" means an irrevocable stand-by or commercial letter
of credit issued by the Agent for the account of the Borrower pursuant to a
Letter of Credit Agreement subject to and in accordance with this
Agreement.
"Letter of Credit Agreement" means an application and agreement for
stand-by or commercial letter of credit in such form as may at any time be
customarily required by the Agent for its issuance of stand-by or
commercial letters of credit.
"Libor Loan" means any portion of any Loan bearing interest at the
Libor Rate.
"Libor Rate" means, for any Interest Period, the Adjusted Libor Rate
in effect on the first day of such Interest Period (subject to adjustment
as provided in the definition of Adjusted Libor Rate) plus the Applicable
Margin for Libor Loans from time to time in effect.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other) or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including without limitation any conditional sale or other title retention
agreement and any Capitalized Lease Obligation) having substantially the
same economic effect as any of the foregoing and the filing of any
financing statement under the
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(Loan Agreement - Fleet/Convergent)
<PAGE> 19
applicable Uniform Commercial Code or comparable law of any jurisdiction in
respect of any of the foregoing.
"Loans" and "Loan" means at any time the outstanding principal amount
of Indebtedness owed to the Lenders or to any Lender, as the context may
require pursuant to this Agreement.
"Majority Lenders" means Lenders holding an aggregate Pro Rata Share
of the outstanding principal balance of the Loans in an amount equal to or
in excess of 66.67% of the total outstanding principal balance of the Loans
and if there is no outstanding principal balance of the Loans, Lenders
having at least 66.67% of the Revolving Credit Loan Commitment.
"Material Adverse Effect" means material adverse effect on (i) the
ability of the Borrower or any Subsidiary to fulfill their obligations
under any of the Financing Documents or (ii) the Business Condition of the
Borrower or any Subsidiary.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Income" means, for any fiscal period, the net after tax income
(loss) of the Borrower and any Subsidiaries for such period determined on
an accrual and consolidated basis in accordance with GAAP.
"Net Outstanding Amount of Eligible Receivables" means the net amount
of Eligible Receivables outstanding after eliminating from the aggregate
amount of outstanding Eligible Receivables all payments, adjustments and
credits applicable thereto.
"New Stockholders" means the InSight/UBS Stockholders and WI Software
Investors LLC, a Delaware limited liability company, Imprimis SB LP, a
Delaware limited partnership, GS Private Equity Partners II, L.P., GS
Private Equity Partners II Offshore, L.P., GS Private Equity Partners III,
L.P., GS Private Equity Partners III Offshore, L.P., NBK/GS Private Equity
Partners, L.P. and any venture capital or other fund controlled by, under
common control with or controlling any of said latter three named entities
and Stephen Friedman and Charles A. Davis.
"Note" means any promissory note of the Borrower payable to the order
of a Lender and substantially in the form of Exhibit 1.5 and evidencing all
or a portion of the Loan and "Notes" means all of the Notes, collectively.
"Obligations" mean any and all Indebtedness, obligations and
liabilities of Borrower and/or any Subsidiaries under any of the Financing
Documents to any one or more of the Lenders and/or the Agent of every kind
and description, absolute or contingent, due or to become due, whether for
payment or performance, now existing or hereafter arising, including,
without limitation, all Loans, interest, taxes, fees, charges, and expenses
under the Financing Documents and attorneys' fees chargeable to the
Borrower and/or any Subsidiaries or incurred by any of the Lenders and/or
the Agent under any of the Financing Documents.
"Officer's Certificate" means a certificate signed by an Authorized
Representative and delivered to the Agent on behalf of the Lenders.
"Old Stockholders" means those Persons listed under the heading "Old
Stockholders" on Exhibit 1.1.
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(Loan Agreement - Fleet/Convergent)
<PAGE> 20
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to subtitle A of Title IV of ERISA.
"P.M." mean a time from and including 12 o'clock noon on any Business
Day to the end of such Business Day using Eastern Standard (Daylight
Savings) time.
"Permitted Encumbrances" means each Lien granted pursuant to any of
the Security Documents, those Liens, security interests and defects in
title permitted under Section 5.2.1 and those Liens listed on Exhibit 1.8.
"Person" means an individual, corporation, partnership, limited
liability company, joint venture, trust, or unincorporated organization, or
a government or any agency or political subdivision thereof
"Plan" means an employee benefit plan as defined in Section 3(3) of
ERISA maintained for employees of the Borrower or any Commonly Controlled
Entity.
"Post-Closing Letter" means that certain letter agreement between the
Borrower and the Agent dated the Closing Date and listing certain
post-closing actions to be completed by the Borrower.
"Premises" has the meaning assigned to such term in Section 4.1.21.1.
"Prime Rate" means the higher of (i) the floating rate of interest per
annum designated from time to time by Fleet as being its "prime rate" of
interest, such interest rate to be adjusted on the effective date of any
change thereof by Fleet, it being understood that such rate of interest may
not be the lowest rate of interest from time to time charged by Fleet and
(ii) the Federal Funds Rate plus one-half percent (.50%), such interest
rate to be adjusted on the effective date of any change thereof by the
Federal Reserve Bank of New York.
"Prime Rate Loan(s)" means any portion of the Loans bearing interest
at Effective Prime.
"Projections" means the Borrower's written projections of Borrower's
5-year future performance on a consolidated basis dated May 23, 1999
delivered to the Agent prior to the Closing and attached to this Agreement
as Exhibit 1.12.
"Pro Rata Share" means (i) with respect to the Revolving Credit Loan
Commitment, each Lender's percentage share of the Revolving Credit Loan
Commitment as set forth immediately opposite such Lender's name on Exhibit
1.9, and (ii) with respect to the Loans, each Lender's percentage share of
the aggregate outstanding principal balance of the Loans and "Pro Rata
Shares" means such percentage shares of the Lenders.
"Qualified Initial Public Offering" means the Borrower and/or any
Subsidiary filing a Form S-1 or any other form of registration statement
then available for registration with the Securities and Exchange Commission
or otherwise conducting an initial public offering of any class of the
Borrower's or any Subsidiary's securities, which such offering generates
$25,000,000 or more in net proceeds.
"Quick Ratio" means the ratio of the (i) the sum of (w) cash on hand
or on deposit in any bank or trust company which has not suspended
business, (x) Cash Equivalent Investments (without duplication with (w))
and (y) Net Outstanding Amount of Eligible Receivables plus
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(Loan Agreement - Fleet/Convergent)
<PAGE> 21
accrued revenue to (ii) (x) Current Liabilities less the amount of any
deferred revenue. Each item described in clauses (i) and (ii) of this
definition shall be calculated as of the last day of the Borrower fiscal
quarter and include only the item(s) in question of the Borrower and its
Subsidiaries on a consolidated basis and calculated in accordance with
GAAP.
"Reference Lender(s)" means the Agent unless the Agent resigns said
responsibility, at which time and thereafter such term means one or two
Lenders selected by the Agent in its discretion from time to time as a
reference lender for purposes of determining the Adjusted Libor Rate.
"Related Funds" means, with respect to any Lender which is a fund that
invests in loans, any other fund that invests in loans and is managed by
the same investment advisor as such Lender or by an affiliate of such
Lender.
"Related Transactions" means the Borrower's receipt of the Equity, the
Borrower's repurchase of certain capital stock from certain of the Old
Stockholders on or prior to the Closing Date, the purchase by the New
Stockholders of Borrower capital stock from certain of the Old Stockholders
and the Borrower's issuance of capital stock to the New Stockholders,
exercise of certain stock options for Borrower's capital stock, payment of
certain Borrower deferred compensation liability, buyout of certain
Borrower employment agreements, the completion of the conditions precedent
to the Borrower's receipt of the Equity as set forth in the Related
Transaction Documents and any other transactions described in the Related
Transaction Documents.
"Related Transaction Documents" means the documents listed on Exhibit
1.2.
"Reportable Event" shall have the meaning assigned to that term in
Section 4043 of ERISA for which the requirement of 30 days' notice to the
PBGC has not been waived by the PBGC.
"Request" means a written request for the Loans in the form of Exhibit
1.10, received by the Agent on behalf of the Lenders from the Borrower in
accordance with this Agreement, specifying the date on which the Borrower
desires such Loans and the disbursement instructions of the Borrower with
respect thereto.
"Revolving Credit Loan" means the revolving credit loans to be made by
the Lenders to the Borrower from time to time in the maximum outstanding
principal amount of the Revolving Credit Loan Commitment, all subject and
pursuant to Section 2.1.0.
"Revolving Credit Loan Commitment" means the Lenders' several
commitments to make Revolving Credit Loans to the Borrower and to issue or
participate in Letters of Credit in accordance with Section 2.1.0 and this
Agreement and in the maximum outstanding amount of each Lender's Pro Rata
Share of the lesser of (i) the Borrowing Base and (ii) $25,000,000, as such
amount may be reduced pursuant to Section 2.6.1 or 2.6.4.
"Revolving Credit Note" means each revolving credit note of the
Borrower, payable to the order of a Lender in the form of Exhibit 1.5
hereto evidencing the Indebtedness of the Borrower to such Lender with
respect to the Revolving Credit Loan.
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(Loan Agreement - Fleet/Convergent)
<PAGE> 22
"Revolving Credit Repayment Date" means the earlier to occur of (i)
August 12, 2003 and (ii) such earlier date on which the Revolving Credit
Loan becomes due and payable pursuant to the terms hereof.
"Section" means, when followed by a number, the section or
subsection of this Agreement bearing that number.
"Section 20 Subsidiary " means a subsidiary of the bank holding
company controlling any Lender, which subsidiary has been granted authority
by the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"Security Documents" means any and all documents, instruments and
agreements now or hereafter providing security for the Loans and any other
Indebtedness hereunder and/or under any of the Financing Documents of the
Borrower or any Subsidiary to any of the Lenders and/or the Agent,
including without limitation the following documents, instruments and
agreements between the Agent and the Borrower or any Subsidiary: any
mortgages on and collateral assignments of real property interests (fee,
leasehold and easement) of the Borrower and any Subsidiary granting Liens
thereon; landlord lien waivers and consents as may be reasonably requested
by the Agent; security agreements granting first Liens on all Borrower's
and any Subsidiary's fixtures and tangible and intangible personal property
including without limitation any copyrights, trademarks, servicemarks,
patents and any applications therefor; collateral assignments of Borrower's
and any Subsidiary's contracts, licenses, permits, easements and leases;
collateral assignments of Borrower's and any Subsidiary's copyrights;
conditional assignments of Borrower's and any Subsidiary's trademarks and
patents; any subordination agreement; pledge of any promissory notes of any
Borrower officer or shareholder evidencing Indebtedness owing to the
Borrower or any Subsidiary and any assignment, pledge and security
agreement granting Agent a first Lien on any collateral for any such
promissory note; any guaranty by a Subsidiary; any pledge of the capital
stock of any Subsidiary; casualty and liability insurance policies
providing coverage to the Agent for the benefit of the Lenders; collateral
assignment of keyman life insurance on Borrower's chief executive officer;
UCC-1 financing statements or similar filings perfecting the
above-referenced security interests, pledges and assignments, all as
executed, delivered to and accepted by the Agent on or prior to the Closing
Date or subsequent to the Closing Date as may be required by this
Agreement, as any of the foregoing may be amended in writing by the Agent
and any other party or parties thereto.
"Selling Lender" shall have the meaning assigned to such term in
Section 9.11.1.
"Single Employer Plan" means any Plan as defined in Section
4001(a)(15) of ERISA.
"Stockholders" means, collectively, the Old Stockholders, the New
Stockholders and the holders of Borrower stock granted pursuant to the
Stock Option Plan.
"Stock Option Plan" means the Convergent Group Corporation 1996 Stock
Option Plan and the Convergent Group Corporation 1999 Stock Option Plan.
"Subsidiary" means any corporation or entity other than the Borrower
of which more than 50% of the outstanding capital stock or voting interests
or rights having ordinary voting power to elect a majority of the board of
directors or other managers of such entity (irrespective of whether or not
at the time capital stock or voting interests or rights of any other class
or classes of such Person shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned
by the Borrower or by the Borrower and/or one or more Subsidiaries
16
(Loan Agreement - Fleet/Convergent)
<PAGE> 23
or the management of which corporation or entity is under control of the
Borrower and/or any other Subsidiary, directly or indirectly through one or
more Persons and any other Person which, under GAAP, should at any time for
financial reporting purposes be consolidated or combined with the Borrower
and/or any other Subsidiary.
"Subordinated Indebtedness" means any Indebtedness of the Borrower or
a Subsidiary which is subordinated, both as to payment and as to security,
to the Obligations by a Subordination Agreement.
"Subordination Agreement" means an agreement subordinating
Subordinated Indebtedness to the Obligations and which agreement provides
for (a) a per annum rate of interest not to exceed 10%, (b) no amortization
for at least 5 years, (c) payment of interest only "in kind", i.e., by
issuance of additional Subordinated Indebtedness in the amount of such
interest except as permitted by Section 5.2.11 and (d) no prepayment or
payment of principal or fees during said 5-year period, and which is
otherwise in form and substance reasonably satisfactory to the Majority
Lenders, it being understood that the foregoing restrictions on payment of
principal, interest and fees are deemed reasonable.
"Substituted Lender" has the meaning set forth in Section 9.11 hereof.
"Substitution Agreement" has the meaning assigned to such term in
Section 9.11.1.
"Total Debt Service" means, at any date of determination, the sum of
(i) Interest Expense, (ii) scheduled and mandatory principal payments for
the fiscal period in question due on account of any Indebtedness for
Borrowed Money of the Borrower, but excluding any mandatory payments of
principal required pursuant to Sections 2.6.1.3, 2.6.1.4 and 2.6.1.5, (iii)
the quotient of the amount of the Revolving Credit Loan Commitment divided
by: for the Borrower fiscal quarters ending (w) December 31, 1998, March
31, June 30, September 30 and December 31, 1999 and March 31 and June 30,
2000, 10; (x) September 30 and December 31, 2000 and March 31 and June
30, 2001, 6, (y) September 30 and December 31, 2001 and March 31 and June
30, 2002, 5 and (z) for each fiscal quarter ending thereafter, 4, all of
the foregoing being calculated for the most recent Borrower fiscal quarter
and the three immediately preceding Borrower fiscal quarters on a
consolidated basis in accordance with GAAP.
"Unused Amount" has the meaning assigned to such term in Section
2.2.2.
"Unused Fees" has the meaning assigned to such term in Section 2.2.2.
Section 1.2. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, calculations of
amounts for the purposes of calculating any financial covenants or ratios
hereunder shall be made in accordance with GAAP applied on a basis
consistent with those used in the Borrower's financial statements referred
to in Section 4.1.5 (other than departures therefrom not material in their
impact), and all financial data submitted pursuant to this Agreement shall
be prepared in accordance with GAAP (except, in the case of unaudited
financial statements, the absence of footnotes and that such statements are
subject to changes resulting from year-end adjustments made in accordance
with GAAP).
Section 1.3. Other Terms. References to "Articles", "Sections",
"subsections" and "Exhibits" shall be to Sections, subsections and Exhibits
and of this Agreement unless otherwise specifically provided. In this
Agreement, "hereof," "herein," "hereto," "hereunder" and the like mean and
refer to this Agreement as a whole and not merely to the specific section,
paragraph or
17
(Loan Agreement - Fleet/Convergent)
<PAGE> 24
clause in which the respective word appears; words importing any gender
include the other genders; references to "writing" include printing,
typing, lithography and other means of reproducing words in a tangible
visible form; the words "including," "includes" and "include" shall be
deemed to be followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to include
subsequent amendments, assignments, and other modifications thereto, but
only to the extent such amendments, assignments and other modifications are
not prohibited by the terms of this Agreement or any other Financing
Document; references to Persons include their respective permitted
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of same and
any successor statutes and regulations.
ARTICLE 2.
AMOUNT AND TERMS OF THE LOANS
Section 2.1. The Loans.
Section 2.1.0. The Revolving Credit Loans. Each of the
Lenders severally agrees, subject to the terms and conditions of this
Agreement, to make Advances of Revolving Credit Loans to the Borrower from
time to time after receipt by the Agent from time to time before the
Revolving Credit Repayment Date of, and at the times provided for in, a
Request and an Interest Rate Election from the Borrower in accordance with
this Agreement, during the period commencing on the Closing Date and ending
on the Business Day immediately preceding the Revolving Credit Repayment
Date, in an aggregate principal amount at any one time outstanding not to
exceed the lesser of (i) such Lender's Pro Rata Share of the Revolving
Credit Loan Commitment less (ii) in each case, such Lender's Pro Rata Share
of the aggregate outstanding stated amount of any Letters of Credit and,
without duplication, Letter of Credit Agreements and any unreimbursed
amounts drawn thereunder.
Promptly after receipt of a Request and Interest Rate Election, Agent
shall notify each Lender by telephone, telex or telecopy of the proposed
borrowing. Subject to the immediately preceding paragraph, each Lender
agrees that after its receipt of notification from Agent of Agent's receipt
of a Request and Interest Rate Election, such Lender shall send its Pro
Rata Share (or such portion thereof as may be necessary to provide Agent
with such Pro Rata Share in Dollars and in immediately available funds,
without consideration or use of any contra accounts of any Lender) of the
requested Loan by wire transfer to Agent so that Agent receives such Pro
Rata Share in Dollars and in immediately available funds not later than
12:00 P.M. (Boston, Massachusetts time) on the first day of the Interest
Period for any such requested Libor Loan and on the Business Day for such
Advance set forth in Borrower's Request for any such requested Prime Rate
Loan, and Agent shall advance funds to the Borrower by depositing such
funds in Borrower's account with the Agent upon Agent's receipt of such Pro
Rata Shares in the amount of the Pro Rata Shares of such Loan in Agent's
possession. Unless Agent shall have been notified by any Lender (which
notice may be telephonic if confirmed promptly in writing) prior to the
first day of the Interest Period in respect of any Loan which such Lender
is obligated to make under this Agreement, that such Lender does not intend
to make available to Agent such Lender's Pro Rata Share of such Loan on
such date, Agent may assume that such Lender has made such amount available
to Agent on such date and Agent in its sole discretion may, but shall not
be obligated to, make available to the Borrower a corresponding amount on
such date. If such corresponding amount is not in fact made available to
Agent by such Lender, Agent shall be
18
(Loan Agreement - Fleet/Convergent)
<PAGE> 25
entitled to recover such corresponding amount from such Lender
promptly upon demand by Agent together with interest thereon, for each
day from such date until the date such amount is paid to Agent, at the
Federal Funds Rate for three (3) Business Days and thereafter at the
interest rate on the Loan in question. If such Lender does not pay
such corresponding amount forthwith upon Agent's demand therefor,
Agent shall promptly notify the Borrower and the Borrower shall
promptly pay such corresponding amount to Agent. Nothing contained in
this Section shall be deemed to relieve any Lender from its obligation
to fulfill its obligations hereunder or to prejudice any rights which
the Borrower may have against any Lender as a result of any default by
such Lender hereunder.
Throughout the term of the Revolving Credit Loans, $1,000,000 of
the Revolving Credit Loan Commitment and principal amount of the
Revolving Credit Loans may, at the Borrower's request and with the
Agent's approval which shall not be unreasonably withheld or delayed,
be made available to the Borrower prior to the Revolving Credit
Repayment Date by issuance of Letters of Credit having an expiration
date prior to the earlier to occur of (a) the first anniversary date
of the date of issuance of any such Letter of Credit or (b) three (3)
Business Days prior to the Revolving Credit Repayment Date, reasonably
promptly after submission by the Borrower to the Agent of a Letter of
Credit Agreement, duly completed and executed by the Borrower and
otherwise in form and substance satisfactory to the Agent. The
Borrower shall pay upon demand by the Agent such fees and costs as the
Agent may from time to time establish generally for its customers for
issuance, transfer, amendment and negotiation of each Letter of Credit
and shall pay to the Agent for the Agent's account upon issuance of
any Letter of Credit an annual Letter of Credit fee in an amount equal
to the product of (i) the stated amount of each Letter of Credit
multiplied by (ii) the Applicable Margin then in effect with respect
to any Revolving Credit Loan which is a Libor Loan. In the event that
the Borrower shall fail to reimburse the Agent under any Letter of
Credit or Letter of Credit Agreement, and any outstanding Indebtedness
of the Borrower relating thereto, the Agent shall promptly notify each
Lender of the unreimbursed amount together with accrued interest
thereon, and each Lender agrees to purchase, and it shall be deemed to
have purchased, a participation in such Letter of Credit or Letter of
Credit Agreement and such Indebtedness in an amount equal to its Pro
Rata Share of the unpaid amount together with unpaid interest thereon.
Upon one (1) Business Day's notice from the Agent, each Lender shall
deliver to the Agent an amount equal to its respective participation
in same day funds, at the place and on the date and by the time
notified by the Agent. The obligation of each Lender to deliver to
the Agent an amount equal to its respective participation pursuant to
the foregoing sentence shall be absolute and unconditional and such
remittance shall be made notwithstanding the occurrence or
continuation of an Event of Default or the failure to satisfy any
condition set forth in Article III of this Agreement.
As soon as is practicable following the close of each month after
the Closing Date and in any event within fifteen (15) days thereafter,
the Borrower will submit to the Agent a borrowing base certificate in
the form of Exhibit 2.1.0.
Section 2.2. Interest and Fees on the Loans.
Section 2.2.1. Interest. Interest shall accrue and be
paid currently on the Loans at Effective Prime or the Libor Rate
for each of the Loans' Interest Periods in accordance with the
Borrower's Interest Rate Elections for the Loans subject to and
in accordance with the terms and conditions of this Agreement
and the Note(s); provided that if a Default or an Event of
Default exists and is continuing, no Interest Rate Election
made during such period electing the Libor Rate shall be
effective and any Prime Rate Loan shall bear interest, payable on
demand, at Effective Prime plus, so long as an Event of Default
exists and is continuing, four percent (4.0%)
19
(Loan Agreement - Fleet/Convergent)
<PAGE> 26
and each Libor Loan shall bear interest, payable on demand, at
the Libor Rate plus four percent (4.0%); all of the foregoing
being applicable until such Default or Event of Default is cured
or waived and an Interest Rate Election electing the Libor Rate
for such Loan or portion thereof which is effective in accordance
with this Agreement is submitted to the Agent. The Borrower shall
pay such interest to the Agent for the pro rata account of each
Lender in arrears on the Loans (including without limitation
Libor Loans) outstanding from time to time after the Closing
Date, such payments to be made, with respect to Libor Loans with
Interest Periods of three months or less on each Interest
Adjustment Date for such Loans, and with respect to Libor Loans
with Interest Periods of more than three months and with respect
to Prime Rate Loans, every 90 days after the day of making of
such Loan or the commencement of the Interest Period in question
and on the Interest Adjustment Date for each of such Libor Loans.
In the event no Interest Rate Election has been made by the
Borrower with respect to any Loan or Advance (or an Interest Rate
Election shall have expired without an effective substitute
Interest Rate Election), Effective Prime shall be the rate
applicable to such Loan or Advance. All provisions of each Note
and any other agreements between the Borrower and the Lenders
are expressly subject to the condition that in no event, whether
by reason of acceleration of maturity of the Indebtedness
evidenced by any Note or otherwise, shall the amount paid or
agreed to be paid to the Lenders which is deemed interest under
applicable law exceed the maximum permitted rate of interest
under applicable law (the "Maximum Permitted Rate"), which shall
mean the law in effect on the date of this Agreement, except that
if there is a change in such law which results in a higher
Maximum Permitted Rate, then each Note shall be governed by such
amended law from and after its effective date. In the event that
fulfillment of any provision of any Note, or this Agreement or
any document, instrument or agreement providing security for any
Note results in the rate of interest charged under any Note being
in excess of the Maximum Permitted Rate, the obligation to be
fulfilled shall automatically be reduced to eliminate such
excess. If, notwithstanding the foregoing, any Lender receives an
amount which under applicable law would cause the interest rate
under any Note to exceed the Maximum Permitted Rate, the portion
thereof which would be excessive shall automatically be deemed a
prepayment of and be applied to the unpaid principal balance of
such Note to the extent of then outstanding Prime Rate Loans and
not a payment of interest and to the extent said excessive
portion exceeds the outstanding principal amount of Prime Rate
Loans, said excessive portion shall be repaid to the Borrower.
Section 2.2.2. Fees. On the last Business Day of each
March, June, September and December commencing September 30, 1999
and continuing through the Revolving Credit Repayment Date, the
Borrower shall pay to the Agent for the pro rata account of each
Lender, a fee in an amount equal to .50% per annum of the amount,
if any, by which the average actual daily amount of the Revolving
Credit Loan Commitment for the quarterly period just ended (or in
the case of the first such payment, the period from the Closing
Date to the date such payment is due) exceeds the average of the
actual daily outstanding principal balances of the Revolving
Credit Loans plus the average of the actual daily aggregate
outstanding stated amounts of any Letters of Credit and, without
duplication, Letter of Credit Agreements, and any unreimbursed
amounts thereunder (the "Unused Amount"); provided, however, that
if at any time after the receipt by the Agent of the annual
audited financial statements for the Borrower's December 31,
1999 fiscal year and of the Borrower's quarterly financial
statements for each subsequent Borrower fiscal quarter provided
to the Agent by the Borrower pursuant to Section 5.3.2 or 5.3.3
hereof, the ratio of (a) total Indebtedness for Borrowed Money of
the Borrower and its Subsidiaries on a consolidated basis as of
the last day of the most recently ended fiscal quarter of the
Borrower to (b) EBITDA, (i) is less than 2.5:1.0 and greater
than or equal to 2.0:1.0 and if and so long as no Event of
Default or Default exists and is continuing, subject to the
next-to-last sentence of the next paragraph, the Borrower shall
pay to the Agent for the pro rata account of each Lender a fee in
an amount equal to .40% per annum of the Unused Amount, if any,
(ii) is less than 2.0:1.0 and
20
(Loan Agreement - Fleet/Convergent)
<PAGE> 27
greater than or equal to 1.0:1.0 and if and so long as no Event
of Default or Default exists and is continuing, subject to the
next-to-last sentence of the next paragraph, the Borrower shall
pay to the Agent for the pro rata account of each Lender a fee in
an amount equal to .30% per annum of the Unused Amount, if any;
(iii) is less than 1.0:1.0 and if and so long as no Event of
Default or Default exists and is continuing, subject to the
next-to-last sentence of the next paragraph, the Borrower shall
pay to the Agent for the pro rata account of each Lender a fee in
an amount equal to .25% per annum of the Unused Amount, if any
(the "Unused Fees"). In addition, the Borrower shall pay to the
Agent certain other fees as specified in the Fee Letter; provided
further, however, that if on any date the Borrower would be
entitled to an Unused Fee other than .50% except for the fact
that a Default exists, the Unused Fee shall not change until the
first to occur of (a) such Default becoming an Event of Default
and (b) waiver or cure of such Default, at which time the Unused
Fee shall be adjusted or remain the same in accordance with the
provisions of this definition preceding this further proviso.
Any change in the Unused Fee required pursuant to the
foregoing shall become effective on the fifth Business Day after
the Agent receives the Borrower's financial statement for the
Borrower's fiscal quarter or year-end, as the case may be, in
question; provided, however, that each of the above-referenced
Unused Fees shall remain in effect only so long as Borrower
qualifies therefor in accordance with this definition and
provided further, however, that Unused Fee reductions shall
become final only on the basis of Borrower's annual audited
financial statements and in the event that such annual audited
financial statements establish that the Borrower was not entitled
to an Unused Fee reduction which was previously granted, the
Borrower shall, upon written demand by the Agent, repay to the
Agent for the account of each Lender an amount equal to the
excess of the Unused Fee at the rate which should have been
charged based on such annual audited financial statements and the
rate actually charged on the basis of Borrower's quarterly
financial statement(s) (provided that in the event of a dispute
as to the appropriate fiscal quarter as to which any adjustment
should be allocated, the decision of the independent accountants
of the Borrower shall be made in accordance with GAAP and shall
be binding upon the Agent, the Lenders and the Borrower absent
manifest error); and provided further, however, that in the event
that Borrower fails to provide any financial statement on a
timely basis in accordance with Sections 5.3.2 or 5.3.3 any
Unused Fee increase payable as a result thereof shall be
retroactively effective to the date on which the financial
statement in question should have been received by the Agent in
accordance with Section 5.3.2 or 5.3.3, and the Borrower shall
pay any amount due as a result thereof upon written demand from
the Agent. The Agent shall send the Borrower written
acknowledgment of each change in the Unused Fee in accordance
with the Agent's customary procedures as in effect from time to
time, but the failure to send such acknowledgment shall have no
effect on the effectiveness or applicability of the foregoing
provisions of this definition or Borrower's obligations with
respect to payment and calculation of Unused Fees.
Section 2.2.3. Increased Costs - Capital. If, after the
date hereof, any Lender shall have reasonably determined that the
adoption after the date hereof of any applicable law,
governmental rule, regulation or order regarding capital adequacy
of banks or bank holding companies, or any change therein, or any
change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by such Lender or such Lender's holding company with any policy,
guideline, directive or request regarding capital adequacy
(whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of any such
authority, central bank or comparable agency, has or would have
the effect of reducing the rate of return on the capital of such
Lender or such Lender's holding company as a consequence of the
obligations hereunder of such Lender to a level below that which
such Lender could have achieved but for
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<PAGE> 28
such adoption, change or compliance (taking into consideration
the policies of such Lender or such Lender's holding company with
respect to capital adequacy immediately before such adoption,
change or compliance and assuming that the capital of such Lender
or such Lender's holding company was fully utilized prior to such
adoption, change or compliance) by an amount reasonably deemed by
such Lender to be material, then such Lender shall notify the
Agent and the Borrower thereof and the Borrower shall pay to the
Agent for the account of such Lender from time to time as
specified by such Lender such additional amounts as shall be
sufficient to compensate such Lender for such reduced return,
each such payment to be made by the Borrower within five (5)
Business Days after each demand by such Lender; provided that the
liability of the Borrower to pay such costs shall only accrue
with respect to costs accruing from and after the 180th day prior
to the date of each such demand. A certificate in reasonable
detail of one of the officers of such Lender describing the event
giving rise to such reduction and setting forth the amount to be
paid to such Lender hereunder and a computation of such amount
shall accompany any such demand and shall, in the absence of
manifest error, be conclusive. In determining such amount, such
Lender shall act reasonably and will use any reasonable averaging
and attribution methods. If the Borrower shall, as a result of
the requirements of this Section 2.2.3 above, be required to pay
any Lender the additional costs referred to above and the
Borrower, in its sole discretion, shall deem such additional
amounts to be material, the Borrower shall have the right to
substitute another bank satisfactory to the Agent for such Lender
which has certified the additional costs to the Borrower, and the
Agent shall use reasonable efforts at no cost to the Agent to
assist the Borrower to locate such substitute bank. Any such
substitution shall take place in accordance with Section 9.11 and
shall otherwise be on terms and conditions reasonably
satisfactory to the Agent, and until such time as such
substitution shall be consummated, the Borrower shall continue to
pay such additional costs. Upon any such substitution, the
Borrower shall pay or cause to be paid to the Lender that is
being replaced, all principal, interest (to the date of such
substitution) and other amounts owing hereunder to such Lender
and such Lender will be released from liability hereunder.
Section 2.3. Notations. At the time of (i) the making
of each Advance evidenced by any Note, (ii) each change in the
interest rate under any Note effected as a result of an Interest
Rate Election; and (iii) each payment or prepayment of any Note,
each Lender may enter upon its records an appropriate notation
evidencing (a) such Lender's Pro Rata Share of the Loans and (b)
the interest rate and Interest Adjustment Date applicable thereto
or (c) such payment or prepayment (voluntary or involuntary) of
principal and (d) in the case of payments or prepayments
(voluntary or involuntary) of principal, the portion of the
applicable Loan which was paid or prepaid. No failure to make any
such notation shall affect the Borrower's unconditional
obligations to repay the Loans and all interest, fees and other
sums due in connection with this Agreement and/or any Note in
full, nor shall any such failure, standing alone, constitute
grounds for disproving a payment of principal by the Borrower,
However, in the absence of manifest error, such notations and
each Lender's records containing such notations shall constitute
presumptive evidence of the facts stated therein, including,
without limitation, the outstanding amount of such Lender's Pro
Rata Share of the Loans and all amounts due and owing to such
Lender at any time. Any such notations and such Lender's records
containing such notations may be introduced in evidence in any
judicial or administrative proceeding relating to this Agreement,
the Loans or any Note.
Section 2.4. Computation of Interest. Interest due
under this Agreement and any Note shall be computed on the basis
of a year of 360 days for the actual number of days elapsed.
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(Loan Agreement - Fleet/Convergent)
<PAGE> 29
Section 2.5. Time of Payments and Prepayments in Immediately
Available Funds.
Section 2.5.1. Time. All payments and prepayments of
principal, fees, interest and any other amounts owed from time
to time under this Agreement and/or under each Note shall be made
to the Agent for the pro rata account of each Lender at the
address referred to in Section 9.6 in Dollars and in immediately
available funds prior to 12:00 o'clock P.M. on the Business Day
that such payment is due, provided that the Borrower hereby
authorizes and instructs the Agent to charge against the
Borrower's accounts with the Agent on each date on which a
payment is due hereunder and/or under any Note and on any
subsequent date if and to the extent any such payment is not made
when due an amount up to the principal, interest and fees due and
payable to the Lenders, the Agent or any Lender hereunder and/or
under any Note and such charge shall be deemed payment hereunder
and under the Note(s) in question to the extent that immediately
available funds are then in such accounts. The Agent shall use
reasonable efforts in accordance with the Agent's customary
procedures to give subsequent notice of any such charge to the
Borrower, but the failure to give such notice shall not affect
the validity of any such charge. To the extent that immediately
available funds are then in such accounts, the failure of the
Agent to charge any such account or the failure of the Agent to
charge any such account prior to 12 o'clock P.M. shall not be
basis for an Event of Default under Section 6.1.1 and any amount
due on the Loans on such date shall be deemed paid; provided that
the Agent shall have the right to charge any such account on any
subsequent date for such unpaid payment and an Event of Default
shall exist if sufficient immediately available funds are not in
such accounts on the date the Agent so charges such account after
the expiration of any applicable cure period. In the event of any
charge against the Borrower's accounts by the Agent pursuant to
the immediately preceding sentence, the Agent shall use
reasonable efforts to provide notice to the Borrower of such
charge in accordance with the Agent's customary procedures, but
the failure to provide such notice shall not in any way be a
basis for any liability of the Agent nor shall such failure
adversely affect the validity and effectiveness of any such
action by the Agent. Any such payment or prepayment which is
received by the Agent in Dollars and in immediately available
funds after 12 o'clock P.M. on a Business Day shall be deemed
received for all purposes of this Agreement on the next
succeeding Business Day unless the failure by Agent to receive
such funds prior to 12 o'clock P.M. is due to Agent's failure to
charge the account of Borrower prior to 12 o'clock P.M., except
that solely for the purpose of determining whether a Default or
Event of Default has occurred under Section 6.1.1., any such
payment or prepayment, if received by the Agent prior to the
close of the Agent's business on a Business Day, shall be deemed
received on such Business Day. All payments of principal,
interest, fees and any other amounts which are owing to any or
all of the Lenders or the Agent hereunder and/or under any of the
Notes that are received by the Agent in immediately available
Dollars prior to 12:00 o'clock P.M. on any Business Day shall, to
the extent owing to the Lenders other than the Agent, be sent by
wire transfer by the Agent to any such other Lenders (in each
case, without deduction for any claim, defense or offset of any
type) before 3:00 o'clock P.M. on the same Business Day. Each
such wire transfer shall be addressed to each Lender in
accordance with the wire instructions set forth in Exhibit 1.9
hereto. The amount of each payment wired by the Agent to each
such Lender shall be such amount as shall be necessary to provide
such Lender with its Pro Rata Share of such payment (without
consideration or use of any contra accounts of any Lender), or
with such other amount as may be owing to such Lender in
accordance with this Agreement (in each case, without deduction
for any claim, defense or offset of any type). Each such wire
transfer shall be sent by the Agent only after the Agent has
received immediately available Dollars from or on behalf of the
Borrower and each such wire transfer shall provide each Lender
receiving same with immediately available Dollars on receipt by
such Lender. Any such payments of immediately available Dollars
received by the Agent after 12:00 o'clock P.M. and before 3:00
o'clock P.M. on any Business Day shall be forwarded in the same
manner by the Agent to such Lender(s) as soon as practicable on
said Business Day, and if
23
(Loan Agreement - Fleet/Convergent)
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any such payments of immediately available Dollars are received
by the Agent after 3:00 o'clock P.M. on a Business Day, the
Agent shall so forward same to such Lender(s) before 10:00
o'clock A.M. on the immediately succeeding Business Day.
Section 2.5.2. Setoff, etc. Borrower and any
Subsidiaries hereby grant to the Agent and each Lender a Lien,
security interest and right of setoff as security for all
Obligations to the Agent and such Lender whether now existing or
hereafter arising. Regardless of the adequacy of any collateral
for any of the Obligations, and subject to the provisions of
Article 7.1 upon the occurrence and during the continuance of any
Event of Default, each Lender is hereby authorized at any time
and from time to time, without notice to the Borrower (any such
notice being expressly waived by the Borrower), to set off and
apply any and all deposits (general or special, time or demand,
provisional or final) credits, collateral and property at any
time in the possession , custody, safekeeping or control of such
Lender or any entity under the control of any Lender's holding
company or in transit to any of them and any other Indebtedness
at any time owing by such Lender to or for the credit or the
account of the Borrower against any and all of the Obligations of
the Borrower irrespective of whether or not such Lender shall
have made any demand under this Agreement or any Note and
although such obligations may be unmatured. Each such Lender
agrees to promptly notify the Borrower and the Agent after any
such setoff and application; provided that the failure to give
such notice shall not affect the validity of such setoff and
application. Promptly following any notice of setoff received by
the Agent from a Lender pursuant to the foregoing, the Agent
shall notify each other Lender thereof. The rights of each Lender
under this Section 2.5.2 are in addition to all other rights and
remedies (including, without limitation, other rights of setoff)
which such Lender may have and are subject to Section 9.12. ANY
AND ALL RIGHTS TO REQUIRE THE AGENT OR ANY LENDER TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH
SECURES THE LOANS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE
BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND
IRREVOCABLY WAIVED.
Section 2.5.3. Unconditional Obligations and No Deductions.
Section 2.5.3.1 The Borrower's obligation to make all
payments provided for in this Agreement and the other Financing
Documents shall be unconditional. Each such payment shall be made
without deduction for any claim, defense or offset of any type,
including without limitation any withholdings and other
deductions on account of income or other taxes (except to the
extent provided in Section 2.5.3.2) and regardless of whether any
claims, defenses or offsets of any type exist.
Section 2.5.3.2. (a) Any and all payments by the
Borrower to or for the account of any Lender or the Agent
hereunder or under any other Financing Document shall be made
free and clear of and without deduction for any and all present
or future taxes, duties, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, by the
jurisdiction under the laws of which such Lender (or its
applicable lending office) or the Agent (as the case may be) is
organized or any political subdivision thereof, other than to the
extent such income or franchise tax is imposed solely as a result
of the activities of the Agent or a Lender pursuant to or in
respect of this Agreement or any of the other Financing Documents
(all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable under this Agreement or any other Financing
24
(Loan Agreement - Fleet/Convergent)
<PAGE> 31
Document to any Lender or the Agent, (i) the sum payable shall be
increased as necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 2.5.3.2) such Lender or the Agent
receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) the Borrower shall
furnish to the Agent, at its address referred to in Section 9.6
hereof, the original or a certified copy of a receipt evidencing
payment thereof.
(b) In addition, the Borrower agrees to pay any and all
present or future stamp or documentary taxes and any other excise
or property taxes or charges or similar levies which arise from
any payment made under this Agreement or any other Financing
Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the
Agent for the full amount of Taxes and Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted
by any jurisdiction on amounts payable under this Section
2.5.3.2) paid by such Lender or the Agent (as the case may be)
and any liability (including penalties, interest, and expenses)
arising therefrom or with respect thereto.
(d) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its
execution and delivery of this Agreement in the case of each
Lender listed on the signature pages hereof and on or prior to
the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing
by the Borrower or the Agent (but only so long as such Lender
remains lawfully able to do so), shall provide the Borrower and
the Agent with (i) a properly completed Internal Revenue Service
Form 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that such
Lender is entitled to benefits under an income tax treaty to
which the United States is a party which reduces the rate of
withholding tax on payments of interest or certifying that the
income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United
States, (ii) a properly completed Internal Revenue Service Form
W-8 or W-9, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is
exempt from United States backup withholding, and (iii) any other
form or certificate required by any taxing authority (including
any certificate required by Sections 871(h) and 881(c) of the
Internal Revenue Code), certifying that such Lender is entitled
to an exemption from or a reduced rate of tax on payments
pursuant to this Agreement or any of the other Financing
Documents.
(e) For any period with respect to which a Lender has failed
to provide the Borrower and the Agent with the appropriate form
pursuant to Section 2.5.3.2(d) hereof (unless such failure is due
to a change in treaty, law, or regulation occurring subsequent to
the date on which a form originally was required to be provided),
such Lender shall not be entitled to indemnification under
Sections 2.5.3.1. 2.5.3.2(a) or 2.5.3.2(b) hereof with respect to
Taxes imposed by the United States; provided, however, that
should a Lender, which is otherwise exempt from or subject to a
reduced rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required hereunder, the Borrower
shall take such steps as such Lender shall reasonably request and
at such Lender's cost to assist such Lender to recover such
Taxes.
(f) If the Borrower is required to pay additional amounts to
or for the account of any Lender pursuant to this Section
2.5.3.2, then such Lender will agree to use reasonable efforts to
25
(Loan Agreement-Fleet/Convergent)
<PAGE> 32
change the jurisdiction of its applicable lending office so as to
eliminate or reduce any such additional payment which may
thereafter accrue if such change, in the judgment of such Lender,
is not otherwise disadvantageous to such Lender. Alternatively,
in the event of such an additional cost, the Borrower shall have
the right to substitute another bank satisfactory to the Agent,
and the Agent and such Lender shall use reasonable efforts at no
cost to the Agent and such Lender to assist the Borrower to
locate and effect the substitution in favor of such substitute
bank. Any such substitution shall take place in accordance with
Section 9.11 and shall otherwise be on terms and conditions
reasonably satisfactory to the Agent, and until such time as such
substitution shall be consummated, the Borrower shall continue to
pay such additional costs. Upon any such substitution, the
Borrower shall pay or cause to be paid to the Lender that is
being replaced, all principal, interest (to the date of such
substitution) and other amounts owing hereunder to such Lender
and such Lender will be released from liability hereunder.
(g) Within thirty (30) days after the date of any payment of
Taxes, the Borrower shall furnish to the Agent the original or a
certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.5.3.2 shall survive until
the first anniversary of the Repayment Date.
(i) If the Borrower makes any additional payment to any
Lender pursuant to this Section 2.5.3.2 in respect of any Taxes,
and such Lender determines that it has received (i) a refund of
such Taxes, or (ii) a credit against, relief or remission for, or
a reduction in the amount of, any tax or other governmental
charge as a result of any deduction or credit for any Taxes with
respect to which it has received payments under this Section
2.5.3.2, such Lender shall, to the extent that it can do so
without prejudice to the retention of such refund, credit,
relief, remission or reduction, pay to the Borrower such amount
as shall be reasonably determined by such Lender to be solely
attributable to the deduction or withholding of such Taxes. If
such Lender later determines that it was not entitled to such
refund, credit, relief, remission or reduction to the full extent
of any payment made pursuant to the first sentence of this
Section 2.5.3.2(i), the Borrower shall upon demand of such Lender
promptly repay the amount of such overpayment. Nothing in this
Section 2.5.3.2(i) shall be construed as requiring such Lender to
conduct its business or to arrange or alter in any respect its
tax or financial affairs so that it is entitled to receive such a
refund, credit or reduction or as allowing any Person to inspect
any records, including tax returns, of such Lender.
Section 2.6. Prepayment and Certain Payments.
Section 2.6.1. Mandatory Payments.
Section 2.6.1.1. In addition to each other
principal payment required hereunder, the outstanding principal
balances of the Revolving Credit Loans shall be repaid on the
Revolving Credit Repayment Date.
Section 2.6.1.2. [Intentionally omitted.]
Section 2.6.1.3. In the event that the Borrower or
any Subsidiary is entitled to receive, collectively, proceeds
from any casualty insurance policies maintained by any of them on
account of any interest of the Borrower and/or any Subsidiary in
any property, which proceeds are in an aggregate amount in excess
of $100,000 during the term of this Agreement, such proceeds
shall be received by the Agent and, to the extent that such
proceeds result from a
26
(Loan Agreement - Fleet/Convergent)
<PAGE> 33
casualty to property of the Borrower and/or any Subsidiary, so
long as no Default or Event of Default exists and is continuing
and the Borrower or such Subsidiary elects to repair, replace or
restore such property, such proceeds shall be released to the
Borrower or such Subsidiary subject to reasonable procedures and
conditions established by the Agent to the extent necessary to so
repair, replace or restore such property within 3 months (or as
soon as reasonably practicable if such restoration, replacement
or repair is not susceptible to being completed within 3 months)
from the date of receipt of such proceeds by the Agent and to the
extent such proceeds are not so used or do not result from such a
casualty, the amount of such proceeds shall (a) be released to
Borrower and (b) permanently reduce the Revolving Credit Loan
Commitment and to the extent that the outstanding principal
balance of the Loans exceeds the Revolving Credit Loan Commitment
as so reduced, the Borrower shall make a prepayment of the Loans
for the accounts of the Lenders in accordance with their Pro Rata
Shares upon written notice from the Agent.
Section 2.6.1.4. In the event that the Borrower
and/or any Subsidiary sells, assigns or otherwise transfers title
to any asset other than in the ordinary course of its business
for net cash proceeds in the aggregate since the Closing Date in
excess of $200,000, the Borrower and/or such Subsidiary shall
remit 100% of the net cash proceeds of such sale, assignment or
other transfer to the Agent as a prepayment of the Loans for the
accounts of the Lenders in accordance with their Pro Rata Shares
within 10 Business Days of the date of Borrower's or any
Subsidiary's receipt of such net cash proceeds; provided,
however, that Borrower may sell any of its equipment which is
obsolete, worn-out or no longer used or useful in Borrower's
business and Borrower may use the proceeds of such sale to
purchase other equipment which is useful or necessary in the
operation of Borrower's business and provided further that the
Borrower can sell assets as permitted by Section 5.2.3 without
complying with this Section.
Section 2.6.1.5. In the event that the Borrower
and/or any Subsidiary files a Form S-1 or any other form of
registration statement then available for registration with the
Securities and Exchange Commission (other than an offering on
Form S-4 or S-8 or their successor forms) or otherwise conducts a
Qualified Initial Public Offering of any class of the Borrower's
or any Subsidiary's securities, the Borrower and/or such
Subsidiary upon receipt of the net aggregate cash consideration
from the sale of any such registered shares of its capital stock
shall prepay to the Agent for the accounts of the Lenders in
accordance with their Pro Rata Shares an amount of the
outstanding principal balances of the Loans equal to that amount
necessary to reduce the Borrower's average ratio of total
Indebtedness for Borrowed Money as of the Borrower fiscal quarter
ends in the four Borrower fiscal quarter period consisting of the
Borrower's most recent fiscal quarter and the immediately
preceding three Borrower fiscal quarters to EBITDA to less than
1.0:1.0, and the Revolving Credit Loan Commitment shall be
permanently reduced to an amount which, if fully outstanding as
Loans and Letters of Credit and, without duplication, Letter of
Credit Agreements or unreimbursed amounts drawn thereunder would
result in such ratio being less than 1.0:1.0.
Section 2.6.1.6. If at any time the aggregate
principal amount of the Revolving Credit Loans plus the aggregate
outstanding stated amounts of any Letters of Credit and, without
duplication, Letter of Credit Agreements and any unreimbursed
amounts drawn thereunder shall exceed the Revolving Credit Loan
Commitment, the Borrower shall immediately pay to the Agent in
immediately available Dollars the amount of such excess.
Section 2.6.1.7. Any amounts repaid by the
Borrower and/or any Subsidiary under this Section 2.6.1 shall be
paid without premium or penalty. In the event that any payment or
prepayment of a Libor Loan under this Section 2.6.1 is received
on a date other than the last day of an Interest Period, such
payment or prepayment shall be held by the Agent in
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(Loan Agreement - Fleet/Convergent)
<PAGE> 34
a separate account and be pledged to the Agent as collateral for
the Obligations of the Borrower arising in connection with the
Financing Documents until the last day of the then current
Interest Period, at which time the Agent shall apply such payment
or prepayment, for the account of the Lenders in accordance with
their Pro Rata Shares, to the outstanding Libor Loans, for which
such day is an Interest Adjustment Date; provided that if on or
prior to the date of such payment or prepayment the Borrower
provides the Agent with written notice of Borrower's election to
have such payment or prepayment applied to the Libor Loan in
question, such payment or prepayment shall be so applied and
Borrower shall pay the Agent for the accounts of the Lenders any
amount due in accordance with Section 2.9.
Section 2.6.2. Voluntary Prepayments. All or any
portion of the unpaid principal balance of the Loans (other than
portions of any Loans constituting Libor Loans) may be prepaid at
any time, without premium or penalty, by giving the Agent at
least 3 days' prior written notice of such prepayment and by a
payment to the Agent for the accounts of the Lenders in
accordance with their Pro Rata Shares of such prepayment in
immediately available Dollars by the Borrower; provided that each
such partial payment or prepayment of principal of the Loans
shall be in a principal amount of at least $100,000 or an
integral multiple of $50,000 in excess thereof.
Section 2.6.3. Prepayment of Libor Loans.
Notwithstanding anything to the contrary contained in any Note or
in any other agreement executed in connection herewith or
therewith, the Borrower shall be permitted to prepay any portion
of the Loans constituting Libor Loans only in accordance with
Section 2.9 hereof.
Section 2.6.4. Permanent Reduction of Revolving
Credit Loan Commitment. At the Borrower's option the Revolving
Credit Loan Commitment may be permanently and irrevocably reduced
in whole or in part by an amount of at least $1,000,000 and to
the extent in excess thereof in integral multiples of $500,000 or
if less, the Revolving Credit Loan Commitment, at any time;
provided that (i) the Borrower gives the Agent written notice of
the exercise of such option at least three (3) Business Days
prior to the effective date thereof, (ii) the aggregate
outstanding balance of the Revolving Credit Loans, plus the
aggregate outstanding amount of any Letters of Credit and,
without duplication, Letter of Credit Agreement and any
unreimbursed drawn amounts thereunder, if any, does not exceed
the Revolving Credit Loan Commitment, as so reduced in any such
case on the effective date of such reduction and (iii) the
Borrower is not, and after giving effect to such reduction, would
not be in violation of Section 2.6.3. Any such reduction shall
concurrently reduce the Dollar amount of each Lender's Pro Rata
Share of the Revolving Credit Loan Commitment.
Section 2.7. Payment on Non-Business Days.
Whenever any payment to be made hereunder or under any Note shall
be stated to be due on a day other than a Business Day, such
payment may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of payment of fees, if any, and interest under this
Agreement and under such Note.
Section 2.8. Use of Proceeds. (a) The Borrower
shall use the proceeds of the Loans to repurchase capital stock
from the Old Stockholders, to pay certain deferred compensation
liabilities and the costs of buying out certain employment
contracts, to pay costs incurred by the Borrower in connection
with the closing of the Loans, including without limitation, the
Facility Fee and costs incurred in connection with the Related
Transactions, to refinance existing bank debt, to make a loan in
a maximum amount of $2,000,000 to Glenn E. Montgomery, Jr., for
Borrower's general corporate purposes, including working capital
needs and for Investments
28
(Loan Agreement - Fleet/Convergent)
<PAGE> 35
permitted by Section 5.2.12. The Borrower shall obtain any
Letters of Credit solely for working capital and general
corporate purposes.
(b) No portion of the proceeds of any Loans is to
be used, and no portion of any Letter of Credit is to be
obtained, for the purpose of (a) knowingly purchasing, or
providing credit support for the purchase of, Ineligible
Securities from a Section 20 Subsidiary during any period in
which such Section 20 Subsidiary makes a market in such
Ineligible Securities, (b) knowingly purchasing, or providing
credit support for the purchase of, during the underwriting or
placement period, any Ineligible Securities being underwritten or
privately placed by a Section 20 Subsidiary, or (c) making, or
providing credit support for the making of, payments of principal
or interest on Ineligible Securities underwritten or privately
placed by a Section 20 Subsidiary and issued by or for the
benefit of the Borrower or any Subsidiary or other Affiliate of
the Borrower.
Section 2.9. Special Libor Loan Provisions. The Libor Loans
shall be subject to and governed by the following terms and
conditions:
Section 2.9.1. Requests. Each Request accompanied by an
Interest Rate Election selecting the Libor Rate must be received
by the Agent in accordance with the definition of Interest Rate
Election.
Section 2.9.2. Libor Loans Unavailable. Notwithstanding any
other provision of this Agreement, if, prior to or on the date on
which all or any portion of the Loans is to be made as or
converted into a Libor Loan, any of the Lenders (or the Agent
with respect to (ii) below) shall reasonably determine (which
determination shall be conclusive and binding on the Borrower),
that
(i) Dollar deposits in the relevant amounts and for the
relevant Interest Period are not offered to such Lender in the
London interbank market,
(ii) by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist for
ascertaining the Adjusted Libor Rate, or
(iii) the Adjusted Libor Rate shall no longer represent the
effective cost to such Lender for Dollar deposits in the London
interbank market for reasons other than the fact, standing alone,
that the Adjusted Libor Rate is based on an averaging of rates
determined by the Agent and that such Lender's rate may exceed
such average,
such Lender may elect not to accept any Interest Rate Election
electing a Libor Loan and such Lender shall notify the Agent by
telephone or telex thereof, stating the reasons therefor, not
later than the close of business on the second Business Day prior
to the date on which such Libor Loan is to be made. The Agent
shall promptly give notice of such determination and the reason
therefor to the Borrower, and all or such portion of the Loans,
as the case may be, which are subject to any of Section 2.9.2
(i), (ii) through (iii) as a result of such Lender's
determination shall be made as or converted into, as the case may
be, Prime Rate Loans and such Lender shall have no further
obligation to make Libor Loans, until further written notice to
the contrary is given by the Agent to the Borrower. If such
circumstances subsequently change so that such Lender shall no
longer be so affected, such Lender's obligation to make or
maintain its Pro Rata Share of all or any portion of the Loans as
Libor Loans shall be reinstated when such Lender obtains actual
knowledge of such change of circumstances and promptly after
obtaining such actual knowledge such Lender shall forward written
notice thereof to the Agent. After receipt of such notice, the
29
(Loan Agreement - Fleet/Convergent)
<PAGE> 36
Agent shall promptly forward written notice thereof to the
Borrower. Upon or after receipt by the Borrower of such written
notice, the Borrower may submit an Interest Rate Election in
accordance with this Agreement electing an Interest Period ending
no later than the Interest Adjustment Date for the then current
Interest Period for the other Lenders' Pro Rata Shares of Libor
Loans and electing the Libor Rate for such Lenders' or Lender's
Pro Rata Share(s) of the Loans as to which such Lender's or
Lenders' obligation(s) to make or maintain its or their Pro Rata
Share(s) of the Loans as Libor Loans was suspended and such Pro
Rata Share(s) shall be converted to Libor Loans in accordance
with this Agreement. During any period throughout which any of
the Lenders has or have no obligation to make or maintain its or
their Pro Rata Share(s) of the Loans as Libor Loans, no Interest
Rate Elections electing the Libor Rate shall be effective with
regard to the Loans to the extent of the Pro Rata Share(s) of
such Lender(s), but shall be effective as to the other Lenders.
Section 2.9.3. Libor Lending Unlawful. In the event that
after the date hereof any change in applicable laws or
regulations (including the introduction of any new applicable law
or regulation) or in the interpretation thereof (whether or not
having the force of law) by any governmental or other regulatory
authority charged with the administration thereof, shall make it
unlawful for any of the Lenders to make or continue to maintain
its Pro Rata Share of all or any portion of the Loans as Libor
Loans, each such Lender shall promptly notify the Agent by
telephone or telex thereof, and of the reasons therefor, and the
obligation of such Lender to make or maintain its Pro Rata Share
of the Loans or such portion thereof as Libor Loans shall, upon
the happening of such event, terminate and the Agent shall, by
telephonic notice to the Borrower, declare that such obligation
has so terminated with respect to such Lender, and such Pro Rata
Share of the Loans or any portion thereof to the extent then
maintained as Libor Loans, shall, on the last day on which such
Lender can lawfully continue to maintain such Pro Rata Share of
the Loans or any portion thereof as Libor Loans, automatically
convert into Prime Rate Loans without additional cost to the
Borrower. If circumstances subsequently change so that such
Lender shall no longer be so affected, such Lender's obligation
to make or maintain its Pro Rata Share of all or any portion of
the Loans as Libor Loans shall be reinstated when such Lender
obtains actual knowledge of such change of circumstances, and
promptly after obtaining such actual knowledge such Lender shall
forward written notice thereof to the Agent. After receipt of
such notice, the Agent shall promptly forward written notice
thereof the Borrower. Upon or after receipt by the Borrower of
such written notice, the Borrower may submit an Interest Rate
Election in accordance with this Agreement electing an Interest
Period ending no later than the Interest Adjustment Date for the
then current Interest Period for the other Lenders' Pro Rata
Shares of Libor Loans and electing the Libor Rate for such
Lenders' or Lender's Pro Rata Share(s) of the Loans as to which
such Lender's or Lenders' obligation(s) to make or maintain its
or their Pro Rata Share(s) of the Loans as Libor Loans was
suspended and such Pro Rata Share(s) shall be converted to Libor
Loans in accordance with this Agreement. During any period
throughout which any of the Lenders has or have no obligation to
make or maintain its or their Pro Rata Share(s) of the Loans as
Libor Loans, no Interest Rate Elections electing the Libor Rate
shall be effective with regard to the Loans to the extent of the
Pro Rata Share(s) of such Lender(s), but shall be effective as to
the other Lenders.
Section 2.9.4. Additional Costs on Libor Loans. The Borrower
further agrees to pay to the Agent for the account of the
applicable Lender or Lenders such amounts as will compensate any
of the Lenders for any increase in the cost to such Lender of
making or maintaining (or of its obligation to make or maintain)
all or any portion of its Pro Rata Share of the Loans as Libor
Loans and for any reduction in the amount of any sum receivable
by such Lender under this Agreement in respect of making or
maintaining all or any portion of such
30
(Loan Agreement - Fleet/Convergent)
<PAGE> 37
Lender's Pro Rata Share of the Loans as Libor Loans, in either case,
from time to time by reason of:
(i) any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, such Lender, under or pursuant to any law, treaty,
rule, regulation (including, without limitation, any Regulations
of the Board of Governors of the Federal Reserve System) or
requirement in effect after the date hereof, any interpretation
thereof by any governmental authority charged with administration
thereof or by any central bank or other fiscal or monetary
authority or other authority, or any requirement imposed by any
central bank or such other authority whether or not having the
force of law; or
(ii) any change in (including the introduction of any new)
applicable law, treaty, rule, regulation or requirement or in the
interpretation thereof by any official authority, or the
imposition of any requirement of any central bank, whether or not
having the force of law, which shall subject such Lender to any
tax (other than taxes on net income imposed on such Lender),
levy, impost, charge, fee, duty, deduction or withholding of any
kind whatsoever or change the taxation of such Lender with
respect to making or maintaining all or any portion of its Pro
Rata Share of the Loans as Libor Loans and the interest thereon
(other than any change which affects, and to the extent that it
affects, the taxation of net income of such Lender), in each
case, after the date hereof; provided, that with respect to any
withholding the foregoing shall not apply to any withholding tax
described in sections 1441, 1442 or 3406 of the Code, or any
succeeding provision of any legislation that amends, supplements
or replaces any such section, or to any tax, levy, impost, duty,
charge, fee, deduction or withholding that results from any
noncompliance by a Lender with any federal, state or foreign law
or from any failure by a Lender to file or furnish any report,
return, statement or form the filing or furnishing of which would
not have an adverse effect on such Lender and would eliminate
such tax, impost, duty, deduction or withholding;
In any such event, such Lender shall promptly notify the Agent
thereof, and of the reasons therefor, and the Agent shall promptly
notify the Borrower thereof in writing stating the reasons provided to
the Agent by such Lender therefor and the additional amounts required
to fully compensate such Lender for such increased or new cost or
reduced amount as reasonably determined by such Lender. Such
additional amounts shall be payable on each date on which interest is
to be paid hereunder or, if there is no outstanding principal amount
under any of the Notes, within 10 Business Days after the Borrower's
receipt of said notice. Such Lender's certificate as to any such
increased or new cost or reduced amount (including calculations, in
reasonable detail, showing how such Lender computed such cost or
reduction) shall be submitted by the Agent to the Borrower and shall,
in the absence of manifest error, be conclusive. In determining any
such amount, the Lender(s) may use any reasonable averaging and
attribution methods. Notwithstanding anything to the contrary set
forth above, the Borrower shall not be obligated to pay any amounts
pursuant to this Section 2.9.4 as a result of any requirement or
change referenced above with respect to any period prior to the one
hundred and eightieth (180th) day prior to the date on which the
Borrower is first notified thereof (other than any amounts which
relate to any such requirement or change which is adopted with
retroactive effect in which case the Borrower shall be obligated to
pay all such amounts accrued from the date as of which such
requirement or change is retroactively effective) unless the failure
to give such notice within such one hundred and eighty (180) day
period resulted from reasonable circumstances beyond such Lender's
reasonable control.
31
(Loan Agreement - Fleet/Convergent)
<PAGE> 38
Section 2.9.5. Libor Funding Losses. In the event that any
payment or prepayment of a Libor Loan is received on a date other than
the last day of an Interest Period, such payment or prepayment shall
be held by the Agent in a separate account and be pledged to the Agent
as collateral for the obligations of the Borrower arising in
connection with this Agreement, the Notes and the other Financing
Documents until the end of the then current Interest Period, at which
time the Agent shall apply such payment or prepayment, for the
accounts of the Lenders in accordance with their Pro Rata Shares, to
the outstanding Libor Loans; provided that if on or prior to the date
of such payment or prepayment the Borrower provides the Agent with
written notice of Borrower's election to have such payment or
prepayment applied to the Libor Loan in question, such payment or
prepayment shall be so applied. Notwithstanding the foregoing, in the
event any of the Lenders shall incur any loss or expense (including,
without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain all or any portion of the Loans as
Libor Loans) as a result of:
(i) payment or prepayment by the Borrower of all or any
portion of any Libor Loan on a date other than the Interest
Adjustment Date for such Libor Loan, for any reason;
(ii) conversion of all or any portion of any Libor Loan on a
day other than the last day of an Interest Period applicable to
such Loan to a Prime Rate Loan for any reason including, without
limitation, acceleration of the Loans upon or after an Event of
Default, any Interest Rate Election or any other cause whether
voluntary or involuntary and whether or not referred to or
described in this Agreement, other than any such conversion
resulting solely from application of Sections 2.9.2 or 2.9.3 by
any Lender; provided, however that this clause shall not be
deemed to grant the Borrower any right to convert a Libor Loan to
a Prime Rate Loan prior to the end of any Interest Period or to
imply such right; or
(iii) any failure by the Borrower to borrow the Loans as
Libor Loans on the date specified in any Interest Rate Election
selecting the Libor Rate, other than any such failure resulting
solely from application of Sections 2.9.2 or 2.9.3 by any Lender;
such Lender shall promptly notify the Agent thereof, and of the
reasons therefor. Upon the request of the Agent, the Borrower shall
pay directly to the Agent for the account of such Lender such amount
as will (in the reasonable determination of such Lender, which shall
be conclusive in the absence of manifest error) reimburse such Lender
for such loss or expense. Each Lender shall furnish to the Borrower,
upon written request from the Borrower received by the Agent, a
written statement setting forth the computation of any such amounts
payable to such Lender under this Section 2.9.5.
Section 2.9.6. Banking Practices. Each Lender agrees that upon
the occurrence of any of the events described in Sections 2.2.3 and/or
2.9.2, 2.9.4 or 2.9.5. such Lender will exercise all reasonable
efforts to take such reasonable actions at no expense to such Lender
(other than reasonable expenses which are covered by the Borrower's
advance deposit of funds with such Lender for such purpose, or if such
Lender agrees, which the Borrower has agreed to pay or reimburse to
such Lender in full upon demand), in accordance with such Lender's
usual banking practices in such situations and subject to any
statutory or regulatory requirements applicable to such Lender, as
such Lender may take without the consent or participation of any other
Person to, in the case of an event described in Sections 2.2.3 and/or
2.9.4 or 2.9.5, mitigate the cost of such events to the Borrower and,
in the case of an event described in Sections 2.9.2(i), (ii) or "iii,
to seek Dollar deposits in any other interbank Libor market in which
such Lender regularly
32
(Loan Agreement - Fleet/Convergent)
<PAGE> 39
participates and in which the applicable determination(s) described in
Sections 2.9.2(i), (ii) or (iii), as the case may be, does not apply.
Section 2.9.7. Borrower's Options on Unavailability or Increased
Cost of Libor Loans. In the event of any conversion of all or any
portion of any Lender's Pro Rata Share of any Libor Loans to a Prime
Rate Loan for reasons beyond the Borrower's control or in the event
that any Lender's Pro Rata Share of all or any portion of the Libor
Loans becomes subject, under Sections 2.9.4 or 2.9.5, to additional
costs, the Borrower shall have the option, subject to the other terms
and conditions of this Agreement, to convert such Lender's Pro Rata
Share to a Prime Rate Loan by making Interest Rate Elections for
Interest Periods which (i) end on the Interest Adjustment Date for
such Libor Loan or (ii) end on Business Days occurring prior to such
Interest Adjustment Date, in which case, at the end of the last of
such Interest Periods any such Libor Rate Loan shall automatically
convert to a Prime Rate Loan and the Borrower shall have no further
right to make an Interest Rate Election with respect to such Prime
Rate Loan other than an Interest Rate Election which is effective on
the Interest Adjustment Date for such Libor Loan. The Borrower's
options set forth in this Section 2.9.7 may be exercised, if and only
if the Borrower pays, concurrently with delivery to the Agent of each
such Interest Rate Election and thereafter in accordance with Sections
2.9.4, 2.9.5 and 2.9.6 all amounts provided for therein to the Agent
in accordance with this Agreement.
If the Borrower shall, as a result of the requirements of Section
2.9.4 above, be required to pay any Lender the additional costs
referred to therein, but not be required to pay such additional costs
to the other Lender or Lenders and the Borrower, in its sole
discretion, shall deem such additional amounts to be material or in
the event that Libor Loans from a Lender are unavailable to the
Borrower as a result solely of the provisions of Sections 2.9.2,
2.9.3 or 2.9.4, but are available from the other Lender or Lenders,
the Borrower shall have the right to substitute another bank
satisfactory to the Agent for such Lender which is entitled to such
additional costs or which is relieved from making Libor Loans and the
Agent shall use reasonable efforts (with all reasonable costs of such
efforts by the Agent to be borne by the Borrower) to assist the
Borrower to locate such substitute bank. Any such substitution shall
take place in accordance with Section 9.11 and otherwise be on terms
and conditions reasonably satisfactory to the Agent, and until such
time as such substitution shall be consummated, the Borrower shall
continue to pay such additional costs and comply with the
above-referenced Sections. Upon any such substitution, the Borrower
shall pay or cause to be paid to the Lender that is being replaced,
all principal, interest (to the date of such substitution) and other
amounts owing hereunder to such Lender and such Lender will be
released from liability hereunder.
Section 2.9.8. Assumptions Concerning Funding of Libor Loans. The
calculation of all amounts payable to the Lenders under this Section
2.9 shall be made as though each Lender actually funded its relevant
Libor Loans through the purchase of a deposit in the London interbank
market bearing interest at the Libor Rate in an amount equal to that
Libor Loan and having a maturity comparable to the relevant Interest
Period and through the transfer of such deposit from an offshore
office of such Lender to a domestic office of such Lender in the
United States of America; provided, however, that each Lender may fund
each of its Libor Loans in any manner it sees fit and the foregoing
assumption shall be utilized solely for the calculation of amounts
payable under this Section 2.9.
33
(Loan Agreement - Fleet/Convergent)
<PAGE> 40
ARTICLE 3.
CONDITIONS OF LENDING
Section 3.1. Conditions Precedent to the Revolving Credit Loan Commitment
and to all Loans.
Section 3.1.1. The Revolving Credit Loan Commitment and Initial
Loans. The Revolving Credit Loan Commitment and the obligation of the Lenders to
make the initial Advances of the Loans and/or to issue any Letter of Credit or
Letter of Credit Agreement are subject to performance by the Borrower of all of
its obligations under this Agreement and to the satisfaction of the conditions
precedent that all legal matters incident to the transactions contemplated
hereby or incidental to the Loans shall be reasonably satisfactory to counsel
for the Agent and that the Lenders shall have received on or before the Closing
Date all of the following, each dated the Closing Date or another date
acceptable to the Lenders and each to be in form and substance reasonably
satisfactory to the Agent or if any of the following is not a deliverable, the
satisfaction of such condition in form and substance reasonably satisfactory to
the Agent:
Section 3.1.1.1. The Financing Documents, including, without
limitation, those hereinafter set forth and the Borrower's and any Subsidiary's
certificate of incorporation or other organizational documents, by-laws and each
agreement or instrument relating thereto.
Section 3.1.1.2. Certificate of the secretary, clerk or similar
officer of the Borrower and each Subsidiary certifying as to the resolutions of
the shareholders or board of directors of the Borrower and each Subsidiary
authorizing and approving each of the Financing Documents to which the Borrower
and each Subsidiary is a party and other matters contemplated hereby and
certifying as to the names and signatures of the Authorized Representative(s) of
the Borrower and each Subsidiary authorized to sign each Financing Document to
be executed and delivered by or on behalf of the Borrower and each Subsidiary.
The Agent and the Lenders may conclusively rely on each such certificate until
the Agent shall receive a further certificate canceling or amending the prior
certificate and submitting the signatures of the Authorized Representative(s)
named in such further certificate.
Section 3.1.1.3. Favorable opinions of Holland & Hart, counsel for
the Borrower, in form and substance reasonably satisfactory to the Agent.
Section 3.1.1.4. An Officer's Certificate stating that:
Section 3.1.1.4.1. The representations and warranties
contained in Section 4.1 and/or contained in any of the other Financing
Documents are correct on and as of the Closing Date as though made on and as of
such date; and
Section 3.1.1.4.2. No Default or Event of Default has
occurred and is continuing, or would result from the making of the Loans.
Section 3.1.1.5. Certificates of good standing or legal existence of
the secretaries of state (or equivalent officials) of the states (or
jurisdictions) of organization and qualification of and covering the Borrower
and any Subsidiaries dated reasonably near the Closing Date.
34
(Loan Agreement - Fleet/Convergent)
<PAGE> 41
Section 3.1.1.6. Evidence that (i) the ownership interests in the
Borrower are as set forth in Exhibit 1.1, (ii) the New Stockholders have
invested the Equity in the Borrower on or prior to the Closing Date, as set
forth on Exhibit 1.1 and (iii) that except for receipt and application of
certain proceeds of the Loans, the Related Transactions have been completed in
accordance with the Related Transaction Documents without any waiver or
amendment of any term or condition contained therein without the prior written
approval of the Lenders, and in compliance with any applicable laws and
necessary governmental authority approvals.
Section 3.1.1.7. A Request and an Interest Rate Election.
Section 3.1.1.8. All documents, instruments and agreements necessary
to terminate, cancel and discharge the documents, instruments and agreements
evidencing or securing any and all existing Indebtedness of the Borrower and any
Subsidiary and Liens securing such Indebtedness other than those listed in
Exhibit 3.1.1.8.
Section 3.1.1.9. Payment to the Agent of the fees specified in this
Agreement or in the Fee Letter as being payable on the Closing Date and all
reasonable out-of-pocket costs and expenses incurred by the Agent in connection
with the transactions contemplated hereby, including, but not limited to,
reasonable outside legal expenses (subject to a maximum of $40,000 in legal fees
plus out-of-pocket disbursements all with respect to closing of the Loans) and
any accounting fees, auditing fees, appraisal fees, and other fees associated
with any independent analyses of the Borrower and any Subsidiary and evidence
that all other reasonable fees and costs payable by the Borrower in connection
with the transactions contemplated by the Financing Documents and completed on
the Closing Date have been paid in full.
Section 3.1.1.10. An Officer's Certificate in the form of Exhibit
3.1.1.10, duly completed and reflecting, inter alia, compliance by the Borrower
as of the opening of business on the first Business Day after the Closing Date
but based on the Borrower's financial information as of the last day of the
Borrower's most recent fiscal quarter, adjusted to give effect to the Loans made
on the Closing Date and completion of the Related Transactions to be completed
on or prior to the Closing Date, with the financial covenants provided for
herein.
Section 3.1.1.11. Such other information about the Borrower, any
Subsidiaries and/or their Business Condition as the Lenders may reasonably
request.
Section 3.1.1.12. True copies of, and/or true copies of any
revisions to, the financial statements, the Projections, the pro forma Closing
Date financial statements giving effect to the Loans, the Equity to be received
on or prior to the Closing Date and completion of the other Related Transactions
to be completed on or prior to the Closing Date, and other information provided
pursuant to Section 4.1.5 and certification by the Borrower of the Projections.
Section 3.1.1.13. Certificates of fire, business interruption,
liability and extended coverage insurance policies, each such policy to name the
Agent as mortgagee and loss payee and, on all liability policies, as additional
insured.
Section 3.1.1.14. True descriptions of any pending or threatened
litigation against or by Borrower or any Subsidiary.
35
(Loan Agreement - Fleet/Convergent)
<PAGE> 42
Section 3.1.1.15. Evidence that all necessary material third party
consents to the Related Transactions and the Loans have been obtained and remain
in effect without the imposition of any terms or condition not reasonably
acceptable to the Lenders and all required filings with any governmental
authority have been duly completed.
Section 3.1.1.16. The financial statements described in Section
4.1.5 together with the Borrower's pro forma Closing Date balance sheet and any
updates to the Projections. Such financial statements shall be accompanied by an
Officer's Certificate of the chief financial officer of the Borrower to the
effect that (i) the representations of the Borrower set forth in Section 4.1.14
are accurate as of the Closing Date and (ii) that no Material Adverse Effect
has occurred since the date of the Borrower's most recent audited financial
statements delivered to the Lenders except as set forth or reflected in the
financial statements described in Section 4.1.5 or otherwise disclosed in
writing and acceptable to the Agent.
Section 3.1.1.17. True copies of (i) the Equity Documents, (ii) all
other documents, instruments and agreements relating to the Borrower's capital
structure and (iii) the Related Transaction Documents.
Section 3.1.1.18. The fact that the representations and warranties
of the Borrower contained in Article 4, infra, and in each of the other
Financing Documents are true and correct in all material respects on and as of
the Closing Date except as altered hereafter by actions not prohibited
hereunder. The Borrower's delivery of each Note and Letter of Credit Agreement
to the Lenders and of each Request to the Agent shall be deemed to be a
representation and warranty by the Borrower as of the date thereof to such
effect.
Section 3.1.1.19. That there has been no enactment of any law or
regulation by any Governmental Authority which would make it (i) unlawful, or
(ii) prevent, restrain or impose conditions which the Lenders determine to be
adverse, in any respect as to the foregoing, to the making of the Loans and/or
the completion of the Related Transactions.
Section 3.1.1.20. A completed Year 2000 questionnaire covering the
Borrower and any Subsidiaries.
Section 3.1.1.21. The Security Documents, after the completion of
any required filings or recordations, will grant to the Agent perfected, first
priority security interests or mortgages, as the case may be, with respect to
the collateral identified therein and the Agent shall received the favorable
opinions of counsel referred to in Section 3.1.1.3 above with respect to such
perfection. The Agent shall also have received such searches, landlord consents,
access agreements and/or title insurance commitments as reasonably requested by
the Agent, all in form and substance reasonably satisfactory to the Agent and/or
its counsel. Without limiting the generality of the foregoing, the Agent shall
be reasonably satisfied with the terms and conditions of all real property
leases in which the Borrower and any Subsidiary has a leasehold interest,
including the terms of such leaseholds and the assumability of the lessee's
obligations thereunder upon the transfer of or foreclosure upon of the
Borrower's or any Subsidiary's leasehold interest.
Section 3.1.1.22. No Material Adverse Effect has occurred and there
shall exist no action, suit, investigation, litigation or proceeding pending or
threatened in any court or before any arbitrator or Governmental Authority that
could reasonably be expected to result in a Material Adverse Effect.
36
(Loan Agreement - Fleet/Convergent)
<PAGE> 43
Section 3.1.1.23. All information and materials supplied to the
Agent prior to the date hereof shall be true and correct in all material
aspects; and no additional information shall have come to the attention of the
Agent or the Lenders that is inconsistent in any material respect with the
information and materials supplied to the Agent prior to the date hereof or that
could reasonably be expected to have a Material Adverse Effect.
Section 3.1.1.24. The Agent shall be satisfied with the results of
its due diligence examination of the report on the Borrower prepared by Ernst &
Young, and review of other business and financial information about the Borrower
and any Subsidiaries as may be requested from time to time by the Agent.
Section 3.1.2. The Revolving Credit Loan Commitment and the Loans.
The Revolving Credit Loan Commitment and the obligation of each Lender to make
or maintain its Pro Rata Share of any Advance or Loan and/or to issue any Letter
of Credit or Letter of Credit Agreement are subject to performance by the
Borrower of all its obligations under this Agreement and to the satisfaction of
the following further conditions precedent:
(a) The fact that, immediately prior to and upon the making of each Loan,
no Event of Default or Default shall have occurred and be continuing;
(b) The fact that the representations and warranties of the Borrower
contained in Article 4, infra and in each of the other Financing Documents, are
true and correct in all material respects on and as of the date of each Advance
or Loan except as altered hereafter by actions consented to or not prohibited
hereunder. The Borrower's delivery of the Notes to the Lenders and of each
Request to the Agent shall be deemed to be a representation and warranty by the
Borrower as of the date of such Advance or Loan as to the facts specified in
Sections 3.1.2(a) and (b);
(c) Receipt by Agent on or prior to the Business Day specified in the
definition of Interest Rate Election of a written Request stating the amount
requested for the Loan or Advance in question and an Interest Rate Election for
such Loan or Advance, all signed by a duly authorized officer of the Borrower on
behalf of the Borrower;
(d) That there exists no law or regulation by any governmental authority
having jurisdiction over the Agent or any of the Lenders which would make it
unlawful in any respect for such Lender to make its Pro Rata Share of the Loan
or Advance, including, without limitation, Regulations U, T and X of the Board
of Governors of the Federal Reserve System; and
(e) No Material Adverse Effect has occurred.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Agent and the Lenders that, after giving effect
to the Loans and the application of the proceeds thereof (which representations
and warranties shall survive the making of the Loans) as follows:
37
(Loan Agreement - Fleet/Convergent)
<PAGE> 44
Section 4.1.1. Organization and Existence. The Borrower and any Subsidiary
is a corporation, duly organized, validly existing and in good standing under
the laws of the state (or applicable jurisdiction) of its incorporation or
organization and is duly qualified to do business in all jurisdictions in which
such qualification is required, all as noted on Exhibit 4.1.1., except where
failure to so qualify could not reasonably be expected to have a Material
Adverse Effect, and has all requisite power and authority to conduct its
business, to own its properties and to execute and deliver, and to perform all
of its obligations under the Financing Documents.
Section 4.1.2. Authorization and Absence of Defaults. Except as described
on Exhibit 4.1.2, the execution, delivery to the Agent and/or the Lenders and
performance by the Borrower and any Subsidiary of the Financing Documents and
Related Transaction Documents have been duly authorized by all necessary
corporate and governmental action and do not and will not (i) require any
consent or approval of the shareholders or board of directors of the Borrower or
any Subsidiary which has not been obtained, (ii) violate any provision of any
law, rule, regulation (including, without limitation, Regulations U and X of
the board of governors of the federal reserve system), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Borrower and/or any Subsidiary and/or the articles of
organization or by-laws, as applicable, of the Borrower and/or any Subsidiary,
(iii) result in a material breach of or constitute a material default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower and/or any Subsidiary is or are a party or
parties or by which it or they or its or their properties may be bound or
affected, or (iv) result in, or require, the creation or imposition of any Lien
on any of the Borrower's and/or any Subsidiary's respective properties or
revenues other than Liens granted to the Agent by any of the Financing Documents
securing the Obligations. The Borrower and any Subsidiary are in compliance with
any such applicable law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award or any such indenture, other agreement, lease or
instrument, except where the failure to be in compliance could not reasonably be
expected to have a Material Adverse Effect.
Section 4.1.3. Acquisition of Consents. Except as noted on Exhibit 4.1.3.,
no authorization, consent, approval, license, exemption of or filing or
registration with any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, other than those which
have been obtained, is or will be necessary to the valid execution and delivery
to the Agent and/or the Lenders or performance by the Borrower or any Subsidiary
of any Financing Documents and each of the foregoing which has been obtained is
in full force and effect.
Section 4.1.4. Validity and Enforceability. Each of the Financing Documents
when delivered hereunder will constitute the legal, valid and binding
obligations of each of the Borrower and any Subsidiary which is or are a party
thereto enforceable against the Borrower, and any Subsidiary which is or are a
party thereto in accordance with their respective terms except as the
enforceability thereof may be limited by the effect of general principles of
equity and bankruptcy and similar laws affecting the rights and remedies of
creditors generally.
Section 4.1.5. Financial Information. The following information with
respect to the Borrower has heretofore been furnished to the Agent:
Section 4.1.5.1. Audited annual financial statements of the Borrower
for the periods ended December 31, 1997 and December 31, 1998; and
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Section 4.1.5.2. Interim, consolidated balance sheets of the Borrower
and any Subsidiaries as of the end of the most recent fiscal quarter prior to
the Closing and the related statements of income and cash flows and
shareholders' equity, such balance sheets and statements to be prepared and
certified by an Authorized Representative in an Officer's Certificate as having
been prepared in accordance with GAAP except for footnotes and year-end
adjustments, and to be in form reasonably satisfactory to the Agent;
Section 4.1.5.3. The Projections.
Section 4.1.5.4. The pro forma financial statements of the Borrower as
of the Closing Date provided pursuant to Section 3.1.1.12.
Each of the financial statements referred to above in Section 4.1.5.1
and 4.1.5.2 was prepared in accordance with GAAP (subject, in the case of
interim statements, to the absence of footnotes and normal year-end adjustments)
applied on a consistent basis, except as stated therein. To the best of the
Borrower's knowledge, each of the financial statements referred to above in
Sections 4.1.5.1, 4.1.5.2 and 4.1.5.4 fairly presents the financial condition or
pro forma financial condition, as the case may be, of the Person being reported
on at such dates and is complete and correct in all material respects and no
Material Adverse Effect has occurred since the date thereof. The Projections
were prepared by the Borrower in good faith.
Section 4.1.6. No Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower and/or any Subsidiary or any of their properties before any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which if determined adversely to the
Borrower and/or any Subsidiary would draw into question the legal existence of
the Borrower and/or any such Subsidiary and/or the validity, authorization
and/or enforceability of any of the Financing Documents and/or any provision
thereof and/or could not reasonably be expected to have a Material Adverse
Effect except those matters, if any, described on Exhibit 4.1.6 none of which,
in Borrower's good faith opinion, will (i) have such Material Adverse Effect or
(ii) draw into question (a) the legal existence of the Borrower and/or any such
Subsidiary or (b) the validity, authorization and/or enforceability of any of
the Financing Documents and/or any provision thereof.
Section 4.1.7. Regulation U. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System (12 CFR Part 221), does not own and has no present intention of acquiring
any such margin stock or a "margin security" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System (12 CFR, Part 207). None
of the proceeds of the Loans will be used directly or indirectly by the Borrower
for the purpose of purchasing or carrying, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry,
any such margin security or margin stock or for any other purpose which might
constitute the transaction contemplated hereby a "purpose credit" within the
meaning of said Regulation U, or cause this Agreement to violate any other
regulation of the Board of Governors of the Federal Reserve System or the
Securities and Exchange Act of 1934, as amended, or any rules or regulations
promulgated under either said statute.
Section 4.1.8. Absence of Adverse Agreements. Neither the Borrower nor any
Subsidiary is a party to any indenture, loan or credit agreement or any lease or
other agreement or
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<PAGE> 46
instrument or subject to any corporate or partnership restriction which could
reasonably be expected to have a Material Adverse Effect.
Section 4.1.9. Taxes. The Borrower and each Subsidiary has filed all tax
returns (federal, state and local) required to be filed and paid all taxes shown
thereon to be due, including interest and penalties, except for those taxes, if
any, which are being contested in good faith and by appropriate proceedings, and
for which proper reserve or other provision has been made in accordance with
GAAP and except where any failure to file or pay could not reasonably be
expected to have a Material Adverse Effect on the Borrower or any Subsidiary and
except as described in Exhibit 4.1.9.
Section 4.1.10. ERISA. Borrower and any Commonly Controlled Entity do not
maintain or contribute to any Plan which is not in substantial compliance with
ERISA, or any Single Employer Plan which has incurred any accumulated funding
deficiency within the meaning of sections 412 and 418 of the Code or which has
applied for or obtained a waiver from the Internal Revenue Service of any
minimum funding requirement under section 412 of the Code. Borrower and any
Commonly Controlled Entity have not incurred any liability to the PBGC in
connection with any Plan covering any employees of Borrower or any Commonly
Controlled Entity in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate or ceased operations at any facility or withdrawn from any Plan in a
manner which could subject any of them to liability under sections 4062(e), 4063
or 4064 of ERISA in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate, and know of no facts or circumstance which might give rise to any
liability of Borrower or any Commonly Controlled Entity to the PBGC under Title
IV of ERISA in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate. Borrower and any Commonly Controlled Entity have not incurred any
withdrawal liability in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate (including but not limited to any contingent or secondary withdrawal
liability) within the meaning of sections 4201 and 4202 of ERISA, to any
Multiemployer Plan, and no event has occurred, and there exists no condition or
set of circumstances known to the Borrower, which presents a risk of the
occurrence of any withdrawal from or the partition, termination, reorganization
or insolvency of any Multiemployer Plan which could result in any liability to a
Multiemployer Plan in amount exceeding Fifty Thousand Dollars ($50,000) in the
aggregate.
Except for payments for which the minimum funding requirement has been
waived under section 412 of the Code, full payment has been made of all amounts
which Borrower and any Commonly Controlled Entity are required to have paid as
contributions to any Plan under applicable law or under any plan or any
agreement relating to any Plan to which Borrower or any Commonly Controlled
Entity is a party. Borrower and each Commonly Controlled Entity have made
adequate provision for reserves to meet contributions that have not been made
because they are not yet due under the terms of any Plan or related agreements.
Neither Borrower nor any Commonly Controlled Entity has any knowledge, nor
do any of them have any reason to believe, that any Reportable Event which could
result in a liability or liabilities of Fifty Thousand Dollars ($50,000) or more
in the aggregate has occurred with respect to any Plan.
Section 4.1.11. Ownership of Properties.
Section 4.1.11.1. Except for Permitted Encumbrances, Borrower and any
Subsidiary has good title to all of its properties and assets free and clear of
all restrictions and Liens of any kind other than those which could not
reasonably be expected to have a Material
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<PAGE> 47
Adverse Effect or a material adverse effect on the validity, authorization
and/or enforceability of the Financing Documents and/or any provision thereof.
Section 4.1.11.2. Exhibit 4.1.11 accurately and completely lists the
location of all real property owned or leased by Borrower or any Subsidiary.
Borrower and each Subsidiary enjoys quiet possession under all material leases
of real property to which it is a party as a lessee, and all of such leases are
valid, subsisting and, to Borrower's knowledge, in full force and effect.
Section 4.1.11.3. To Borrower's knowledge, except as specified in
Exhibit 4.1.11, none of the real property occupied by Borrower or any
Subsidiary is located within any federal, state or municipal flood plain zone.
Section 4.1.11.4. Except as set forth in Exhibit 4.1.11, all of the
material properties used in the conduct of the Borrower's and each Subsidiary's
business (i) are in good repair, working order and condition (reasonable wear
and tear excepted) and reasonably suitable for use in the operation of
Borrower's, and each Subsidiary's business; and (ii) to Borrower's knowledge are
currently operated and maintained, in all material respects, in accordance with
the requirements of applicable governmental authorities.
Section 4.1.12. Accuracy of Representations and Warranties. None of
Borrower's representations or warranties set forth in this Agreement or in any
document or certificate furnished pursuant to this Agreement or in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary to make any statement
of fact contained herein or therein, in light of the circumstances under which
it was made, not misleading; except that unless provided otherwise any such
document or certificate which is dated speaks as of the date stated and not the
present.
Section 4.1.13. No Investment Company. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company" as such terms are defined in the Investment Company Act of
1940, as amended, which is required to register thereunder.
Section 4.1.14. Solvency, etc. After giving effect to the consummation of
each Loan outstanding and to be made under this Agreement as of the time this
representation and warranty is given, the Borrower (a) will be able to pay its
debts as they become due and (b) will have funds and capital sufficient to carry
on its business and all businesses in which it is about to engage. The Borrower
will not be rendered insolvent by the execution and delivery of this Agreement
and the consummation of any transactions contemplated herein.
Section 4.1.15. Approvals. Except as set forth in Exhibit 4.1.3, all
approvals required from all Persons including without limitation all
governmental authorities with respect to the Financing Documents have been
obtained.
Section 4.1.16. Ownership Interests. The schedule of ownership interests in
the Borrower and any Subsidiaries set forth in Exhibit 1.1 is true, accurate
and complete and the Investments to be made for all ownership interests
disclosed therein have in fact been fully paid in immediately available Dollars
after giving effect to the closing of the Related Transactions.
Section 4.1.17. Licenses, Registrations, Compliance with Laws, etc. Exhibit
4.1.17 accurately and completely describes all permits, governmental licenses,
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<PAGE> 48
registrations and approvals, material to carrying out of Borrower's and each of
the Subsidiaries' businesses as presently conducted and as required by law or
the rules and regulations of any Governmental Authority or foreign governmental
agency, body, instrumentality or commission having jurisdiction over the
Borrower or any of the Subsidiaries, including but not limited to the United
States Environmental Protection Agency, the United States Department of Labor,
the United States Occupational Safety and Health Administration, the United
States Equal Employment Opportunity Commission, the Federal Trade Commission and
the United States Department of Justice and analogous and related state and
foreign agencies. All existing authorizations, licenses and permits are in full
force and effect, are duly issued in the name of, or validly assigned to the
Borrower or a Subsidiary and the Borrower or a Subsidiary has full power and
authority to operate thereunder. There is no material violation or material
failure of compliance or, to Borrower's knowledge, allegation of such violation
or failure of compliance on the part of the Borrower or any Subsidiary with any
of the foregoing permits, licenses, registrations, approvals, rules or
regulations and there is no action, proceeding or investigation pending or to
the knowledge of the Borrower threatened nor has the Borrower or any Subsidiary
received any notice of such which might result in the termination or suspension
of any such permit, license, registration or approval which in any case could be
reasonably expected to have a Material Adverse Effect.
Section 4.1.18. Principal Place of Business; Books and Records. The
Borrower's chief executive offices (as that term is used in the Uniform
Commercial Code) are located at Borrower's addresses set forth in Section 9.6.
All of the Borrower's books and records are kept at one or more of its addresses
set forth in Section 9.6.
Section 4.1.19. Subsidiaries. As of the Closing Date, the Borrower has only
the Subsidiaries identified on Exhibit 1.1.
Section 4.1.20. Copyright. Except as set forth in Exhibit 4.1.20 the
Borrower has not violated any of the provisions of the Copyright Revision Act of
1976, 17 U.S.C.101, et seq. The Borrower has filed all registration statements,
notices and statements of account and all necessary supplements and adjustment
schedules thereto with the United States Copyright Office and has made all
payments to the United States Copyright Office that are required. Exhibit 4.1.20
accurately and completely sets forth all copyrights held by the Borrower or any
of the Subsidiaries and contains exceptions to the representations contained in
this Section 4.1.20. To the best of Borrower's knowledge, no claim of
infringement of a copyright by the Borrower or any subsidiary has been made or
threatened by any other Person.
Section 4.1.21. Environmental Compliance. Neither the Borrower nor, to the
knowledge of the Borrower, any other Person:
Section 4.1.21.1. has ever caused, permitted, or suffered to exist
any Hazardous Material to be spilled, placed, held, located or disposed of on,
under, or about, any of the facilities owned, leased or used by the Borrower
(the "Premises"), or from the Premises into the atmosphere, any body of water,
any wetlands, or on any other real property, nor to Borrower's knowledge does
any Hazardous Material exist on, under or about the Premises other than as
disclosed on Exhibit 4.1.21, or in respect of Hazardous Material used or
disposed of in compliance with law;
Section 4.1.21.2. has ever used any of the Premises as a treatment,
storage or disposal (whether permanent or temporary) site for any Hazardous
Material as defined in 42 U.S.C.A. 6901, et seq. (the Resource Recovery and
Conservation Act); and
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<PAGE> 49
Section 4.1.21.3. has received any notice of violation, Lien or
other notice issued by any Governmental Authority with respect to the
environmental condition of the Premises or any other property occupied by the
Borrower, or any other property which was included in the property description
of the Premises or such other real property within the preceding three years
except as disclosed to the Agent.
Section 4.1.22. Material Agreements, etc. Exhibit 4.1.22 attached hereto
accurately and completely lists, as of the Closing Date, all material agreements
to which the Borrower or any of the Subsidiaries are a party including without
limitation all software licenses, and all material construction, engineering,
consulting, employment, management, operating and related agreements, if any,
which are presently in effect. All of the material agreements to which Borrower
or any Subsidiary is a party, are legally valid, binding, and, to Borrower's
knowledge, in full force and effect and neither the Borrower, any of the
Subsidiaries nor, to Borrower's knowledge, any other parties thereto are in
material default thereunder.
Section 4.1.23. Patents, Trademarks and Other Property Rights. Exhibit
4.1.23 attached hereto contains, as of the Closing Date, a complete and accurate
schedule of all registered trademarks, registered copyrights and patents of the
Borrower and/or any of the Subsidiaries, and pending applications therefor, and
all other intellectual property in which the Borrower and/or any of the
Subsidiaries has any rights other than "off-the shelf" software which is
generally available to the general public at retail. Except as set forth in
Exhibit 4.1.23, the Borrower and any Subsidiaries own, possess, or have licenses
to use all the patents, trademarks, service marks, trade names, copyrights and
non-governmental licenses, and all rights with respect to the foregoing,
necessary for the conduct of their respective businesses as now conducted,
without, to the Borrower's knowledge any conflict with the rights of others with
respect thereto.
Section 4.1.24. Related Transaction Documents. The Borrower has, prior to
the date hereof, delivered to the Agent true copies of the Related Transaction
Documents, and each and every amendment or modification thereto and, except for
receipt and application of certain proceeds of the Loans, the Related
Transactions have been completed in accordance with the Related Transaction
Documents, without any waiver or amendment of any term or condition contained
therein without the prior written approval of the Lenders, and in compliance
with any applicable laws and necessary governmental authority approvals.
Section 4.1.25. Material Adverse Effect. No Material Adverse Effect has
occurred and there exists no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental or regulatory agency or authority that could reasonably be expected
to result in a Material Adverse Effect.
Section 4.1.26. Year 2000. On the basis of comprehensive review and
assessment undertaken by the Borrower of the Borrowers' and its Subsidiaries'
computer applications and an assessment by the Borrower of its and its
Subsidiaries' material suppliers, vendors and customers, the Borrower reasonably
believes that the "Year 2000 Problem" (that is, the risk that computer
applications used by any person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999) will not result in a Material Adverse Effect.
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<PAGE> 50
ARTICLE 5.
COVENANTS OF THE BORROWER
Section 5.1. Affirmative Covenants of the Borrower Other than Reporting
Requirements. From the date hereof and thereafter for so long as there is
Indebtedness of the Borrower to any Lender and/or the Agent under any of the
Financing Documents or any part of the Revolving Credit Loan Commitment is in
effect, the Borrower will, with respect to itself and, unless noted otherwise
below, with respect to each of its Subsidiaries, ensure that each Subsidiary
will, unless the Majority Lenders shall otherwise consent in writing:
Section 5.1.1. Payment of Taxes, etc. Pay and discharge all taxes and
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims for the same which, if
unpaid, might become a Lien upon any of its properties, provided that (unless
and until foreclosure, restraint, sale or any similar proceeding is pending and
is not stayed, discharged or bonded within 30 days after commencement) the
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by proper proceedings and for
which proper reserve or other provision has been made in accordance with GAAP,
unless failure to pay could not reasonably be expected to result in a Material
Adverse Effect.
Section 5.1.2. Maintenance of Insurance. Maintain on the collateral
under any of the Security Documents insurance against loss by fire, hazards
included within the term "extended coverage", and such other hazards, casualties
and contingencies as the Agent may from time to time require, in an amount equal
to one hundred percent (100%) of the replacement cost of the collateral under
any of the Security Documents and business interruption insurance in the amount
of at least $4,000,000. All policies of such insurance and all renewals thereof
shall be in form and substance acceptable to Agent, shall be made payable in
case of loss to the Agent as loss payee and mortgagee and shall contain an
endorsement requiring thirty (30) days prior written notice to the Agent prior
to cancellation or change in the coverage, scope or amount of any such policies.
Borrower shall also keep in full force and effect a policy of public liability
insurance against claims of bodily injury, death or property damage occurring in
any building in which the limits of liability shall not be less than $1,000,000
per person and $2,000,000 per accident, together with an excess liability policy
in the amount of $5,000,000 which shall be in addition to the limits above set
forth. Borrower shall increase the limits of such liability insurance to such
higher amounts as the Agent may from time to time reasonably require.
Certificates of all such insurance shall be delivered to the Agent concurrently
with the execution and delivery of this Agreement, and thereafter all renewal or
replacement certificates shall be delivered to the Agent not less than thirty
(30) days prior to the expiration date of the policy to be renewed or replaced,
accompanied by evidence satisfactory to the Agent that all premiums payable with
respect to such policies have been paid by Borrower. Borrower shall have the
right of free choice in the selection of the agent or the insurer through or by
which the insurance required hereunder is to be placed; provided, however, said
insurer has at all times a general policyholders' rating of A or A+ in Best's
latest rating guide. Furthermore, the Agent shall have the right and is hereby
constituted and appointed the true and lawful attorney irrevocable of Borrower,
in the name and stead of Borrower, but in the uncontrolled discretion of said
attorney, (i) to adjust, sue for, compromise and collect any amounts due under
such insurance policies in the event of loss and (ii) to give releases for any
and all amounts received in settlement of losses under such policies; and the
same shall, subject to Section 2.6.1.3 of this Agreement, at the option of the
Agent, be applied, after first deducting the costs of collection, on account of
any Indebtedness the payment of which is
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<PAGE> 51
secured by any of the Financing Documents, whether or not then due, or,
notwithstanding the claims of any subsequent lienor, be used or paid over to
Borrower in accordance with reasonable procedures established by the Agent for
use in repairing or replacing any damaged or destroyed collateral under any of
the Security Documents.
Section 5.1.3. Preservation of Existence, etc. Preserve and maintain in
full force and effect its legal existence, and all material rights, franchises
and privileges in the jurisdiction of its organization, preserve and maintain
(except for sales licenses or other scopes of use granted in the ordinary course
of Borrower's business consistent with past practice) all material licenses,
governmental approvals, trademarks, patents, trade secrets, copyrights and trade
names owned or possessed by it and which are necessary or, in the reasonable
business judgment of the Borrower, desirable in view of its business and
operations or the ownership of its properties and qualify or remain qualified as
a foreign corporation in each jurisdiction in which such qualification is
necessary or, in its reasonable business judgment, desirable in view of its
business and operations and ownership of its properties except where the failure
to so qualify could reasonably be expected to have a Material Adverse Effect.
Section 5.1.4. Compliance with Laws, etc. Comply with the requirements
of all present and future applicable laws, rules, regulations and orders of any
governmental authority having jurisdiction over it and/or its business
including, without limitation, regulations of the United States Copyright Office
and the Copyright Royalty Tribunal, except where the failure to comply could not
be reasonably expected to have a Material Adverse Effect.
Section 5.1.5. Visitation Rights. Permit, during normal business hours
and upon the giving of reasonable notice, the Agent, the Lenders and any agents
or representatives thereof, to examine and make copies of (at Borrower's cost
and expense) and abstracts from the records and books of account of, and visit
the properties of the Borrower and any Subsidiary to discuss the affairs,
finances and accounts of the Borrower or any Subsidiary with any of their
partners, officers or management level employees and/or any independent
certified public accountant of the Borrower and/or any Subsidiary.
Section 5.1.6. Keeping of Records and Books of Account. Keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP and with applicable requirements of any governmental
authority having jurisdiction over the Borrower and/or any Subsidiary in
question, reflecting all financial transactions.
Section 5.1.7. Maintenance of Properties, etc. Maintain and preserve
all of its properties necessary or useful in the proper conduct of its business,
in good working order and condition, ordinary wear and tear excepted, and in
accordance with each of the Security Documents and except as otherwise permitted
by other provisions of this Agreement.
Section 5.1.8. Post-Closing Items. Complete in a timely fashion all
actions required in the Post-Closing Letter.
Section 5.1.9. Other Documents, etc. Except as otherwise required by
this Agreement, pay, perform and fulfill all of its material obligations and
covenants under each material document, instrument or agreement to which it is a
party including, without limitation, the Related Transaction Documents; provided
that so long as the Borrower or any Subsidiary is contesting any claimed default
by it or them under any of the foregoing by proper proceedings conducted in good
faith and for which any proper reserve or other provision in accordance with
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<PAGE> 52
and to the extent required by GAAP has been made, such default shall not be
deemed a violation of this covenant.
Section 5.1.10. Minimum Interest Coverage Ratio. Maintain at the end of
each Borrower fiscal quarter a ratio of EBITDA to Interest Expense of not less
than 3.0:1.0, such ratio to be measured at each Borrower fiscal quarter end
commencing September 30, 1999 as follows: (i) for the Borrower fiscal quarter
ending September 30, 1999 Interest Expense shall be Interest Expense for such
fiscal quarter times four, (ii) for the Borrower fiscal quarter ending December
31, 1999 Interest Expense shall be Interest Expense for such fiscal quarter plus
Interest Expense for the Borrower fiscal quarter ending September 30, 1999 times
two, (iii) for the Borrower fiscal quarter ending March 31, 2000 Interest
Expense shall be Interest Expense for such fiscal quarter plus Interest Expense
for the Borrower fiscal quarters ending September 30, 1999 and December 31, 1999
times one and one third and (iv) for the Borrower fiscal quarter ending June 30,
2000 and thereafter Interest Expense shall be Interest Expense for the rolling
four Borrower fiscal quarter period consisting of the Borrower fiscal quarter
then ending and the three immediately preceding Borrower fiscal quarters. EBITDA
shall be, at all Borrower fiscal quarter ends, EBITDA for the rolling four
Borrower fiscal quarter period consisting of the Borrower fiscal quarter then
ending and the three immediately preceding Borrower fiscal quarters.
Section 5.1.10(A). Minimum Profitability. Have EBITDA at each
Borrower fiscal quarter end for such fiscal quarter and at each Borrower fiscal
year end for such fiscal year of at least 80.1% of the EBITDA projected in the
most recent Budget received by the Agent in compliance with Section 5.3.7;
provided that for September 30, 1999 and December 31, 1999 this EBITDA
requirement shall be based on EBITDA in the Projections.
Section 5.1.11. Minimum Debt Service Coverage Ratio. Maintain a Debt
Service Coverage Ratio of not less than 1.25:1.00, such ratio to be measured at
each Borrower fiscal quarter end for the rolling four Borrower fiscal quarter
period consisting of the Borrower fiscal quarter then ending and the three
immediately preceding Borrower fiscal quarters; provided that for purposes of
this covenant Interest Expense shall be calculated as provided in Section
5.1.10.
Section 5.1.12. Maximum Ratio of Total Indebtedness for Borrowed Money
to EBITDA. Maintain at the end of each fiscal quarter of the Borrower in each
period set forth below a ratio of (i) total Indebtedness for Borrowed Money of
the Borrower and its Subsidiaries on a consolidated basis as of the last day of
such fiscal quarter to (ii) EBITDA for the rolling four Borrower fiscal quarter
period consisting of such fiscal quarter and the three immediately preceding
Borrower fiscal quarters of not greater than the ratio set forth below opposite
such period:
<TABLE>
<CAPTION>
Borrower Fiscal Quarter Ending Ratio
------------------------------ -----
<S> <C>
June 30, September 30 and December 31, 1999 3.00:1.00
March 31, 2000 2.75:1.00
June 30, 2000 through December 31, 2000 2.50:1.00
March 31, 2001 through March 31, 2002 2.00:1.00
June 30, 2002 and thereafter 1.50:1.00
</TABLE>
Section 5.1.12(A). Minimum Quick Ratio. Maintain a Quick Ratio of
not less than 1.10:1.00 at the Borrower fiscal quarter end September 30, 1999
and at each Borrower fiscal quarter end thereafter. As soon as is practicable
following the close of each month after the Closing Date and in any event within
fifteen (15) days thereafter, the Borrower will submit to the
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Agent an Eligible Receivables certificate in the form of Exhibit 5.1.12(A) or on
such other form as the Agent may from time to time prescribe, which certificate
shall contain information adequate to identify accounts receivable which the
Borrower wishes to include in Eligible Receivables. During the continuance of a
Default or Event of Default, the Borrower shall also, if the Agent so requests,
accompany such information with assignments of accounts in form and substance
satisfactory to the Agent which assignments shall give the Agent full power to
collect, compromise or otherwise deal with the assigned accounts as the sole
owner thereof. Concurrently with each of such reports, and immediately if
material in amount, the Borrower shall notify the Agent of each return or
adjustment, rejection, repossession or loss, theft or damage of or to
merchandise represented by Eligible Receivables or any other collateral for any
Indebtedness of the Borrower to the Agent and of any credit, adjustment or
dispute arising in connection with the goods or services represented by Eligible
Receivables. All payments on Eligible Receivables and all adjustments and
credits with respect thereto, whether unilateral, negotiated or otherwise,
shall, to the extent they exceed $50,000 in the aggregate, be immediately
reflected in the Net Outstanding Amount of Eligible Receivables.
Section 5.1.12(B). Receivables and Accrued Revenues. Maintain at each
Borrower fiscal quarter end accounts receivable and accrued revenues days
outstanding determined in accordance with GAAP not to exceed 75 days. Accounts
receivable and accrued revenues days outstanding shall be calculated as follows:
the quotient of the Borrower's revenues for the trailing four quarter period
consisting of the Borrower's most recent fiscal quarter and the immediately
preceding three Borrower fiscal quarters divided by the sum of the average
ending accounts receivable balance for the immediately preceding 12 months plus
the average ending accrued revenues balance for the immediately preceding 12
months shall be divided into 365 and the quotient of the latter division shall
be the amount of accounts receivable and accrued revenue days outstanding.
Section 5.1.13. Officer's Certificates and Requests. Provide each
Officer's Certificate required under this Agreement and each Request so that the
statements contained therein are accurate and complete in all material respects.
Section 5.1.14. Depository. Use the Agent and Wells Fargo Bank,
National Association as principal depositories of Borrower's funds.
Section 5.1.15. Chief Executive Officer. Maintain Glenn E. Montgomery,
Jr. as chief executive officer of the Borrower and as the Person with principal
executive, operating and management responsibility for the Borrower's business
or obtain a replacement of comparable experience and training in the Borrower's
industry within 150 days of his ceasing to act in such capacity.
Section 5.1.16. Notice of Purchase of Real Estate, Leases, etc.
Promptly notify the Agent in the event that the Borrower shall purchase any real
estate or enter into any lease of real estate or of equipment material to the
operation of the Borrower's business, supply the Agent with a copy of the
related purchase agreement or of such lease, as the case may be, promptly notify
the Agent in the event that the Borrower shall have assets having a value of
$100,000 or more located in any jurisdiction in which Agent does not have a
perfected Lien on such assets and promptly notify the Agent if Borrower acquires
any item referred to in Section 4.1.23 and, if requested by the Agent, execute
and deliver, or cause to be executed and delivered, to the Agent for the benefit
of the Lenders a Uniform Commercial Code financing statement, Security Document,
Security Document amendment, deed of trust, mortgage, assignment or other
document, together with landlord consents, in the case of leased property,
reasonably satisfactory
47
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in form and substance to the Agent, granting a valid first Lien (subject to any
Liens permitted under Section 5.2.1 hereof) on such real property or leasehold
or personal property as security for the Financing Documents, all subject to the
limitations of Section 5.2.17.
Section 5.1.17. Additional Assurances. From time to time hereafter,
execute and deliver or cause to be executed and delivered, such additional
instruments, certificates and documents, and take all such actions, as the Agent
shall reasonably request for the purpose of implementing or effectuating the
provisions of the Financing Documents, and upon the exercise by the Agent of any
power, right, privilege or remedy pursuant to the Financing Documents which
requires any consent, approval, registration, qualification or authorization of
any governmental authority or instrumentality, exercise and deliver all
applications, certifications, instruments and other documents and papers that
the Agent may be so required to obtain. In addition, upon receipt of an
affidavit of an officer of any Lender as to the loss, theft, destruction or
mutilation of any of such Lender's Notes or any Security Document which is not
of public record, and, in the case of any such loss, theft, destruction or
mutilation, upon cancellation of any such Note or Security Document, Borrower
will issue, in lieu thereof, a replacement Note or Security Document in the same
principal amount thereof and otherwise of like tenor.
Section 5.1.18. Appraisals. Permit the Agent and its agents, at any
time and in the sole discretion of the Agent or at the request of the Majority
Lenders, to conduct appraisals of the Borrower's business, the cost of which
shall be borne by the Borrower; provided that so long as no Event of Default
exists the Borrower shall not be required to bear the cost of any such
appraisals (a) on more than two occasions during any 12 month period and (b) in
excess of $5,000 per appraisal.
Section 5.1.19. Environmental Compliance. Comply strictly and in all
material respects with the requirements of all federal, state, and local
environmental laws; notify the Lenders promptly in the event of any spill of
Hazardous Material materially affecting the Premises occupied by the Borrower
from time to time; forward to the Lenders promptly any written notices relating
to such matters received from any governmental agency; and pay promptly when due
any uncontested fine or assessment against the Premises.
Section 5.1.20. Remediation. Immediately contain and remove any
Hazardous Material found on the Premises in compliance with applicable laws and
at the Borrower's expense, subject however, to the right of the Agent, at the
Agent's option but at the Borrower's expense, to have an environmental engineer
or other representative review the work being done.
Section 5.1.21. Site Assessments. Promptly upon the request of the
Agent, based upon the Agent's reasonable belief that a material Hazardous Waste
or other environmental problem exists with respect to any Premises, provide the
Agent with a Phase I environmental site assessment report and, if Agent finds a
reasonable basis for further assessment in such Phase I assessment, a Phase II
environmental site assessment report, or an update of any existing report, all
in scope, form and content and performed by such company as may be reasonably
satisfactory to the Agent.
Section 5.1.22. Indemnity. Indemnify, defend, and hold the Agent and
the Lenders harmless from and against any claim, cost, damage (including without
limitation consequential damages), expense (including without limitation
reasonable attorneys' fees and expenses), loss, liability, or judgment now or
hereafter arising as a result of any claim for environmental cleanup costs, any
resulting damage to the environment and any other environmental claims against
the Borrower, any Subsidiary, the Lenders and/or the Agent arising
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<PAGE> 55
out of the transactions contemplated by this Agreement, or any of the Premises.
The provisions of this Section shall continue in effect and shall survive (among
other events), until the applicable statute of limitations has expired, any
termination of this Agreement, foreclosure, a deed in lieu transaction,
payment and satisfaction of the Obligations of Borrower, and release of any
collateral for the Loans.
Section 5.1.23. Trademarks, Copyrights, etc. Concurrently with the
acquisition of any trademark, tradename, copyright, patent or service mark
collaterally assign and grant a first priority perfected Lien thereon to the
Agent pursuant to documents in form and substance reasonably satisfactory to the
Agent.
Section 5.1.24. Montgomery Loan. Cause that certain $2,000,000 loan
made by the Borrower to Glenn E. Montgomery, Jr. on or about the Closing Date to
be repaid to the Borrower in full and in Dollars on or prior to the 270th day
after the Closing Date, provided that so long as the Borrower is in the process
of registration for a Qualified Initial Public Offering or has completed same,
said period shall be extended for 90 days.
Section 5.2. Negative Covenants of the Borrower. From the date hereof and
thereafter for so long as there is Indebtedness of the Borrower to any Lender
and/or the Agent under any of the Financing Documents or any part of the
Revolving Credit Loan Commitment is in effect, the Borrower will not, with
respect to itself and, unless noted otherwise below, with respect to each of the
Subsidiaries, will ensure that each such Subsidiary will not, without the prior
written consent of the Majority Lenders:
Section 5.2.1. Liens, etc. Create, incur, assume or suffer to exist any
Lien of any nature, upon or with respect to any of its properties, now owned or
hereafter acquired, or assign as collateral or otherwise convey as collateral,
any right to receive income, except that the foregoing restrictions shall not
apply to any Liens:
Section 5.2.1.1. For taxes, assessments or governmental charges or
levies on property if the same shall not at the time be delinquent or thereafter
can be paid without penalty or interest, or (if foreclosure, distraint, sale or
other similar proceedings shall not have been commenced or if commenced not
stayed, bonded or discharged within 30 days after commencement) are being
contested in good faith and by appropriate proceedings diligently conducted and
for which proper reserve or other provision has been made in accordance with and
to the extent required by GAAP;
Section 5.2.1.2. Imposed by law, such as landlords', carriers',
warehousemen's and mechanics' liens, bankers' set off rights and other similar
Liens arising in the ordinary course of business for sums not yet due or being
contested in good faith and by appropriate proceedings diligently conducted and
for which proper reserve or other provision has been made in accordance with and
to the extent required by GAAP;
Section 5.2.1.3. Arising in the ordinary course of business out of
pledges or deposits under worker's compensation laws, unemployment insurance,
old age pensions, or other social security or retirement benefits, or similar
legislation;
Section 5.2.1.4. Arising from or upon any judgment or award,
provided that such judgment or award is being contested in good faith by proper
appeal proceedings and only so long as execution thereon shall be stayed;
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Section 5.2.1.5. Those set forth on Exhibit 1.8;
Section 5.2.1.6. Those now or hereafter granted pursuant to the
Security Documents or otherwise now or hereafter granted to the Agent for the
benefit of the Lenders as collateral for the Loans and/or Borrower's other
Obligations arising in connection with or under any of the Financing Documents;
Section 5.2.1.7. Deposits to secure the performance of bids, trade
contracts (other than for Borrowed Money), leases, statutory obligations, surety
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of the Borrower's or any Subsidiary's business;
Section 5.2.1.8. Easements, rights of way, restrictions and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of business by any Borrower or any
Subsidiary;
Section 5.2.1.9. Liens securing Indebtedness permitted to exist
under Section 5.2.8.3; provided that the Lien securing any such Indebtedness is
limited to the item of property purchased or leased in each case;
Section 5.2.1.10. UCC-1 financing statements filed solely for notice
or precautionary purposes by lessors under operating leases which do not secure
Indebtedness and which are limited to the items of equipment leased pursuant to
the lease in question; and
Section 5.2.2. Assumptions, Guaranties, etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise become directly or contingently
liable in connection with any obligation or Indebtedness of any other Person,
except:
Section 5.2.2.1. Guaranties by endorsement of negotiable instruments
for deposit or collection or similar transactions in the ordinary course of
business;
Section 5.2.2.2. Assumptions, guaranties, endorsements and
contingent liabilities within the definition of Indebtedness and permitted by
Section 5.2.8; and
Section 5.2.2.3. Those set forth on Exhibit 5.2.2.
Section 5.2.3. Acquisitions. Dissolution. etc. Acquire, in one or a
series of transactions, all or any substantial portion of the assets or
ownership interests in another Person, or dissolve, liquidate, wind up, merge or
consolidate or combine with another Person or sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) any
material assets, whether now owned or hereafter acquired, other than assets
which are replaced within 30 days of any asset sale, assignment, lease or
disposition with assets of like kind, usefulness and value; provided that during
the term of this Agreement Borrower can (a) sell, assign, lease or otherwise
dispose of up to an aggregate of $200,000 of assets other than (i) accounts
receivable and intellectual property including without limitation any trade
secrets, proprietary information, copyrights, patents, trademarks or any
applications therefor, software and source and object codes relating thereto and
(ii) any of the Borrower's or any Subsidiary's interests in real property and
(b) in the ordinary course of its business license, sell, assign, lease or
otherwise dispose of intellectual property or rights therein; provided that it
will not, subsequent to
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the Closing Date, sell, assign, lease or otherwise dispose of (but may in the
ordinary course of its business license) any intellectual property which it owns
as of the Closing Date; provided, however, that Borrower shall be permitted to
acquire all or any portion of the assets of or ownership interests in another
Person (by merger, consolidation or otherwise so long as the Borrower survives)
having aggregate (for all such acquisitions since the Closing Date but excluding
the Related Transactions) consideration not to exceed $5,000,000 in cash and
$5,000,000 in total non-cash consideration including shares of Borrower's
capital stock if (a) at the time of any such acquisition the Borrower shall
provide or grant or cause to be provided or granted to the Agent a guaranty of
the Obligations by any Subsidiary resulting from any such acquisition and in any
event a first priority perfected Lien (subject only to Permitted Encumbrances)
on the assets or ownership interests acquired, including without limitation the
assets owned by any Subsidiary, but in the case of any Subsidiary organized
under the laws of a country other than the United States so long as such foreign
Subsidiary has contracts providing in the aggregate for revenues of less than
$2,000,000, Agent shall receive a pledge of only 65% of the ownership interests
in such Subsidiary, and such foreign Subsidiary shall not be required to
guaranty the Obligations or grant the Agent a lien on its assets to the extent
that the Agent does not already have such a Lien and (b) that prior to the
consummation of any such acquisition, Borrower shall submit to the Agent a
pro-forma compliance certificate on a consolidated basis (including the
to-be-acquired assets and any assumed liabilities or if ownership interests are
acquired, the to-be-acquired Person if such Person is to be a Subsidiary and if
not, the to-be-acquired ownership interests, all measured as set forth below in
this Section 5.2.3), which pro-forma compliance certificate shall indicate that
no Default or Event of Default exists or would exist following consummation of
the acquisition and that the Borrower would be in compliance with (on a
consolidated basis including the to-be-acquired assets and any assumed
liabilities or if ownership interests are acquired, the to-be-acquired Person if
such Person is to be a Subsidiary and if not, the to-be-acquired ownership
interests), Sections 5.1.10, 5.1.10A, 5.1.11, 5.1.12 and 5.1.12(A) on a pro
forma basis following consummation of the acquisition, including the
to-be-acquired assets, Person or ownership interests and the operating results
thereof on the same basis and for the same periods as the Borrower is measured
for each such covenant, respectively and, in the event that any such acquisition
is for total consideration exceeding $5,000,000, the Borrower shall have
provided the Agent at least 14 days prior to the closing of the acquisition in
question with audited financial statements for the Person being acquired as of
the last day of the most recent fiscal quarter ending prior to such acquisition
of the Person being acquired and such acquisition shall be approved by the
Majority Lenders (each, a "Permitted Acquisition") and provided further that
Borrower may make the Investments permitted under Section 5.2.12.
Section 5.2.4. Change in Nature of Business. Make any material change
in the nature of its business.
Section 5.2.5. Ownership. Cause or permit the occurrence of any Change
of Control.
Section 5.2.6. Sale and Leaseback; Synthetic Leases. Enter into any
sale and leaseback arrangement with any lender or investor, enter into any lease
treated as an operating lease under GAAP and as a loan or financing for United
States income tax purposes, or enter into any leases except in the normal course
of business at reasonable rents comparable to those paid for similar leasehold
interests in the area.
Section 5.2.7. Sale of Accounts. etc. Sell, assign, discount or dispose
in any way of any accounts receivable, promissory notes or trade acceptances
held by the Borrower or any
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Subsidiary, with or without recourse, except in the ordinary course of the
Borrower's or any Subsidiary's business.
Section 5.2.8 Indebtedness. Incur, create, become or be liable directly
or indirectly in any manner with respect to or permit to exist any Indebtedness
except:
Section 5.2.8.1. Indebtedness under the Financing Documents;
Section 5.2.8.2. Indebtedness with respect to trade payable
obligations and other normal accruals and customer deposits in the ordinary
course of business not yet due and payable in accordance with customary trade
terms or with respect to which the Borrower or any Subsidiary is contesting in
good faith the amount or validity thereof by appropriate proceedings and then
only to the extent such person has set aside on its books adequate reserves
therefor in accordance with and to the extent required by GAAP;
Section 5.2.8.3. Indebtedness with respect to Capitalized Lease
Obligations and purchase money Indebtedness with respect to real or personal
property in an aggregate amount outstanding at any time not to exceed $1,000,000
plus the amount of the Hewlett-Packard and NEC leases listed on Exhibit 3.1.1.8
under "Existing Capitalized Lease Obligations"; provided that the amount of any
purchase money Indebtedness does not exceed 90% of the lesser of the cost or
fair market value of the asset purchased with the proceeds of such Indebtedness;
Section 5.2.8.4. Unsecured Indebtedness in an aggregate amount
outstanding at any time not to exceed $250,000;
Section 5.2.8.5. Indebtedness listed on Exhibit 3.1.1.8;
Section 5.2.8.6. Indebtedness owing by the Borrower to any Affiliate
or Subsidiary or by any Subsidiary to the Borrower or an Affiliate or any other
Subsidiary; provided, however, that any Indebtedness owing by the Borrower or
any Subsidiary to an Affiliate shall be subordinated to the Obligations on terms
and conditions satisfactory to the Majority Lenders.
Section 5.2.8.7. Indebtedness permitted by Section 5.2.2.
Section 5.2.8.8. So long as no Default or Event of Default exists or
would exist after the incurrence thereof, Subordinated Indebtedness in aggregate
outstanding principal amount not to exceed (a) $1,500,000 incurred to fund any
of Borrower's indemnification obligations under Article X of the
Recapitalization Agreement which is one of the Related Transaction Documents
plus any amount of Subordinated Indebtedness issued as "payment in kind" of
interest thereon and (b) the remainder of subtracting the aggregate amount of
payments made by Borrower for redemption of employee stock upon termination of
employment from $500,000, which Subordinated Indebtedness is incurred solely to
fund such employment termination redemptions plus any amount of Subordinated
Indebtedness issued as "payment in kind" of interest thereon.
Section 5.2.8.9. Indebtedness outstanding as a refinancing of
Indebtedness permitted under another clause of this Section 5.2.8 other than
Sections 5.2.8.2 or 5.2.8.9; provided that such Indebtedness as refinanced
continues to qualify as permitted Indebtedness under the clause of this Section
5.2.8 under which the refinanced Indebtedness was permitted under this Section
5.2.8.
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Section 5.2.9. Other Agreements. Amend any of the terms or conditions
of any of the Related Transaction Documents in a manner materially adverse to
the Agent or any of the Lenders, its certificate of incorporation (other than to
provide for stock splits and combinations), bylaws (or comparable applicable
charter or governance document), any other subordination agreement or any
indenture, agreement, document, note or other instrument evidencing, securing or
relating to any other Indebtedness permitted under Section 5.2.8.
Section 5.2.10. Payment or Prepayment of Equity. Make any payment or
prepayment of any principal of or interest on or any payment, prepayment,
redemption, defeasance, sinking fund payment, other repayment of principal or
capital or deposit for the purpose of any of the foregoing on or in connection
with the Equity or any other equity or ownership interests in the Borrower,
except for: (a) payments in respect of redemptions or repurchases of the
Borrower's stock under the Stock Option Plan, employee stock plans and programs
approved by Borrower's Board of Directors and redemptions of employee stock upon
termination of employment not to exceed, without duplication, $500,000 in the
aggregate, all of the foregoing not to exceed in the aggregate, without
duplication, 10% of Borrower's issued and outstanding capital stock, and (b)
payments by the Borrower to any of the Old Stockholders required under the
Related Transaction Documents made on or prior to the Closing Date or as to the
"Contingent Payments" in aggregate amounts not to exceed $3,218,934 as further
defined in Section 1.11 and Schedule IV of the Recapitalization Agreement which
is one of the Related Transaction Documents, within 45 days after the Closing
Date.
Section 5.2.11. Dividends. Payments and Distributions. Declare or pay
any dividends, management fees or like fees or make any other distribution of
cash or property or both to any of the Stockholders other than, (i) so long as
no Default or Event of Default exists or would exist immediately after payment
thereof, the quarterly management fee payable to InSight Capital Partners III,
L.P., or any successor entity, not to exceed $125,000 in any Borrower fiscal
quarter and (ii) directors' fees and compensation for services rendered to the
Borrower and/or any Subsidiary or use any of its assets for payment, purchase,
conversion, redemption, retention, acquisition or retirement of any beneficial
interest in the Borrower or set aside or reserve assets for sinking or like
funds for any of the foregoing purposes, make any other distribution by
reduction of capital or otherwise in respect of any beneficial interest in the
Borrower or permit any Subsidiary which is not a wholly-owned Subsidiary so to
do or pay any amount on account of the Subordinated Indebtedness which is not
permitted to be paid under the Subordination Agreement; provided, however, that
so long as no Default or Event of Default exists, (a) the Borrower shall be
permitted to make payments to Stockholders and to redeem or repurchase stock to
the extent permitted under Section 5.2.10, (b) subsequent to completion of a
Qualified Initial Public Offering and so long as Borrower maintains a ratio of
total Indebtedness for Borrowed Money to EBITDA of less than or equal to
1.0:1.0 before and after any such payment, Borrower may make regularly scheduled
payments of interest on Subordinated Indebtedness and (c) the Borrower may issue
its capital stock to the New Stockholders pursuant to Section 10.1(e) of the
Recapitalization Agreement which is one of the Related Transaction Documents and
may issue its capital stock, up to 10% of Borrower's issued and outstanding
capital stock in connection with the Stock Option Plan and, to the extent
permitted by Section 5.2.3, in connection with Permitted Acquisitions, all so
long as no Change of Control exists or results therefrom. Notwithstanding
anything to the contrary set forth in this Agreement, the New Stockholders may
at any time convert their shares of the Borrower's convertible participating
preferred stock in accordance with the provisions of the Borrower's Amended and
Restated Certificate of Incorporation.
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Section 5.2.12. Investments in or to Other Persons. Make or commit to
make any Investment in or to any other Person (including, without limitation,
any Subsidiary) other than (i) advances to employees for business expenses not
to exceed $20,000 in the aggregate outstanding for any one employee and not to
exceed in the aggregate outstanding at any one time to all such employees an
amount equal to the product of (a) the number of employees of Borrower and/or
any Subsidiaries and (b) $1,000, (ii) other employee loans not to exceed
$100,000 in the aggregate outstanding at any one time to all such employees
(excluding, solely during the period described in Section 5.1.24, any amounts up
to a maximum of $2,000,000 principal amount owing under the Closing Date loan to
Glenn E. Montgomery, Jr.), (iii) Cash Equivalent Investments, (iv) Permitted
Acquisitions, (v) Investments in accounts, contract rights and chattel paper (as
defined in the Uniform Commercial Code) and notes receivable, arising or
acquired in the ordinary course of business or as permitted by other provisions
of this Agreement; provided that the Borrower and any Subsidiaries which
guaranty the Obligations shall not make Investments in the aggregate in any
Subsidiary which is not a guarantor of the Obligations in excess of $500,000 and
(vi) Investments described on Exhibit 5.2.2 or 5.2.12.
Section 5.2.13. Transactions with Affiliates. Except as contemplated by
the Equity Documents and Related Transaction Documents, engage in any
transaction or enter into any agreement with an Affiliate, or in the case of
Affiliates or Subsidiaries, with the Borrower or another Affiliate or
Subsidiary, except in the ordinary course of business or as permitted by any
other provision of this Agreement and then only on an arm's length basis except
as set forth on Exhibit 5.2.13; provided that the Related Transactions shall be
deemed to be effected on an arm's length basis.
Section 5.2.14. Change of Fiscal Year. Change its accounting policies,
reporting practices or its fiscal year from those in effect on the Closing Date.
Section 5.2.15. Subordination of Claims. Subordinate any present or
future claim against or obligation of another Person, except as ordered in a
bankruptcy or similar creditors' remedy proceeding of such other Person.
Section 5.2.16. Compliance with ERISA. With respect to Borrower and any
Commonly Controlled Entity (a) withdraw from or cease to have an obligation to
contribute to, any Multiemployer Plan so as to result in any material liability
of the Borrower or any Commonly Controlled Entity to PBGC or to any
Multiemployer Plan, (b) engage in any "prohibited transaction" (as defined in
Section 4975 of the Code) involving any Plan which would result in a material
liability of the Borrower or any Commonly Controlled Entity for an excise tax or
civil penalty in connection therewith, (c) except for any deficiency caused by a
waiver of the minimum funding requirement under sections 412 and/or 418 of the
Code, as described above, incur or suffer to exist any material "accumulated
funding deficiency" (as defined in section 302 of ERISA and section 412 of the
Code) of the Borrower or any Commonly Controlled Entity, whether or not waived,
involving any Single Employer Plan, (d) incur or suffer to exist any Reportable
Event or the appointment of a trustee or institution of proceedings for
appointment of a trustee for any Single Employer Plan if, in the case of a
Reportable Event, such event continues unremedied for ten (10) days after notice
of such Reportable Event pursuant to sections 4043(a), (c) or (d) of ERISA is
given, if in the reasonable opinion of the Majority Lenders any of the foregoing
is likely to result in a material liability of the Borrower or any Commonly
Controlled Entity, (e) permit the assets held under any Plan to be insufficient
to protect all accrued benefits, (f) allow or suffer to exist any event or
condition, which presents a material risk of incurring a material liability of
the Borrower or any Commonly Controlled Entity to PBGC by reason of termination
of any such Plan or (g) cause or permit any Plan maintained by Borrower and/or
any Commonly Controlled
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Entity to be out of compliance with ERISA. For purposes of this Section 5.2.16
"material liability" shall be deemed to mean any liability of Fifty Thousand
Dollars ($50,000) or more in the aggregate.
Section 5.2.17. [Intentionally omitted.]
Section 5.2.18. Hazardous Material. Become involved, or permit, to the
extent reasonably possible after the exercise by the Borrower of reasonable due
diligence and preventive efforts, any tenant of its real property to become
involved, in any operations at such real property generating, storing,
disposing, or handling Hazardous Material or any other activity that could
reasonably be expected to lead to the imposition on the Borrower or the Agent or
any Lender, or any such real property of any material liability or Lien under
any environmental laws.
Section 5.2.19. Other Restrictions on Liens or Dividends. Enter into
any agreement or otherwise agree to or grant any restriction substantially
similar to the provisions of Section 5.2.1 hereof or which would otherwise have
the effect of prohibiting, restricting, impeding or interfering with the
creation subsequent to the Closing Date of additional Liens to secure the
Obligations.
Section 5.2.20. Limitation on Creation of Subsidiaries, etc.
Establish, create or acquire any Subsidiary or become the general partner in any
partnership, except for wholly-owned Subsidiaries and partnerships the sole
partners in which are the Borrower and one or more Subsidiaries and then only to
the extent permitted under Section 5.2.3 or 5.2.12 including to the extent such
establishment or creation would be permitted under Section 5.2.3 or 5.2.12 if it
were treated as an acquisition.
Section 5.3. Reporting Requirements. From the date hereof and thereafter for
so long as the Borrower is indebted to any Lender and/or the Agent under any of
the Financing Documents, the Borrower will, unless the Majority Lenders shall
otherwise consent in writing, furnish or cause to be furnished to the Agent for
distribution to the Lenders:
Section 5.3.1. As soon as possible and in any event upon acquiring
knowledge of an Event of Default or Default, continuing on the date of such
statement, the written statement of an Authorized Representative setting forth
details of such Event of Default or Default and the actions which the Borrower
has taken and proposes to take with respect thereto;
Section 5.3.2. As soon as practicable after the end of each Borrower
fiscal year and in any event within 90 days after the end of each such fiscal
year, consolidated and consolidating balance sheets of the Borrower and any
Subsidiaries as at the end of such year, and the related statements of income
and cash flows or shareholders' equity of the Borrower and any Subsidiaries
setting forth in each case the corresponding figures for the preceding fiscal
year, such statements to be certified by a firm of independent certified public
accountants selected by Borrower and reasonably acceptable to the Majority
Lenders, to be accompanied by a true copy of said auditors' management letter,
if one was provided to the Borrower;
Section 5.3.3. As soon as is practicable after the end of each fiscal
quarter of each Borrower fiscal year and in any event within 45 days thereafter,
consolidated balance sheets of the Borrower and any Subsidiaries as of the end
of such period and the related statements of income and cash flows and
shareholders' equity of the Borrower and any Subsidiaries, subject to changes
resulting from year-end adjustments, together, subject to Section 5.3.7, with a
comparison to the Budget for the applicable period, such balance sheets and
statements to be prepared under the
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supervision of, and certified by, an Authorized Representative in an Officer's
Certificate as having been prepared in accordance with GAAP except for footnotes
and year-end adjustments, and to be in form reasonably satisfactory to the
Agent;
Section 5.3.4. Simultaneously with the furnishing of each of the
year-end consolidated and consolidating financial statements of the Borrower and
any Subsidiaries to be delivered pursuant to Section 5.3.2 and each of the
consolidated quarterly statements of the Borrower and the Subsidiaries to be
delivered pursuant to Section 5.3.3 an Officer's Certificate of an Authorized
Representative which shall contain a statement in the form of Exhibit 3.1.1.10
to the effect that no Event of Default or Default has occurred, without having
been waived in writing, or if there shall have been an Event of Default not
previously waived in writing pursuant to the provisions hereof, or a Default,
such Officer's Certificate shall disclose the nature thereof and the actions the
Borrower has taken and prepare to take with respect thereto. Each such Officer's
Certificate shall also contain a calculation of and certify to the accuracy of
the amounts required to be calculated in the financial covenants of the Borrower
contained in this Agreement and described in Exhibit 3.1.1.10;
Section 5.3.5. Promptly after the commencement thereof, notice of all
material actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting the Borrower and/or any Subsidiary;
Section 5.3.6. The borrowing base certificates required pursuant to
Section 2.1 hereof and the Eligible Receivables reports required by Section
5.1.12(A);
Section 5.3.7. On or before January 31 of each fiscal year of the
Borrower, an updated proposed budget, prepared on a quarterly basis, and updated
financial projections for the Borrower and any Subsidiaries on a consolidated
basis (together, the "Budget") for such fiscal year, setting forth in detail
reasonably satisfactory to the Agent the projected results of operations of the
Borrower and any Subsidiaries on a consolidated quarterly basis, detailed
Capital Expenditures plan and stating underlying assumptions and accompanied by
a written statement of an Authorized Representative certifying as to the
approval of such Budget by Borrower's board of directors.
Section 5.3.8. Such other information respecting the Business Condition
of the Borrower or any Subsidiaries as the Agent or any Lender may from time to
time reasonably request;
Section 5.3.9. Written notice of the fact and of the details of any
sale or transfer of any ownership interest in the Borrower or any Subsidiary
given promptly after the Borrower acquires knowledge thereof; provided, however,
that this clause shall not be deemed to constitute or imply any consent to any
such sale or transfer;
Section 5.3.10. Prompt written notice of (i) loss of or the termination
or resignation of any officer or director and (ii) any Material Adverse Effect
and an explanation thereof and of the actions the Borrower and/or such
Subsidiary propose to take with respect thereto; and
Section 5.3.11. Written notice of the following events, as soon as
possible and in any event within 15 days after the Borrower knows or has reason
to know thereof: (i) the occurrence or expected occurrence of any Reportable
Event with respect to any Plan, or (ii) the
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institution of proceedings or the taking or expected taking of any other action
by PBGC or the Borrower or any Commonly Controlled Entity to terminate, withdraw
or partially withdraw from any Plan and, with respect to any Multiemployer Plan,
the Reorganization (as defined in Section 4241 of ERISA) or Insolvency (as
defined in Section 4245 of ERISA) of such Multiemployer Plan and in addition to
such notice, deliver to the Agent whichever of the following may be applicable:
(a) an Officer's Certificate setting forth details as to such Reportable Event
and the action that the Borrower or Commonly Controlled Entity proposes to take
with respect thereto, together with a copy of any notice of such Reportable
Event that may be required to be filed with PBGC, or b) any notice delivered by
PBGC evidencing its intent to institute such proceedings or any notice to PBGC
that such Plan is to be terminated, as the case may be.
ARTICLE 6.
EVENTS OF DEFAULT
Section 6.1. Events of Default. The Borrower shall be in default under each
of the Financing Documents, upon the occurrence of any one or more of the
following events ("Events of Default"):
Section 6.1.1. If the Borrower shall fail to make due and punctual
payment of any principal, fees, interest and/or other amounts payable under this
Agreement as provided in any Note and/or in this Agreement when the same is due
and payable except that it shall not be an Event of Default if any interest,
fees and/or other amounts (excluding principal) is paid within 5 days after it
is due and payable, whether at the due date thereof or at a date fixed for
prepayment or if the Borrower shall fail to make any such payment of fees,
interest, principal and/or any other amount under this Agreement and/or under
any Note on the date when such payment becomes due and payable by acceleration;
Section 6.1.2. If the Borrower or any Subsidiary shall make an
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall admit in writing its inability to pay its
debts as they become due or shall file a voluntary petition in bankruptcy, or
shall file any petition or answer seeking any reorganization, arrangement,
composition, adjustment, liquidation, dissolution or similar relief under the
present or any future federal bankruptcy laws or other applicable federal, state
or other statute, law or regulation, or shall seek or consent to or acquiesce in
the appointment of any trustee, receiver or liquidator of it or of all or any
substantial part of its properties, or if partnership or corporate action shall
be taken for the purpose of effecting any of the foregoing; or
Section 6.1.3. To the extent not described in Section 6.1.2, (i) if the
Borrower or any Subsidiary shall be the subject of a bankruptcy proceeding, or
(ii) if any proceeding against any of them seeking any reorganization,
arrangement, composition, adjustment, liquidation, dissolution, or similar
relief under the present or any future federal bankruptcy law or other
applicable federal, foreign, state or other statute, law or regulation shall be
commenced, or (iii) if any trustee, receiver or liquidator of any of them or of
all or any substantial part of any or all of their properties shall be appointed
without their consent or acquiescence; provided that in any of the cases
described above in this Section 6.1.3, such proceeding or appointment shall not
be an Event of Default if the Borrower or the Subsidiary in question shall cause
such proceeding or appointment to be discharged, vacated, dismissed or stayed
within sixty (60) days after commencement thereof; or
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Section 6.1.4. If final judgment or judgments aggregating more than
$200,000 shall be rendered against the Borrower or any Subsidiary and shall
remain undischarged, unstayed or unpaid for an aggregate of thirty (30) days
(whether or not consecutive) after entry thereof; or
Section 6.1.5. If the Borrower or any Subsidiary shall default (after
giving effect to any applicable grace period) in the due and punctual payment of
the principal of or interest on any Indebtedness exceeding in the aggregate
$200,000 (other than the Loans), or if any default shall have occurred and be
continuing after any applicable grace period under any mortgage, note or other
agreement evidencing, securing or providing for the creation of such
Indebtedness, which results in the acceleration of such Indebtedness or which
permits, or with the giving of notice would permit, any holder or holders of any
such Indebtedness to accelerate the stated maturity thereof; or
Section 6.1.6. If there shall be a default in the performance of the
Borrower's obligations under Section 5.1.3 (insofar as such Section requires the
preservation of the corporate existence of the Borrower or any Subsidiary), any
of Sections 5.1.2., 5.1.10 through 5.1.13 or Section 5.2 of this Agreement or
under any covenant, representation or warranty contained in any of the Security
Documents for which no cure period is provided in such Security Document; or
Section 6.1.7. If there shall be any Default in the performance of any
covenant or condition contained in this Agreement or in any of the other
Financing Documents to be observed or performed pursuant to the terms hereof or
any Financing Document, as the case may be, or to the extent such Default would
have a Material Adverse Effect, by the Borrower under any of the Related
Transaction Documents, other than a covenant or condition referred to in any
other subsection of this Section 6.1 and such Default shall continue unremedied
or unwaived, (i) in the case of any covenant or condition contained in Section
5.3, for fifteen (15) Business Days, or (ii) in the case of any other covenant
or condition for which no other grace period is provided, for thirty (30) days,
or (iii) in the case of any other covenant or condition for which another grace
period is provided, for such grace period, or (iv) if any of the representations
and warranties made or deemed made by the Borrower to the Agent and/or any
Lender pursuant to any of the Financing Documents proves to have been false or
misleading in any material respect when made and such falseness or misleading
representation or warranty would be reasonably likely to have a material adverse
effect on the Agent or any Lender or their rights and remedies or a Material
Adverse Effect; or
Section 6.1.8. If there shall be any attachment of any deposits or
other property of the Borrower and/or any Subsidiary in the possession of any
Lender or any attachment of any other property of the Borrower and/or any
Subsidiary in an amount exceeding $200,000, which shall not be discharged,
vacated or stayed within thirty (30) days of the date of such attachment; or
Section 6.1.9. Any certification of the financial statements, furnished
to the Agent pursuant to Section 5.3.2, shall contain any qualification;
provided, however, that such qualifications will not be deemed an Event of
Default if in each case (i) such certification shall state that the examination
of the financial statements covered thereby was conducted in accordance with
generally accepted auditing standards, including but not limited to all such
tests of the accounting records as are considered necessary in the circumstances
by the independent certified public accountants preparing such statements, (ii)
such financial statements were prepared in accordance with GAAP and (iii) such
qualification does not involve the "going concern" status of the entity being
reported upon.
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ARTICLE 7.
REMEDIES OF LENDERS
Upon the occurrence and during the continuance of any one or more of
the Events of Default, the Agent, at the request of the Majority Lenders, shall,
by written notice to the Borrower, declare the obligation of the Lenders to make
or maintain the Loans to be terminated, whereupon the same and the Revolving
Credit Loan Commitment shall forthwith terminate, and the Agent, at the request
of the Majority Lenders, shall, by notice to the Borrower, declare the entire
unpaid principal amount of each Note and all fees and interest accrued and
unpaid thereon and/or under this Agreement, and/or any of the other Financing
Documents and any and all other Indebtedness under this Agreement, each Note
and/or any of the other Financing Documents to the Agent and/or any of the
Lenders and/or to any holder of all or any portion of each Note to be forthwith
due and payable, whereupon each Note, and all such accrued fees and interest and
other such Indebtedness shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided, however, that upon the
occurrence of an Event of Default under Sections 6.1.2 or 6.1.3, all of the
unpaid principal amount of each Note, all fees and interest accrued and unpaid
thereon and/or under this Agreement and/or under any of the other Financing
Documents and any and all other such Indebtedness of the Borrower to any of the
Lenders and/or to any such holder shall thereupon be due and payable in full
without any need for the Agent and/or any Lender to make any such declaration or
take any action and the Lenders' obligations to make the Loans shall
simultaneously terminate. The Agent shall, in accordance with the votes of the
Majority Lenders, exercise all remedies on behalf of and for the account of each
Lender and on behalf of its respective Pro Rata Share of the Loans, its Note and
Indebtedness of the Borrower owing to it or any of the foregoing, including,
without limitation, all remedies available under or as a result of this
Agreement, the Notes or any of the other Financing Documents or any other
document, instrument or agreement now or hereafter securing any Note without any
such exercise being deemed to modify in any way the fact that each Lender shall
be deemed a separate creditor of the Borrower to the extent of its Note and Pro
Rata Share of the Loans and any other amounts payable to such Lender under this
Agreement and/or any of the other Financing Documents and the Agent shall be
deemed a separate creditor of the Borrower to the extent of any amounts owed by
the Borrower to the Agent.
ARTICLE 8.
AGENT
Section 8.1. Appointment. The Agent is hereby appointed as
administrative and collateral agent, hereunder and each Lender hereby authorizes
the Agent to act under the Financing Documents as its Agent hereunder and
thereunder, respectively. The Agent agrees to act as such upon the express
conditions contained in this Article 8. The provisions of this Article 8 are
solely for the benefit of the Agent, and, except as expressly provided in
Section 8.6, neither the Borrower nor any third party shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Financing Documents to
which the Agent is a party, the Agent shall act solely as Agent of the Lenders
and does not assume nor shall the Agent be deemed to have assumed any obligation
towards or relationship of agency or trust with or for the Borrower, any of the
Stockholders, any Affiliate or any Subsidiary.
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Section 8.2. Powers; General Immunity
Section 8.2.1. Duties Specified. Each Lender irrevocably authorizes the
Agent to take such action on such Lender's behalf, including, without
limitation, to execute and deliver the Financing Documents to which the Agent is
a party and to exercise such powers hereunder and under the Financing Documents
and other instruments and agreements referred to herein as are specifically
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. The Agent shall have only those
duties and responsibilities which are expressly specified in this Agreement or
in any of the Financing Documents and may perform such duties by or through its
agents or employees. The duties of the Agent shall be mechanical and
administrative in nature; and the Agent shall not have by reason of this
Agreement or any of the Financing Documents a fiduciary relationship in respect
of any Lender; and nothing in this Agreement or any of the Security Documents,
expressed or implied, is intended to or shall be so construed as to impose upon
the Agent any obligations in respect of this Agreement or any of the Financing
Documents or the other instruments and agreements referred to herein except as
expressly set forth herein or therein.
Section 8.2.2. No Responsibility For Certain Matters. The Agent shall
not be responsible to any Lender for the execution, effectiveness, genuineness,
validity, enforceability, collectibility or sufficiency of any of the Financing
Documents or any other document, instrument or agreement now or hereafter
executed in connection herewith or therewith, or for any representations,
warranties, recitals or statements made herein or therein or made in any written
or oral statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith by or on
behalf of the Borrower, any of the Affiliates, and/or any Subsidiary to the
Agent or any Lender, or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained herein or therein or as to the use of the proceeds of
the Loans or of the existence or possible existence of any Default or Event of
Default.
Section 8.2.3. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted hereunder or under any of the Financing Documents, or in
connection herewith or therewith unless caused by its or their gross negligence
or willful misconduct. If the Agent shall request instructions from Lenders with
respect to any action (including the failure to take an action) in connection
with any of the Financing Documents, the Agent shall be entitled to refrain from
taking such action unless and until the Agent, shall have received instructions
from the Majority Lenders (or all of the Lenders if the action requires their
consent). Without prejudice to the generality of the foregoing, (i) the Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for the Borrower, any of the Affiliates, and/or
any Subsidiary), accountants, experts and other professional advisors selected
by it; and (ii) no Lender shall have any right of action whatsoever against the
Agent as a result of the Agent acting or (where so instructed) refraining from
acting under any of the Financing Documents or the other instruments and
agreements referred to herein in accordance with the instructions of the
Majority Lenders (or all of the Lenders if the action requires their consent).
The Agent shall be entitled to refrain from exercising any power, discretion or
authority vested in it under any of the Financing Documents or the other
instruments and agreements referred to herein unless and until it has obtained
the instructions of the Majority Lenders (or all of the Lenders if the action
requires their consent).
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Section 8.2.4. Agent Entitled to Act as Lender. The agency hereby
created shall in no way impair or affect any of the rights and powers of, or
impose any duties or obligations upon, Fleet in its individual capacity as a
Lender hereunder. With respect to its participation in the Loans and the
Revolving Credit Loan Commitment, Fleet shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
performing the duties and functions delegated to it hereunder, and the term
"Lender" or "Lenders" or any similar term shall, unless the context clearly
otherwise indicates, include Fleet in its individual capacity. The Agent and its
affiliates may accept deposits from, lend money to and generally engage in any
kind of banking, trust, financial advisory or other business with the Borrower,
any of the Stockholders, or any Affiliate or Subsidiary as if it were not
performing the duties specified herein, and may accept fees and other
consideration from the Borrower and/or any of such other Persons for services in
connection with this Agreement and otherwise without having to account for the
same to Lenders.
Section 8.3. Representations and Warranties; No Responsibility for
Appraisal of Creditworthiness. Each Lender represents and warrants that it has
made its own independent investigation of the financial condition and affairs of
the Borrower, the Stockholders and any Subsidiaries of any of them in connection
with the making of the Loans hereunder and has made and shall continue to make
its own appraisal of the creditworthiness of the Borrower, the Stockholders and
the Subsidiaries. The Agent shall not have any duty or responsibility, either
initially or on a continuing basis, to make any such investigation or any such
appraisal on behalf of Lenders or to provide any Lender with any credit or other
information with respect thereto whether coming into its possession before the
making of any Loan or any time or times thereafter (except for information
received by the Agent under Section 5.3 hereof which the Agent will promptly
forward to the Lenders), and the Agent shall further not have any responsibility
with respect to the accuracy of or the completeness of the information provided
to any of the Lenders.
Section 8.4. Right to Indemnity. Each Lender severally agrees to indemnify
the Agent proportionately to its Pro Rata Share of the Loans, to the extent the
Agent shall not have been reimbursed by or on behalf of the Borrower, for and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including, without limitation,
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
performing its duties hereunder or in any way relating to or arising out of this
Agreement and/or any of the other Financing Documents; provided that no Lender
shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or willful misconduct. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished.
Section 8.5. Payee of Note Treated as Owner. The Agent may deem and treat
the payee of any Note as the owner thereof for all purposes hereof unless and
until a written notice of the assignment or transfer thereof shall have been
filed with the Agent. Any request, authority or consent of any person or entity
who, at the time of making such request or giving such authority or consent, is
the holder of any Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Note or of any Note or Notes issued in exchange
for such Note.
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Section 8.6. Resignation by Agent.
Section 8.6.1. The Agent may resign from the performance of all its
functions and duties under the Financing Documents at any time by giving 30
days' prior written notice to the Borrower and each of the Lenders. Such
resignation shall take effect upon the acceptance by a successor Agent, of
appointment pursuant to Sections 8.6.2 and 8.6.3 below or as otherwise provided
below.
Section 8.6.2. Upon any such notice of resignation, the Majority
Lenders shall appoint a successor Agent, who shall be a Lender and, so long as
no Default or Event of Default exists and is continuing, who shall be reasonably
satisfactory to the Borrower and in any event shall be an incorporated bank or
trust company with a combined surplus and undivided capital of at least Five
Hundred Million Dollars ($500,000,000).
Section 8.6.3. If a successor Agent shall not have been so appointed
within said 30 day period, the resigning Agent, with the consent of the
Borrower, which shall not be unreasonably withheld or delayed, shall then
appoint a successor Agent, who shall be a Lender and who shall serve as the
Agent, until such time, if any, as the Majority Lenders, and so long as no
Default or Event of Default exists and is continuing, with the consent of the
Borrower, which shall not be unreasonably withheld or delayed, appoint a
successor Agent as provided above.
Section 8.6.4. If no successor Agent has been appointed pursuant to
Sections 8.6.2 or 8.6.3 by the 40th day after the date such notice of
resignation was given by the resigning Agent, the resigning Agent's resignation
shall become effective and the Majority Lenders shall thereafter perform all the
duties of the resigning Agent under the Financing Documents including without
limitation directing the Borrower on how to submit Requests and Interest Rate
Elections and otherwise on administration of the Agent's duties under the
Financing Documents and the Borrower shall comply therewith so long as such
directions do not have a Material Adverse Effect on the Borrower or any
Subsidiary until such time, if any, as the Majority Lenders, and so long as no
Default or Event of Default exists and is continuing, with the consent of the
Borrower, which shall not be unreasonably withheld or delayed, appoint a
successor Agent, as provided above.
Section 8.7. Successor Agent. Upon the acceptance of any appointment as
the Agent hereunder by a successor Agent, that successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent, shall be discharged from its
duties and obligations as the Agent under the Financing Documents. After any
retiring Agent's resignation hereunder as the Agent the provisions of this
Article 8 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent under the Financing Documents.
ARTICLE 9.
MISCELLANEOUS
Section 9.1. Consent to Jurisdiction and Service of Process.
Section 9.1.1. Except to the extent prohibited by applicable law, the
Borrower irrevocably:
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Section 9.1.1.1. agrees that any suit, action, or other legal
proceeding arising out of any of the Financing Documents or any of the Loans may
be brought in the courts of record of the Commonwealth of Massachusetts, the
State of Colorado or any other state(s) in which any of the Borrower's or any
Subsidiary's assets are located or the courts of the United States located in
the Commonwealth of Massachusetts, the State of Colorado or any other state(s)
in which any of the Borrower's or any Subsidiary's assets are located;
Section 9.1.1.2. consents to the jurisdiction of each such court in
any such suit, action or proceeding; and
Section 9.1.1.3. waives any objection which it may have to the
laying of venue of such suit, action or proceeding in any of such courts.
For such time as any of the Indebtedness of the Borrower to any Lender
and/or the Agent shall be unpaid in whole or in part and/or the Revolving Credit
Loan Commitment is in effect, the Borrower irrevocably designates the registered
agent or agent for service of process of the Borrower as reflected in the
records of the Secretary of State of Colorado as its registered agent, and, in
the absence thereof, the Secretary of State of Colorado as its agent to accept
and acknowledge on its behalf service of any and all process in any such suit,
action or proceeding brought in any such court and agrees and consents that any
such service of process upon such agent and written notice of such service to
the Borrower by registered or certified mail shall be taken and held to be valid
personal service upon the Borrower regardless of where the Borrower shall then
be doing business and that any such service of process shall be of the same
force and validity as if service were made upon it according to the laws
governing the validity and requirements of such service in each such state and
waives any claim of lack of personal service or other error by reason of any
such service. Any notice, process, pleadings or other papers served upon the
aforesaid designated agent shall, within three (3) Business Days after such
service, be sent by the method provided therefor under Section 9.6 to the
Borrower at its address set forth in this Agreement. BORROWER, AGENT AND EACH
LENDER MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT, ANY NOTE, OR ANY OTHER FINANCING DOCUMENTS
CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR EACH OF THE LENDERS TO
ENTER INTO THIS AGREEMENT, ACCEPT ITS NOTE AND MAKE THE LOANS.
Section 9.2. Rights and Remedies Cumulative. No right or remedy conferred
upon or reserved to the Agent and/or the Lenders in any of the Financing
Documents is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given under any of the Financing
Documents or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy under any of the Financing
Documents, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 9.3. Delay or Omission not Waiver. No delay in exercising or
failure to exercise by the Agent and/or the Lenders of any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by any of the Financing
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Documents or by law to the Agent and/or any of the Lenders may be exercised from
time to time, and as often as may be deemed expedient, by the Agent and/or any
of the Lenders.
Section 9.4. Waiver of Stay or Extension Laws. The Borrower covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, which may affect the covenants or the performance of any of the Financing
Documents; and the Borrower (to the extent that it may lawfully do so) hereby
expressly waives all benefit and advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Agent and/or any of the Lenders, but will suffer and permit the execution of
every such power as though no such law had been enacted, except to the extent
the Agent or any Lender is guilty of willful misconduct or gross negligence.
Section 9.5. Amendments, etc. No amendment, modification, termination, or
waiver of any provision of any of the Financing Documents nor consent to any
departure by the Borrower therefrom shall in any event be effective unless the
same shall be in a written notice given to the Borrower by the Agent and
consented to in writing by the Majority Lenders (or by the Agent acting alone if
any specific provision of this Agreement provides that the Agent, acting alone,
may grant such amendment, modification, termination, waiver or departure) and
the Agent shall give any such notice if the Majority Lenders so consent or
direct the Agent to do so; provided, however, that any such amendment,
modification, termination, waiver or consent shall require a written notice
given to the Borrower by the Agent and consented to in writing by all of the
Lenders if the effect thereof is to (i) change any of the provisions affecting
the interest rate or fees on the Loans so as to reduce said interest rate or
fees, (ii) extend or modify the Revolving Credit Loan Commitment, (iii)
discharge or release the Borrower from its obligation to repay all principal due
under the Loans or release any collateral or guaranty for the Loans, (iv) change
any Lender's Pro Rata Share of the Revolving Credit Loan Commitment or the
Loans, (v) modify this Section 9.5, (vi) change the definition of Majority
Lenders, (vii) extend any scheduled due date for payment of principal, interest
or fees or (viii) permit the Borrower to assign any of its rights under or
interest in this Agreement, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. Any
amendment or modification of this Agreement must be signed by the Borrower, the
Agent and at least all of the Lenders consenting thereto who shall then hold the
Pro Rata Shares of the Loans required for such amendment or modification under
this Section 9.5 and the Agent shall sign any such amendment if such Lenders so
consent or direct the Agent to do so provided that any Lender dissenting
therefrom shall be given an opportunity to sign any such amendment or
modification. Any amendment of any of the Security Documents must be signed by
each of the parties thereto. No notice to or demand on the Borrower and no
consent, waiver or departure from the terms of this Agreement granted by the
Agent and/or the Lenders in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances.
Section 9.6. Addresses for Notices, etc. All notices, requests, demands and
other communications provided for hereunder (other than those which, under the
terms of this Agreement, may be given by telephone, which shall be effective
when received verbally) shall be in writing (including telecopied communication)
and mailed (provided that in the case of items referred to in the next-to-last
sentence of Section 9.1 and the items set forth below as requiring a copy to
legal counsel for the Borrower, the Agent or a Lender, such items shall be
mailed by overnight courier for delivery the next Business Day), telecopied or
delivered to the applicable party at the addresses indicated below:
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If to the Borrower:
Convergent Group Corporation
6200 South Syracuse Way, Suite 200
Englewood, Colorado 80111
Attention: Timothy A. Peach, Controller
Telecopy: (303) 741-8474
With a copy to (if given pursuant to any of Sections 5.3.1, 5.3.5, 5.3.9,
5.3.10 and 5.3.11):
Holland & Hart
555 17th Street, Suite 3200
Denver, Colorado 80202-3979
Attention: Kevin Crandell, Esq.
Telecopy: (303) 295-8261
InSight Capital Partners III, L.P.
527 Madison Avenue
10th Floor
New York, New York 10022
Attention: Jerry Murdock
Telecopy: (212) 230-9272
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Ilan S. Nissan, Esq.
Telecopy: (212) 408-2428
If to Fleet as the Agent and/or a Lender:
Fleet National Bank
Mail Stop MA OF D07A
One Federal Street
Boston, MA 02110
Attention: Michael S. Barclay, Vice President
Telecopy: (617) 346-0151
With a copy to (if given pursuant to any of Sections 5.3.1, 5.3.5, 5.3.9.
5.3.10 and 5.3.11)
Hinckley, Allen & Snyder
28 State Street
Boston, MA 02109
Attention: Malcolm
Farmer III, Esq.
Telecopy: (617) 345-9020
If to any other Lender, to the address set forth on Exhibit 1.9.
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or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to the delivery with the
terms of this Section. All such notices, requests, demands and other
communications shall be effective when received. Requests, certificates, other
items provided pursuant to Section 5.3 and other routine mailings or notices
need not be accompanied by a copy to legal counsel for the Lenders or the
Borrower.
Section 9.7. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand the reasonable fees and out-of-pocket expenses of Messrs. Hinckley, Allen
& Snyder, counsel for the Agent and of any local counsel retained by the Agent
in connection with (i) the preparation, execution, delivery and initial
syndication of the Financing Documents and the Loans subject to the limitation
in Section 3.1.1.9 and (ii) the administration of the Loans. The Borrower agrees
to pay on demand all reasonable costs and expenses (including without limitation
reasonable attorneys' fees) incurred by the Agent and/or any Lender, upon or
after the occurrence and during the continuance of any Default or Event of
Default, if any, in connection with the enforcement of any of the Financing
Documents and any amendments, waivers or consents with respect thereto. In
addition, the Borrower shall pay on demand any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution and
delivery of the Financing Documents, and agrees to save the Lenders and the
Agent harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees, except
those resulting from the Lenders' or Agent's gross negligence or willful
misconduct.
Section 9.8. Participations. Subject to compliance with the proviso in the
first sentence of Section 9.11, any Lender may sell participations in all or
part of the Loans made by it and/or its Pro Rata Share of the Revolving Credit
Loan Commitment or any other interest herein to a financial institution having
at least $500,000,000 of assets, in which event the participant shall not have
any rights under any of the Financing Documents (the participant's rights
against such Lender in respect of that participation to be those set forth in
the Agreement executed by such Lender in favor of the participant relating
thereto) and all amounts payable by the Borrower hereunder or thereunder shall
be determined as if such Lender had not sold such participation. Such Lender may
furnish any information concerning the Borrower and any Subsidiary in the
possession of such Lender from time to time to participants (including
prospective participants); provided that such Lender and any participant comply
with the proviso in Section 9.11.7 as if any such participant was a Substituted
Lender.
Section 9.9. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the Borrower, the Agent and the Lenders and
their respective successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the Agent and the Lenders. This Agreement and all
covenants, representations and warranties made herein and/or in any of the other
Financing Documents shall survive the making of the Loans, the execution and
delivery of the Financing Documents and shall continue in effect so long as any
amounts payable under or in connection with any of the Financing Documents or
any other Indebtedness of the Borrower to the Agent and/or any Lender remains
unpaid or the Revolving Credit Loan Commitment remains outstanding; provided,
however, that Sections 2.2.3 and 9.7 shall, except to the extent agreed to in a
pay-off letter by the Agent and the Lenders in their complete discretion,
survive and remain in full force and effect for 90 days following repayment in
full of all amounts payable under or in connection with all of the Financing
Documents and any other such Indebtedness.
Section 9.10. Actual Knowledge. For purposes of this Agreement, neither
the Agent nor any Lender shall be deemed to have actual knowledge of any fact or
state of facts unless the senior loan officer or any other officer responsible
for the Borrower's account established
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pursuant to this Agreement at the Agent or such Lender, shall, in fact, have
actual knowledge of such fact or state of facts or unless written notice of such
fact shall have been received by the Agent or such Lender in accordance with
Section 9.6.
Section 9.11. Substitutions and Assignments. Upon the request of any
Lender, the Agent and such Lender may assign or pledge all or any portion of
such Lender's Pro Rata Share of the Revolving Credit Loan Commitment and the
Loans to an affiliate or Related Fund of a Lender (so long as such affiliate or
Related Fund is at least adequately capitalized under any applicable federal
regulations) or to another Lender and may, subject to the terms and conditions
hereinafter set forth and with the prior written consent of the Agent and, so
long as no Default or Event of Default exists, the Borrower, which shall not be
unreasonably withheld or delayed, take the actions set forth below to substitute
one or more other funds or financial institutions having at least $500,000,000
in assets and being at least adequately capitalized under applicable federal
regulations (all of the foregoing assignees other than a Federal Reserve Bank
being hereinafter called a "Substituted Lender") as a Lender or Lenders
hereunder having an amount of the Loans as specified in the relevant Assignment
and Acceptance executed in connection therewith; provided that no Lender,
together with any affiliate or Related Fund of such Lender, shall have or shall
assign a Pro Rata Share of the Revolving Credit Loan Commitment and the Loans in
the aggregate of less than 10% and Fleet and/or its affiliates shall retain for
their own account at least 20% of the Revolving Credit Loan Commitment.
Section 9.11.1. In connection with any such substitution the
Substituted Lender and the Agent shall enter into a Substitution Agreement in
the form of Exhibit 9.11.1 hereto (a "Substitution Agreement") pursuant to
which such Substituted Lender shall be substituted for the Lender requesting the
substitution in question (any such Lender being hereinafter referred to as a
"Selling Lender") to the extent of the reduction in the Selling Lender's portion
of the Loans specified therein. In addition, such Substituted Lender shall
assume such of the obligations of each Selling Lender under the Financing
Documents as may be specified in such Substitution Agreement and this Agreement
shall be amended by execution and delivery of each Substitution Agreement to
include such Substituted Lender as a Lender for all purposes under the Financing
Documents and to substitute for the then existing Exhibit 1.9 to this Agreement
a new Exhibit 1.9 in the form of Schedule A to such Substitution Agreement
setting forth the portion of the Loans belonging to each Lender following
execution thereof. The Agent, each Selling Lender and the Borrower shall
countersign and accept delivery of each Substitution Agreement.
Section 9.11.2. Without prejudice to any other provision of this
Agreement, each Substituted Lender shall, by its execution of a Substitution
Agreement, agree that neither the Agent nor any Lender is any way responsible
for or makes any representation or warranty as to: (a) the accuracy and/or
completeness of any information supplied to such Substituted Lender in
connection therewith, (b) the financial condition, creditworthiness, affairs,
status or nature of the Borrower, any of the Affiliates and/or any of the
Subsidiaries or the observance by the Borrower, or any other party of any of its
obligations under this Agreement or any of the other Financing Documents or (c)
the legality, validity, effectiveness, adequacy or enforceability of any of the
Financing Documents.
Section 9.11.3. The Agent shall be entitled to rely on any Substitution
Agreement delivered to it pursuant to this Section 9.11 which is complete and
regular on its face as to its contents and appears to be signed on behalf of the
Substituted Lender which is a party thereto, and the Agent shall have no
liability or responsibility to any party as a consequence of relying thereon and
acting in accordance with and countersigning any such Substitution Agreement.
The effective date of each Substitution Agreement shall be the date specified as
such therein and each
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Lender prior to such effective date shall, for all purposes hereunder, be deemed
to have and possess all of their respective rights and obligations hereunder up
to 12:00 o'clock Noon on the effective date thereof.
Section 9.11.4. Upon delivery to the Agent of any Substitution
Agreement pursuant to and in accordance with this Section 9.11 and acceptance
thereof by the Agent (which delivery shall be evidenced and accepted exclusively
and conclusively by the Agent's countersignature thereon pursuant to the terms
hereof without which such Substitution Agreement shall be ineffective): (i)
except as provided hereunder and in Section 9.11.5, the respective rights of
each Selling Lender and the Borrower against each other under the Financing
Documents with respect to the portion of the Loans being assigned or delegated
shall be terminated and each Selling Lender and the Borrower shall each be
released from all further obligations to the other hereunder with respect
thereto (all such rights and obligations to be so terminated or released being
referred to in this Section 9.11 as "Discharged Rights and Obligations"); and
(ii) the Borrower and the Substituted Lender shall each acquire rights against
each other and assume obligations towards each other which differ from the
Discharged Rights and Obligations only in so far as the Borrower and the
Substituted Lender have assumed and/or acquired the same in place of the Selling
Lender in question; and (iii) the Agent, the Substituted Lender and the other
Lenders shall acquire the same rights and assume the same obligations between
themselves as they would have acquired and assumed had such Substituted Lender
been an original party to this Agreement as a Lender possessing the Discharged
Rights and Obligations acquired and/or assumed by it in consequence of the
delivery of such Substitution Agreement to the Agent.
Section 9.11.5. Discharged Rights and Obligations shall not include,
and there shall be no termination or release pursuant to this Section 9.11 of
(i) any rights or obligations arising pursuant to any of the Financing Documents
in respect of the period or in respect of payments hereunder made during the
period prior to the effective date of the relevant Substitution Agreement or,
(ii) any rights or obligations relating to the payment of any amount which has
fallen due and not been paid hereunder prior to such effective date or rights or
obligations for the payment of interest, damages or other amounts becoming due
hereunder as a result of such nonpayment.
Section 9.11.6. With respect to any substitution of a Substituted
Lender taking place after the Closing Date, the Borrower shall issue to such
Substituted Lender and to such Selling Lender, new Notes reflecting the
inclusion of such Substituted Lender as a Lender and the reduction in the
respective Loans of such Selling Lender, such new Notes to be issued against
receipt by the Borrower of the existing Notes of such Lender. The Selling Lender
or the Substituted Lender shall pay to the Agent for its own account an
assignment fee in the amount of $3,000 for each assignment hereunder, which
shall be payable at or before the effective date of the assignment.
Section 9.11.7. Each Lender may furnish to any financial institution
having at least $500,000,000 in assets which such Lender proposes to make a
Substituted Lender or to a Substituted Lender any information concerning such
Lender, the Borrower, Stockholders and any Subsidiary in the possession of that
Lender from time to time; provided that any Lender providing any confidential
information about the Borrower, any of the Stockholders and/or any Subsidiary to
any such financial institution shall first obtain such financial institution's
agreement to keep confidential any such confidential information in accordance
with Section 9.14.
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Section 9.11.8. In addition to the foregoing, the Agent and each Lender
may at any time pledge all or any portion of its rights to under the Financing
Documents, including any portion of the Notes, to any of the twelve Federal
Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C.
Section 341. No such pledge or the enforcement thereof shall release the Agent
or such Lender from its obligations hereunder or under any of the other
Financing Documents.
Section 9.12. Payments Pro Rata. The Agent agrees that promptly after its
receipt of each payment from or on behalf of the Borrower in respect of any
obligations of the Borrower hereunder it shall distribute such payment to the
Lenders pro rata based upon their respective Pro Rata Shares, if any, of the
obligations with respect to which such payment was received. Each of the Lenders
agrees that, if it should receive any amount hereunder (whether by voluntary
payment, by realization upon security, by the exercise of the right of setoff
under Section 2.5.2 or otherwise or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Financing Documents, or
otherwise), which is applicable to the payment of the Obligations of a sum which
with respect to the related sum or sums received by other Lenders is in a
greater proportion than the total amount of such Obligation then owed and due to
such Lender bears to the total amount of such Obligation then owed and due to
all of the Lenders immediately prior to such receipt, except for any amounts
received pursuant to Section 2.2.3, then such Lender receiving such excess
payment shall purchase for cash without recourse or warranty from the other
Lenders an interest in the Obligations of the Borrower to such Lenders in such
amount as shall result in a proportional participation by all the Lenders in
such amount; provided further, however, that if all or any portion of such
excess amount is thereafter recovered from such Lender, such purchase shall be
rescinded and the purchase price restored to the extent of such recovery, but
without interest.
Section 9.13. Indemnification. The Borrower irrevocably agrees to and does
hereby indemnify and hold harmless Agent and each of the Lenders, their agents
or employees and each Person, if any, who controls any of the Agent and the
Lenders within the meaning of Section 15 of the Securities Act of 1933, as
amended, and each and all and any of them (the "Indemnified Parties"), against
any and all losses, claims, actions, causes of action, damages or liabilities
(including any amount paid in settlement of any action, commenced or threatened
and any amount described in Section 8.4) (collectively, the "Damages"), joint or
several, to which they, or any of them, may become subject under statutory law
or at common law, and to reimburse the Indemnified Parties for any legal or
other out-of-pocket expenses reasonably incurred by it or them in connection
with investigating, preparing for or defending against any of the Indemnified
Parties, insofar as such losses, claims, damages, liabilities or actions arise
out of or are related to any act or omission of the Borrower and/or any
Subsidiary with respect to any of (i) the Related Transactions, (ii) any of the
Financing Documents, (iii) any of Loans, (iv) any use made or proposed to be
made with the proceeds of the Loans, (v) any acquisition or proposed acquisition
or any other similar business combination or proposed business combination by
the Borrower and/or any of its Subsidiaries and/or its Affiliates (whether by
acquisition or exchange of capital stock or other securities or by acquisition
of all or substantially all of the assets of any Person), (vi) any offering of
securities by the Borrower and/or any Subsidiary after the date hereof and/or in
connection with the Securities and Exchange Act of 1933 and/or (vii) any failure
to comply with any applicable federal, state or foreign governmental law, rule,
regulation, order or decree, including without limitation, any Damages which
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact with respect to matters relative to any of the foregoing
contained in any document distributed in connection therewith, or the omission
or alleged omission to state in any of the foregoing a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, but
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excluding any Damages to the extent arising from or due to, as determined in a
final nonappealable judgment by a court of competent jurisdiction, the gross
negligence or willful misconduct of any of the Indemnified Parties; provided,
however, that notwithstanding the foregoing, no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort of otherwise) to the
Borrower, any Affiliates or any Subsidiaries or to their respective security
holders or creditors except for direct (as opposed to consequential) damages
determined in a final nonappealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. In the case of an investigation, litigation or proceeding to
which the indemnity described in this paragraph applies, such indemnity shall be
effective whether or not such investigation, litigation or proceeding is brought
by the Borrower, any Affiliates or any Subsidiary or to their respective
security holders or creditors or an Indemnified Party or an Indemnified Party is
otherwise a party thereto and whether or not the Related Transaction and the
transactions contemplated by the Financing Documents are consummated.
Promptly upon receipt of notice of the commencement of any action, or
information as to any threatened action against any of the Indemnified Parties
in respect of which indemnity or reimbursement may be sought from the Borrower
on account of the agreement contained in this Section 9.13, notice shall be
given to the Borrower in writing of the commencement or threatening thereof,
together with a copy of all papers served, but the omission so to notify the
Borrower of any such action shall not release the Borrower from any liability
which it may have to such Indemnified Parties unless, and only to the extent
that, such omission materially prejudiced Borrower's ability to defend against
such action.
In case any such action shall be brought against any of the Indemnified
Parties, the Borrower shall be entitled to participate in (and, to the extent
that it shall wish, to select counsel and to direct) the defense thereof at its
own expense. Any of the Indemnified Parties shall have the right to employ its
or their own counsel in any case, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless the employment of such
counsel shall have been authorized in writing by the Borrower in connection with
the defense of such action or the Borrower shall not have employed counsel to
have charge of the defense of such action or such Indemnified Party shall have
received an opinion from an independent counsel that there may be defenses
available to it which are different from or additional to those available to the
Borrower (in which case the Borrower shall not have the right to direct the
defense of such action on behalf of such Indemnified Party), in any of which
events the same shall be borne by the Borrower. If any Indemnified Party settles
any claim or action with respect to which the Borrower has agreed to indemnify
such Indemnified Party pursuant to the terms hereof, the Borrower shall have no
liability pursuant to this Section 9.13 to such Indemnified Party with respect
to such claim or action unless the Borrower shall have consented in writing to
the terms of such settlement.
The provisions of Section 9.13 shall be effective only to the fullest
extent permitted by law. The provisions of this Section 9.13 shall continue in
effect and shall survive (among other events), until the applicable statute of
limitations has expired, any termination of this Agreement, foreclosure, a deed
in lieu transaction, payment and satisfaction of the Obligations of Borrower,
and release of any collateral for the Loans.
Section 9.14. Confidential Information. The Lenders and the Agent shall,
with respect to any and all financial statements or other reports or documents
delivered by or on behalf of the Borrower or any related parties to the Lenders
or the Agent pursuant to Section 5.3 and any other information provided to any
Lender or the Agent (other than in a public forum, including an
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analyst's meeting and other than any such information which is publicly
available other than solely as a result of disclosure by the Agent or any of the
Lenders) and to the extent that such information therein contained or provided
has not theretofore otherwise been disclosed in such a manner as to render
such information no longer confidential (other than as a result of disclosure by
the Agent or a Lender in violation of its obligation hereunder), employ
reasonable procedures designed to maintain the confidential nature of the
information therein contained; provided, however, that any Lender or the Agent
may disclose or disseminate such information to: (a) such Lender's or the
Agent's respective employees, agents, attorneys and accountants who would
ordinarily have access to such information in the normal course of the
performance of their duties in connection with the administration of the Loans;
(b) such third parties as such Lender or the Agent may, in its discretion, deem
reasonably necessary in connection with or in response to (i) compliance with
any law, ordinance or governmental order, regulation, rule, subpoena, or
investigation, or (ii) any order, decree, judgment, subpoena, notice of
discovery or similar ruling or pleading issued, filed, served or purported on
its face to be issued, filed or served (x) by or under authority of any court,
tribunal, arbitration board or any governmental agency, commission, authority
board or similar entity or (y) in connection with any proceeding, case or matter
pending (or on its face purported to be pending) before any court, tribunal,
arbitration board or any governmental agency, commission, authority, board or
similar entity; provided that without notice to the Borrower, the Agent and any
Lender may disclose such information to bank examiners of governmental agencies
having regulatory authority over the Agent or such Lender in question in
connection with such examiner's examinations of Agent or such Lender's books and
records, or (iii) collection by judicial proceeding of any of the Indebtedness
now or hereafter owing by the Borrower and/or any Subsidiary to the Agent and/or
any of the Lenders or enforcement of any rights or remedies now or hereafter
possessed by Agent and/or any of the Lenders pursuant to this Agreement, any of
the Notes or any of the other Financing Documents; (c) subject to Section 9.11,
any prospective purchaser (including an affiliate of any Lender), in connection
with the resale or proposed resale by it of any portion of its Notes or other
participation in its Pro Rata Share of the Loans; provided that the prospective
participant has signed an agreement binding such participant under this Section
9.14 as if it were a Lender; and (d) any entity utilizing such information to
rate or classify any Lender's or the Agent's debt or equity securities for sale
to the public; provided that such rating agency has agreed to keep such
information confidential pursuant to an agreement reasonably satisfactory to the
Borrower.
Section 9.15. Governing Law. This Agreement and each Note shall be governed
by, and construed in accordance with, the laws of The Commonwealth of
Massachusetts without regard to such state's conflict of laws rules.
Section 9.16. Severability of Provisions. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 9.17. Headings. Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 9.18. Counterparts. This Agreement may be executed and delivered in
any number of counterparts each which shall be deemed an original, and this
Agreement shall be effective when at least one counterpart hereof has been
executed by each of the parties hereto.
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SIGNATURES APPEAR ON NEXT PAGE
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument by their respective officers thereunto duly
authorized, as of August 12, 1999.
In the presence of: CONVERGENT GROUP CORPORATION
/s/ VICKY PIERCE By: /s/ SCOTT M. SCHLEY
- ------------------------------- ---------------------------
Name: Scott M. Schley
Title: V/P Finance
In the presence of: FLEET NATIONAL BANK, as Agent for
the Lenders and as a Lender
/s/ DAVID B. BREMER By: /s/ MICHAEL S. BARCLAY
- ------------------------------- ---------------------------
David B. Bremer Name: Michael S. Barclay
Title: Vice President
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(Loan Agreement - Fleet/Convergent)
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument by their respective officers thereunto duly
authorized, as of August 12, 1999.
In the presence of: CONVERGENT GROUP CORPORATION
By:
- ------------------------------- ---------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
In the presence of: FLEET NATIONAL BANK, as Agent for
the Lenders and as a Lender
/s/ DAVID B. BREMER By: /s/ MICHAEL S. BARCLAY
- ------------------------------- ---------------------------
DAVID B. BREMER Name: Michael S. Barclay
Title: Vice President
74
(Loan Agreement - Fleet/Convergent)
<PAGE> 81
EXHIBIT 1.1 -- EQUITY INVESTMENTS,
OWNERSHIP INTERESTS, SUBSIDIARIES AND SUBORDINATED DEBT
Organization
1. Convergent Group Corporation ("CVG or the "Borrower") is a Delaware
corporation qualified as a foreign corporation in California and
Colorado
2. Utility Graphics Consultants Corporation ("UGC"), a wholly-owned
subsidiary of the Borrower, is a Colorado corporation qualified as a
foreign corporation in California, Colorado, Ohio, and Texas.
3. Convergent Group Ltd., a wholly-owned subsidiary of the Borrower, is an
Ontario, Canada corporation qualified to do business in British
Colombia and Saskatchewan.
4. Graphic Data Systems Corporation ("GDS"), a wholly-owned subsidiary of
the Borrower, is a Delaware corporation qualified as a foreign
corporation in California, Colorado, District of Columbia, Indiana,
Kentucky, Massachusetts, North Carolina, Nebraska, New Hampshire, Ohio,
Oklahoma, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, and
Wisconsin.
5. Graphic Data Systems Limited ("GDSL"), a wholly-owned subsidiary of
GDS, is a corporation of England and Wales.
6. GIS Research Corporation (Inactive), a wholly-owned subsidiary of UGC,
is a Colorado corporation.
7. UGC General Partnership I is a general partnership owned 51% by UGC and
49% by CVG.
Equity Investments
1. Informatix
GDS owns 6,000 shares (15%) of Informatix Incorporated, a Japanese
Corporation. The share certificates are registered in the name of EDS
World Corporation (Far East), the prior owner of the shares. GDS is in
the process of having the shares transferred into its name.
<PAGE> 82
Capital Stock
1. Shareholder ownership of the Borrower's capital stock prior to the
Closing Date:
<TABLE>
<CAPTION>
Class A Series A Series B
Common Common Preferred Preferred
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Murray T. Holland 2,068,000
Electronic Data
Systems Corporation 282,000 5,725 34,816
GMJM Stock Partnership 372,240
Mark L. Epstein Trust 372,240
LEHE Family
Partners, LTD. 372,240
EAS Trust 50,000
RBS Trust 50,000
James E. Hargis 53,826
Scott M. Schley 57,152
Richard G. Godin 14,288
Barry J. Kemble 26,226
Bart E. Elliott 25,051
Thomas E. VanDenover 18,753
Eugene P. Kindrachuk 12,408
Dean A. Zastava 12,408
John A. Ramseur 95,860
Terrence R. Burns 4,875
Richard J. Leeser 195
Eric E. Westover 500
Other Shareholders 322,784
Option Holders 32,239
------------ ------------ ------------ ------------
Total 1,893,285 2,350,000 5,725 34,816
============ ============ ============ ============
</TABLE>
2. Equity invested in Borrower by New Stockholders on or prior to Closing
Date:
New Stockholder Investment in Brower
--------------- --------------------
InSight Capital Partners III L.P. $12,360,343.11
InSight Capital Partners III(Cayman) $3,061,875.02
<PAGE> 83
<TABLE>
<CAPTION>
New Stockholder Investment in Borrower
--------------- ----------------------
<S> <C>
InSight Capital Partners III L.P. $12,360,343.11
InSight Capital Partners III (Cayman) $ 3,061,875.02
InSight Capital Partners III (Co-Investors) $ 1,850,552.87
UBS Capital II LLC $17,272,741.00
GS Private Equity Partners II, L.P. $ 1,711,610.00
GS Private Equity Partners II Offshore, L.P. $ 886,329.00
GS Private Equity Partners III, L.P. $ 1,794,008.00
GS Private Equity Partners III Offshore, L.P. $ 418,227.00
NBK/GS Private Equity Partners, L.P. $ 189,763.00
WI Software Investors LLC $ 3,000,000.00
Imprimis SB LP $ 2,000,000.00
Stephen Friedman $ 1,000,000
--------------
Total 45,545,449.00
</TABLE>
3. Shareholder ownership of the Borrower's capital stock immediately
subsequent to the Closing Date: See attached Schedule.
<PAGE> 84
<TABLE>
<CAPTION>
SERIES A
SHAREHOLDER COMMON PREFERRED PREFERRED
- ----------- ------ --------- ---------
<S> <C> <C> <C>
Bannon, Tom 54,775
Barry J. Kemble 216,394 102,974
Bart E. Elliott 201,470 98,360
Bisset, Jeremy 18,831
Blackburn, Kern 1,901
Blanks, Charles R. 5,869
Boevingloh, Jeff 978
Bowman, David 19,562
Breining, David 1,901
Broderick, Kathy 3,912
Brown, Steve 3,912
Chamberlain, Susan 1,956
Cooper, Stewart 1,956
Craven, Ruth 1,956
Cushenberry, Chris 1,588
Davis, Loretta L. 9,441
Dean A. Zastava 97,004 48,718
EAS Trust 406,672 196,319
Elliott, Bart E. 49,521
Eric E. Westover 4,066 1,963
Eugene P. Kindrachuk 97,004 48,718
Foster, Greg 66,512
Frazier, Dale 22,008
Gay, Andrew D. 42,302
Giarritano, Pat 978
GMJM Stock Partnership, Ltd. 6,323,561 2,412,621
Goodrich, Glenn 1,588
Harms, Adley D. 12,594
Heitman, Ken 16,507
Helmer Thomas K. 23,596
Huston, Randy 19,562
Ihaia, Jason 1,565
James E. Hargis 210,729 211,342
John A. Ramseur 776,034 376,383
Jones, David W. 2,543
Jones, Jim 978
Juhl, Ginger L. 35,212
Keane, James 39,125
Kemble, Barry J. 39,371
Kindrachuk, Eugene P. 32,278
Kirby, Cordelia S. 5,501
Kling, James 3,912
Krabbenhoeft, Jennifer 13,083
Kussie, David 1,956
Lasiter, Jay 1,956
LEHE Family Partners, Ltd. 6,323,561 2,412,621
Lewis, Chris 9,781
Lonski, Thomas E. 20,419
Mark L. Epstein Trust 6,323,561 2,412,621
Martin, Brian 11,737
McAllister, Kathy 5,869
Merryman, Mark 1,956
Newell, Paul 9,781
Noonan, Patrick J. 14,429
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
Series A
Shareholder Common Preferred Preferred
- ----------- ------ --------- ---------
<S> <C> <C> <C>
Omoto, Milton Y. 9,586
Pate, Rolland J. 18,831
Peach, Tim 65,534
Peterson, Mike 978
Pierce, Vicky 1,956
Post, Mark 5,869
Preis, Bob 1,956
Probasco, Cory 1,956
RBS Trust 406,672 196,319
Richard G. Godin 55,938 56,100
Richard J. Leeser 763 766
Robinson, Gayle F. 1,588
Scott M. Schley 1,619,312 779,312
Scott, Charles M. 11,006
Sicker, Adam 0
Sievert, Martha 1,956
Sullivan, John 7,848
Tao, Michael 31,300
Terrence R. Burns 19,086 19,142
Thomas E. VanDenover 149,237 73,632
Tidd, Randall D. 47,196
Tram, Hahn 13,694
VanDenover, Thomas E. 145,533
Walls, Martin 50,620
Westover, Eric 11,370
Wielgus, Roger 1,588
Yarka, Paul J. 27,387
Yaryan, Terry L. 275,636
Zastava, Dean A. 19,684
Zhou, Minjian 782
GS PRIVATE EQUITY PARTNERS II OFFSHORE, L.P. 816,918
GS PRIVATE EQUITY PARTNERS III OFFSHORE, L.P. 385,475
GS PRIVATE EQUITY PARTNERS III, L.P. 1,653,515
GS PRIVATE EQUITY PARTNERS II, L.P. 1,577,569
IMPRIMIS SB LP 1,843,376
INSIGHT CAPITAL PARTNERS III (CAYMAN), L.P. 2,822,094
INSIGHT CAPITAL PARTNERS III (CO-INVESTORS), LP. 1,705,632
INSIGHT CAPITAL PARTNERS III, L.P. 11,392,380
NBK/GS PRIVATE EQUITY PARTNERS, L.P. 174,902
STEPHEN FRIEDMAN 921,688
UBS CAPITAL II LLC 15,920,076
WI SOFTWARE INVESTORS LLC 2,765,064
Option Holders 1,389,023
---------- ---------- ---------- ----------
TOTALS 1,389,023 24,620,088 9,447,911 41,978,689
========== ========== ========== ==========
</TABLE>
<PAGE> 86
4. Borrower's Authorized and Outstanding Capital Stock
<TABLE>
<CAPTION>
a) Authorized Shares:* Par Value:
<S> <C>
7,500,000 shares of Common Stock, $0.01
further subdivided into:
2,500,000 shares of Common Stock $0.01
3,500,000 shares of Class A Common Stock $0.01
1,500,000 shares of Class B Common Stock $0.01
44,725 shares of Preferred Stock
further subdivided into:
5,725 shares of Series A Preferred Stock $0.10
39,000 shares of Series B Preferred Stock $0.10
</TABLE>
* The 5,725 shares of outstanding Series A Preferred Stock are
convertible into 2,085,000 shares of Class B Common Stock. However,
the 1,500,000 authorized shares of Class B Common Stock are not
sufficient to allow issuance of 2,085,000 shares of Class B Common
Stock upon conversion of the Series A Preferred Stock. The Certificate
of Designations for the Series A Preferred Stock requires such shares
to be available.
b) Outstanding Shares:
1,538,262 shares of Common Stock
2,350,000 shares of Class A Common Stock
2,085,000 shares of Class B Common Stock
5,725 shares of Series A Preferred Stock
34,816 shares of Series B Preferred Stock
5. Authorized and Outstanding Capital Stock of Subsidiaries
A. UGC
Authorized shares: 8,000,000 Total
600,000 shares of Common Stock, no par value
200,000 shares of Series A Preferred Stock $.01 par value
Outstanding shares: 316,400 Common shares owned by the Borrower
17,958 shares of Series A Preferred Stock owned by
the Borrower
B. Convergent Group LTD.
Authorized shares: Unlimited number of Common Shares
Outstanding shares: 800 Shares of Common owned by the Borrower
C. GDS
<PAGE> 87
Authorized shares: 59,000 Total
3,000 Common par value $.01
500 non-voting Common par value $.01
55,500 Preferred Stock Par Value $.10
1,000 Series A Convertible Exchangeable Preferred Stock par value $.01
24,500 Series B Exchangeable Preferred Stock par value $.01
30,000 Series C Exchangeable Preferred Stock $.01
Outstanding shares: 1,000 shares Common Stock owned by the Borrower
13,980 Shares Series B Preferred Stock owned by the Borrower
D. Graphic Data Systems Limited
Authorized shares: 5,000,000 shares of Common at 1 Pound Sterling each
Outstanding shares: 100 shares of Common Stock owned by GDS
E. GIS Research Corporation
Authorized shares: 50,000 shares of Common Stock - no par value
Outstanding shares: 10,000 shares Common Stock owned by UGC
<PAGE> 88
EXHIBIT 1.2 - RELATED TRANSACTION DOCUMENTS
Recapitalization Agreement, dated as of August 12, 1999, by and among Convergent
Group Corporation, certain shareholders of the Borrower, certain Investors and
InSight capital Partners III, L.P.
Stock Purchase and Redemption Agreement.
Shareholder Agreement (2 versions)
Registration Rights Agreement
<PAGE> 89
EXHIBIT 1.2 - RELATED TRANSACTION DOCUMENTS
To be provided at closing.
1
<PAGE> 90
EXHIBIT 1.4 - FORM OF INTEREST RATE ELECTION
Fleet National Bank Date:
One Federal Street
Boston, MA 02110
Attn: Pauline Kowalczyk
Telecopy: (617) 346-0149
Re: Interest Rate Election
Gentlemen:
Reference is made to that certain Loan Agreement, dated as of August _,
1999 by and among the undersigned, you, and the Lenders, (the "Loan Agreement").
Capitalized terms used herein shall have the same meaning as in the Loan
Agreement.
The undersigned hereby elects, pursuant to the Loan Agreement, that the
[Libor Rate or Effective Prime] shall be the interest rate applicable to that
certain [outstanding] Loan [requested pursuant to the Request attached hereto]
in the principal amount of and no/100 Dollars ($ ). [The Interest
Adjustment Date for said Loan is .]
The undersigned hereby elects an Interest Period for such Loan of []
months. [Complete only if electing Adjusted Libor Rate].
The undersigned hereby certifies to the Lenders that as of the date
hereof:
A. No Event of Default and no Default has occurred and is continuing;
and
B. The representations and warranties of the Borrower contained in
Article 4 of the Loan Agreement and/or in any of the other Financing Documents
are true and correct in all material respects except as altered by actions
permitted under the Loan Agreement.
CONVERGENT GROUP CORPORATION
By:
------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
cc: Fleet National Bank
Mailstop MA OF D07A
One Federal Street
Boston, MA 02110
Attn: Michael S. Barclay
Telecopy: (617) 346-0151
1
<PAGE> 91
EXHIBIT 1.5 - FORM OF REVOLVING CREDIT NOTE
REVOLVING CREDIT NOTE
[Insert Maximum Amount of _________, 19__
Lenders Pro Rata Share of
Revolving Credit Loan
Commitment]
FOR VALUE RECEIVED, CONVERGENT GROUP CORPORATION, a Delaware with a
business address of 6200 South Syracuse Way, Suite 200, Englewood, Colorado
80111 (hereinafter referred to as the "Borrower"), promises to pay to the order
of [insert name of Lender], [a national banking association organized and
existing under the laws of the United States of America] [a __________ banking
corporation _______] (the "Lender"), at the Lender's office located at [insert
address] or to Fleet National Bank or any successor agent under the Loan
Agreement (defined below) (the "Agent") in accordance with the Loan Agreement
(defined below), the lesser of (i) the principal sum of [insert Lender's Pro
Rata Share of the Revolving Credit Loan Commitment] ($__________.00), or (ii)
the aggregate unpaid principal amount of all advances of funds under the
Revolving Credit Loan made by the Lender to the Borrower or by the Lender
through the Agent to the Borrower pursuant to that certain Loan Agreement dated
as of the date hereof by and among the Borrower, the Agent, the other Lenders
party thereto and the Lender, as the same may be amended (the "Loan Agreement").
The Borrower shall pay in full all unpaid principal, interest, fees and
other amounts due under this Note on the Revolving Credit Repayment Date.
The Borrower promises to pay to the order of the Lender interest before
and after maturity on the principal amount of this Note outstanding from time to
time from the date hereof until payment in full of all principal, interest, fees
and other sums due under this Note in accordance with the Loan Agreement.
Upon the occurrence and during the continuance of any Event of Default
each Prime Rate Loan evidenced by this Note, shall bear interest, payable on
demand, at a floating interest rate per annum equal to four percent (4.0%) above
Effective Prime and each Libor Loan evidenced by this Note shall bear interest
at the Libor Rate plus four percent (4.0%). In addition, in the event that the
Borrower fails to pay any amount of principal or interest hereof within ten (10)
days after such payment is due, the Borrower shall pay to the Lender upon demand
by the Agent or the Lender, a late charge in an amount equal to five percent
(5%) of such amount of principal or interest.
Principal, interest, fees and other sums are payable in immediately
available Dollars to the Agent at its address set forth in the Loan Agreement or
as otherwise directed in writing from the Agent to the Borrower.
This Note is one of the Revolving Credit Notes referred to in, and is
entitled to the benefits of, the Loan Agreement. The applicable terms and
provisions of the Loan Agreement are incorporated herein by reference as if
fully set forth herein. In the event of any conflict between any provision of
this Note and any provision(s) of the Loan Agreement, such provision(s) of the
Loan Agreement shall control. Each capitalized term used in this Note and not
expressly defined
1
<PAGE> 92
in this Note shall have the meaning ascribed to such term in the Loan Agreement.
The Loan Agreement, among other things, contains provisions for acceleration of
the maturity of this Note upon the happening of certain stated events and also
for prepayments on account of principal of this Note prior to the maturity of
this Note upon the terms and conditions specified in the Loan Agreement.
This Note is secured by the Security Documents.
If this Note shall not be paid when due and shall be placed by the
holder hereof in the hands of an attorney for collection, through legal
proceedings or otherwise, the Borrower will pay reasonable attorneys' fees to
the holder hereof together with reasonable costs and expenses of collection.
All provisions of this Note and any other agreements between the
Borrower and the Lender are expressly subject to the condition that in no event,
whether by reason of acceleration of maturity of the Indebtedness evidenced by
this Note or otherwise, shall the amount paid or agreed to be paid to the Lender
which is deemed interest under applicable law exceed the maximum permitted rate
of interest under applicable law (the "Maximum Permitted Rate"), which shall
mean the law in effect on the date of this Note, except that if there is a
change in such law which results in a higher Maximum Permitted Rate, then this
Note shall be governed by such amended law from and after its effective date. In
the event that fulfillment of any provision of this Note, or the Loan Agreement
or any document, instrument or agreement providing security for this Note
results in the rate of interest charged hereunder being in excess of the Maximum
Permitted Rate, the obligation to be fulfilled shall automatically be reduced to
eliminate such excess. If, notwithstanding the foregoing, the Lender receives an
amount which under applicable law would cause the interest rate hereunder to
exceed the Maximum Permitted Rate, the portion thereof which would be excessive
shall automatically be deemed a prepayment of and be applied to the unpaid
principal balance of this Note to the extent of then outstanding Prime Rate
Loans and not a payment of interest and to the extent said excessive portion
exceeds the outstanding principal amount of Prime Rate Loans, said excessive
portion shall be repaid to the Borrower.
The Borrower expressly waives presentment, notice of acceleration and
intent to accelerate, demand for payment and protest and notice of protest and
nonpayment.
This Note shall for all purposes be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts without regard to
such state's conflict of laws rules.
Executed as a sealed instrument as of the date first above written.
In the presence of: CONVERGENT GROUP CORPORATION
By:
- ------------------------------------ --------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
2
<PAGE> 93
EXHIBIT 1.8 - PERMITTED ENCUMBRANCES
None. The existing security interest of Norwest Business Credit will be released
at the Closing Date. However, owners of leased equipment have made notification
filings under the UCC.
<PAGE> 94
EXHIBIT 1.9 - PRO RATA SHARES
AGENT'S AND LENDERS'
NOTICE ADDRESSES AND WIRE TRANSFER INSTRUCTIONS
Name of AGENT, address for notices
and wire transfer instructions:
Fleet National Bank
Mailstop MA OF D07A
One Federal Street
Boston, Massachusetts 02110
Attn: High Tech Group
Michael S. Barclay, Vice President
Wire Transfer Instructions:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
ABA#: 011000138
Account: Commercial Loan Services
Attn: Agent Bank MA
Account#: 1510351 G/L
Re: Convergent Group
Name of LENDER, address for notices
and wire transfer instructions: Pro Rata Share
Fleet National Bank 100%
Mailstop MA OF D07A
One Federal Street
Boston, Massachusetts 02110
Attn: High Tech Group
Michael S. Barclay, Vice President
Wire Transfer Instructions:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
ABA#: 011000138
Account: Commercial Loan Services
Attn: Agent Bank MA
Account#: 1510351 G/L
Re: Convergent Group
1
<PAGE> 95
Name of LENDER, address for notices and
wire transfer instructions:
For Credit Matters: Pro Rata Share
-------------------------- []%
--------------------------
--------------------------
Tel:
----------------------
Fax:
----------------------
For Administrative/Operations Matters:
--------------------------
--------------------------
--------------------------
Tel:
----------------------
Fax:
----------------------
Wire Transfer Instructions:
--------------------------
--------------------------
--------------------------
ABA #:
--------------------
Account Name:
-------------
Attn:
---------------------
Re:
-----------------------
2
<PAGE> 96
EXHIBIT 1.10 - FORM OF REQUEST
Date:
Fleet National Bank.
One Federal Street
Boston, Massachusetts 02110
Attn: Pauline Kowalczyk
Telecopy: (617) 346-0149
RE: Request for Loan
Gentlemen:
Reference is made to that certain Loan Agreement dated as of August __,
1999 by and among the undersigned, you and the Lenders (the "Loan Agreement").
Capitalized terms used herein shall have the same meaning as in the Loan
Agreement.
The undersigned hereby requests a Revolving Credit Loan from the
Lenders pursuant to the Loan Agreement in the amount of
and no/100 Dollars ($ .00) at the interest rate set forth in the Interest
Rate Election pertaining to such Loan.
The undersigned requests that each Lender fund its Pro Rata Share of
such Loan on , 19 and such date is in accordance with the terms and
conditions of the Loan Agreement.
The undersigned hereby certifies to the Lenders that as of the date
hereof:
(a) no Event of Default and no Default has occurred and is continuing;
and
(b) the representations and warranties of the Borrower contained in
Article 4 of the Loan Agreement and/or contained in any of the other Financing
Documents are true and correct in all material respects except as altered by
actions not prohibited under the Loan Agreement.
CONVERGENT GROUP CORPORATION
By:
--------------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
cc: Fleet National Bank
Mailstop MA OF D07A
One Federal Street
Boston, MA 02110
Attn: Michael S. Barclay
Telecopy: (617) 346-0151
1
<PAGE> 97
EXHIBIT 1.12 - PROJECTIONS
Attached
<PAGE> 98
SECTION 1.12-PROJECTIONS
CONVERGENT GROUP CORPORATION
FIVE YEAR OPERATING FORECAST BASE PLAN
<TABLE>
<CAPTION>
Fiscal year ended: 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Technology Integration Services 35,821,917 43,901,468 58,196,626 77,146,562 102,266,959
Conversion Revenue and Subcontractor Fees 17,511,613 20,310,195 26,923,583 35,690,418 47,311,901
Billed Expenses 2,238,085 1,689,993 2,240,287 2,969,768 3,936,781
Workbench and Application Licenses 3,350,385 4,587,362 8,027,883 14,048,795 24,585,392
Third Party Software Sales 2,280,134 5,548,116 6,688,058 8,062,218 9,718,719
Hardware Sales 1,270,961 3,153,802 3,689,949 4,317,240 5,051,171
Hardware and Software Maintenance 1,797,968 3,528,907 6,175,587 10,807,277 18,912,734
GDS Maintenance and other GDS Income 1,439,359 -- -- -- --
Other Income 84,000 139,000 152,000 168,000 184,000
------------ ------------ ------------ ------------ ------------
Total Revenue 65,794,422 82,858,843 112,093,973 153,210,278 211,967,657
Cost of Revenue:
Employee Compensation and Benefits 17,531,540 20,194,675 26,770,448 35,487,419 47,042,801
Conversion and Subcontractor Costs 16,458,936 18,279,176 24,231,225 32,121,376 42,580,711
Billable Project Expense 2,179,512 1,689,993 2,240,287 2,969,768 3,936,781
Workbench and Application Costs 333,146 3,440,522 6,020,912 10,536,596 18,439,044
Third Party Software Costs 1,010,469 2,885,020.32 1,010,469 1,010,469 1,010,469
Hardware Costs 1,063,529 2,680,732 3,136,457 3,669,654 4,293,495
Hardware and Software Maintenance Costs 1,369,886 2,823,126 4,940,470 8,645,822 15,130,187
GDS Maintenance and other GDS Costs 1,082,211 -- -- -- --
Other Expense 899,655 2,634,088 3,491,798 4,628,794 6,136,018
------------ ------------ ------------ ------------ ------------
Total cost of Revenue 41,928,884 54,627,331 71,842,065 99,069,897 138,569,506
------------ ------------ ------------ ------------ ------------
Gross Margin 23,865,538 28,231,512 40,251,908 54,140,381 73,398,151
Selling, General and Administrative Expense 13,378,737 14,254,568 19,107,600 25,932,906 35,686,631
(normalized for executive compensation 1999)
------------ ------------ ------------ ------------ ------------
EBITDA 10,486,801 13,976,944 21,144,309 28,207,475 37,711,520
Interest expense (income) net 689,167 1,654,000 1,654,000 1,654,000 1,654,000
Depreciation, amortization expense 1,464,107 1,525,000 2,028,000 2,657,000 3,454,000
Tax expense (614,359) (1,509,827) 6,810,300 9,319,625 12,715,373
Transaction costs 2,911,000
------------ ------------ ------------ ------------ ------------
Net income 6,036,886 12,307,771 10,652,008 14,576,849 19,888,147
============ ============ ============ ============ ============
</TABLE>
<PAGE> 99
SECTION 1.12-PROJECTIONS
CONVERGENT GROUP CORPORATION
FIVE YEAR OPERATING FORECAST STRETCH PLAN
<TABLE>
<CAPTION>
Fiscal year ended: 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Technology Integration Services 35,821,917 49,772,000 66,188,447 86,708,008 112,721,767
Conversion Revenue and Subcontractor Fees 17,511,613 25,504,000 33,633,952 44,403,513 58,717,298
Billed Expenses 2,238,085 1,833,664 1,871,200 2,712,800 3,975,200
Workbench and Application Licenses 3,350,385 8,845,000 17,690,000 30,957,500 46,436,250
Third Party Software Sales 2,280,134 5,983,075 6,636,150 8,680,920 11,635,020
Hardware Sales 1,270,961 3,504,225 2,929,500 3,880,500 5,239,500
Hardware and Software Maintenance 1,797,968 2,923,951 3,940,600 6,207,300 9,454,400
GDS Maintenance and other GDS Income 1,439,359 -- -- -- --
Other Income 84,000 139,000 152,000 168,000 184,000
------------ ------------ ------------ ------------ ------------
Total Revenue 65,794,422 98,504,915 133,041,849 183,718,541 248,363,435
Cost of Revenue:
Employee Compensation and Benefits 17,531,540 26,677,000 35,540,000 46,529,000 60,439,000
Conversion and Subcontractor Costs 16,458,936 22,953,000 30,298,000 39,994,000 52,792,000
Billable Project Expense 2,179,512 1,834,000 1,871,000 2,712,000 3,975,000
Workbench and Application Costs 333,146 2,211,000 4,422,000 7,739,000 11,609,000
Third Party Software Costs 1,010,469 3,111,000 3,451,000 4,514,000 6,050,000
Hardware Costs 1,063,529 2,978,000 2,491,000 3,299,000 4,454,000
Hardware and Software Maintenance Costs 1,369,886 2,339,000 3,153,000 4,966,000 7,563,000
GDS Maintenance and other GDS Costs 1,082,211 -- -- -- --
Other Expense 899,655 2,986,000 3,972,000 5,204,000 6,764,000
------------ ------------ ------------ ------------ ------------
Total cost of Revenue 41,928,894 65,089,000 85,198,000 114,957,000 153,646,000
------------ ------------ ------------ ------------ ------------
Gross Margin 23,865,538 33,415,915 47,843,949 68,761,541 94,717,435
Selling, General and Administrative Expense 13,378,737 17,742,000 22,882,000 30,473,000 40,090,000
(normalized for executive compensation 1999)
------------ ------------ ------------ ------------ ------------
EBITDA 10,486,801 15,673,915 24,961,849 38,288,541 54,627,435
Interest expense (income) net 689,167 1,654,000 1,654,000 1,654,000 1,654,000
Depreciation, amortization expense 1,464,107 1,525,000 2,028,000 2,657,000 3,454,000
Tax expense (614,359) (848,008) 8,299,141 13,251,241 19,312,580
Transaction costs 2,911,000
------------ ------------ ------------ ------------ ------------
Net income 6,036,886 13,342,923 12,980,708 20,726,300 30,206,855
============ ============ ============ ============ ============
</TABLE>
<PAGE> 100
EXHIBIT 2.1.0 - FORM OF BORROWING BASE CERTIFICATE
Fleet National Bank
Mailstop MA OF D07A
One Federal Street
Boston, Massachusetts 02110
Attn: Michael S. Barclay, Vice President
Re: Borrowing Base Certificate Required by Section 2.1.0 of the
Loan Agreement dated as of August __, 1999 by and among you as
Agent, the undersigned and certain Lenders, as same may have
been amended (the "Loan Agreement")
Gentlemen:
This certificate is submitted by the undersigned (hereinafter the
"Borrower") pursuant to Section 2.1.0 of the Loan Agreement. Capitalized terms
used herein have the same meaning as in the Loan Agreement.
The Borrower hereby certifies to the Agent and the Lenders that the
following information is true, accurate and complete as of , 19 .
I Revolving Credit Loan Commitment
(a) $25,000,000
(b) less reductions $
(c) equals $
and
(d) EBITDA for four most recent
quarters $
(e) times maximum permitted ratio under
Section 5.1.12 ___:1.0
(f) equals $
(g) Revolving Credit Loan Commitment is
lesser of (c) and (f) $
The Borrower further certifies to the Lenders that as of the date
hereof no Event of Default or Default has occurred without having been waived in
writing.
CONVERGENT GROUP CORPORATION
By:
-------------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
1
<PAGE> 101
EXHIBIT 3.1.1.8 - PERMITTED INDEBTEDNESS AND CAPITALIZED LEASES
Promissory Note(s) issued in connection with stock repurchase agreement(s) with:
CHDH Family Partners, Ltd.
Bruce W. Morse
Stan P. Weber
As of June 30, 1999, the Borrower and its Subsidiaries had the following
intercompany balances (before certain tax related intercompany allocations):
$1,312,528.88 owed to Convergent Group Ltd. (Canada) from CVG,
$3,438,051.09 owed to UGC. from CVG,
$581.60 owed to GDSL. (United Kingdom) from GDS
$7,828,760.13 owed by GDS. to CVG,
$282,770.34 owed by UGC. to GDS,
$21,463.19 owed by GDSL to CVG, and
$173,643.00 owed by GDSL. to UGC
The balances shown on the books and records of the Borrower are a result of
intercompany transactions and do not constitute formal loans between the
entities. These intercompany transactions are eliminated in the consolidated
financial statements of the Borrower.
Employment Letter Agreement with Gregory Foster - Exhibit 4.1.22.
NEC America, Inc. Lease, terminating September 1999, and the Master Equipment
Lease Agreement between Convergent Capital Corporation and Convergent Group
Corporation dated June 10, 1999, which will commence September, 1999.
Hewlett Packard Equipment Lease.
<PAGE> 102
EXHIBIT 3.1.1.10 - FORM OF COMPLIANCE CERTIFICATE
Fleet National Bank
Mailstop MA OF D07A
One Federal Street
Boston, MA 02110
Attn: Michael S. Barclay, Vice President
Re: Compliance Certificate Required by Sections 3.1.1.10 or 5.3.4
of the Loan Agreement dated as of August _____, 1999 by and
among you as Agent, the undersigned and certain Lenders, as
same may have been amended (the "Loan Agreement")
Gentlemen:
This certificate is submitted by the undersigned (hereinafter the
"Borrower") pursuant to Sections 3.1.1.10 or 5.3.4 of the Loan Agreement.
Capitalized terms used herein have the same meaning as in the Loan Agreement.
The Borrower hereby certifies to the Agent and the Lenders that the
following information is true, accurate and complete as of , 19 .
I. Definitions.
1.1 Interest Expense
(a) Interest on Indebtedness under $
Financing Documents
(b) Other fees, charges and expenses on $
Indebtedness under Financing
Documents (not including Facility
Fees)
(c) Interest, fees and other charges on $____
other Indebtedness
(d) (a)+(b)+(c) = total Interest Expense $
1.2 EBITDA (all for a Borrower fiscal quarter)
(a) Net Income (loss) on GAAP basis $
(b) plus Interest Expense $
(c) plus taxes $
(d) plus depreciation $
1
<PAGE> 103
(e) plus amortization $
(f) plus other non-cash charges and $
extraordinary pre-9/30/99 Loans and
Related Transactions costs
(g) plus pre-Closing Date excess $
compensation payments, if
applicable
(h) plus non-cash Permitted Acquisition $
charges, if any
(i) plus cash Permitted Acquisition $
costs, if any
(j) plus pro forma Permitted $
Acquisition expense reductions, if any
(k) less Capitalized Software Development costs $
(1) less pro forma Permitted Acquisition $
expense increases, if any
(m) less Permitted Acquisition earn $
out, etc. purchase price payments,
if any
(n) sum of (a) through (j) $
(o) sum of (k) through (m) $
(p) (n) - (o) $
(q) (n) - (p) = EBITDA $
1.3 EBITDA for covenants
(a) EBITDA for most recent Borrower $
fiscal quarter
(b) EBITDA for immediately preceding $
Borrower fiscal quarter
(c) EBITDA for second immediately $
preceding Borrower fiscal quarter
(d) EBITDA for third immediately $
preceding Borrower fiscal quarter
(e) Sum of (a) through (d) equals $
----
2
<PAGE> 104
1.4 Total Debt Service (for Borrower fiscal quarter
ending on date of determination and three Borrower
fiscal quarters next preceding such Borrower fiscal
quarter)
(a) Interest Expense from 1.5 below $
(b) plus scheduled and mandatory $
principal amortization on Loans
(c) less any Sections 2.6.1.3, 2.6.1.4 $
and 2.6.1.5 mandatory payments
required
(d) plus scheduled and mandatory $
payments on other Indebtedness and
Capitalized Lease Obligations
(e) plus the quotient of: $
(i) Revolving Credit Loan Commitment $
(ii) divided by ________ $
(iii) equals $
(f) (a)+(b)-(c)+(d)+(e) = Total Debt $
Service ----------
1.5 Interest Coverage Ratio
(a) EBITDA for current and 3 preceding $
quarters
(b) Interest Expense for _________ $
quarters
(c) times _____ = $
or
(d) Interest Expense for current and 3 $
preceding quarters
(e) (a)/(c) or (d) = Interest Coverage ___:1.0
Ratio
II. Section 5.1.10. Minimum Interest Coverage Ratio.
(a) Interest Coverage Ratio ___:1.0
(b) Minimum ratio permitted 3.0:1.0
3
<PAGE> 105
III. Section 5.1.11. Minimum Debt Service Coverage Ratio.
(a) EBITDA $
less the sum of:
(b) taxes paid or payable $
(c) Capital Expenditures $
(d) (b)+(c) = $
(e) (a)-(d) = $
(f) Total Debt Service $
(g) Ratio of (e) to (f) ____:1.0
(h) Minimum Ratio permitted 1.25:1.0
IV. Section 5.1.12. Maximum Ratio of Total Indebtedness for Borrowed Money
to EBITDA.
(a) Total Indebtedness for Borrowed $
Money
(b) EBITDA $
(c) Ratio of (a) to (b) ____:1.0
(d) Maximum ratio permitted ____:1.0
V. Section 5.1.12(A). Minimum Quick Ratio.
(a) Quick Ratio ____:1.0
(b) Minimum quick ratio permitted 1.10:1.0
VI. Section 5.1.12(B). Accounts Receivables and Accrued Revenues.
(a) Revenues for 4 quarters $
(b) average ending accounts receivable $
balance for immediately preceding
12 months
(c) plus average ending accrued $
revenues balance for immediately
preceding 12 months
(d) (a)/sum of (b) and (c) $
4
<PAGE> 106
(e) 365/(d) = days outstanding $
(f) Maximum days outstanding 75
The Borrower further certifies to the Lenders that as of the date
hereof no Event of Default or Default has occurred without having been waived in
writing.
CONVERGENT GROUP CORPORATION
By:
-----------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
5
<PAGE> 107
EXHIBIT 4.1.1 - FOREIGN QUALIFICATIONS
See Exhibit 1.1.
1
<PAGE> 108
EXHIBIT 4.1.2 - AUTHORIZATIONS
None.
1
<PAGE> 109
EXHIBIT 4.1.3 - CONSENTS
None.
1
<PAGE> 110
EXHIBIT 4.1.6 - LITIGATION
EEOC claim attached.
<PAGE> 111
[SEAL]
Equal Employment Opportunity Commission
Denver District Office
303 East 17th Avenue Suite 510
Denver, Colorado 80203
Charging Party: Barnhart, Rick E
Charge No.: 320990415
Mr. Mark Epstein
Owner
Convergent Group
6200 So. Syracuse Way
Suite 200
Englewood, CO 80111
Dear Mr. Epstein:
Your organization is hereby requested to submit information and records relevant
to the subject charge of discrimination. The Commission is required by law to
investigate charges filed with it, and the enclosed request for information does
not necessarily represent the entire body of evidence which we need to obtain
from your organization in order that a proper determination as to the merits of
the charge can be made. Please submit a response to the requested information by
the deadline cited below.
You may be assured that any information or explanation supplied by your
organization will not be made public.
Sincerely
/s/ SANDRA DAKOTA
for
Elizabeth Frank
Compliance Manager
Response Deadline Date: 031199
The following dates are considered to be the "relevant period" for the attached
Request for Information: 120297 - 120298.
<PAGE> 112
PERSON FILING [ILLEGIBLE]
EQUAL EMPLOYMENT OPPORTUNITY COMMISSION Barnhart,Rick E
THIS PERSON(check one)
[X] CLAIMS TO BE AGGRIEVED
Mr. Mark Epstein [ ] IS FILING ON BEHALF OF ANOTHER
Owner
Convergent Group DATE OF ALLEGED VIOLATION
6200 So. Syracuse Way Earliest Most Recent
Suite 200 12/02/1998 12/02/1998
Englewood, CO 80111 PLACE OF ALLEGED VIOLATION
Englewood, CO
CHARGE NUMBER
320990415
- --------------------------------------------------------------------------------
NOTICE OF CHARGE OF DISCRIMINATION
(See EEOC "Rules and Regulations" before completing this Form)
You are hereby notified that a charge of employment discrimination has been
filed against your organization under:
[ ] TITLE VII OF THE CIVIL RIGHTS ACT OF 1964
[X] THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967
[ ] THE AMERICANS WITH DISABILITIES ACT
[ ] THE EQUAL PAY ACT (29 U.S.C., SECT. 206(d)) investigation will be
conducted concurrently with our investigation of this charge.
The boxes checked below apply to your organization:
1. [ ] No action is required on your part at this time.
2. [x] Please submit by 03/11/99 a statement of your position with respect to
the allegation(s) contained in this charge, with copies of any supporting
documentation. This material will be made a part of the file and will be
considered at the time that we investigate this charge. Your prompt
response to this request will make it easier to conduct and conclude our
investigation of this charge.
3. [x] Please respond fully by 03/11/99 to the attached request for information
which pertains to the allegations contained in this charge. Such
information will be made a part of the file and will be considered by the
Commission during the course of its investigation of the charge.
For further inquiry on this matter, please use the charge number shown above.
Your position statement, your response to our request for information, or any
inquiry you may have should be directed to:
Denver District Office
303 East 17th Avenue
Suite 510 Elizabeth Frank Compliance Manager
Denver, Colorado 80203 ----------------------------------
(Commission Representative)
(303) 866-1334
----------------------------------
(Telephone Number)
[ ] Enclosure: Copy of Charge
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
BASIS OF DISCRIMINATION
<S> <C> <C> <C> <C> <C> <C> <C>
[ ] RACE [ ] COLOR [ ] SEX [ ] RELIGION [ ] NAT. ORIGIN [x] AGE [ ]DISABILITY [ ] RETALIATION [ ] OTHER
- --------------------------------------------------------------------------------------------------------------
</TABLE>
CIRCUMSTANCES OF ALLEGED VIOLATION
see enclosed charge of discrimination form 5
- --------------------------------------------------------------------------------
DATE TYPED NAME/TITLE OF AUTHORIZED EEOC OFFICIAL SIGNATURE
2/19/99 Francisco J. Flores Jr. /s/ SANDRA NAHATE
- --------------------------------------------------------------------------------
RESPONDENT'S COPY
<PAGE> 113
[STAMP]
THIS FORM IS AFFECTED BY THE PRIVACY ACT OF 1974; SEE PRIVACY [ ] FEPA
ACT STATEMENT BEFORE COMPLETING THIS FORM. [X] EEOC 3209904
- --------------------------------------------------------------------------------
Colorado Civil Rights Division and EEOC
---------------------------------------------------------
State or local Agency, if any
FEB 1 1999
- --------------------------------------------------------------------------------
NAME (Indicate Mr., Ms., Mrs.) HOME TELEPHONE (Include Area Code)
Mr. Rick E. Barnhart (303) 680-3199
- --------------------------------------------------------------------------------
STREET ADDRESS CITY, STATE AND ZIP CODE DATE OF [ILLEGIBLE]
18925 E. Ida Dr., Aurora, CO 80015 05/25/1 [ILLEGIBLE]
- --------------------------------------------------------------------------------
NAMED IS THE EMPLOYER, LABOR ORGANIZATION, EMPLOYMENT AGENCY APPRENTICESHIP
[ILLEGIBLE] STATE OR LOCAL GOVERNMENT AGENCY WHO DISCRIMINATED AGAINST ME (IF
MORE THAN ONE LIST BELOW.)
- --------------------------------------------------------------------------------
NAME NUMBER OF EMPLOYEES, MEMBERS TELEPHONE (Include Area Code)
Convergent Group Cat B (101-200) (303) 741-840[ILLEGIBLE]
- --------------------------------------------------------------------------------
STREET ADDRESS CITY, STATE AND ZIP CODE COUNTY
6200 So. Syracuse Way, Suite 200, Englewood, CO 80111 005
- --------------------------------------------------------------------------------
NAME TELEPHONE (Include Area Code)
- --------------------------------------------------------------------------------
STREET ADDRESS CITY, STATE AND ZIP CODE COUNTY
- --------------------------------------------------------------------------------
CAUSE OF DISCRIMINATION BASED ON (Check appropriate box(es))
[ ]RACE [ ]COLOR [ ]SEX [ ]RELIGION [ ]NATIONAL ORIGIN
[ ]RETALIATION [X]AGE [ ]DISABILITY [ ] OTHER (Specify)
DATE DISCRIMINATION TOOK PL[ILLEGIBLE]
EARLIEST LATEST
12/02/1998 12/02/19[ILLEGIBLE]
[ ]CONTINUING ACTION
- --------------------------------------------------------------------------------
THE PARTICULARS ARE (If additional space is needed, attach extra sheet(s)):
I. On December 2, 1998, I was informed that I had not been hired for the
position of Buyer.
II. I was told someone else had been hired and that they were looking a
[ILLEGIBLE] "...more junior..." person.
III. I feel I was discriminated against because of my age (53) in violation of
the 1967 Age Discrimination in Employment Act, as amended, for the
following reasons:
A. My date of birth is May 25, 1945.
B. The duties and responsibilities of the buyer's job for which I
was applying appeared to the same as those I performed during
previous employment with this company as the purchasing manager.
C. I received excellent reports on my job performance during my prior
employment.
D. A person who is approximately 35 years of age was hired for the
position.
- --------------------------------------------------------------------------------
[ ] I want this charge filed with both the EEOC and the State or local Agency,
if any. I will advise the agencies if I change my address or telephone number
and cooperate fully with them in the processing of my charge in accordance with
their procedures.
- --------------------------------------------------------------------------------
I declare under penalty of perjury that the foregoing is true and correct.
DATE 2/12/99 Charging Party (Signature)
- --------------------------------------------------------------------------------
NOTARY (When necessary for State Local Requirements [ILLEGIBLE]
/s/ KATHRYN HAMMIG
- --------------------------------------------------------------------------------
I swear or affirm that I have read the above charge and that [ILLEGIBLE]
it is true to the best of my knowledge, information and bel [ILLEGIBLE]
- --------------------------------------------------------------------------------
SIGNATURE OF COMPLAINANT
/s/ RICK E. BARNHART
- --------------------------------------------------------------------------------
SUBSCRIBED AND SWORN TO BEFORE ME THIS DATE [ILLEGIBLE]
(Day, Month, and Year)
12-2-99
- --------------------------------------------------------------------------------
EEOC FORM 5 (Rev. 06/92) [NOTARY SEAL]
<PAGE> 114
PRIVACY ACT STATEMENT
(This form is covered by the Privacy Act of 1974, Public Law 93-579: Authority
for requesting the personal data and the [ILLEGIBLE] below.)
1. FORM NUMBER/TITLE/DATE. EEOC Form 5. CHARGE OF DISCRIMINATION, March 1984.
2. AUTHORITY. 42 U.S.C. Section 2000e-5(b). 29 U.S.C. Section 211.29 U.S.C.
Section 626
3. PRINCIPAL PURPOSE(S). The purpose of the charge, whether recorded initially
on this form or in some other way [ILLEGIBLE] writing and later recorded on
this form, is to invoke the jurisdiction of the Commission.
4. ROUTINE USES. This form is used to determine the existence of facts which
fall within the Commission's jurisdiction to investigate, determine,
consolidate and litigate charges of unlawful employment practices.
Information provided on this form will be used by Commission employees to
guide the Commission's investigatory activities. This form may be disclosed
to State, local and federal agencies as may be appropriate or necessary to
carrying out the Commission's functions. A copy of the charge will
ordinarily be served upon the person against whom the charge is made.
5. WHETHER DISCLOSURE IS MANDATORY OR VOLUNTARY AND EFFECT ON INDIVIDUAL FOR
NOT PROVIDING INFORMATION. Charges must be in writing and should identify
the parties and action or policy complained of. Failure to have a charge
which identifies the parties in writing may result in the Commission not
accepting the charge. Charges under Title VII must be sworn to or affirmed.
Charges under the ADEA should ordinarily be signed. Charges may be
clarified or amplified later by amendment. It is not mandatory that this
form be used to provide the requested information.
6. [ ] Under Section 706 of Title VII of the Civil Rights Act of 1964, as
amended, this charge will be deferred to and will be processed by the State
or local agency indicated. Upon completion of the agency's processing, you
will be notified of its final resolution in your case. If you wish EEOC to
give Substantial Weight Review to the agency's findings, you must send us a
request to do so, in writing, within fifteen (15) days of your receipt of
the agency's finding. Otherwise, we will adopt the agency's finding as
EEOC's and close your case.
NOTICE OF NON-RETALIATION REQUIREMENTS
SECTION 704(a) of the Civil Rights Act of 1964, as amended, and Section 4(d) of
the Age Discrimination in Employment Act, as amended, state:
It shall be an unlawful employment practice for an employer to
discriminate against any of his employees or applicants for employment, for an
employment agency to discriminate against any individual, or for a labor
organization to discriminate against member thereof or applicant for membership,
because he has opposed a practice made an unlawful employment practice by
[ILLEGIBLE] title or because he has made a charge, testified, assisted, or
participated in any manner in an investigation, proceeding, or [ILLEGIBLE] under
this title.
The Equal Pay Act of 1963 contains similar provisions. Persons filing charges of
discrimination are advised of these Non-[ILLEGIBLE] Requirements and are
instructed to notify EEOC if any attempt at retaliation is made.
<PAGE> 115
Feb 12 11:34 1999 CP Initials RB Chg #, Attachment Page 1
-----------------------------------------------------------------------
Equal Employment Opportunity Commission
Form 5 - Charge of Discrimination, Additional Text
------------------------------------------------------------------------
E. To my knowledge, most of the employees in current work force
of this company are much younger than I am.
MY NAME MAY BE USED IN THE PROCESSING OF THIS CHARGE.
<PAGE> 116
[SEAL]
[U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION LETTERHEAD]
NOTICE TO RESPONDENT
The Equal Employment Opportunity Commission (EEOC) Denver District Office
(DENDO) requests that you provide a copy of your position statement and any
non-confidential exhibits referenced in your position statement to the Charging
Party and or his/her attorney if applicable. Please furnish with your response
to EEOC a certificate of service, confirming the date you provided the position
statement to the Charging Party.
Part of the EEOC's investigative process is to provide to the Charging Party a
copy of the position statement to review and the opportunity to rebut any
material presented. A copy of the position statement will be sent to the
Charging Party if one is not provided by your organization. Charging Party's
response to this material, or lack of response, will be used in determining
what further investigation is warranted.
Thank you for your cooperation.
SUPERVISOR, CHARGE RECEIPT
TECHNICAL INFORMATION UNIT (CRTIU)
DENDO
<PAGE> 117
- --------------------------------------------------------------------------------
Equal Employment Opportunity Commission
REQUEST FOR INFORMATION
- --------------------------------------------------------------------------------
Chg. Party: Barnhart, Rick E
Respondent: Convergent Group
Charge No.:
1. Give the correct name and address of the facility named in the charge.
2. Submit a written position statement on each of the allegations of the
charge, accompanied by documentary evidence and/or written statements,
where appropriate. Also include any additional information and
explanation you deem relevant to the charge.
3. Submit copies of all written rules, policies and procedures relating to
the issue(s) raised in the charge. If such does not exist in written
form, explain the rules, policies and procedures.
Issue: HIRING
1. Submit a copy of your hiring policies. If actual hiring practice is
different from the written policy, describe actual practice.
2. Describe in detail the method(s) used by your organization to receive,
screen, and process applications for employment for the position in
question. Your description should include, but not be limited to, the
following information:
a. the manner in which persons are recruited for the position in
question,
b. the manner in which a person is determined to be an applicant
for the position,
c. whether applications are solicited or accepted whether or not
vacancies exist for the position,
d. the time period for which applications are considered active
and the time period for which applications are retained,
e. the forms of written documentation used which reflect the
solicitation, receipt and processing of an application,
f. how applications for the position are reviewed for the purpose
of selecting an applicant. Include the name, position, and
date of birth of person(s) responsible, and
g. whether applicants are interviewed during the application
process and if so, by whom (include name, position, and date
of birth of individual(s)).
3. Provide the total number of applications received for the position in
question during the relevant period. Submit copies of all applications
and other records received from prospective employees.
4. State whether the charging party applied for the position in question
during the relevant period. If yes, for each time the charging party
did apply, include the following:
a. the date of and the nature of application, whether written or
oral,
b. a copy of the application and/or resume filed by the charging
party and/or any other notation made during the processing of
the charging party's application,
c. the exact job title and job grade or wage level sought by the
charging party, and
d. whether the charging party sought full-time, part-time,
temporary, seasonal or other type of employment.
5. State whether the charging party was considered for the position. If
your answer is no, state each reason why the charging party was not
considered
<PAGE> 118
for the position.
6. State whether the position in question was filed during the relevant
period. If your answer is yes, provide the following for each person
selected for the position:
a. name, and date of birth
b. the date of and the nature of application, whether written or
oral,
c. a copy of the application and/or resume filed by the charging
party and/or any other notation made during the processing of
the charging party's application,
d. the date on which the person applied for or otherwise
indicated interest in the position,
e. the job title, and job grade or wage level for which the
person was hired, and
f. the date the person was hired and whether hired as full-time,
part-time, temporary, seasonal or other.
7. State each and every reason why the charging party was not selected for
the position in question. Provide any written documents which reflect
the bases of the decision not to select the charging party. For each
person involved in the decision not to select the charging party, list
their name, position, and date of birth
8. State each and every reason why you contend the person(s) selected for
the position was/were selected instead of the charging party. Provide
any written documents which reflect the bases of your decision to
select those persons who were hired into the position.
9. List all persons hired during the relevant period, including name, hire
date, position applied for, position hired to, and date of birth
<PAGE> 119
[HOLLAND & HART LLP LETTERHEAD]
April 15, 1999
VIA HAND DELIVERY
Elizabeth Frank
Compliance Manager
Equal Employment Opportunity Commission
Denver District Office
303 E. 17th Avenue, Suite 510
Denver, Colorado 80203
Re: Rick E. Barnhart and Convergent Group Corporation
Charge No. 320990415
Dear Ms. Frank:
This will constitute the position statement and response to request for
information of Respondent Convergent Group Corporation ("Convergent Group" or
"the Company") with respect to the above-captioned charge of discrimination.
Thank you for your cooperation in allowing Convergent Group an extension of time
to respond.
Charging Party Rick Barnhart filed his charge of discrimination on or
about February 12, 1999, alleging that Convergent Group failed to hire him for
the position of "Buyer" because of his age, 53 (DOB 5/25/45). Barnhart alleges
that the duties and responsibilities of the job were the same as what he had
performed during his previous employment with the Company as a purchasing
manager, from which he was laid off in 1996. In fact, the job duties and
responsibilities for the position of Technical Purchasing Agent, the position in
question, were substantially different from Barnhart's prior position with
Convergent Group. The Technical Purchasing Agent position required not only
purchasing experience, which Barnhart possessed, but also technical expertise in
configuring computer systems, which Barnhart lacked. Because he did not have the
technical qualifications for the position, Barnhart was not interviewed or
selected. Instead, the position went to a more-qualified candidate, William
Emerson.
The Company denies that age played any role in the consideration of the
candidates for the Technical Purchasing Agent position, and further denies that
Barnhart
<PAGE> 120
Elizabeth Frank
April 15, 1999
Page 2
was not selected because of his age or that it unlawfully discriminated against
him in any way because of his age.
By way of background, Convergent Group is North America's largest
spatial systems integration and consulting firm. The Company partners with
electric, gas, and waste/wastewater utilities and city/county government clients
to provide value-added project management and consulting services in the areas
of geographic information systems, outage management systems, work management
systems, computer-aided dispatch/mobile data terminal, engineering analysis, and
related spatial information and management technologies. Convergent Group has
approximately 220 employees at present and is headquartered in Englewood,
Colorado.
Barnhart was employed by Convergent Group from October 1, 1993 until
March 29, 1996 in the position of Purchasing Manager. (Prior to October 1, 1993,
Barnhart had been employed with GDS, which was acquired by Convergent Group.) In
his Purchasing Manager position, Barnhart's job duties and responsibilities were
restricted to purchasing activities, and he performed these activities in a
satisfactory manner. However, effective as of March 29, 1996, his position was
eliminated as part of a larger reduction in force. In all, 36 employees were
laid off at that time. Barnhart, as with the other laid-off employees, received
a severance package from Convergent Group.
During the Fall of 1998, it was determined that the Company had need
for a new position, Technical Purchasing Agent. Because of changes in the nature
of the Company's business, Convergent Group found itself needing to purchase
more hardware and software as part of the services being provided to its
clients. The new position required not only purchasing experience, but also the
ability to configure PC's and servers.(1) The position description for the new
Technical Purchasing Agent position is attached to the Hiring Requirement Form,
dated November 5, 1998, which is attached hereto as Exhibit A. Note especially
that the position description for Technical Purchasing Agent includes as job
responsibilities "[r]eviews hardware configurations provided by technical staff
with 3rd party planners or vendors" and that the education/experience
requirements include "developing technical specifications for hardware, or at a
minimum, working with a set of requirements to determine configurations with
vendors."
- -----------------
(1) A Convergent Group employee, Dan Timmerman, had previously
performed in a somewhat similar role, including configuring systems, but he
voluntarily resigned from the Company during 1997. His job title was Manager,
Systems Distribution Installation.
<PAGE> 121
Elizabeth Frank
April 15, 1999
Page 3
The Technical Purchasing Agent position was posted, internally and
externally, on the Internet. A copy of the posting, dated November 5, 1998, is
attached hereto as Exhibit B.
One of the Company's primary sources of candidates for technical
positions is an outside recruitment firm, State of the Art Recruiting, Inc. In
this case, on November 16, 1998, Susan Schell, owner of State of the Art,
provided a summary sheet briefly describing five potential candidates, together
with their resumes. See Exhibit C attached hereto.(2) After reviewing the
resumes, Randy Tidd, Vice President and General Manager, Applications and
Technology, determined to schedule personal interviews with two of the
candidates, William Emerson and Linda Hullett. Both candidates were interviewed
by Tidd and his team on November 19, 1998. At that time, consistent with Company
policy, the candidates each filled out an employment application, an affirmative
action questionnaire, and a release form. These materials, as well as some of
the interviewers' notes for Emerson and Hullett, are attached hereto as Exhibits
D and E, respectively.(3) Following the interviews, Emerson was selected for the
position, in large part because of his experience in configuring PC's and
servers.
Barnhart did not formally apply for the Technical Purchasing Agent
position. However, he learned of the opening from his friend, Bob Preis, a
current employee of Convergent Group. Barnhart faxed his resume to Preis, who,
in turn, forwarded it to McAllister, who reported to Tidd and who was, together
with Tidd, one of the key decisionmakers for the hiring decision. McAllister did
not know Barnhart as she had joined Convergent Group after Barnhart was gone.
She reviewed his resume and discussed it with Tidd. McAllister determined that
Barnhart lacked the technical qualifications for the position. He had
substantial purchasing experience, but he did not have experience in technical
configuration of systems. Tidd had known Barnhart from his previous employment
with Convergent Group, and regarded him as a good person and a good employee,
but he agreed with McAllister that Barnhart lacked the technical qualifications
for the job. Thus, Barnhart was not selected for an interview or given further
consideration for the Technical Purchasing Agent position.
In the meanwhile, Barnhart contacted several persons within Convergent
Group to check on the status of his "application." For example, he called
Cordelia Kirby, Manager,
- ----------
(2) Exhibit C includes the Technical Purchasing Agent Candidate Overview,
together with the resumes of Cheryl Curtis, Richard Branchik, and Edwin Dunn,
the resumes of William Emerson and Linda Hullett, the two candidates interviewed
by the Company, are included in Exhibits D and E, infra.
(3) Tidd's interview notes for Emerson and those of Kathy McAllister, Manager,
Technical Operations, for both Emerson and Hullett, apparently were not
retained.
<PAGE> 122
Elizabeth Frank
April 15, 1999
Page 4
Corporate Benefits and Employee Relations, to ask if he was being considered for
the position. Kirby checked with Kathy Broderick, Manager, Human Resources, who
was and is in charge of the Company's recruiting efforts. Broderick did not have
a record of having received a resume from Barnhart (as Preis had forwarded it
directly to McAllister). Broderick checked with the hiring manager, Tidd, and
also with Scott Schley, Chief Financial Officer of Convergent Group. They agreed
that Barnhart's job skills and experience were simply not a good match with the
requirements of the position.(4)
Barnhart also attempted to contact Mark Epstein, Executive Vice
President, Consulting Business Development, and the former President of GDS, the
Convergent Group subsidiary for whom Barnhart had worked previously. Eventually,
after a series of internal communications between and among Epstein, Schley,
Tidd, McAllister, Kirby, and Broderick, Broderick was asked to call Barnhart and
inform him that he had not been selected for the position.
In his charge, Barnhart alleges, in Section I, that "[o]n December 2,
1998, I was informed that I had not been hired for the position Buyer," and, in
Section III.B, that "[t]he duties and responsibilities of the buyer's job for
which I was applying appeared to [be] the same as those I performed during
previous employment with this Company as the purchasing manager." Barnhart is
simply wrong with respect to these matters; the Technical Purchasing Agent
position was not the same as his prior Purchasing Manager position. Barnhart did
not have the experience in configuring systems that the new position required.
That, not his age, was the reason why he was not interviewed or selected.
It is somewhat curious that Barnhart believes that his rejection for
the Technical Purchasing Agent position was due to age discrimination. Following
his layoff in March 1996, but prior to November 1998, Barnhart had applied for
two other positions with Convergent Group, without success. During the Spring of
1997, he applied for the position of Business Relations Analyst, a position
which had been formerly held by Carrie Payne. His skills and experience did not
match those required for the position and he was not hired for the job.
Similarly, in March of 1998, Barnhart informally expressed interest, via Preis,
in the Production Room Manager position, which had been formerly held by Darby
Johnson Kelly. After Preis discussed the position with Broderick, who was
primarily responsible for filling the position, Barnhart did not submit his
resume or otherwise formally apply for the job. Significantly, Barnhart did not
complain that his
- ----------
(4) Schley was generally familiar with Barnhart's performance as an employee of
Convergent Group, as he had overall responsibility for Barnhart's department. In
fact, after Barnhart was laid off, Schley had written a letter of recommendation
for Barnhart.
<PAGE> 123
Elizabeth Frank
April 15, 1999
Page 5
failure to be hired for either of these positions constituted age discrimination
on the part of Convergent Group(5).
In Section II of the charge, Barnhart alleges that he was told (by some
unnamed source) that the Company was looking for a "more junior" person.
Convergent Group does not know who is supposed to have made such a statement,
but it denies that any such statement was, in fact, made by anyone. Barnhart did
ask Broderick what the job paid, to which she replied that the range for the
position was $35-45,000, again, substantially less than the $60,000 per year
which Barnhart had been paid at the time he was laid off in 1996.
In Section III.C of the charge, Barnhart alleges that he received
"excellent reports on [his] job performance during [his] prior employment." The
Company does not dispute that Barnhart was a good employee during his prior
employment; however, such fact is not particularly relevant to the present case,
as Barnhart was laid off in March of 1996 because his position was eliminated.
He was not terminated for poor performance, nor does the Company contend that he
was not rehired because of past poor performance.
In Section III.D, the Charging Party alleges that a 35-year old was
hired for the position, and, in Section III.E, he alleges that "[t]o my
knowledge, most of the employees in [the] current workforce of this Company are
much younger than I am." While it is true that Emerson was 35 years old at the
time he was hired (DOB 11/4/63), the principal decisionmakers with respect to
the hiring decision were McAllister (DOB 6/22/45), who is almost exactly the
same age as Barnhart (DOB 5/25/45), and Tidd (DOB 8/9/51), who was 47 years old
at the time. Moreover, Charging Party's allegation that most of Convergent
Group's workforce is younger than him is not particularly relevant to the
individual hiring decision which is at issue in this matter; indeed, such is
probably true for most workplaces in this country and in no way evidences age
discrimination on their part or the part of Convergent Group.
The fact that Convergent Group does not discriminate against older
workers is demonstrated by its treatment of Glenn Bremer (DOB 10/10/47), an
employee who, like Barnhart, was laid off in the March 29, 1996 reduction.
Bremer was a Credit Manager and, in fact, worked next to Barnhart. After the
layoff, the Company realized that it needed Bremer's skill set, but only on a
part-time basis, and thus, he was hired to perform such services and continued
to do so until late in 1998. This example clearly illustrates
- ----------
(5) It is interesting to note that both of these jobs paid in the mid-$30,000
range, far less than Barnhart's former salary with Convergent Group ($60,000).
<PAGE> 124
Elizabeth Frank
April 15, 1999
Page 6
that Convergent Group is interested in the skills and experience its employees
bring to the company, not their age.
In conclusion, as is readily apparent on the face of his charge,
Barnhart is under the mistaken impression that the Technical Purchasing Agent
position was the same as the one which he had previously held with the Company.
As can be seen, such was simply not the case. Barnhart was not qualified for the
new position because he lacked the key requisite of having technical experience
in configuring PC's and servers. It was for this reason, not his age, that he
was not selected for the position. Thus, Barnhart's charge of age discrimination
is without merit and should be dismissed.
Convergent Group's response to the Commission's request for information
is enclosed. It is our intent to cooperate with the Commission's investigation
of this charge in every reasonable manner. If you have any further questions or
need any additional information, please do not hesitate to contact me.
We look forward to a prompt conclusion of the investigation and to the
Commission's dismissal of this charge.
Sincerely,
/s/ JEFFREY T. JOHNSON
Jeffrey T. Johnson
of Holland & Hart LLP
Attorneys for Respondent
Convergent Group Corporation
JTJ:vf
Enclosures
bcc: Kathy Broderick
<PAGE> 125
RESPONSE TO REQUEST FOR INFORMATION
Rick E. Barnhart v. Convergent Group Corporation
Charge No. 320990415
Request No. 1: Give the correct name and address of the facility named in
the charge.
Response to Request No. 1: Convergent Group Corporation, 6200 South
Syracuse Way, Suite 200, Englewood, Colorado 80111.
Request No. 2: Submit a written position statement on each of the
allegations of the charge, accompanied by documentary evidence and/or written
statements, where appropriate. Also include any additional information and
explanation you deem relevant to the charge.
Response to Request No. 2: See position statement.
Request No. 3: Submit copies of all written rules, policies and procedures
relating to the issue(s) raised in the charge. If such does not exist in written
form, explain the rules, policies and procedures.
Response to Request No. 3: Convergent Group does not have written
rules, policies, or procedures relating to the hiring process. See position
statement.
ISSUE: HIRING
Request No. 1: Submit a copy of your hiring policies. If actual hiring
practice is different from the written policy, describe actual practice.
Response to Request No, 1: See Response to Request No. 3, supra.
Request No. 2: Describe in detail the method(s) used by your organization
to receive, screen, and process applications for employment for the position in
question. Your description should include, but not be limited to, the following
information:
a. the manner in which persons are recruited for the position in
question,
b. the manner in which a person is determined to be an applicant for the
positions,
C. whether applications are solicited or accepted whether or not
vacancies for the position,
<PAGE> 126
d. the time period for which applications are considered active and the
time period for which applications are retained,
e. the forms or written documentation used which reflect the
solicitation, receipt and processing of an application,
f. how applications for the position are reviewed for the purpose of
selecting an applicant. Include the name, position, and date of birth
of person(s) responsible, and
g. whether applicants are interviewed during the application process and
if so, by whom (include name, position, and date of birth of
individual(s)).
Response to Request No. 2: See position statement.
Request No. 3: Provide the total number of applications received for the
position in question during the relevant period. Submit copies of all
applications and other records received from prospective employees.
Response to Request No. 3: See position statement and exhibits thereto.
Note that Convergent Group received five resumes from State of the Art
Recruiting, Inc., as well as the Charging Party's resume, which he submitted
informally through a Convergent Group employee, Preis. Application forms were
completed only by the two employees who were interviewed for the Technical
Purchasing Agent position, Emerson and Hullett.
Request No. 4: State whether the charging party applied for the position in
question during the relevant time period. If yes, for each time the charging
party did apply, include the following:
a. the date of and the nature of application, whether written or oral,
b. a copy of the application and/or resume filed by the charging party,
and/or any other notations made during the processing of the charging
party's application,
c. the exact job title and job grade or wage level sought by the charging
party, and
d. whether the charging party sought full-time, part-time, temporary,
seasonal or other type of employment.
Response to Request No. 4: See position statement. Charging Party did
not formally "apply" for the position by submitting his resume to the
Convergent Group Human Resources Department. However, his resume was
considered by the primary decisionmakers, McAllister and Tidd. The Company
has been unable to locate a copy of the resume submitted by Charging Party.
Request No. 5: State whether the charging party was considered for the
position. If your answer is no, state each reason why the charging party was not
considered for the position.
2
<PAGE> 127
Response to Request No. 5: Yes. See position statement.
Request No. 6: State whether the position in question was filed during the
relevant period. If your answer is yes, provide the following for each person
selected for the position:
a. name, and date of birth,
b. the date of and the nature of application, whether written or oral,
c. a copy of the application and/or resume filed by the charging party
and/or any other notation made during the processing of the charging
party's application,
d. the name on which the person applied for or otherwise indicated
interest in the position,
e. the job title, and job grade or wage level for which the person was
hired, and
f. the date the person was hired and whether hired as full-time,
part-time, temporary, seasonal or other.
Response to Request No. 6: See position statement.
Request No. 7: State each and every reason why the charging party was not
selected for the position in question. Provide any written documents which
reflect the bases of the decision not to select the charging party. For each
person involved in the decision not to select the charging party, list their
name, position, and date of birth.
Response to Request No. 7: See position statement.
Request No. 8: State each and every reason why you contend the person(s)
selected for the position was/were selected instead of the charging party.
Provide any written documents which reflect the bases of your decision to select
those persons who were hired into the position.
Response to Request No. 8: See position statement.
Request No. 9: List all persons hired during the relevant period, including
name, hire date, position applied for, position hired to, and date of birth.
Response to Request No. 9: See Exhibit F attached hereto.
3
<PAGE> 128
EXHIBIT 4.1.8 - ADVERSE AGREEMENTS
None.
1
<PAGE> 129
EXHIBIT 4.1.9 - TAXES
The Borrower has requested extensions of time within which to file its U.S.
Corporation Income Tax Return (consolidated) and separate company and
consolidated/combined state income tax returns for the fiscal year ended
December 31, 1998. These returns have not been filed, however, are expected to
be filed within the time prescribed for filing as required by the extended due
dates. See Schedule attached for list.
Graphic Data Systems Corporation's December 31, 1993 Form 1120, U.S. Corporation
Income Tax Return was examined by the Internal Revenue Service and adjustment
made in the amount of $131,237.00 reducing expenses claimed for that year. The
Borrower, proposing the adjustment to the Internal Revenue Service which
represented a mistake in the return, as originally filed, agreed with the final
Internal Revenue Agent's adjustment and reduced the net operating loss carry
forward accordingly for tax return purposes.
The Borrower's records do not reflect the performance of a study to limit the
annual utilization of tax net operating losses pursuant to Internal Revenue Code
Section 382 which was brought forward and present at the time Convergent Group
Corporation was formed on April 9, 1994. The tax net operating loss brought
forward from that date will be utilized in the December 31, 1998 U.S.
Consolidated Federal Income Tax Return of Convergent Group Corporation.
Management believes that any adjustment to the net operating loss available
for use in the December 31, 1998 return, if any, would be nominal.
The Borrower presently recognizes potential exposures to tax and or tax
penalties in the following areas:
For the fiscal years 1993 and 1996, Convergent Group Ltd. (Canada) failed
to file timely Form T106, Information Return. The Canadian tax authority
(Revenue Canada) assessed penalty and interest in the total amount of
Can$6,113.69. The penalty and interest for 1993 was successfully abated,
reducing the outstanding penalty and interest by Cad$3,485.60 to Can$2,628.09.
A request for the abatement of this amount has been submitted to Revenue Canada,
with response pending.
For the fiscal year 1997, GDS Ltd. (United Kingdom), failed to file Form
CT200, Corporation Tax Return. GDS Ltd. expects the return to reflect a net
operating loss for such period and therefore, no taxes will be due with the
return. The Inland Revenue may assess penalties of up to 100 British Pounds for
each month the return is late. GDS Ltd. has not received notice of such
assessment and believes it has meritorious defense to such assessment.
In connection with the Borrower's discontinuance of GDS Ltd.'s operations
in the United Kingdom, employees were notified of the discontinuance and
provided notice of
<PAGE> 130
separation and severance during January 1997. Administrative personnel
performance subsequent to the notification resulted in misplacement of certain
documents related to its transactions with branch operations in Europe. GDS
Ltd.'s ability to substantiate income and expense transactions with its European
branch operation in France could be questioned by the Inland Revenue and expense
items disallowed. Management believes that any adjustment would result in
nominal, if any, additional income tax expense in the United Kingdom.
GDS Ltd. received notice from Tresor Public with regard to outstanding
Business Privilege tax due for the fiscal years 1995 and 1997 in the total
amount of FF 191.591, including penalty and interest. FF 31,963 of this amount
has been satisfied with the remaining balance of FF 159,628 outstanding. The
assessment related to 1997 was based upon the tax authority's estimate of tax
due. No return for fiscal 1997 was prepared due to lack of complete records
related to the French branch operation for that year. (The records were
maintained in the United Kingdom and were misplaced or inadvertently destroyed
during the reduction in the GDS Ltd.'s operations in that country.) GDS Ltd.
does not believe an assessment of Business Privilege tax for 1997 is appropriate
due to losses realized during that year and has no record of the original 1995
return or assessment notice.
California has recently notified the Borrower that minimum franchise tax
related to prior periods is outstanding. California appears to have misapplied
franchise tax paid during and prior to the organization of the consolidated
group in fiscal 1994 and the Borrower has responded to the State on this basis.
A response has not been received. The Borrower believes the exposure to
additional tax and penalty to be nominal.
The filing of the Form 5500 for the CVG Health and Welfare Plan for the
calendar years 1995, 1996, 1997 and 1998 are delinquent, and the maximum penalty
for such late filings is estimated to be from $15,000 to $20,000.
-------------------
LIST OF FEDERAL AND
STATE TAX RETURNS
ON EXTENSION FOR
1998
JURISDICTION-ENTITY:
- --------------------
Alabama-CVG Michigan-GDS
Alabama-UGC Michigan-UGC
Alaska-GDS Minnesota-CVG
Arizona-CVG Mississippi-UGC
Arizona-GDS Missouri-GDS
Arizona-UGC Nebraska-CVG
Arkansas-GDS Nebraska-GDS
<PAGE> 131
California-CVG New Hampshire-CVG
California-GDS New Hampshire-GDS
California-UGC New Jersey-GDS
Colorado-CVG New Jersey-UGC
Colorado-GDS New York-CVG
Connecticut-GDS New York-GDS
Delaware-GDS N. Carolina-CVG
Dist. of Columbia-GDS N. Carolina-UGC
Florida-CVG N. Carolina-GDS
Florida-GDS Ohio, Columbus-CVG
Florida-UGC Ohio, Columbus-GDS
Georgia-GDS Ohio, Columbus-UGC
Georgia-UGC Ohio-GDS
Hawaii-CVG Ohio-UGC
Hawaii-UGC Oklahoma-CVG
Illinois-CVG Oklahoma-GDS
Illinois-GDS Oklahoma-UGC
Indiana-CVG Oregon-CVG
Indiana-GDS Oregon-GDS
Indiana-Partner Oregon, Portland-CVG
Iowa-CVG Pennsylvania-GDS
Iowa-UGC Rhode Island-GDS
Kansas-GDS S. Carolina-GDS
Kentucky-CVG S. Carolina-UGC
Kentucky-GDS Tennessee-GDS
Kentucky-UGC Tennessee-UGC
Louisiana-CVG Texas-CVG
Louisiana-GDS Texas-GDS
Maine-CVG Texas-UGC
Maine-GDS Virginia-GDS
Maryland-CVG Virginia-UGC
Maryland-GDS Washington-GDS
Maryland-UGC Wisconsin-CVG
Massachusetts-GDS Wisconsin-GDS
Michigan-CVG Wisconsin-UGC
FEDERAL RETURNS:
- ----------------
Federal-Partnership Form Convergent Group
1065 Partnership
Federal-Consolidated Form Convergent Group
1120 Corporation
<PAGE> 132
\
EXHIBIT 4.1.11 - REAL PROPERTY
The Borrower leases real property at the following locations:
1. 6200 S. Syracuse Way, Englewood, CO 80111
(Leased through September 30, 1999)
2. Fiddler's Green Center Building I
6399 South Fiddlers Green Circle, Englewood, CO 80111
(Lease estimated to commence September 24, 1999)
3. Pierce Leahy Storage
3900 Nome St., Unit J, Denver, CO
4. Arapahoe and Holly Storage
6800 S. Holly Circle, Englewood, CO
5. Zimmerman & Associates (Apartment)
16570 Amberstone Way, Parker, CO 80134
6. JPI Executive Quarters (Apartment)
7600 E. Caley Avenue, Apt. #412, Englewood, CO 80111
7. Globe Corporate Stay (Apartment)
7600 E. Caley Avenue, #1212, Englewood, CO 80111
8. Globe Corporate Stay (Apartment)
6433 1-D Cameron Forest Lane, Charlotte, NC
9. Globe Corporate Stay (Apartment)
6540 1-C Quail Hollow Road, Charlotte, NC
10. Globe Corporate Stay (Apartment)
6540 2-C Quail Hollow Road, Charlotte, NC
<PAGE> 133
EXHIBIT 4.1.17 - GOVERNMENTAL PERMITS
None.
1
<PAGE> 134
EXHIBIT 4.1.17 - GOVERNMENTAL PERMITS
None.
<PAGE> 135
EXHIBIT 4.1.20 - COPYRIGHTS
The Borrower has not filed any Copyright Registration Statements.
<PAGE> 136
EXHIBIT 4.1.21 - HAZARDOUS WASTE
None.
<PAGE> 137
EXHIBIT 4.1.22 - MATERIAL CONTRACTS
Employment Agreements
Employment Agreement between Convergent and Glenn E. Montgomery dated
December 31, 1997 (to be terminated at closing).
1996-97 Deferred Payment Agreement between Convergent and Glenn E.
Montgomery, Jr. dated December 31, 1997.
Employment Agreement between Convergent and Mark L. Epstein dated
December 31, 1997 (to be terminated at closing).
1996-97 Deferred Payment Agreement between Convergent and Mark L.
Epstein dated December 31, 1997.
Employment Agreement between Convergent and Larry J. Engelken dated
December 31, 1997 (to be terminated at closing).
1996-97 Deferred Payment Agreement between Convergent and Larry J.
Engelken dated December 31, 1997.
Consulting Agreement among Convergent, Convergent Associates and Murray
T. Holland dated January 1, 1997 (to be amended at closing).
Amended and Restated Employment Agreement between Convergent and
Charles H. Harris dated February 1, 1997 (terminates January 31, 2000).
Employment Agreement between Convergent and Joseph E. Hogan dated May
31, 1999.
Letter Agreement between Convergent and Terry L. Yaryan dated June 1,
1998.
Separation Agreement and Release between Convergent and James E. Harris
dated March 30, 1999.
Compensation Plan between Convergent and Adrian Oxbrow dated January 1,
1999.
Compensation Plan between Convergent and Thomas E. VanDenover dated
January 1, 1999.
Employment Letter Agreement and Nondisclosure, Invention Assignment and
Non Compete Agreement between Gregory Foster and Graphic Data Systems.
<PAGE> 138
Indemnification Agreements between Convergent and Glenn E. Montgomery,
Mark L. Epstein, Larry J. Engelken, Scott M. Schley, Murray T. Holland, Dave
Stewart, Barry Kemble and John Lancaster dated February 24, 1997.
Agreements
a. Set forth below are material contracts of the Borrower with a remaining
value of $1,000,000 in any given calendar year or greater period of time.
The Borrower is not making any representation or warranty that any of the
contracts listed in this Item g will involve an aggregate consideration in
excess of $1,000,000. (NOTE: By agreement with the Investors, amendments to
the contracts have not been separately listed.)
1. Master Agreement between Cinergy Services, Inc. and Convergent Group
Corporation (CVG No. U159) dated July 10, 1997.
2. UGC General Partnership 1 Software maintenance and Support Agreement
for Master Agreement U159 between Cinergy Services, Inc. and UGC
General Partnership 1 dated April 3, 1998.
3. Agreement between SigCorp, Inc. and UGC General Partnership 1 (CVG No.
U166) dated September 3, 1997.
4. UGC General Partnership 1 Hardware and Software Maintenance and
support Agreement between UGC General Partnership and Sigcorp, Inc.
dated June 11, 1998.
5. Smallworld Software Product and Support Agreement between Smallworld
Systems, Inc. and Convergent Group Corporation dated November 6, 1997.
6. Agreement between Citizens Utilities Company and Convergent Group
Corporation (CVG No. U181) dated September 15,1997.
7. Convergent Group Software Maintenance and Support Agreement between
Convergent Group Corporation and Citizens Utilities Company dated
December 15, 1997.
8. Smallworld Software Product Maintenance and Support Agreement between
Smallworld Systems, Inc. and Convergent Group Corporation dated
November 24, 1997.
<PAGE> 139
9. Agreement between The Regis Agency and Convergent Group Corporation
(CVG No. U226) dated November 24, 1998.
10. Agreement between IES Industries, Inc. and Convergent Group
Corporation (CVG No. U109) dated August 21, 1996.
11. Convergent Group Software and Maintenance support Agreement between
Convergent Group Corporation and IES Industries dated August 25, 1997.
12. Software Services Agreement between Mobile Data Solutions, Inc. and
Convergent Group Corporation dated February 3, 1998.
13. Smallworld Systems Product Maintenance and Support Agreement between
Smallworld Systems, Inc. and Convergent Group Corporation dated May
30, 1997.
14. Software Maintenance Agreement between Severn Trent Systems and
Convergent Group Corporation dated September 21, 1997.
15. Consultant Agreement between City of Columbus, Ohio and Utility
Graphics Consultants Corporation dated June 29, 1995, as amended by
Amendment 3, dated March 31, 1999.
16. Agreement between Piedmont Natural Gas Company and Convergent Group
Corporation (CVG No. U283) dated June 3, 1999.
17. Agreement between Central Illinois Light Company and Convergent Group
Corporation (CVG No. U206) dated June 9, 1998.
18. Software Maintenance and Support Agreement between Convergent Group
Corporation and Central Illinois Light Company dated January 27, 1998.
19. Subcontractor Agreement between UGC General Partnership 1 and SCT
Software and Resource Management Corporation, dated March 7, 1997.
20. Subcontract Agreement between Smallworld Systems Canada, Ltd. and
Convergent Group, Ltd. for Ontario Hydro (CVG No. U256) dated June
30,1999.
21. Convergent Group Software Maintenance And, Support Agreement between
Convergent Group Corporation and Kentucky Utilities, dated December
12, 1997.
22. Agreement for Services between City of Portland, Oregon and Convergent
Group Corporation, dated July 22, 1998.
<PAGE> 140
23. Letter Agreement between Analytical Surveys, Inc. and Convergent Group
Corporation, dated March 31, 1999.
24. Subcontract Agreement between Convergent Group Corporation and MSE
Corporation dated August 14, 1997, for Cinergy Services, Inc.
25. Subcontractor Agreement between Convergent Group Corporation and MSE
Corporation for IES Industries Data Conversion dated December 30,
1996.
26. Subcontractor Agreement between Convergent Group Corporation and
Analytical Surveys, Inc. for Central Illinois Light Company dated
September 29, 1998.
27. Subcontractor Agreement between Utility Graphics Consultants
Corporation and BBS Corporation for City of Columbus dated March 5,
1998.
28. Subcontractor Agreement between UGC General Partnership 1 and
Analytical Surveys, Inc. for Sigcorp, dated September 23, 1997.
29. Subcontractor Agreement between Convergent Group and Analytical
Surveys, Inc. for Citizens Utilities, dated September 30, 1997.
b. The following contracts have a minimum purchase obligation in excess of
$50,000 per year:
1. Office lease between Fiddlers Green Center and Convergent Group
Corporation dated August 28, 1998.
2. Master Equipment Lease Agreement between Convergent Capital Corporation
and Convergent Group Corporation dated June 10, 1999.
3. Acceptance by Convergent Group Corporation, dated May 26, 1999, of the
Network Design Systems, Inc. Proposal dated May 4, 1999 relating to cabling
for the new location.
4. Acceptance by Convergent Group Corporation, dated May 24, 1999, of the
RIA Corporation Proposal dated May 14, 1999 relating to audiovisual for new
location.
5. Lease Agreement between Utility Graphics Consultants Corporation and
Xerox, dated December 27,1997.
<PAGE> 141
6. MCI WorldCom Flex T1 Internet Agreement, dated May 18, 1999.
7. Acceptance by Convergent Group Corporation, dated May 26, 1999, of the
Proposal of Local Area Network Technologies, Inc. dated May 25, 1999,
relating to the LAN for the new location.
8. Hewlett Packard Equipment Lease.
9. Acceptance by Convergent Group Corporation, dated May 28, 1999, of the
Indoff proposal relating to modular furniture.
c. The following contracts prohibit the Company freely engaging in business:
1. Voyageur Technology Transfer, Business Partner Program and Joint
Marketing Agreement between Convergent Group Corporation and
Environmental Systems Research Institute, Inc. dated March 10, 1997.
2. Software License Purchase and Sale Agreement between Smallworld
Systems, Inc. and Convergent Group Corporation and Graphic Data
systems Corporation dated January 24, 1997.
3. World Class Partner Agreement between Smallworld Systems, Inc. and
Convergent Group Corporation dated May 23, 1997.
4. Account Specific Teaming Agreement between Smallworld Systems and
Convergent Group Corporation for Targeted Business Development dated
September 23, 1998.
5. Restructuring Agreement.
6. Agreement for Reorganization among the Company, GDS, UGC, Graphic Data
Systems Ltd., ARC Information Systems, Inc., Spatial Systems Nominees
Pty Ltd, Spatial Enterprise Systems Pty Ltd, Cadgraphics Australia Pty
Ltd, Convergent Group Asia Pacific Pty Ltd, and UGC Consulting Asia
Pacific Pty Ltd.
7. Informatix Maintenance Agreement.
8. Asset Purchase Agreement dated June 4, 1997 among Geopak
Transportation Management Systems, Inc., GDS and the Company.
<PAGE> 142
EXHIBIT 4.1.23 - INTELLECTUAL PROPERTY
Intellectual Property
a. See attached list of filings.
b. The Borrower and its Subsidiaries have all Intellectual Property Rights
necessary or required for the conduct of the Subject Business as currently
conducted. In many cases, title to such Intellectual Property Rights are
held by third parties, as for example hardware or software used in the
conduct of the Subject Business or hardware or software which is re-sold or
re-licensed by the Borrower to its customers. Such Intellectual Property
Rights used in the conduct of the Subject Business are made available to
the Borrower under license or otherwise by agreement with such third party,
and the Borrower's rights are subject to the continuance of such licenses
or agreements. Moreover, since the Borrower's rights are often limited
under such licenses or agreement, the Borrower does not have the unimpaired
right to use, sell, license and dispose of or the right to bring actions
for the infringement of all Intellectual Property Rights necessary or
required for the conduct of the Subject Business.
Borrower, in its ordinary course of business, has developed custom software
which is too numerous to list separately.
c. The Borrower must pay a royalty to the following entities if the
Borrower resells the Intellectual Property developed specifically for
such entities:
1. The Regis Agency (only for sales within Michigan)
2. Riverside, California
3. Oshkosh, Wisconsin
4. Piedmont Natural Gas
d. The following entities own the Intellectual Property developed
specifically for such entities:
<PAGE> 143
o City of Columbus
o City of Portland
e. Convergent and the Subsidiaries have granted interests in Intellectual
Property Rights to its customers in the ordinary course of business.
Convergent and the Subsidiaries have granted interests in Intellectual
Property Rights outside the ordinary course of business in connection with
the following agreements:
1) Voyageur Technology Transfer, Business Partner Program and Joint
Marketing Agreement between Convergent and Environmental Systems
Research Institute, Inc. dated March 10, 1997.
2) Agreement for Reorganization among the Borrower, GDS, UGC, Graphic
Data Systems Ltd., ARC Information Systems, Inc., Spatial Systems
Nominees Pty Ltd, Spatial Enterprise Systems Pty Ltd, Cadgraphics
Australia Pty Ltd, Convergent Group Asia Pacific Pty Ltd, and UGC
Consulting Asia Pacific Pty Ltd.
3) Software License Agreement between GDS and Geopak Transportation
Management Systems, Inc. dated June 4, 1997.
4) Agreement for Asset Transfer by and among CVG, GDS, GDSL and
Informatix Software International Limited and Informatix, Inc., dated
April 25, 1997.
5) Agreement for provision of Software Maintenance and Support Services
by and among CVG, GDS, GDSL and Informatix Software International
Limited, dated April 25, 1997 ("Informatix Maintenance Agreement").
<PAGE> 144
Convergent Group Corporation United States Trademark Registration Activities
August 6, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
OWNER MARK STATUS REG. NO. NEXT ACTION
H&H FILE NO. CLASS APP. NO. REG. DATE AND DEADLINE
APP. DATE RENEW DATE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Convergent Group Corp. CONVERGENT APPLICATIONS PENDING FILING RECEIPT PENDING
36139.840019.000 (0007) 09 and 42 75/736,274
06/24/99
- -----------------------------------------------------------------------------------------------------------------------
Convergent Group Corp. CONVERGENT GROUP PENDING FILING RECEIPT PENDING
36139.840017.000 (0005) 09 and 42
07/22/99
- -----------------------------------------------------------------------------------------------------------------------
Convergent Group Corp. CONVERGENT SOLUTIONS PENDING FILING RECEIPT PENDING
36139.840018.000 (0006) 09 and 42
07/22/99
- -----------------------------------------------------------------------------------------------------------------------
Convergent Group Corp. ENOM PENDING FILING RECEIPT PENDING
36139.840020.000 (0008) 09
7/22/99
- -----------------------------------------------------------------------------------------------------------------------
Convergent Group Corp. SOLUTIONS WORKBENCH PENDING FILING RECEIPT PENDING
36139.840014.000 (0003) 09 75/552,601
07/16/99
- -----------------------------------------------------------------------------------------------------------------------
Convergent Group Corp. WHERE BUSINESS AND PENDING NOTICE OF PUBLICATION
TECHNOLOGY COME TOGETHER PENDING
36139.840015.000 (0002) 09 75/548,300
09/04/98
- -----------------------------------------------------------------------------------------------------------------------
Convergent Group Corp. WHERE DO WE GROW FROM PENDING NOTICE OF ALLOWANCE
HERE PENDING
36139.840016.000 42 75/558,064
09/23/98
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 145
GRAPHIC DATA SYSTEMS CORPORATION
<TABLE>
<CAPTION>
OWNER TRADEMARK REPORT BY MARK PRINTED: 7/19/99 PAGE
STATUS: ACTIVE
COUNTRY REFERENCE# FILED APPL# REGDT REG# STATUS CLASSES
- -------------------------------------------------------------------------------------------------------------
GDS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FRANCE DL-M-55017 12/19/90 257,017 12/19/90 1,634,436 REGISTERED 09.16
09-ELECTRICAL AND SCIENTIFIC APPARATUS
16-PAPER GOODS
42-MISCELLANEOUS SERVICE MARKS
UNITED STATES DL-M-55016 8/3/92 74/300,345 8/3/93 1,786,297 REGISTERED 0
09-COMPUTER SOFTWARE IN THE FIELD OF FEATURE BASED GEOGRAPHIC INFORMATION SYSTMES AND MANUALS SOLD AS A UNIT
- ----------------------------------------------------------------------------------------------------------------
END OF REPORT TOTAL ITEMS SELECTED=2
</TABLE>
<PAGE> 146
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
[ILLEGIBLE] TITLE COUNTRY SERIAL NO. PAT/REG NO. GRANT DATE FILE DATE ASSIGNEE STATUS
- ----------------------------------------------------------------------------------------------------------------------------------
000 DB-ABLE UNITED STATES 74/439,658 1,846,631 9/24/93 OPEN
000 UGC UNITED STATES 690,256 1,493,734 10/19/87 OPEN
000 UGC USER ENGINEERING UNITED STATES 74/214,571 1,853,331 10/18/91 OPEN
000 UGC UTILITY GRAPHICS UNITED STATES 690,257 1,495,520 10/19/87 OPEN
CONSULTANTS
000 UGC WORKS UNITED STATES 74/439,672 1,850,987 9/24/93 OPEN
000 UGC WORKS UNITED STATES 74/439,771 9/24/93 OPEN
000 USERWORKS UNITED STATES 74/801,609 ABANDON
</TABLE>
<PAGE> 147
EXHIBIT 5.1.12(A)-FORM OF ELIGIBLE RECEIVABLES CERTIFICATE
FLEET NATIONAL BANK
- --------------------------------------------------------------------------------
Company Name: CONVERGENT GROUP CORPORATION Date: / /
- --------------------------------------------------------------------------------
1. Period End Accounts Receivable as of ___/___/___ $_________
2. Ineligible Accounts Receivable as of ___/___/___
Sum of:
Accounts over 90 days from Invoice Date $__________
Officer, etc. Accounts $__________
Consignment, "bill and hold" etc. Account $__________
Government Accounts $__________
Subsidiary/Affiliate Accounts $__________
Contra Accounts $__________
Foreign Accounts (other than Canadian Accounts) $__________
Disputed Accounts $__________
Accounts subject to other Liens $__________
Insolvent debtor Accounts $_________
Uncollectible Accounts $__________
TOTAL INELIGIBLES $__________
3. Eligible Accounts Receivable (Line 1 minus Line 2) $__________
4. Less payments, adjustments and credits $__________
5. Net Outstanding Amount of Eligible Receivables $__________
The Company named in the box above labeled "Company Name" (the "Company"),
by its duly authorized officer signing below, hereby certifies that (a) the
information set forth in this certificate is true and correct as of the
date(s) indicated herein and (b) the Company is in compliance with all
terms and provisions in (i) the loan or other agreement between the
Company, Fleet National Bank as Agent and a Lender and any other Lenders
pursuant to which this certificate is delivered (the "Agreement") and (ii)
any and all documents, instruments and agreements evidencing, governing or
securing the Agreement or otherwise executed in connection therewith.
CONVERGENT GROUP CORPORATION
__________________________ By:________________________
Prepared by Authorized Signature
<PAGE> 148
EXHIBIT 5.2.2 - GUARANTIES
Utility Graphics Consultants Corporation and Graphic Data systems Corporation
are guarantors under The NorWest Credit Agreement.
Convergent has guaranteed certain obligations of GDS and GDSL pursuant to the
Informatix Asset Agreement.
<PAGE> 149
EXHIBIT 5.2.12 - EXISTING INVESTMENTS IN SUBSIDIARIES AND
PARTNERSHIPS.
See Schedule 1.1
<PAGE> 150
EXHIBIT 5.2.13 - TRANSACTIONS WITH AFFILIATES
See Exhibit 3.1.1.8.
<PAGE> 151
EXHIBIT 9.11.1 - FORM OF ASSIGNMENT AND ACCEPTANCE
Form of Assignment and Acceptance
Assignment and Acceptance made and entered into as of __ day of
_________, 19__ by and between ____________, a _________ having a principal
place of business at _______________ (the "Substituted Lender"), ______________,
a ________________ having a place of business at _______________ (the "Selling
Lender"), CONVERGENT GROUP CORPORATION, a Delaware corporation (the "Borrower")
and FLEET NATIONAL BANK, acting as Agent for the Lenders which are parties to
the Loan Agreement (defined below) (the "Agent").
1. This Agreement relates to a Loan Agreement (the "Loan
Agreement") dated August __, 1999, as same may have been or be
amended, made between the Borrower, the Lenders and the Agent,
upon and subject to the terms of which the Lenders agreed to
make available to the Borrower the Loans in an aggregate
principal amount up to $25,000,000. Terms defined in the Loan
Agreement shall, unless otherwise defined herein, have the
same meanings herein.
2. The Selling Lender hereby irrevocably sells and assigns to the
Substituted Lender without recourse to the Selling Lender, and
the Substituted Lender hereby irrevocably purchases and
assumes from the Selling Lender without recourse to the
Selling Lender, as of ___________, ____ (the "Effective Date")
the interest described in Schedule A hereto (the "Assigned
Interest") in and to the Selling Lender's rights and
obligations under the Loan Agreement as set forth on Schedule
A hereto (the "Assigned Facility").
3. The Selling Lender (i) makes no representation or warranty and
assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with
the Loan Agreement or with respect to the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
the Loan Agreement, any other Financing Document or any other
instrument or document furnished pursuant thereto, other than
that the Selling Lender has not created any adverse claim upon
the Assigned Interest, has full right, power and authority to
sell and assign the Assigned Interest and that the Assigned
Interest is free and clear of any such adverse claim; (ii)
makes no. representation or warranty and assumes no
responsibility with respect to the financial condition of the
Borrower or any Subsidiary or any other obligor or the
performance or observance by the Borrower, any of its
Subsidiaries or any other obligor of any of their respective
obligations under the Loan Agreement or any other Financing
Document or any other instrument or document furnished
pursuant hereto or thereto; and (iii) attaches any Notes held
by it evidencing the Assigned Facility and (a) requests that
the Agent, upon request by the Substituted Lender, exchange
the attached Notes for a new Note or Notes payable to the
Substituted Lender and (b) if the Selling Lender has retained
any interest in the Loans, requests that the Agent exchange
the attached Notes for a new Note or Notes payable to the
Selling Lender, in each case in amounts which reflect the
assignment being made hereby (and after giving effect to any
other assignments which have become effective on the Effective
Date).
1
<PAGE> 152
4. The Substituted Lender (i) represents and warrants that it is
legally authorized to enter into this Assignment and
Acceptance; (ii) confirms that it has received a copy of the
Loan Agreement, together with copies of the financial
statements delivered pursuant to Section 5.3 thereof and such
other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Selling Lender,
the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking
action under the Loan Agreement, the other Financing Documents
or any other instrument or document furnished pursuant hereto
or thereto; (iv) appoints and authorizes the Agent to take
such action as Agent on its behalf and to exercise such powers
and discretion under the Loan Agreement, the other Financing
Documents or any other instrument or document furnished
pursuant hereto or thereto as are delegated to the Agent by
the terms thereof, together with such powers as are incidental
thereto; and (v) agrees that it will be bound by the
provisions of the Loan Agreement and will perform in
accordance with its terms all the obligations which by the
terms of the Loan Agreement are required to be performed by it
as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation
pursuant to Section 2.5.3.2 of the Loan Agreement.
5. The Substituted Lender hereby agrees to become a Lender
pursuant to the terms of Section 9.11 of the Loan Agreement
having a Pro Rata Share of the Loans and the Revolving Credit
Loan Commitment in the amount set forth opposite the
Substituted Lender's name on Schedule A hereto and to fund its
Pro Rata Share of any outstanding Loans in which it is
purchasing a Pro Rata Share by wire transfer to the Selling
Lender in accordance with Schedule A hereto on the Effective
Date.
6. The Selling Lender hereby agrees that, effective as of the
Effective Date, its Pro Rata Share of the Loans and the
Revolving Credit Loan Commitment shall be reduced to the Pro
Rata Share set forth opposite its name on Schedule A hereto.
7. The Substituted Lender hereby agrees (i) that its address for
notices for the purposes of Section 9.6 of the Loan Agreement
shall be the address set forth opposite its name on Schedule A
hereto and (ii) that the instructions for wire transfers of
funds to the Agent and for wire transfers of funds to the
Substituted Lender are as set forth on Schedule A hereto.
8. The Substituted Lender hereby requests the Agent to accept, on
behalf of the Borrower and the Lenders, this Agreement as an
Assignment and Acceptance delivered to the Agent pursuant to
and for the purposes of Section 9.11 of the Loan Agreement so
as to take effect in accordance with the terms hereof and
thereof on Effective Date.
9. The Substituted Lender hereby acknowledges the correctness of
the details specified in Schedule A hereto.
2
<PAGE> 153
10. This Agreement and the rights and obligations of the parties
hereunder shall be governed by, and construed in accordance
with the laws of The Commonwealth of Massachusetts without
regard to such state's conflict of laws rules.
CONVERGENT GROUP CORPORATION
By:
-------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
FLEET NATIONAL BANK, as Agent for
itself in its individual capacity
and as agent for the Borrower,
[INSERT NAME(S) OF SELLING
LENDER(S)] and any other Lenders
By:
-------------------------------
3
<PAGE> 154
SCHEDULE A
Name of AGENT, address for notices
and wire transfer instructions:
Fleet National Bank
Mailstop MA OF D07A
One Federal Street
Boston, Massachusetts 02110
Attn: High Tech Group
Michael S. Barclay, Vice President
Wire Transfer Instructions:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
ABA#: 011000138
Account: Commercial Loan Services
Attn: Agent Bank MA
Account#: 1510351 G/L
Re: Convergent Group
Name of LENDER, address for notices
and wire transfer instructions: Pro Rata Share
Fleet National Bank 100%
Mailstop MA OF D07A
One Federal Street
Boston, Massachusetts 02110
Attn: High Tech Group
Michael S. Barclay, Vice President
Wire Transfer Instructions:
Fleet National Bank
One Federal Street
Boston, Massachusetts 02110
ABA#: 011000138
Account: Commercial Loan Services
Attn: Agent Bank MA
Account#: 1510351 G/L
Re: Convergent Group
1
<PAGE> 155
Name of LENDER, address for notices and wire
transfer instructions:
For Credit Matters: Pro Rata Share
[ ]%
-----------------------------
-----------------------------
-----------------------------
Tel:
-------------------------
Fax:
-------------------------
For Administrative/Operations Matters:
-----------------------------
-----------------------------
-----------------------------
Tel:
-------------------------
Fax:
-------------------------
Wire Transfer Instructions:
-----------------------------
-----------------------------
ABA #:
-----------------------
Account Name:
----------------
Attn:
------------------------
Re:
--------------------------
2
<PAGE> 1
EXHIBIT 10.1
EXECUTION COPY
================================================================================
RECAPITALIZATION AGREEMENT
BY AND AMONG
CONVERGENT GROUP CORPORATION,
CERTAIN SHAREHOLDERS OF CONVERGENT GROUP CORPORATION,
SCOTT M. SCHLEY, AS THE SHAREHOLDERS' REPRESENTATIVE,
INSIGHT CAPITAL PARTNERS III, L.P.,
AS THE INVESTORS' REPRESENTATIVE,
AND
THE INVESTORS NAMED HEREIN
AUGUST 13, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.........................................................................................................2
RECAPITALIZATION TRANSACTIONS.....................................................................................2
1.1 CONSUMMATION OF THE EDS TRANSACTIONS AND THE MTH TRANSACTIONS..............................................2
1.2 RECAPITALIZATION...........................................................................................3
1.3 SALE AND PURCHASE OF PURCHASED SHARES......................................................................3
1.4 SALE OF THE SHARES OF NEW SERIES A PREFERRED STOCK; DELIVERY...............................................3
1.5 REDEMPTION OF REDEEMED SHARES..............................................................................3
1.6 CONSIDERATION..............................................................................................4
1.7 DELIVERY OF PURCHASED SHARES...............................................................................4
1.8 DELIVERY OF REDEEMED SHARES................................................................................4
1.9 ISSUANCE OF SHARES OF NEW COMMON STOCK.....................................................................5
1.10 TERMINATION OF EMPLOYMENT AGREEMENTS......................................................................5
1.11 CONTINGENT PAYMENTS.......................................................................................5
1.12 NO OTHER TRANSACTIONS; RELEASE............................................................................5
ARTICLE II RELATED MATTERS.......................................................................................6
2.1 HSR ACT....................................................................................................6
2.2 STAMP AND OTHER TAXES......................................................................................6
ARTICLE III CLOSING..............................................................................................6
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................6
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.......................................................6
4.2 EQUITY INVESTMENTS.........................................................................................7
4.3 CAPITAL STOCK..............................................................................................7
4.4 DIRECTOR AND SHAREHOLDER APPROVALS.........................................................................8
4.5 AUTHORITY; NONCONTRAVENTION; CONSENTS......................................................................8
4.6 FINANCIAL STATEMENTS; PROJECTIONS..........................................................................9
4.7 ABSENCE OF UNDISCLOSED LIABILITIES........................................................................10
4.8 ABSENCE OF CHANGES........................................................................................10
4.9 EMPLOYMENT AGREEMENTS.....................................................................................12
4.10 TAX MATTERS..............................................................................................13
4.11 ERISA COMPLIANCE.........................................................................................17
4.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS...............................................19
4.13 REAL PROPERTY............................................................................................20
4.14 INTELLECTUAL PROPERTY....................................................................................21
4.15 AGREEMENTS, NO DEFAULTS, ETC.............................................................................22
4.16 COMPLIANCE WITH LAWS.....................................................................................23
4.17 LITIGATION, ETC..........................................................................................23
4.18 INSURANCE................................................................................................23
4.19 LABOR RELATIONS; EMPLOYEES...............................................................................24
4.20 ENVIRONMENTAL MATTERS....................................................................................25
4.21 CHANGE IN CONTROL........................................................................................25
4.22 STATE TAKEOVER STATUTES..................................................................................25
4.23 CONFLICTS OF INTEREST....................................................................................25
4.24 BROKERS..................................................................................................26
4.25 RELATED TRANSACTIONS.....................................................................................26
4.26 DISCLOSURE...............................................................................................26
4.27 ACCOUNTS AND NOTES RECEIVABLE............................................................................26
4.28 ACCOUNTS AND NOTES PAYABLE...............................................................................27
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
4.29 BANK ACCOUNTS: POWER OF ATTORNEY.........................................................................27
4.30 SUPPLIERS AND VENDORS....................................................................................27
4.31 CUSTOMER RELATIONS, PROFITABILITY........................................................................27
4.32 YEAR 2000................................................................................................27
4.33 OWNERSHIP OF THE COMPANY.................................................................................28
4.34 DEFINITION OF "KNOWLEDGE."...............................................................................28
4.35 PRIOR TRANSACTIONS.......................................................................................29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE RESPONSIBLE SHAREHOLDERS........................................29
5.1 TITLE TO SHARES...........................................................................................29
5.2 AUTHORITY.................................................................................................29
5.3 NONCONTRAVENTION..........................................................................................29
5.4 CONSENTS..................................................................................................30
5.5 BROKERS...................................................................................................30
5.6 NO CLAIMS AGAINST THE COMPANY.............................................................................30
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTORS......................................................30
6.1 AUTHORITY; NONCONTRAVENTION; CONSENTS.....................................................................30
6.2 BROKERS...................................................................................................31
6.3 INVESTMENT REPRESENTATIONS AND WARRANTIES.................................................................31
ARTICLE VII COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS CONCERNING REPRESENTATIONS AND WARRANTIES................32
7.1 INDEMNIFICATION BY RESPONSIBLE SHAREHOLDERS...............................................................32
7.2 WAIVER OF CONTRIBUTION....................................................................................32
7.3 SUFFICIENT AUTHORIZED SHARES..............................................................................33
ARTICLE VIII CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL AGREEMENTS...............................33
8.1 AFFIRMATIVE COVENANTS OF THE COMPANY......................................................................33
8.2 NEGATIVE COVENANTS OF THE COMPANY.........................................................................33
8.3 AFFIRMATIVE COVENANTS OF THE RESPONSIBLE SHAREHOLDERS.....................................................33
8.4 REASONABLE EFFORTS........................................................................................35
8.5 REPRESENTATIONS AND WARRANTIES............................................................................35
8.6 CONSENTS..................................................................................................35
8.7 PUBLIC ANNOUNCEMENTS......................................................................................35
8.8 NEGOTIATION WITH OTHERS...................................................................................36
8.9 CERTAIN TAX MATTERS.......................................................................................36
8.10 SHAREHOLDERS' REPRESENTATIVE.............................................................................36
8.11 INVESTORS' REPRESENTATIVE................................................................................37
8.12 KEY MAN LIFE INSURANCE...................................................................................39
8.13 ADDITIONAL SMALL BUSINESS COVENANTS......................................................................39
ARTICLE IX CONDITIONS...........................................................................................40
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS....................................................................40
9.2 CONDITIONS TO OBLIGATIONS OF THE INVESTORS................................................................40
9.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY..................................................................43
9.4 RELEASE BY RESPONSIBLE SHAREHOLDERS.......................................................................44
ARTICLE X INDEMNIFICATION.......................................................................................45
10.1 INDEMNIFICATION GENERALLY; ETC...........................................................................45
10.2 ASSERTION OF CLAIMS......................................................................................49
10.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS.................................................................49
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...............................................................50
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
10.5 NO THIRD PARTY RELIANCE..................................................................................51
10.6 REMEDIES EXCLUSIVE.......................................................................................51
ARTICLE XI [INTENTIONALLY OMITTED]..............................................................................52
ARTICLE XII MISCELLANEOUS PROVISIONS............................................................................52
12.1 EXPENSES.................................................................................................52
12.2 AMENDMENT................................................................................................52
12.3 ENTIRE AGREEMENT.........................................................................................52
12.4 SEVERABILITY.............................................................................................52
12.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.....................................................52
12.6 HEADINGS.................................................................................................53
12.7 NOTICES..................................................................................................53
12.8 COUNTERPARTS.............................................................................................54
12.9 GOVERNING LAW............................................................................................54
12.10 INCORPORATION OF EXHIBITS AND SCHEDULES.................................................................54
12.11 CONSTRUCTION............................................................................................54
12.12 NON-MERGER OF REPRESENTATIONS AND WARRANTIES............................................................55
12.13 REMEDIES; SPECIFIC PERFORMANCE..........................................................................55
12.14 JURISDICTION, ETC.......................................................................................55
12.15 WAIVER OF JURY TRIAL....................................................................................56
12.16 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES............................................56
</TABLE>
2622060_1.DOC
<PAGE> 5
RECAPITALIZATION AGREEMENT (as amended,
modified or supplemented, this "Agreement"), dated as
of August 13, 1999, by and among CONVERGENT GROUP
CORPORATION, a Delaware corporation (the "Company"),
certain shareholders of the Company listed on the
signature pages hereto (the "Responsible
Shareholders"), Scott M. Schley, solely in his
capacity as the Shareholders' Representative, the
Investors listed on Schedule I hereto (the
"Investors") and INSIGHT CAPITAL PARTNERS III, L.P.,
solely in its capacity as the Investors'
Representative.
RECITALS
WHEREAS, the Company is engaged in the business (the "Subject
Business") of providing technical management consulting and/or systems
integration services for automated mapping/facilities management systems and/or
geographic information systems and/or utility transmission and distribution
systems;
WHEREAS, the Board of Directors has approved this Agreement, the
Related Documents to which the Company is a party and the transactions
contemplated hereby and thereby (including the Purchase and the Redemption);
WHEREAS, subject to the terms and conditions set forth in this
Agreement, on the Closing Date the Company and the other parties hereto shall
accomplish the recapitalization of the Company (the "Recapitalization") as
follows:
(a) the Company shall enter into a twenty-five million dollar
($25,000,000) secured revolving line of credit with Fleet National Bank
("Fleet") on the terms and conditions set forth in the Loan Agreement dated as
of the date hereof among the Company, Fleet and the other parties thereto (the
"Bank Financing");
(b) the Company shall exercise its option to redeem 282,000 shares
of its Class A Common Stock and 5,725 shares of its Series A Preferred Stock
from EDS for an aggregate purchase price of $12,645,086 and 34,816 shares of its
Series B Preferred Stock from EDS for an aggregate purchase price of $14,000,000
(collectively, the "EDS Transactions"). Upon consummation of the EDS
Transactions, EDS shall not own any of the capital stock of the Company;
(c) the Company shall file the Restated Charter, which shall,
among other things, authorize the New Series A Preferred Stock;
(d) the Company shall exercise its option to redeem 2,068,000
shares of its Class A Common Stock from Murray T. Holland ("MTH") for an
aggregate purchase price of
<PAGE> 6
$17,619,360 (the "MTH Transactions"), after which MTH shall not own any capital
stock of the Company;
(e) certain Shareholders listed on Schedule II shall exchange the
number of shares of New Common Stock set forth opposite their respective names
for the number of shares of New Series A Preferred Stock set forth opposite
their respective names;
(f) the Investors shall purchase (the "Purchase") an aggregate of
9,447,911 shares of New Series A Preferred Stock from certain Shareholders for
an aggregate purchase price of $10,250,683, as set forth on Schedule II hereto;
(g) the Investors shall subscribe for and purchase 32,530,778
shares of New Series A Preferred Stock from the Company for an aggregate
purchase price of $35,294,766, as set forth on Schedule I hereto;
(h) the Company shall redeem (the "Redemption") an aggregate of
1,389,024 shares of New Common Stock from certain Shareholders for an aggregate
purchase price of $1,512,394, as set forth on Schedule II hereto;
(i) the Company shall issue shares of New Common Stock (or options
exercisable for New Common Stock) to the Persons identified on Schedule II
hereto in the amounts set forth thereon in consideration of their continued
employment with the Company;
(j) certain Employees of the Company identified on Schedule III
hereto shall terminate their current employment agreements with the Company in
exchange for the consideration set forth opposite their respective names on
Schedule III.
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated hereby (including the Purchase and the Redemption).
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
RECAPITALIZATION TRANSACTIONS
1.1 CONSUMMATION OF THE EDS TRANSACTIONS AND THE MTH TRANSACTIONS.
(a) The Company shall exercise its option to purchase all of the
capital stock of the Company owned by EDS upon the terms and conditions set
forth in the EDS Option Agreement.
(b) The Company shall exercise its option to purchase all of the
capital stock of the Company owned by MTH upon the terms and conditions set
forth in the MTH Option Agreement.
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1.2 RECAPITALIZATION.
Immediately following the consummation of the EDS Transactions and
immediately prior to the consummation of the MTH Transactions, the Company shall
file the Restated Charter, which shall, among other things, authorize the New
Series A Preferred Stock. Upon the effectiveness of the Restated Charter, each
authorized share and outstanding share of Common Stock shall be automatically
converted into 7.83 shares of New Common Stock. Upon the effectiveness of the
Restated Charter, the Shareholders identified on Schedule II shall exchange
certain shares of New Common Stock then held by them for shares of New Series A
Preferred Stock, and upon the surrender by such Shareholders of their shares of
New Common Stock, the Company shall issue to each such Shareholder one share of
New Series A Preferred Stock for each share of New Common Stock so surrendered.
1.3 SALE AND PURCHASE OF PURCHASED SHARES.
(a) Immediately following the effectiveness of the Restated
Charter, and upon the terms and subject to the conditions set forth herein, at
the Closing the Shareholders identified on Schedule II hereto shall, severally
but not jointly, sell, transfer, convey and assign to the Investors, that number
of shares of New Series A Preferred Stock set forth opposite such Shareholder's
name on Schedule II (the "Purchased Shares").
(b) Subject to the terms and conditions hereof and of the Stock
Purchase and Redemption Agreement, each Investor shall purchase from the
Shareholders identified on Schedule II, severally but not jointly, that number
of Purchased Shares specified opposite such Investor's name on Schedule I
hereto, for an aggregate purchase price for all Investors of $10,253,135 (the
"Purchased Shares Consideration").
1.4 SALE OF THE SHARES OF NEW SERIES A PREFERRED STOCK; DELIVERY.
(a) Subject to the terms and conditions hereof, the Company shall
sell and issue to each Investor, and each Investor shall purchase from the
Company, severally but not jointly, that number of shares of New Series A
Preferred Stock specified opposite such Investor's name on Schedule I hereto,
for an aggregate purchase price for all Investors of $35,292,407 (the
"Subscription").
(b) At the Closing the Company shall deliver to each Investor the
appropriate certificate(s) representing the shares of Series A Preferred Stock
purchased by such Investor at the Closing, which shall be delivered against
payment of the purchase price therefor in the amount specified in Schedule I, by
wire transfer of same day funds.
1.5 REDEMPTION OF REDEEMED SHARES.
(a) The Company will have authorized before the Closing the
redemption of 1,389,024 shares of New Common Stock.
(b) Upon the terms and subject to the conditions set forth herein
and in the Stock Purchase and Redemption Agreement, at the Closing the
Shareholders identified on Schedule II
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hereto shall, severally but not jointly
sell, transfer, convey and assign to the Company, and the Company shall redeem
and purchase from such Shareholders (the "Redemption"), that number of shares of
New Common Stock (the "Redeemed Shares") set forth opposite such Shareholder's
name on Schedule II hereto. As payment for the Redeemed Shares, the Company
shall pay to the Shareholders by wire transfer or check the amount set forth
opposite each such Shareholder's name on Schedule II hereto ($1,512,394 in the
aggregate) (the "Redeemed Shares Consideration").
1.6 CONSIDERATION.
(a) The consideration to be paid to the Shareholders by the
Investors or the Company, as the case may be, shall be deemed to be good and
sufficient consideration for the Purchased Shares, the Redeemed Shares and the
covenants contained in Section 8.3(c) herein.
(b) At the Closing, the Shareholders and/or the Company are
delivering to the holders of Funded Indebtedness identified on Schedule 1.6
hereto (unless otherwise instructed by the Investors) an amount sufficient to
repay all such Funded Indebtedness outstanding immediately prior to the Closing,
with the result that immediately following the Closing there will be no further
monetary obligations of the Company with respect to any such Funded Indebtedness
outstanding immediately prior to the Closing. On the Closing Date, the Company
or the Shareholders shall provide the Investors with customary pay-off-letters
from all holders of such Funded Indebtedness outstanding immediately prior to
the Closing, and make arrangements satisfactory to the Investors for such
holders to provide to the Investors recordable form mortgage and lien discharges
and releases, UCC-3 and other personal property security financing statements,
canceled notes, trademark and patent relinquishments and other documents
reasonably requested by the Investors simultaneously with the Closing to
evidence the discharge and repayment of such Funded Indebtedness and the
discharge release of all Encumbrances securing such Funded Indebtedness.
1.7 DELIVERY OF PURCHASED SHARES.
At the Closing, in consideration of the Investor's delivery of the
Purchased Shares Consideration, each Shareholder shall deliver to the Investors
a certificate or certificates representing the Purchased Shares owned by such
Shareholder as set forth on Schedule II, duly endorsed in blank for transfer or
accompanied by stock powers duly executed in blank, sufficient in form and
substance to convey to the Investors, good and marketable title to the Purchased
Shares free and clear of all Encumbrances.
1.8 DELIVERY OF REDEEMED SHARES.
At the Closing, in consideration of the Company's delivery of the
Redeemed Shares Consideration, each Shareholder shall deliver to the Company a
certificate or certificates representing the number of Redeemed Shares being
redeemed and purchased from each Shareholder, set forth on Schedule II, duly
endorsed in blank for transfer or accompanied by stock powers duly executed in
blank, sufficient in form and substance to convey to the Company, good and
marketable title to the Redeemed Shares free and clear of all Encumbrances.
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<PAGE> 9
1.9 ISSUANCE OF SHARES OF NEW COMMON STOCK.
At the Closing, immediately following the consummation of the Purchase
and the Redemption, the Company shall issue to certain Persons, in consideration
for their continued employment with the Company, such number of shares of New
Common Stock (or options exercisable therefor), as is set forth on Schedule II
hereto (the "New Issuance").
1.10 TERMINATION OF EMPLOYMENT AGREEMENTS.
At the Closing, certain employees of the Company identified on Schedule
III hereto shall terminate their current employment agreements with the Company
in consideration for the payments set forth opposite their respective names on
Schedule III hereto.
1.11 CONTINGENT PAYMENTS.
On the thirty (30) day anniversary of the Closing Date (the "Contingent
Payment Date"), the Company shall consummate the transactions set forth on
Schedule IV hereto (the "Contingent Payments"); provided, however, that the
Company shall have no obligation to make any such Contingent Payment to any
proposed recipient except in accordance with, and subject to the terms and
conditions of, such Person's Deferred Payment Agreement (with all such Deferred
Payment Agreements attached as Exhibit E hereto). All Contingent Payments shall
be made to the recipients thereof net of all applicable federal, state,
municipal and local withholding Taxes at a level consistent with the Company's
past practices.
1.12 NO OTHER TRANSACTIONS; RELEASE.
Other than the Transactions, there shall be no other issuances of
capital stock, redemptions, repurchases or exchanges of capital stock,
cancellations of options, purchases of stock, payments of any bonuses, deferred
bonuses, payments of transaction fees or other fees, loans or option grants, in
each case effected on, after or before the Closing Date in any way related to or
in contemplation of, the Recapitalization. Each of the Responsible Shareholders
agrees and acknowledges that as a result of the Transactions, certain payments,
consideration and benefits are being provided to certain Shareholders but not
all Shareholders and that certain Shareholders are receiving different
consideration, taken as a whole, for the sale of their shares of Common Stock
than other Shareholders are receiving for the sale of their shares of Common
Stock. The Responsible Shareholders hereby release the Company, its Subsidiaries
and the Investors, their Affiliates, members, partners (including limited
partners), officers, directors, employees, independent advisors and agents from
any claims, Losses, damages or costs arising from the Transactions, including
claims, Losses, damages or costs in connection with the fact that certain
Shareholders may be, taken as a whole, receiving disparate treatment in
connection with the Transactions.
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ARTICLE II
RELATED MATTERS
2.1 HSR ACT.
Prior to the signing of the Agreement, the Company and UBS shall each
make any and all filings required under the HSR Act, each in form approved by
the other with respect to items 1 through 3 of the Notification and Report Form
required thereby. The Company shall pay its fees and expenses and the fees
(including legal fees) and expenses of UBS (including all filing fees) incurred
in connection with such filings.
2.2 STAMP AND OTHER TAXES.
The Company shall pay all stamp, filing and similar Taxes and fees
payable with respect to the transactions contemplated by this Agreement.
ARTICLE III
CLOSING
The closing of the Purchase, the Redemption and the other transactions
contemplated hereby (the "Closing") shall take place (a) at the offices of
O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York
10112, as promptly as practicable after satisfaction or waiver of the conditions
set forth in Article IX in accordance with this Agreement or (b) at such other
place, time and date as the Investors and the Company may agree in writing. The
date and time of such Closing are referred to herein as the "Closing Date".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors as follows:
4.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
Each of the Company and its subsidiaries (each of which is listed on
Schedule 4.1 attached hereto) (each a "Subsidiary," and together , the
"Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the Laws of the state, province or country of its jurisdiction,
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, to enter into
this Agreement and the Related Documents, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated hereby and
thereby, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where a failure to so
qualify would not have a Material Adverse Effect. The jurisdictions in which the
Company and its Subsidiaries are qualified as foreign corporations or licensed
or registered to carry on business are set forth in
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Schedule 4.1. The Company has delivered to the Investors true and complete
correct copies of its and its Subsidiaries certificates or articles of
incorporation and bylaws (or other corporate governance documents) in each case
as amended to the date hereof.
4.2 EQUITY INVESTMENTS.
Except as set forth in Schedule 4.2, the Company does not currently
have any subsidiaries, nor does it currently own any capital stock or other
interest, directly or indirectly, in any Person.
4.3 CAPITAL STOCK.
(a) Immediately prior to the filing of the Restated Charter, the
authorized capital stock of the Company consists of 2,500,000 shares of Common
Stock, 3,500,000 shares of Class A Common Stock, 1,500,000 shares of Class B
Common Stock, 5,725 shares of Series A Preferred Stock and 39,000 shares of
Series B Preferred Stock. Immediately prior to the consummation of any of the
Transactions, 1,488,905 shares of Common Stock are outstanding, 2,350,000 shares
of Class A Common Stock are outstanding, no shares of Class B Common Stock are
outstanding, 5,725 shares of Series A Preferred Stock are outstanding and 34,816
shares of Series B Preferred Stock are outstanding. All of the foregoing
outstanding shares of capital stock of the Company are owned of record by the
Shareholders in the amounts set forth in Schedule 4.3. All of such shares are
validly issued, fully paid and non-assessable and have been issued in compliance
with all applicable Laws including, without limitation, applicable securities
Laws. Except as set forth in Schedule 4.3 or on Schedule II, there are no
securities of the Company presently outstanding, and on the Closing Date there
will not be any outstanding securities of the Company, which are convertible
into, exchangeable for, or carrying the right to acquire, equity securities of
the Company, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
the Company to issue, sell, register, purchase or redeem any of its equity
securities or any ownership interest or rights therein. Except as set forth in
Schedule 4.3, there are no voting trusts or other agreements or understandings
to which the Company is bound with respect to the voting of the Company's
capital stock. There are no stock appreciation rights, phantom stock rights or
similar rights or arrangements outstanding.
(b) Upon the effectiveness of the Restated Charter, the authorized
capital stock of the Company shall consist of 125,000,000 shares of common
stock, $0.001 par value (the "New Common Stock") and 75,000,000 shares of
Preferred Stock, $0.001 par value, all of which shall be designated as Series A
Participating Convertible Preferred Stock (the "New Series A Preferred Stock").
The New Series A Preferred Stock shall have the rights, preferences, privileges
and limitations set forth in the Restated Charter. The Company has reserved, and
at all times from and after the date hereof will keep reserved, free from
preemptive rights, out of its authorized but unissued shares of New Common
Stock, solely for the purpose of effecting the conversion of all shares of New
Series A Preferred Stock, sufficient shares of New Common Stock to provide for
the conversion of all outstanding shares of New Series A Preferred Stock. All of
such shares of New Common Stock issued on such conversion will be duly
authorized and be validly issued and outstanding, fully paid and nonassessable
and free from preemptive rights.
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<PAGE> 12
(c) The authorized capital stock of each Subsidiary of the Company
is as set forth on Schedule 4.3. As of the date hereof and immediately prior to
the Closing, all outstanding shares of each such Subsidiary are owned of record
by the shareholders in the amounts set forth in Schedule 4.3. All of such shares
are validly issued, fully paid and non-assessable and have been issued in
compliance with all applicable Laws including, without limitation, applicable
securities Laws. Except as set forth in Schedule 4.3, there are no securities of
any Subsidiary presently outstanding, and on the Closing Date there will not be
any outstanding securities of any Subsidiary, which are convertible into,
exchangeable for, or carrying the right to acquire, equity securities of such
Subsidiary, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
such Subsidiary to issue, sell, register, purchase or redeem any of its equity
securities or any ownership interest or rights therein. Except as set forth in
Schedule 4.3, there are no voting trusts or other agreements or understandings
to which any Subsidiary is bound with respect to the voting of its capital
stock. There are no stock appreciation rights, phantom stock rights or similar
rights or arrangements outstanding.
(d) With respect to the UK Subsidiary, the shares set out in
Schedule 4.3 constitute the whole of the issued and allotted share capital of
the UK Subsidiary and are fully paid or credited as fully paid and there are no
options over or other rights (whether exercisable now or in the future and
whether contingent or not) to acquire any shares or subscribe for shares in the
capital of the UK Subsidiary. Except as set forth in Schedule 4.3, there is no
Encumbrance on, over or affecting any of the shares in the UK Subsidiary, no
agreement to create such Encumbrance has been made and no claim has been made
that any Person is entitled to any such Encumbrance.
4.4 DIRECTOR AND SHAREHOLDER APPROVALS.
The Board of Directors of the Company has approved the Transactions,
this Agreement and the Related Documents to which the Company is a party and
determined Transactions to be fair to and in the best interests of the Company
and the Shareholders. Except as set forth on Schedule 4.4, one hundred percent
(100%) of the Company's shareholders have consented in writing to the Company's
consummation of the Transactions. Except as set forth on Schedule 4.4, no other
approval is required in order for the Company to consummate the transactions
contemplated by this Agreement or the Related Documents to which it is a party.
4.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The execution, delivery and performance of this Agreement and
the Related Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all necessary action
on the part of the Company; and this Agreement has been, and the Related
Documents, when executed and delivered by the Company will be, duly and validly
executed and delivered by it and this Agreement is, and the Related Documents,
when executed and delivered by it will be, the valid and binding obligations of
the Company, enforceable against it in accordance with their respective terms,
except as enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors rights generally or
by general principles of equity.
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(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents, nor the consummation by the Company or any
Subsidiary of the transactions contemplated hereby or thereby will (i) conflict
with, or result in any violation of, or cause a default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation contained in or the
loss of any benefit under, or result in the creation of any Encumbrance upon any
of the properties or assets of the Company or any Subsidiary under any term,
condition or provision of (x) the Company's certificate or articles of
incorporation or bylaws or any Subsidiary's constating or governing documents or
(y) any Contract to which the Company or any Subsidiary is a party or by which
its properties or assets are bound, (ii) result in any investigatory, remedial
or reporting obligation under any Environmental Law or (iii) violate any Laws
applicable to the Company or any Subsidiary or any of their respective
properties.
(c) Each Shareholder is the lawful owner of record, of each of the
shares of Common Stock being sold. transferred, conveyed and assigned by him or
her hereunder pursuant to the Purchase and the Redemption.
(d) Except as is expressly contemplated by this Agreement, and
except for post-Closing filings required in connection with the Subscription or
the New Issuance under any applicable securities Law no consent, approval, Order
or authorization of, registration, declaration or filing with, or notification
to any Governmental Entity or any other third party is required in connection
with the execution, delivery and performance by the Company or any Subsidiary of
this Agreement or the Related Documents or the consummation by the Company or
any Subsidiary of the transactions contemplated hereby or thereby.
(e) The UK Subsidiary has not done anything which, and is not a
member or party to any agreement or arrangement which, contravenes or requires
registration or notification under any of the provisions of the United Kingdom
Fair Trading Act 1973, the United Kingdom Restrictive Trade Practices Acts, the
United Kingdom Resale Prices Act 1976, the Treaty of Rome; or the United Kingdom
Competition Act 1980 or any other anti-trust, anti-monopoly or anti-cartel
legislation or regulation in any country of the world in which or with which it
does business.
4.6 FINANCIAL STATEMENTS; PROJECTIONS.
(a) Prior to the date hereof, the Company has delivered to the
Investors true, correct and complete copies of the unaudited, consolidated
balance sheets of the Company as of June 30, 1999, (the "Latest Balance Sheet"
and such date being the "Latest Balance Sheet Date") and the related unaudited
statements of income, stockholders' equity, cash flows and supplemental data for
the six month period then ended, and true, correct and complete copies of the
audited consolidated balance sheets of the Company for the fiscal years ended
1998, 1997 and 1996 and the related statements of income, stockholders' equity,
cash flows and supplemental data for the fiscal periods then ended; and
(b) The financial statements referenced in this Section 4.6 shall
be collectively referred to in this Agreement as the "Financial Statements". The
Financial Statements (i) are in
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accordance with the Books and Records of the Company, (ii) fairly present, in
all material respects, the consolidated financial condition of the Company and
its Subsidiaries as at the respective dates indicated and the results of
operations, stockholders' equity and cash flows of the Company and its
Subsidiaries for the respective periods indicated and (iii) have been prepared
in accordance with the Relevant GAAP and consistently applied throughout the
periods covered thereby subject, in the case of unaudited Financial Statements,
to the omission of footnotes and to normal year end audit adjustments, which
adjustments are not expected to be material (either individually or in the
aggregate).
(c) The projected and financial data of the Company and its
Subsidiaries for the calendar year 1999, including forecasted balance sheets and
income statements and sources and uses of cash for fiscal year 1999, the budget
for calendar year 1999 and current estimates of individual project
profitability, have all been prepared in good faith, using assumptions which are
reasonable. Such projections represent the Company's best estimate of future
performance, revenues, project completion margins and costs, and the Company has
no reason to believe that such projections will not be substantially realized;
provided, however, that the Company does not represent or warrant that such
projected results will be obtained.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth in Schedule 4.7, to the Company's Knowledge,
neither the Company nor any Subsidiary has any Liability, except for (i)
Liabilities reflected in the Liabilities section of the Latest Balance Sheet,
(ii) Liabilities that have arisen since the date of the Latest Balance Sheet in
the ordinary course of business (none of which arise from any breach of
Contract, breach of warranty, tort, infringement, violation of Law, or any
action, suit or Proceeding (including any Liability under any Environmental and
Safety Requirement)), (iii) Liabilities to perform under executory Contracts and
(iv) Liabilities expressly set forth in the Schedules hereto. To the Company's
Knowledge, there are no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) that are not adequately provided for on the
Latest Balance Sheet. Except as set forth in Schedule 4.7, neither the Company
nor any Subsidiary has, either expressly or by operation of Law, assumed or
undertaken any Liability of any other Person, including, without limitation, any
obligation for corrective or remedial action relating to Environmental and
Safety Requirements. To the Company's Knowledge, the reserves reflected on the
Latest Balance Sheet for Liabilities which were incurred but not reported are
adequate to cover such Liabilities.
4.8 ABSENCE OF CHANGES.
Since the Latest Balance Sheet Date, there has not been any Material
Adverse Change affecting the Company or any of its Subsidiaries and, to the
Company's Knowledge, no event (other than changes in general economic conditions
affecting the Subject Business) has occurred or circumstance exists which is
likely to result in such a Material Adverse Change. Without limiting the
generality of the foregoing, since the Latest Balance Sheet Date, except as set
forth in Schedule 4.8, the Company and each Subsidiary has been operated in the
ordinary course,
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consistent with past practice, and there has not been (other than as is
expressly contemplated by this Agreement):
(a) other than in the ordinary course, and consistent with past
practices, of such Person's Business, any payment, discharge or satisfaction of
any Encumbrance or Liability by the Company or any Subsidiary or any
cancellation by the Company or any Subsidiary of any debts or claims or any
amendment, termination or waiver of any rights of value to such Persons;
(b) any declaration, setting aside or payment of any dividend or
other distribution of any assets of any kind whatsoever with respect to any
shares of the capital stock of the Company or any Subsidiary, or any direct or
indirect redemption, purchase or other acquisition of any such shares of the
capital stock of the Company or any Subsidiary;
(c) any stock split, reverse stock split, combination,
reclassification or recapitalization of any capital stock of the Company or any
Subsidiary, or any issuance of any other security in respect of or in exchange
for, any shares of any capital stock of the Company or any Subsidiary;
(d) any issuance by the Company or any Subsidiary of any shares of
their capital stock or any debt security or securities, rights, options or
warrants convertible into or exercisable or exchangeable for any shares of such
capital stock or debt security;
(e) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset of the Company or any Subsidiary
other than in the ordinary course of such Person's business and consistent with
past practices;
(f) any termination or indication of an intention to terminate or
not renew, any Contract between the Company or any Subsidiary and any other
Person;
(g) any write-down or write-up of the value of any asset of the
Company or any Subsidiary, or any write-off of any accounts receivable or notes
receivable of the Company or any Subsidiary or any portion thereof;
(h) any increase in or modification of compensation payable or to
become payable to any officer, employee, consultant or agent of the Company or
any Subsidiary, other than any such increases in the ordinary course of
business, consistent with past practice, or the entering into of any employment
contract with any officer or employee;
(i) any increase in or modification or acceleration of any
benefits payable or to become payable under any bonus, pension, severance,
insurance or other benefit plan, payment or arrangement (including, but not
limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any officer, employee, consultant or
agent of the Company or any Subsidiary;
(j) the making of any loan, advance or capital contribution to or
investment in any Person or the engagement in any transaction with any employee,
officer, director or shareholder
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of the Company or any Subsidiary, other than advances to employees in the
ordinary course of business for travel and similar business expenses;
(k) any change in the accounting methods or practices followed by
the Company or any Subsidiary or any change in depreciation or amortization
policies or rates theretofore adopted;
(l) any deterioration in the aging of the Company's or any
Subsidiary's accounts payable or acceleration in the aging of the Company's or
any Subsidiary's accounts receivable or other change in the Company's or any
Subsidiary's working capital management practices;
(m) other than in the ordinary course, and consistent with past
practices, of such Person's business, any change in the manner in which the
Company or any Subsidiary extends discounts or credit to customers or otherwise
deals with customers;
(n) any termination of employment of any officer or Designated
Employee of the Company or any Subsidiary or any expression of intention to the
Company or any Subsidiary by any officer or Designated Employee of the Company
or any Subsidiary to terminate such office or employment with such Person;
(o) except as contemplated hereby, any amendments or changes in
the Company's or any Subsidiary's articles of incorporation or bylaws or other
constating or governing documents;
(p) any labor disputes or any union organizing campaigns;
(q) to the Knowledge of the Company or any Subsidiary, the
commencement of any Proceedings by or against the Company or any Subsidiary; or
(r) any agreement, understanding, authorization or proposal,
whether in writing or otherwise, for the Company or any Subsidiary to take any
of the actions specified in items (a) through (q) above.
4.9 EMPLOYMENT AGREEMENTS.
Except as disclosed in Schedule 4.9, there exist no employment,
consulting, non-competition, severance, bonus or indemnification agreements or
understandings between the Company or the Subsidiaries and any current or former
director or officer of the Company or the Subsidiaries or any other employee or
agent. Schedule 4.9 sets forth a true, correct and complete list of all amounts
payable or that will become payable to each present or former director, officer,
consultant or employee of the Company or any Subsidiary pursuant to any
agreement or understanding set forth in Schedule 4.9 as a result of the
execution and delivery of this Agreement and the Related Documents and/or the
consummation of the transactions contemplated hereby, which schedule shall
separately identify the Person to whom such amount is or will become payable.
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4.10 TAX MATTERS.
(a) Except as set forth in Schedule 4.10: (i) the Company and (ii)
each Subsidiary:
(i)has timely paid or caused to be paid all Taxes required to
be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return);
(ii)has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns
required to be filed by it with the appropriate Governmental Entities
in all jurisdictions in which such Tax Returns are required to be
filed; and all Tax Returns filed on behalf of the Company and each
Subsidiary were complete and correct; and
(iii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return
has not since been filed.
(b) The Company has previously delivered true, correct and
complete copies of all Federal Tax Returns filed by or on behalf of the Company
through the date hereof for the periods ending after December 31, 1994 and for
all subsequent periods.
(c) Except as set forth in Schedule 4.10:
(i) neither the Company nor any Subsidiary has been notified
by the Internal Revenue Service or any other taxing authority that any
issues have been raised (and no such issues are currently pending) by
the Internal Revenue Service or any other taxing authority in
connection with any Tax Return filed by or on behalf of the Company or
any Subsidiary; there are no pending Tax audits, and no waivers of
statutes of limitations have been given or requested with respect to
the Company or any Subsidiary; no Tax Encumbrances have been filed
against the Company or any Subsidiary except for Encumbrances for
current Taxes not yet due and payable for which adequate reserves have
been provided for in the Latest Balance Sheet; no unresolved
deficiencies or additions to Taxes have been proposed, asserted, or
assessed against the Company or any Subsidiary;
(ii) full and adequate provision has been made (A) on the
Latest Balance Sheet, and the books and records of the Company and each
Subsidiary for all Taxes not yet due and payable by the Company as if
it were a stand-alone company for all periods on or prior to the Latest
Balance Sheet Date;
(iii) neither the Company nor any Subsidiary has incurred any
Liability for Taxes from and after the Latest Balance Sheet Date other
than Taxes incurred in the ordinary course of business and consistent
with past practices;
(iv) neither the Company nor any Subsidiary has (A) made an
election (or had an election made on its behalf by another Person) to
be treated as a "consenting
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<PAGE> 18
corporation" under Section 341(f) of the Code or (B) been a "personal
holding company" within the meaning of Section 542 of the Code;
(v) the Company and each Subsidiary has complied with all
applicable Laws relating to the collection or withholding of Taxes
(such as sales Taxes or withholding of Taxes from the wages of
employees);
(vi) neither the Company nor any Subsidiary has any Liability
in respect of any Tax sharing agreement with any Person, and all Tax
sharing agreements to which either the Company or any Subsidiary has
been bound have been terminated;
(vii) neither the Company nor any Subsidiary has incurred any
Liability to make or possibly make any payments either alone or in
conjunction with any other payments that:
(A) shall be non-deductible under, or would otherwise
constitute a "parachute payment" within the meaning of Section 280G of
the Code (or any corresponding provision of state, local or foreign
income Tax Law); or
(B) are or may be subject to the imposition of an excise
Tax under Section 4999 of the Code;
(viii) neither the Company nor any Subsidiary has agreed to
(nor has any other Person agreed to on its behalf) and is not required
to make any adjustments or changes either on, before or after the
Closing Date, to its accounting methods pursuant to Section 481 of the
Code, and the Internal Revenue Service has not proposed any such
adjustments or changes in the accounting methods of such Persons;
(ix) no claim has been made within the last three years by
any taxing authority in a jurisdiction in which the Company or any
Subsidiary does not file Tax Returns that the Company or any Subsidiary
is or may be subject to taxation by that jurisdiction;
(x) the consummation of the transactions hereunder will not
trigger the realization or recognition of intercompany gain or income
to the Company or any Subsidiary under the Federal consolidated return
regulations with respect to Federal, state, or local taxes; and
(xi) The Company is not currently, nor has it been at any
time during the previous five years, a "U.S. real property holding
corporation" (as defined in Section 897 of the Code).
(xii) neither the Company nor any Subsidiary owns an equity
interest in any foreign entity, including the Canadian Subsidiaries and
the UK Subsidiary, which is or has been either a foreign personal
holding company (as defined in Section 552 of the Code) or a passive
foreign investment company (as defined in Section 1297 of the Code), or
which has resulted in the inclusion of Subpart F income or an amount
determined
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<PAGE> 19
under Section 956 (as defined in the Code) in the federal taxable
income of the Company or any Subsidiary.
(d) Canadian Tax Matters. There are no circumstances existing
which could result in the application of either section 78 or section 80 of the
Income Tax Act (Canada) or any equivalent provincial provision to the Company or
any of its Subsidiaries. Neither the Company nor any of its Subsidiaries has
claimed or will claim any reserve under any one or more of subparagraph
40(1)(a)(iii), or paragraphs 20(1)(l), 20(1)(m) or 20(1)(n) of the Income Tax
Act (Canada) or any equivalent provincial provision, if any such amount could be
included in the income of the Company or any of the Subsidiaries for any period
ending after Closing.
(i) Each of the Company and its Subsidiaries has withheld
from each payment made to any of its present or former employees,
officers and directors, and to all Persons who are (or were at the
relevant time) non-residents of Canada for the purposes of the Income
Tax Act (Canada), all amounts required by Law and has remitted such
withheld amounts within the prescribed periods to the appropriate
Governmental Entity. Each of the Company and its Subsidiaries has
properly withheld all Canada Pension Plan contributions, unemployment
insurance premiums, employer health Tax and other Taxes payable by it
with respect to its employees and has or will have remitted such
amounts to the appropriate Governmental Entity within the time required
under the applicable legislation. Each of the Company and its
Subsidiaries has charged, collected and remitted on a timely basis all
Taxes as required by applicable legislation, including those imposed
under Part XI of the Excise Tax Act (Canada) on any sale, supply or
delivery whatsoever made by the Company or any of its Subsidiaries.
(ii) Copies of all forms T2038 or any equivalent forms are
attached as Schedule 4.10(d) and have been accepted as correct and
complete by the relevant Governmental Entity for the purpose of the
Income Tax Act (Canada) and any relevant provincial taxing statute.
Schedule 4.10(d) accurately sets out the investment tax credits (as
defined in the Income Tax Act (Canada) and any relevant provincial
taxing Law) still available to the Company or its Subsidiaries for
taxation years ending after the Closing Date or used by the Company
with respect to the last seven taxation years ending before the Closing
Date.
(iii) Each of the Canadian Subsidiaries is resident in
Canada, as defined in the Income Tax Act (Canada).
(iv) Each of the Canadian Subsidiaries is a
Canadian-controlled private corporation, as defined in the Income Tax
Act (Canada), and has been since its incorporation. Each of the
Canadian Subsidiaries is a registrant for the purposes of the goods and
services tax provided for under the Excise Tax Act (Canada).
(v) Neither the Company nor any of its Canadian Subsidiaries
has made or filed any election under section 83 or section 85 of the
Income Tax Act (Canada) or any equivalent provincial provision, other
than those elections disclosed on Schedule 4.10(d).
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<PAGE> 20
All elections or designations required to be filed by the Company or
any of its Subsidiaries have been duly filed on a timely basis.
(vi) Each of the Company and its Canadian Subsidiaries has
paid all Taxes imposed under the Retail Sales Tax Act (Ontario) and
comparable legislation of any other province or territory of Canada,
and none of its tangible personal property has been transferred at any
time on a tax-exempt basis under the provisions of the Retail Sales Tax
Act (Ontario) and comparable legislation of any other province or
territory of Canada or any predecessor thereof.
(vii) Neither the Company nor any of its Canadian
Subsidiaries has ever acquired or had the use of any of the assets,
real or personal, tangible or intangible, of the Company or any of its
Subsidiaries, as the case may be, from a Person (a "Related Person")
with whom the Company or any of its Canadian Subsidiaries, as the case
may be, was not dealing at arm's length, as determined under the Income
Tax Act (Canada). Neither the Company nor any of its Canadian
Subsidiaries has ever disposed of such asset to a Related Person for
proceeds less than the fair market value of such asset.
(e) UK TAX MATTERS
Without duplication of Section 4.10(a) through (d):
(i) The UK Subsidiary has duly made all returns and given or
delivered all notices, accounts and information which should have been
made and is not involved in any Proceeding with the Inland Revenue or
other Governmental Entity concerning any matter which may affect in any
way the Liability (whether accrued, contingent or future) of it to
taxation of any nature whatsoever or other sums imposed, charged,
assessed, levied or payable under the provisions of the United Kingdom
taxation Laws and neither the Company nor the UK Subsidiary is aware of
any matter which may lead to such dispute.
(ii) The UK Subsidiary has duly paid or fully provided for
all Taxes for which it is liable and there are no circumstances in
which interest or penalties in respect of a Tax not duly paid could be
charged against it in respect of any period prior to the Closing Date.
(iii) No Liability of the UK Subsidiary for Taxes has arisen
or will arise up to the Closing Date except for corporation Taxes
payable in respect of normal trading profits earned by it or income Tax
deducted under United Kingdom Pay As You Earn regulations or National
Insurance Contributions or Value Added Tax or sickness pay for which it
is accountable to the Inland Revenue or other relevant Governmental
Entity and which has where appropriate been deducted or charged and
where due paid to the Inland Revenue or such other relevant
Governmental Entity.
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<PAGE> 21
(iv) The UK Subsidiary has not entered into or been a party
to any scheme or arrangements designed partly or wholly for the purpose
of it or any other Person avoiding the payment of Taxes which are due
and payable.
(v) All documents in the possession of the UK Subsidiary or
to the production of which it is entitled and which attract stamp or
transfer duty in the United Kingdom or elsewhere have been property
stamped.
4.11 ERISA COMPLIANCE.
(a) Set forth in Schedule 4.11 is a true and complete list of all
Foreign Employee Benefit Plans, Foreign Pension Plans and Employee Plans. All
Employee Plans have been operated and administered in compliance with ERISA, the
Code and other applicable Laws.
(b) Except as set forth in Schedule 4.11:
(i) each Employee Plan, if intended to be "qualified" within
the meaning of Section 401(a) of the Code, has been determined by the
Internal Revenue Service to be so qualified or the applicable remedial
amendment periods will not have ended before the closing date or the
applicable remedial amendment periods will not have ended before the
Closing Date, and the related trusts are exempt from tax under Section
501(a) of the Code and nothing has occurred that has or could
reasonably be expected to affect adversely such qualification or
exemption;
(ii) neither the Company nor any of its ERISA Affiliates nor
any other "disqualified person" or "party in interest" (as such terms
are defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to an Employee Plan has breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that
could subject the Company or any of its ERISA Affiliates to any Tax or
penalty imposed under Section 4975 of the Code or Section 502(i), (j)
or (l) of ERISA;
(iii) all required or declared Company or Subsidiary
contributions (or premium payments) to (or in respect of) all Employee
Plans have been properly made when due, and the Company and its
Subsidiaries have deposited all amounts withheld from employees for
pension, welfare or other benefits into the appropriate trusts or
accounts;
(iv) no Proceedings (other than routine claims for benefits)
are pending or threatened in writing to the Company or any ERISA
Affiliate with respect to or involving any Employee Plan;
(v) except as may be required under Laws of general
application, none of the Employee Plans obligate the Company or any
Subsidiary to provide any employee or former employee, or their
spouses, family members or beneficiaries, any post-employment or
post-retirement health or life insurance, accident or other
"welfare-type" benefits;
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<PAGE> 22
(vi) each Employee Plan which is subject to the requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA")
and the Health Insurance Portability and Accountability Act ("HIPAA")
has been maintained in compliance with COBRA and HIPAA, including all
notice requirements, and no tax payable on account of Section 4980B or
any other section of the Code has been or is expected to be incurred;
(vii) neither the Company nor any of its ERISA Affiliates is
or has ever maintained or been obligated to contribute to a "multiple
employer plan" (as defined in Section 413 of the Code), a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a
"defined benefit pension plan" (as defined in Section 3(35) of ERISA);
(viii) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Employee
Plan;
(ix) no benefit payable or which may become payable by the
Company or its ERISA Affiliates pursuant to any Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise tax under Section 4999 of the Code or which would not be
deductible by reason or Section 280G of the Code;
(x) each Employee Plan which is intended to meet the
requirements of Section 125 of the Code meets such requirements and
each program of benefits for which employee contributions are provided
pursuant to elections made under such Employee Plan meets the
requirements of the Code applicable thereto;
(xi) each Foreign Employee Benefit Plan and each Foreign
Pension Plan have been maintained in good standing with each applicable
Governmental Authority;
(xii) all contributions have been made with respect to all
Foreign Employee Benefit Plans and Foreign Pension Plans on a timely
basis;
(xiii) except as has been fully accrued on the Latest Balance
Sheet, neither the Company nor any ERISA Affiliate has incurred any
obligation in connection with the termination of or withdrawal from any
Foreign Employee Benefit Plan or Foreign Pension Plan;
(xiv) the present value of the accrued benefit liabilities
(whether vested or not) under each Foreign Pension Plan, determined as
of the end of the Company's most recently ended fiscal year on the
basis of actuarial assumptions provided for in such Foreign Pension
Plan, did not exceed the current value of the assets of such Foreign
Pension Plan allocable to such benefit liabilities; and
(xv) the Company has timely deposited and transmitted all
amounts withheld from employees for contributions or premium payments
for each Employee Plan into the appropriate trusts or accounts.
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<PAGE> 23
(c) With respect to the Company and its Canadian Subsidiaries:
(i) The only benefit plans existing in respect of the
employees of the Canadian Subsidiaries are the Canadian Benefit Plans
and the Canadian Pension Plans. True, correct and complete copies of
all written Canadian Benefit Plans and related documentation have been
provided to the Investors and all Canadian Benefit Plans are accurately
described on Schedule 4.11. The Canadian Benefit Plans are duly
registered where required by, and are in good standing under, all
applicable Laws. All required employer and employee contributions and
premiums under the Canadian Benefit Plans have been made, no past
service funding liabilities exist, and there are no Proceedings pending
or threatened in writing to the Company or any Subsidiary (other than
routine claims for benefits) relating to any of the Canadian Benefit
Plans. There is no requirement to provide post-retirement profit
sharing, medical or health benefits to employees of the Company or any
of the Canadian Subsidiaries.
(ii) The only pension plans existing in respect of the
employees of the Canadian Subsidiaries are the Canadian Pension Plans.
True, correct and complete copies of all Canadian Pension Plans and
related documentation (including pension plan summaries for
participants, funding agreements, actuarial reports and investment
management agreements) have been provided to the Investors and are
accurately described in Schedule 4.11. The Canadian Pension Plans are
duly registered where required by, and are in good standing under, all
applicable Laws including the Income Tax Act (Canada), and the Pension
Benefits Act (Ontario), and there are no Proceedings pending or
threatened (other than routine claims for benefits) relating to any of
the Canadian Pension Plans. All required employer and employee
contributions and premiums under the Canadian Pension Plans have been
made, the Canadian Pension Plans are each fully funded on both a
going-concern and a wind-up basis in accordance with applicable Laws
and with the actuarial methods and assumptions used in the most recent
actuarial reports therefor, and there have been no surplus withdrawals
or contribution holidays except as permitted by Law and the terms of
the Canadian Pension Plans.
(d) The Company has provided the Investors with true and complete
copies of all documents pursuant to which each Employee Plan, Foreign Employee
Benefit Plan, Foreign Pension Plan, Canadian Benefit Plan and Canadian Pension
Plan is maintained and administered, the two most recent annual reports (Form
5500 and attachments) and financial statements therefor (if applicable), all
governmental rulings, determinations, and opinions (and pending requests
therefor), and the most recent valuation (if such valuation exists) of the
present and future obligations under each such plan that provides
post-retirement or post-employment health and life insurance, accident, or other
"welfare-type" benefits.
4.12 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
The Company and each Subsidiary has such rights and interests in the
Intellectual Property Rights as provided in Section 4.14 and, except as
specifically set forth in Schedule 4.13, good and marketable title to all other
assets, properties and interests in properties, real or
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personal, reflected on the Latest Balance Sheet or acquired after the Latest
Balance Sheet Date (except (i) inventory sold since the Latest Balance Sheet
Date in the ordinary course of business, and (ii) accounts receivable and notes
receivable paid in full subsequent to the Latest Balance Sheet Date), free and
clear of all Encumbrances, of any kind or character, except for those
Encumbrances set forth in Schedule 4.12 and Permitted Encumbrances. Except as
set forth on Schedule 4.12, such assets are in good operating condition and
repair (normal wear and tear excepted), are suitable for the uses for which they
are used in the Subject Business, are not subject to any condition which
materially interferes with the economic value or use thereof, and constitute all
assets, properties, interests in properties and rights necessary to permit the
Company and the Subsidiaries to carry on their business after the Closing as
generally conducted by them prior thereto. With respect to any leased assets,
such assets are in such condition as to permit surrender thereof by the Company
or Subsidiary to the lessors thereunder on the date hereof without any cost or
expense for repair or restoration as if the related leases were terminated upon
the Closing Date in the ordinary course of business.
4.13 REAL PROPERTY.
(a) No real property is owned by the Company or any Subsidiary.
(b) Schedule 4.13 contains a list and brief description of all
real property in which the Company or any Subsidiary has a leasehold interest
held under leases (the "Leased Property") including the name of the lessor and
any requirement of consent of the lessor to consummate the transactions
contemplated hereby. The Leased Property constitutes all real properties used or
occupied by the Company or the Subsidiaries.
(c) With respect to the Lease Property, except as set forth in
Schedule 4.13:
(i) with respect to the Leased Property, the Company or a
Subsidiary is the owner and holder of all the leasehold estates
purported to be granted by such related lease and each such lease is in
full force and effect and constitutes a valid and binding obligation of
the Company or Subsidiary;
(ii) with respect to the Leased Property, there have been no
discussions or correspondence with the landlord or lessor concerning
renewal terms for those leases scheduled to expire within 12 months of
the date hereof;
(iii) none of the buildings and fixtures thereon, nor their
use, operation or maintenance for the purpose of carrying on the
Subject Business, violates any restrictive covenant or any provision of
any Law or encroaches on any property owned by any other Person;
(iv) there are no outstanding work orders from or required by
any municipality, police department, fire department, sanitation,
health or safety authorities or from any other Person and there are no
matters under discussion with or by the Company or any of its
Subsidiaries relating to such work orders; and
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<PAGE> 25
(v) the Company is not a party to, or under any agreement to
become a party to, any lease with respect to real property other than
the leases, copies of which have been provided to the Investors. With
respect to each lease (i) the lease (or a notice in respect of the
lease) has been properly registered in the appropriate land registry
office, (ii) all rents and additional rents which are due and payable
have been paid, (iii) no waiver, indulgence or postponement of the
lessee's obligations has been granted by the lessor, (iv) there exists
no event of default or event, occurrence, condition or act (including
the transactions contemplated hereby) which, with the giving of notice,
the lapse of time or the happening of any other event or condition,
could become a default under the lease, and (v) all of the covenants to
be performed by any party under the leases have been fully performed.
4.14 INTELLECTUAL PROPERTY.
(a) Except as set forth in Schedule 4.14, the Company and its
Subsidiaries have the unimpaired right to use, sell, license and dispose of, and
have the right to bring actions for the infringement of, all Intellectual
Property Rights necessary or required for the conduct of the Subject Business as
currently conducted and as currently proposed to be conducted and such rights to
use, sell, license, dispose of and bring actions are sufficient for such conduct
of the Subject Business.
(b) Except as set forth in Schedule 4.14, there are no royalties,
honoraria, fees or other payments payable by the Company or any Subsidiary to
any Person by reason of the ownership, use, license, sale or disposition of the
Intellectual Property Rights.
(c) Except as set forth in Schedule 4.14, no activity, service or
procedure currently conducted by the Company or any Subsidiary violates any
Contract of such Person with any third party or infringes any Intellectual
Property Right of any other party.
(d) Except as set forth in Schedule 4.14, neither the Company nor
any Subsidiary has received from any third party in the past five years any
notice, charge, claim or other assertion that the Company is infringing any
Intellectual Property Right of any third party or committed any acts of unfair
competition, and, to the Company's or its Subsidiaries' Knowledge, no such claim
is impliedly threatened.
(e) Except as set forth in Schedule 4.14, neither the Company nor
any Subsidiary has sent to any third party in the past two years or otherwise
communicated to another Person any notice, charge, claim or other assertion of
infringement by or misappropriation of any Intellectual Property Right of the
Company or any Subsidiary by such other Person or any acts of unfair competition
by such other Person, nor, to the Company's or its Subsidiaries' Knowledge, is
any such infringement, misappropriation or unfair competition occurring or
threatened.
(f) Schedule 4.14 contains a true and complete list of all
applications and filings made or taken and determinations made or issued
pursuant to Laws by the Company or any Subsidiary to perfect or protect its or
any Subsidiary's interest in the Intellectual Property Rights,
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<PAGE> 26
including, without limitation, all patents, patent applications, trademarks,
trademark applications, service marks, service mark applications, copyrights and
copyright applications.
(g) Except as set forth on Schedule 4.14, no Person other than the
Company and its Subsidiaries has been granted any interest in a right to use all
or any portion of the Intellectual Property Rights necessary or required for the
conduct of the Subject Business.
(h) The Investors have been provided with a true and complete copy
of all Contracts listed on any Schedule hereto that comprise or are related to
the Intellectual Property Rights used in or required for the conduct of the
Subject Business.
(i) No claim has been made, and the Company is not aware of the
possibility of any claim, for compensation by an employee of the UK Subsidiary
carrying on trade in the UK under Section 40 of the United Kingdom Patents Act
1977 or under any comparable legislation in any part of the world.
4.15 AGREEMENTS, NO DEFAULTS, ETC.
Except as set forth in Schedule 4.15, neither the Company nor any
Subsidiary is a party to any:
(a) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other basis;
(b) Contract with any Affiliate;
(c) Contract relating to the borrowing of money (in excess of
$50,000) or to the mortgaging, pledging or otherwise placing an Encumbrance on
any asset or group of assets of the Company or any Subsidiary with an aggregate
value in excess of $50,000;
(d) Contract relating to any guarantee of any obligation for
borrowed money or otherwise;
(e) Contract with respect to the lending or investing of funds in
excess of $250,000 in the aggregate;
(f) Contract for indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or confidential
information, other than in the ordinary course of the Company's or such
Subsidiary's business on terms and conditions consistent with such Person's past
practices;
(g) Contract or group of related Contracts with the same party
(excluding purchase orders entered into in the ordinary course of business which
are to be completed within 2 months of entering into such purchase orders) for
the purchase or sale of products or services involving aggregate consideration
in excess of $1,000,000 in any given calendar year;
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<PAGE> 27
(h) Contract that prohibits the Company or any Subsidiary from
freely engaging in business anywhere in the world;
(i) Contract pursuant to which the Company or any Subsidiary has
any "take or pay" or minimum purchase obligation exceeding $50,000 per year; or
(j) other Contract (i.e., not covered in clauses (a)-(i) above
without regard to the dollar thresholds set forth therein) that involves
aggregate consideration in excess of $150,000.
Except as set forth in Schedule 4.15, there are no vehicles, boats, aircraft,
apartments or other residential or recreational properties or facilities leased,
owned or operated by the Company or any Subsidiary for executive, administrative
or sales purposes or any social club memberships owned or paid for by it. Except
as set forth in Schedule 4.15, each of the Company and its Subsidiaries has
performed all the obligations required to be performed by it to date and is not
in receipt of a written notice that it is in default or alleged to be in default
in any respect under any Contract, and there exists no event, condition or
occurrence which, after notice or lapse of time, or both, would constitute such
a default by such Person of any of the foregoing. The Company has furnished to
the Investors true and complete copies of all documents listed in Schedule 4.15.
4.16 COMPLIANCE WITH LAWS.
Except as set forth on Schedule 4.16 hereto, the businesses of the
Company and the Subsidiaries have not been and are not being conducted in
violation of any applicable Law, including all Laws relating to wages, hours,
Employee Plans, equal employment opportunity, harassment, immigration, workers'
compensation, Environmental and Safety Requirements and the payment of social
security and other Taxes. Except as set forth in Schedule 4.16, no investigation
or review by any Governmental Entity with respect to the Company or any
Subsidiary is pending or threatened in writing to the Company or any Subsidiary,
nor has any Governmental Entity notified the Company or any Subsidiary of its
intention to conduct the same. Schedule 4.16 sets forth a list of all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities (the "Permits") held by the Company and each Subsidiary which are
material to the Company or its Subsidiaries, including without limitation, all
necessary state, county licenses and other Permits necessary for the conduct of
their respective businesses. Except as set forth on Schedule 4.16, the Company
and the Subsidiaries hold all Permits necessary for the lawful conduct of their
respective businesses as presently conducted and the Company and the
Subsidiaries are in compliance with the terms of the Permits. None of such
Permits shall be adversely affected as a result of the Company's execution and
delivery of, or the performance of its obligations under this Agreement, any
Related Document to which it is a party, or the consummation of the transactions
contemplated hereby or thereby. The Company has not received any written opinion
or memorandum or advice from any Person to the effect that it is exposed, to any
Liability or disadvantage which may result in a Material Adverse Effect on it or
any of its Subsidiaries.
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<PAGE> 28
4.17 LITIGATION, ETC.
Except as set forth in Schedule 4.17, there are no (i) Proceedings
pending or threatened in writing to the Company or any Subsidiary against the
Company or any Subsidiary, whether at law or in equity, or before or by any
Governmental Entity or arbitrator or (ii) Orders of any Governmental Entity or
arbitrator against the Company or any Subsidiary. The Company has delivered to
the Investors all documents and correspondence relating to such matters referred
to in Schedule 4.17.
4.18 INSURANCE.
Schedule 4.18 lists and identifies each insurance policy maintained by
the Company and each Subsidiary with respect to their properties, assets and
business. Except as set forth on Schedule 4.18, the Company and the Subsidiaries
have maintained such insurance coverage at all times during the course of the
operation of the Subject Business. All of such insurance policies are in full
force and effect, and neither the Company nor its Subsidiaries is in default in
any respect with respect to its obligations under any of such insurance policies
and has not received any notification of cancellation of any of such insurance
policies and has no claim outstanding which could be expected to cause an
increase in the insurance rates thereunder. No facts or circumstances exist that
would relieve the insurer under any such policy of its obligation to satisfy in
full any claim of the Company or its Subsidiaries thereunder. Neither the
Company nor its Subsidiaries has received any notice that (i) any of such
policies has been or will be canceled or terminated or will not be renewed on
substantially the same terms as are now in effect or (ii) the premium on any of
such policies will be increased on the renewal thereof. The Company has
delivered to the Investors copies of all such insurance policies.
4.19 LABOR RELATIONS; EMPLOYEES.
(a) Except as set forth in Schedule 4.19: (i) neither the Company
nor its Subsidiaries is delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other compensation for any services
performed by them to date or amounts required to be reimbursed to such
employees, (ii) there is no unfair labor practice complaint against the Company
or any Subsidiary pending before the National Labor Relations Board or any other
Governmental Entity, (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or threatened against or involving the Company or any
Subsidiary, (iv) no labor union currently represents the employees of the
Company or any Subsidiary and no labor union has taken any action within the
last 10 years with respect to organizing the employees of the Company or any
Subsidiary, (v) no Designated Employee has informed the Company that such
employee will or may terminate his or her employment or engagement with the
Company, (vi) no trade union has applied to have the Company or any of its
Canadian Subsidiaries declared a related employer pursuant to the Labour
Relations Act (Ontario) or any similar legislation in any jurisdiction in which
the Company or any Canadian Subsidiary carries on business, (vii) all amounts
due or accrued for all salary, wages, bonuses, commissions, vacation with pay,
pension benefits or other employee benefits are reflected in the Books and
Records of the Company and its Subsidiaries.
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(b) Schedule 4.19 contains a correct and complete list of the
twenty most highly compensated employees, directors, independent contractors,
consultants and agents of the Company and its Subsidiaries, whether actively at
work or not, their salaries, wage rates, commissions and consulting fees, bonus
arrangements, positions, ages, status as full-time or part-time employees and
length of service. No employee of the Company or any of its Subsidiaries has any
agreement as to length of notice or severance payment required to terminate his
or her employment, other than such as results by Law from the employment of an
employee without an agreement as to notice or severance.
(c) Except as set forth on Schedule 4.19 and except in connection
with the Transactions, the Company's execution and delivery of, and performance
of its obligations under, this Agreement and the Related Documents to which it
is a party, and the consummation of the transactions contemplated hereby and
thereby, will not (i) result in any payment (including, without limitation,
severance, unemployment compensation, "golden parachute", bonus or otherwise)
becoming due from the Company or any Subsidiary to any director, officer or
employee of such Person, (ii) increase any such benefits otherwise payable, or
(iii) result in the acceleration of the time of payment or vesting of any such
benefits.
(d) The Company and it's ERISA Affiliates have complied in all
respects with all Laws relating to the hiring and retention of all employees,
leased employees and independent contractors relating to wages, hours, Employee
plans, Foreign Employee Benefit Plans, Foreign Pension Plans, Canadian Benefit
Plans, Canadian Pension Plans, equal opportunity, collective bargaining and the
payment of social security and other Taxes.
4.20 ENVIRONMENTAL MATTERS.
Except as set forth on Schedule 4.20, the Company and its Subsidiaries
are in compliance with all Laws relating to the protection of the environment
(the "Environmental Laws"). Except for ordinary household cleaning solvents,
office supplies and similar materials, the Company has not handled, stored or
released, or exposed any person to, any hazardous substance, as defined in 42
U.S.C.A. Section 9601 (14) or any other applicable Environmental Laws (a
"Hazardous Substance"). The Company is not and will not be liable or responsible
for clean-up costs, remedial work or damages in connection with the handling,
storage, release, or exposure by the Company of any Hazardous Substance. No
claims for clean-up costs, remedial work or damages have been made by any person
or entity in connection with the handling, storage, release, or exposure by the
Company of any Hazardous Substance.
4.21 CHANGE IN CONTROL.
Except (i) as set forth in Schedule 4.21, none of the Company nor the
Subsidiaries is a party to any Contract which terminates, gives rise to a right
of termination, requires any payment, gives rise to any Liability, accelerates
the vesting of any rights or obligations or the maturity of any indebtedness or
otherwise adversely affects the Company or any Subsidiary as a result of a
"change in control" or "potential change in control", in either case, that would
include the transactions contemplated hereby, of the Company.
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4.22 STATE TAKEOVER STATUTES.
The Board of Directors has approved this Agreement, the Related
Documents the transactions contemplated hereby and thereby (including the
Purchase and Redemption) and the Transactions and such approval is sufficient to
render inapplicable to such agreements and transactions the provisions of any
"fair price," "moratorium," "control share," "interested shareholder,"
"affiliated transaction" or other anti-takeover statute or regulation of the
State of Delaware or the State of Colorado and any applicable anti-takeover or
other restrictive provisions of the Company's articles or certificate of
incorporation, bylaws or other constituting or governing instruments.
4.23 CONFLICTS OF INTEREST.
Except as set forth on Schedule 4.23, none of the Company, any
Subsidiary or any officer, employee, agent or other Person acting on behalf of
the Company or any Subsidiary has, directly or indirectly, given or agreed to
give any money, gift or similar benefit (other than legal price concessions to
customers in the ordinary course of business) to any customer, supplier,
employee or agent of a customer or supplier, or official or employee of any
Governmental Entity or other Person who was or is in a position to help or
hinder the business of the Company or any Subsidiary (or assist in connection
with any actual or proposed transaction) that (i) might subject the Company or
any Subsidiary to any damage or penalty in any Proceeding or, investigation,
(ii) if not given in the past, could have resulted in a Material Adverse Effect
on the Company or any Subsidiary, or (iii) if not continued in the future, could
result in a Material Adverse Change on the Company or any Subsidiary.
4.24 BROKERS.
Except as set forth on Schedule 4.24, none of the Company, any
Subsidiary or any of their respective officers, directors, shareholders,
employees or Affiliates have employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
4.25 RELATED TRANSACTIONS.
Except as set forth in Schedule 4.25, except for compensation to
regular employees of the Company or any Subsidiary and except for "arms length"
transactions on terms no more favorable to either party than could have been
obtained from or by an independent third party, no current or former Affiliate
of the Company, or any Subsidiary or any associate of such Person (as defined in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended)
thereof, is now, or has been during the last five fiscal years, (i) a party to
any transaction or Contract with the Company or any Subsidiary, or (ii) the
direct or indirect owner of an interest in any Person which is a present or
potential competitor, supplier or customer of the Company or any Subsidiary
(other than non-affiliated holdings in publicly-held companies), nor does any
such Person receive income from any source other than the Company or any
Subsidiary which should properly accrue to the Company or any of its
Subsidiaries. Except as set forth on Schedule 4.25,
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neither the Company nor any of its Subsidiaries is a guarantor or otherwise
liable for any actual or potential Liability or obligation, whether direct or
indirect, of any of its Affiliates.
4.26 DISCLOSURE.
Neither this Agreement, the Related Documents nor any of the schedules,
attachments or exhibits hereto or thereto contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein, taken as a whole, in light of the circumstances in
which they were made, not misleading.
4.27 ACCOUNTS AND NOTES RECEIVABLE.
Except for reserves accrued on the Latest Balance Sheet, all the
accounts receivable and notes receivable owing to the Company or the
Subsidiaries as of the date hereof constitute, and as of the Closing Date will
constitute, legal, valid and enforceable, claims arising from bona fide
transactions in the ordinary course of business, subject to bankruptcy,
insolvency, moratorium, reorganization and other similar laws affecting
creditors' rights generally, and there are no asserted claims, refusals to pay
or other rights of set-off against any thereof. Schedule 4.27 sets forth a
complete and accurate aging of all accounts receivable as of date hereof from
both the due date and the invoice date.
4.28 ACCOUNTS AND NOTES PAYABLE.
All accounts payable and notes payable by the Company or its
Subsidiaries to third parties as of the date hereof arose, and as of the Closing
will have arisen, in the ordinary course of business, and there is no such
account payable or note payable delinquent in its payment other than accounts
and notes payable being disputed in good faith.
4.29 BANK ACCOUNTS: POWER OF ATTORNEY.
Schedule 4.29 sets forth a true and complete list of (i) all bank
accounts and safe deposit boxes of the Company and its Subsidiaries and all
Persons who are signatories thereunder or who have access thereto and (ii) the
names of all persons, firms, associations, corporations or business
organizations holding general or special powers of attorney from the Company or
its Subsidiaries and a summary of the terms thereof (excluding ministerial
powers of attorney granted to representatives of the Company or its Subsidiaries
which are terminable at will).
4.30 SUPPLIERS AND VENDORS.
Except in the ordinary course of business, no supplier or vendor of the
Company or its Subsidiaries, nor any franchisee or licensee of the Company or
its Subsidiaries, has (i) canceled or otherwise terminated, or, threatened to
cancel or otherwise terminate, its relationship with the Company or its
Subsidiaries, (ii) decreased, limited or otherwise adversely modified, or
threatened to decrease, limit or otherwise adversely modify, the services,
supplies or materials it provides to the Company or its Subsidiaries, or (iii)
failed to honor any warranty obligations.
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4.31 CUSTOMER RELATIONS, PROFITABILITY.
The Company has no notice that any customer, agent, representative or
supplier of the Company or any Subsidiary intends to discontinue, diminish or
change its relationship with the Company.
4.32 YEAR 2000.
(a) The Company has implemented a program to achieve Year 2000
Compliance for the internal systems in use by the Company and its Subsidiaries.
Such program consists of a process by which (i) internal systems which are not
Year 2000 Compliant can be identified, (ii) the extent of the problem or
potential problem can be assessed, and (iii) the problem or potential problem
can be resolved and the systems tested while continuing regular use in
operations, or if such use is interrupted, restored to regular use in operations
on or before December 31, 1999. The program is in process and assessment will be
completed by August 15, 1999. Resolution of identified problems is on schedule
for substantial completion by November 15, 1999.
(b) The "Radline" product line marketed by the Company is itself
Year 2000 Compliant; provided, however, that in order to use the "Radline"
product line, a customer must also use Smallworld Systems' GIS software -
versions 2.21 or 3.0. Based solely upon inquiry of Smallworld Systems and
information posted on Smallworld Systems' Web page, the Company believes that
Smallworld System's GIS software - Versions 2.21 and 3.0 are Year 2000
Compliant. The "GDS" product line previously marketed by the Company's
subsidiary, Graphic Data Systems Corporation ("GDS"), is not currently Year 2000
Compliant unless the customer has purchased and installed a maintenance release
which was released by GDS in April of 1999. GDS has notified its customers of
this fact and has offered to provide the maintenance release to customers that
subscribe to GDS maintenance services. GDS has further notified its customers
that the maintenance release may not be effective to cause the GDS product to
become Year 2000 compliant depending upon the customer's specific hardware and
software operating environment configuration. Neither the Company nor its
Subsidiaries has received notice that any customer using the GDS software which
has failed to enter into a current maintenance agreement intends to make any
claim against the Company or any Subsidiary with respect to the Year 2000
non-Compliance of the GDS products.
(c) All software products other than those described in Section
4.32(b) which have been custom developed by the Company and its Subsidiaries and
licensed or sold to customers or clients of the Company or its Subsidiaries
since July 1, 1998 are Year 2000 Compliant.
(d) For purposes of this Section 4.32, "Year 2000 Compliance" and
"Year 2000 Compliant" means that the hardware and/or software under
consideration will be able to accurately process date data (including, but not
limited to, calculating, comparing and sequencing) from, into and between the
twentieth century (through year 1999), the year 2000 and the twenty-first
century, including leap year calculations, when used in accordance with the
product documentation accompanying such hardware and software.
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4.33 OWNERSHIP OF THE COMPANY.
Upon the consummation of the Transactions, the fully diluted equity
ownership of the Company shall be as set forth on Schedule 4.33.
4.34 DEFINITION OF "KNOWLEDGE."
As used herein "Knowledge" shall mean and include (i) the actual
knowledge of the Responsible Persons and (ii) that knowledge which the
Responsible Persons would have obtained in the management of their respective
business affairs after making due inquiry and exercising due diligence with
respect thereto; and, in connection therewith, the Knowledge (both actual and
constructive) of the Responsible Persons shall be imputed to be the Knowledge of
the Company and its Subsidiaries.
4.35 PRIOR TRANSACTIONS.
Except as is set forth on Schedule 4.35, neither the Company nor any of
its Subsidiaries has any Liability resulting from or arising out of or in
connection with the Company's consummation of the 1997 Restructuring
Transactions or the ARC Transactions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE RESPONSIBLE SHAREHOLDERS
Each of the Responsible Shareholders represents and warrants severally
(as to himself or herself and not as to any other Responsible Shareholder) to
the Investors and the Company as follows:
5.1 TITLE TO SHARES.
Such Responsible Shareholder is the lawful owner, of record and
beneficially, of the shares of Common Stock being sold, transferred, conveyed
and assigned by it, him or her hereunder pursuant to each of the Purchase and
the Redemption and has good and marketable title to such shares, free and clear
of any Encumbrances whatsoever and with no restrictions on the voting rights and
other incidents of record and beneficial ownership pertaining thereto. Except as
set forth on Schedule 4.3, there are no agreements between such Responsible
Shareholder and any other Person with respect to voting of, or any other matters
pertaining to, the capital stock of the Company.
5.2 AUTHORITY.
Such Responsible Shareholder has full and absolute legal right,
capacity, power and authority to enter into this Agreement and the Related
Documents to which such Responsible Shareholder is a party, and this Agreement
is, and the Related Documents to which such Responsible Shareholder is a party,
when executed and delivered by such Responsible
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Shareholder as contemplated hereby, will be, the valid and binding obligation of
such Responsible Shareholder, enforceable against such Responsible Shareholder
in accordance with their respective terms, except as enforceability thereof may
be limited by any applicable bankruptcy, reorganization, insolvency or other
Laws affecting creditors rights generally or by general principles of equity.
5.3 NONCONTRAVENTION.
Neither the execution, delivery and performance of this Agreement and
the Related Documents to which it, he or she is a party nor the consummation of
the transactions contemplated hereby or thereby nor compliance by such
Responsible Shareholder with any of the provisions hereof or thereof will (i)
conflict with, or result in any violations of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligations
contained in or the loss of any benefit under any term, condition or provision
of: (x) such Responsible Shareholder's organizational or constating documents
(if such Responsible Shareholder is not a natural person) or (y) any Contract to
which such Responsible Shareholder is a party, or by which such Responsible
Shareholder or any of its, his or her properties may be bound or (ii) violate
any Law applicable to such Responsible Shareholder or any of its, his or her
properties, which in the case of either clause (i) or (ii) could prevent the
consummation of the transactions contemplated by this Agreement.
5.4 CONSENTS.
Except as specified in this Agreement, no Permit, Order, authorization,
consent or approval of or by, or any notification of or filing with, any Person
(governmental or private) is required in connection with the execution, delivery
and performance by such Responsible Shareholder of this Agreement and the
Related Documents to which he or she is a party or the consummation by such
Responsible Shareholder of the transactions contemplated hereby or thereby.
5.5 BROKERS.
Except as set forth on Schedule 5.5, the Responsible Shareholders have
not employed any broker or finder or incurred any Liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated by this Agreement or the Related Documents.
5.6 NO CLAIMS AGAINST THE COMPANY.
Neither such Responsible Shareholder nor any of its Affiliates
(including the Responsible Persons) has any grounds or reason whatsoever to
bring or initiate any Proceeding against the Company or any of its Subsidiaries.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Company severally (as to
itself and not as to any other Investor) as follows:
6.1 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The execution, delivery and performance of this Agreement and
the Related Documents and the consummation of the transactions contemplated
hereby and thereby has been duly and validly authorized by all necessary action
on the part of such Investor; and this Agreement has been, and the Related
Documents, when executed and delivered by such Investor will be, duly and
validly executed and delivered by such Investor and this Agreement is, and the
Related Documents, when executed and delivered by such Investor will be, the
valid and binding obligations of such Investor, enforceable against such
Investor in accordance with their respective terms, except as enforceability
thereof may be limited by any applicable bankruptcy, reorganization, insolvency
or other Laws affecting creditors rights generally or by general principles of
equity.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents, nor the consummation by such Investor of
the transactions contemplated hereby or thereby will (i) conflict with, or
result in any violation of, or cause a default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
benefit under, or result in the creation of any Encumbrance upon any of the
properties or assets of such Investor under any term, condition or provision of
(x) such Investor's constituting or governing documents or (y) any Contract to
which such Investor is a party or by which its properties or assets are bound or
(ii) violate any Laws applicable to such Investor.
(c) No consent, approval, Order or authorization of, registration,
declaration or filing with, or notification to any Governmental Entity or any
other third party is required in connection with the execution, delivery and
performance by such Investor of this Agreement or the Related Documents or the
consummation of the transactions contemplated hereby or thereby.
6.2 BROKERS.
Except as set forth on Schedule 6.3 such Investor has not employed any
broker or finder or incurred any Liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement.
6.3 INVESTMENT REPRESENTATIONS AND WARRANTIES.
(a) Such Investor will acquire the shares of New Series A
Preferred Stock to be purchased by it and any shares of New Common Stock
issuable upon conversion of such shares for its own account, for investment and
not with a view to the distribution thereof, nor with any present intention of
distributing the same. Notwithstanding the foregoing, the disposition of the
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shares of New Series A Preferred Stock (and the shares of New Common Stock
issued upon conversion thereof) will at all times remain within the control of
such Investor.
(b) Such Investor understands that the shares of New Series A
Preferred Stock to be purchased by it and any shares of New Common Stock
issuable upon conversion of such shares (i) will not be registered under the
Securities Act or the securities laws of any state, by reason of their issuance
in a transaction exempt from the registration or qualification requirements of
the Securities Act or such securities laws, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of such Investor's representations as expressed herein, and (ii) must
be held indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from registration.
(c) Such Investor is an "accredited investor," as defined in Rule
501 (the provisions of which are known to such Investor) promulgated under the
Securities Act.
(d) Such Investor understands that no public market now exists for
the shares of New Series A Preferred Stock (or the shares of New Common Stock
issuable upon conversion thereof) and that no assurances whatsoever have been or
can be given regarding the existence of such a public market at any time or at
all.
(e) Based on such Investor's knowledge, experience and skill in
evaluating and investing in issues of securities derived from actual
participation in financial, investment and business matters, such Investor is
capable of evaluating the merits and risks of an investment in the shares of New
Series A Preferred Stock and the suitability of such shares as an investment for
such Investor.
(f) Such Investor has had an opportunity to discuss the business,
management and financial affairs of the Company and the terms and conditions of
an investment in the shares of New Series A Preferred Stock with, and has had
access to, the management of the Company.
(g) Such Investor is aware that no guarantees have been or can be
made respecting the future value, if any, of the shares of New Series A
Preferred Stock (or the shares of New Common Stock issuable upon conversion
thereof) or the profitability or success of the business of the Company.
ARTICLE VII
COVENANTS, AGREEMENTS AND ACKNOWLEDGEMENTS
CONCERNING REPRESENTATIONS AND WARRANTIES
The Investors, the Responsible Shareholders and the Company hereby
covenant, agree and acknowledge, with respect to the representations and
warranties of the Responsible Shareholders set forth in Article V of this
Agreement and the representations and warranties of the Company set forth in
Article IV of this Agreement as follows:
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7.1 INDEMNIFICATION BY RESPONSIBLE SHAREHOLDERS.
With respect to the representations and warranties of the Company set
forth in Article IV of this Agreement, the Responsible Shareholders hereby agree
to indemnify and hold harmless the Company for a breach of any such
representations and warranties all as set forth and in accordance with Article
X.
7.2 WAIVER OF CONTRIBUTION.
Each of the Responsible Shareholders and the Investors hereby waive any
rights of contribution, reimbursement, or indemnification against the Company
with respect to any of their indemnification obligations hereunder. The
Responsible Shareholders and the Investors all acknowledge and agree that
certain of such Persons may have both indemnification obligation and the
indirect rights and benefits of indemnification by holding shares of Common
Stock. Notwithstanding such dual status, it is the intent of the parties hereto
that any such Person shall not be relieved of an indemnification obligation as a
Responsible Shareholder or Investor nor deprived of any indemnification benefit
or right as a shareholder of the Company but shall be treated, as to any
indemnification obligation, as any other shareholder.
7.3 SUFFICIENT AUTHORIZED SHARES.
The Company shall at all times have a sufficient number of shares of
New Common Stock authorized for issuance to permit the conversion of the New
Series A Preferred Stock into New Common Stock.
ARTICLE VIII
CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL AGREEMENTS
8.1 AFFIRMATIVE COVENANTS OF THE COMPANY.
[Intentionally omitted.]
8.2 NEGATIVE COVENANTS OF THE COMPANY.
[Intentionally omitted.]
8.3 AFFIRMATIVE COVENANTS OF THE RESPONSIBLE SHAREHOLDERS.
Scott M. Schley and, in consideration of the benefits that will inure
to their respective Affiliates pursuant to this Agreement, from and after the
Closing Date, each Responsible Person:
(a) shall not disclose or use at any time, either during his or
her employment period or thereafter, any Confidential Information of which such
Responsible Person is or becomes aware, whether or not such information is
developed by him or her, except to the extent
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that such disclosure or use is directly related to and required by such
Responsible Person's performance of duties assigned to the him or her by the
Company or any Subsidiary;
(b) agrees that all Work Product belongs to the Company or any
Subsidiary. Such Responsible Person will promptly disclose such Work Product to
the Company and perform all actions reasonably requested by the Board of
Directors of the Company (whether during or after the employment period) to
establish and confirm such ownership (including, without limitation, the
execution and delivery of assignments, consents, powers of attorney and other
instruments) and to provide reasonable assistance to the Company or any
Subsidiary in connection with the prosecution of any applications for patents,
trademarks, trade names, service marks or reissues thereof or in the prosecution
or defense of interferences relating to any Work Product;
(c) acknowledges and agrees with the Company that during the
course of such Responsible Person's employment with the Company or any
Subsidiary, such Responsible Person has had and will continue to have the
opportunity to develop relationships with existing employees, customers and
other business associates of the Company and its Subsidiaries which
relationships constitute goodwill of the Company and its Subsidiaries, and the
Company and its Subsidiaries would be irreparably damaged if such Responsible
Person were to take actions that would damage or misappropriate such goodwill
and accordingly agrees as follows:
(i) Such Responsible Person acknowledges that the Company and
its Subsidiaries currently conduct the Subject Business throughout the
world (the "Territory"). Accordingly, during the Non-Compete Period,
such Responsible Person shall not, directly or indirectly, enter into,
engage in, assist, give or lend funds to or otherwise finance, be
employed by or consult with, or have a financial or other interest in,
any Competitive Business in the Territory, whether for or by himself or
as an independent contractor, agent, stockholder, partner or joint
venturor for any other Person. As used in this Agreement, "Non-Compete
Period" means the period beginning on the Closing Date and ending on
the first anniversary of the termination of such Responsible Person's
employment with the Company for any reason. To the extent that the
covenant provided for in this Section 8.3(c)(i) may later be deemed by
a court to be too broad to be enforced with respect to its duration or
with respect to any particular activity or geographic area, the court
making such determination shall have the power to reduce the duration
or scope of this Section 8.3(c)(i), and to add or delete specific words
or phrases. This Section 8.3(c)(i) as modified shall then be enforced.
(ii) Notwithstanding Section 8(c)(i), the aggregate ownership
by a Responsible Person of no more than two percent (on a fully-diluted
basis) of the outstanding equity securities of any Person, which
securities are traded on a national or foreign securities exchange,
quoted on the NASDAQ Stock Market or other automated quotation system,
and which Person competes with the Company (or any part thereof) within
the Territory, shall not be deemed to be a violation of Section
8(c)(i). In the event that any Person in which a Responsible Person has
any financial or other interest directly or indirectly enters into a
line of business during the Non-Compete Period that competes with the
Company within the Territory, such Responsible Person shall divest all
of his or her interest (other than as permitted to be held pursuant to
the first sentence of this
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Section 8.3(c)(ii)) in such Person within 15 days after such Person
enters into such line of business that competes with the Company within
the Territory.
(iii) Such Responsible Person covenants and agrees that
during the Non-Compete Period, such Responsible Person will not,
directly or indirectly, either for himself or herself or for any other
Person (A) solicit any employee of the Company or any of its
Subsidiaries to terminate his or her employment with the Company or any
of its Subsidiaries or employ any such individual during his or her
employment with the Company or any of its Subsidiaries and for a period
of one year after such individual terminates his or her employment with
the Company or any of its Subsidiaries, (B) solicit any customer of the
Company or any of its Subsidiaries to purchase products or services of
or on behalf of such Responsible Person or such other Person that are
competitive with the products or services provided by the Company or
any of its Subsidiaries, or (c) take any action that may cause injury
to the relationships between the Company or any of its Subsidiaries or
any of their employees and any lessor, lessee, vendor, supplier,
customer, distributor, employee, consultant or other business associate
of the Company or any of its Subsidiaries as such relationship relates
to the Company's or any of its Subsidiaries' conduct of their business.
(d) Such Responsible Person understands that the foregoing
restrictions may limit his or her ability to earn a livelihood in a business
similar to the business of the Company and any of its Subsidiaries, but he or
she nevertheless believes that he or she has received and will receive
sufficient consideration and other benefits as an employee of the Company and as
otherwise provided hereunder to clearly justify such restrictions which, in any
event (given his or her education, skills and ability), he or she does not
believe would prevent him or her from otherwise earning a living.
(e) Such Responsible Person shall deliver to the Company at the
termination of his or her employment period or at any time the Company may
request all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, Work Product or the Subject Business which he or she
may then possess or have under his or her control regardless of the location or
form of such material and, if requested by the Company, will provide the Company
with written confirmation that all such materials have been delivered to the
Company.
(f) if any provision of this Section 8.3 is inconsistent with a
substantially similar provision of any Responsible Person's Employment
Agreement, the provisions of such Responsible Person's Employment Agreement
shall control.
8.4 REASONABLE EFFORTS.
The Company and the Investors shall: (i) promptly make their respective
filings and thereafter make any other submissions required under all applicable
Laws with respect to the Transactions and (ii) use their respective reasonable
efforts to promptly take, or cause to be taken, all other actions and do, or
cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the Transactions.
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8.5 REPRESENTATIONS AND WARRANTIES.
Neither the Company, the Responsible Shareholders nor the Investors,
will take any action (without the prior written consent of the other party
hereto) that would cause any of the representations and warranties made by any
such Persons set forth in Articles IV, V and VI, as the case may be, not to be
true and correct at and as of the Closing Date.
8.6 CONSENTS.
Each party shall use its best efforts, and the other parties shall
cooperate with such efforts, to obtain any consents and approvals of, or effect
the notification of or filing with, each Person or authority, whether private or
governmental, whose consent or approval is required in order to permit the
consummation of the transactions contemplated hereby.
8.7 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (i) as otherwise required by Law
(including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976) and
(ii) for disclosure to its respective directors, officers, employees, financial
advisors, potential financing sources, legal counsel, independent certified
public accountants or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential relationship, it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement, the Related Documents or the transactions contemplated hereby or
thereby, without the prior written consent of the Company, the Shareholders'
Representative or the Investors, as the case may be, which consent shall not
unreasonably be withheld or delayed.
8.8 NEGOTIATION WITH OTHERS.
[Intentionally omitted.]
8.9 CERTAIN TAX MATTERS.
[Intentionally omitted.]
8.10 SHAREHOLDERS' REPRESENTATIVE.
The Responsible Shareholders agree among themselves (without prejudice
to or affecting in any way the rights provided in this Agreement or otherwise to
the Company or any Investor) as follows:
(a) Appointment. The Responsible Shareholders, for themselves and
their personal representatives and other successors, hereby constitute and
appoint Scott M. Schley, as their agent (the "Shareholders' Representative"),
with full power and authority, except as otherwise expressly provided in this
Agreement, in the name of and for and on their behalf to take all action
required or permitted under this Agreement or any of the Related Documents
(including, without limitation, the giving and receiving of all accountings,
reports, notices, waivers and consents). In the event of the death, physical or
mental incapacity or resignation of
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Scott M. Schley or any successor Shareholders' Representative, the Responsible
Shareholders shall promptly appoint a substitute or substitutes and shall advise
the Investors and the Company, as the case may be, thereof. The authority
conferred under this Section 8.10(a) is an agency coupled with an interest and
all authority conferred hereby is irrevocable and not subject to termination by
the Responsible Shareholders or by the Shareholders' Representative or by
operation of Law, whether by the death or incapacity of any Responsible
Shareholder, the termination of any trust or estate or the occurrence of any
other event. If any Responsible Shareholder should die or become incapacitated,
if any trust or estate should terminate or if any other such event should occur,
any action taken by the Shareholders' Representative pursuant to this Section
8.10(a) shall be as valid as if such death or incapacity, termination or other
event had not occurred, regardless of whether or not any Person shall have
received notice of such death, incapacity, termination or other event.
(b) Reliance by Shareholders' Representative. The Shareholders'
Representative shall be entitled to rely, and shall be fully protected in
relying, upon any statements furnished to him by any Person or any other
evidence deemed by the Shareholders' Representative to be reasonably reliable,
and the Shareholders' Representative shall be entitled to act on the advice of
counsel selected by him. The Shareholders' Representative shall be fully
justified in failing or refusing to take any action under this Agreement unless
he shall have received such advice or concurrence of the Shareholders as he
deems appropriate or he shall have been expressly indemnified to his
satisfaction by the Shareholders severally according to their respective
Shareholder Percentages against any and all Liability and expense that the
Shareholders' Representative may incur by reason of taking or continuing to take
any such action. The Shareholders' Representative shall in all cases be fully
protected in acting, or refraining from acting, under this Agreement in
accordance with a request of Shareholders whose aggregate Responsible
Shareholder Percentages equal or exceed 67%, and such request, and any action
taken or failure to act pursuant thereto, shall be binding upon all of the
Shareholders.
(c) Expenses of Shareholders' Representative. The Shareholders'
Representative shall be entitled to retain counsel and to incur such expenses
(including litigation expenses) as the Shareholders' Representative deems to be
necessary or appropriate in connection with his performance of his obligations
under this Agreement. All such fees and expenses (including reasonable
attorneys' fees) incurred by the Shareholders' Representative prior to the
Closing shall be borne by the Company, and all such fees and expenses (including
reasonable attorneys' fees) incurred by the Shareholders' Representative after
the Closing shall be borne by the Shareholders severally according to their
respective Shareholder Percentages.
(d) Indemnification. The Responsible Shareholders hereby agree
severally to indemnify the Shareholders' Representative (in his capacity as
such) ratably according to their respective Shareholder Percentages against, and
to hold the Shareholders' Representative (in his capacity as such) harmless
from, any and all Liabilities, Losses, penalties, actions, judgments, suits,
costs, expenses or disbursements of whatever kind which may at any time be
imposed upon, incurred by or asserted against the Shareholders' Representative
in such capacity in any way relating to or arising out of his action or failure
to take action pursuant to this Agreement or in connection herewith or therewith
in such capacity; provided, however, that no Shareholder shall be liable for the
payment of any portion of such Liabilities, Losses, penalties, actions,
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judgments, suits, costs, expenses or disbursements resulting solely from the
gross negligence or willful misconduct of the Shareholders' Representative as
determined by a final decision of a court of competent jurisdiction no longer
subject to appeal. The agreements in this paragraph shall survive the
termination of this Agreement.
(e) No Personal Liability. Except for liability to the
Shareholders resulting solely from his gross negligence or willful misconduct as
determined by a final decision of a court of competent jurisdiction no longer
subject to appeal, the Shareholders' Representative shall have no liability to
any Person as a result of his status as the Shareholders' Representative.
8.11 INVESTORS' REPRESENTATIVE.
The Investors agree (without prejudice to or affecting in any way the
rights provided in this Agreement or otherwise to the Company or any Responsible
Shareholder) as follows:
(a) Appointment. The Investors, for themselves and their
representatives and successors, hereby constitute and appoint InSight, as the
Investors' Representative, with full power and authority, except as otherwise
expressly provided in this Agreement, in the name of and for and on behalf of
the Investors, to take all action required or permitted under this Agreement and
the Related Documents (including, without limitation, the giving and receiving
of all accountings, reports, notices, waivers and consents). In the event of the
resignation of InSight or any successor Investors' Representative, the Investors
shall promptly appoint a substitute or substitutes and shall advise the
Shareholders or the Company as the case may be thereof. The authority conferred
under this Section 8.12(a) is an agency coupled with an interest and all
authority conferred hereby is irrevocable and not subject to termination by the
Investors or by operation of Law.
(b) Reliance by Investors' Representative. The Investors'
Representative shall be entitled to rely, and shall be fully protected in
relying, upon any statements furnished to it by any Person or any other evidence
deemed by it to be reasonably reliable, and the Investors' Representative shall
be entitled to act on the advice of counsel selected by it. The Investors'
Representative shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall have received such advice or
concurrence of the Investors as it deems appropriate or it shall have been
expressly indemnified to its satisfaction by the Investors severally according
to their respective Investor Percentages against any and all Liability and
expense that the Investors' Representative may incur by reason of taking or
continuing to take any such action. The Investors' Representative shall in all
cases be fully protected in acting, or refraining from acting, under this
Agreement in accordance with a request of Investors whose aggregate Investor
Percentages equal or exceed 75%, and such request, and any action taken or
failure to act pursuant thereto, shall be binding upon all of the Investors.
(c) Expenses of Investors' Representative. The Investors'
Representative shall be entitled to retain counsel and to incur such expenses
(including litigation expenses) as it deems to be necessary or appropriate in
connection with its performance of its obligations under this Agreement. All
such fees and expenses (including reasonable attorneys' fees) incurred by it
shall be borne by the Investors severally according to their respective Investor
Percentages.
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(d) Indemnification. The Investors hereby agree severally to
indemnify the Investors' Representative (in its capacity as such) ratably
according to their respective Investor Percentages against, and to hold the
Investors' Representative (in its capacity as such) harmless from, any and all
Liabilities, Losses, penalties, actions, judgments, suits, costs, expenses or
disbursements of whatever kind which may at any time be imposed upon, incurred
by or asserted against the Investors' Representative in such capacity in any way
relating to or arising out of its action or failure to take action pursuant to
this Agreement or in connection herewith or therewith in such capacity;
provided, however, that no Investor shall be liable for the payment of any
portion of such Liabilities, Losses, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the gross negligence or
willful misconduct of the Investors' Representative as determined by a final
decision of a court of competent jurisdiction no longer subject to appeal. The
agreements in this paragraph shall survive termination of this Agreement.
(e) No Liability. Except for liability to the Investors resulting
solely from its gross negligence or willful misconduct as determined by a final
decision of a court of competent jurisdiction no longer subject to appeal, the
Investors' Representative shall have no liability to any Person as a result of
its status as the Investors' Representative.
8.12 KEY MAN LIFE INSURANCE
From and after the Closing Date, and so long as such Person is an
employee of the Company, the Company shall maintain its "key man" life insurance
policies for Glenn E. Montgomery, Mark L. Epstein and Larry J. Engelken, in the
amount of $1,000,000 for each such Person, in each case, on terms reasonably
satisfactory to the Investors. Each such policy shall name the Company as sole
beneficiary.
8.13 ADDITIONAL SMALL BUSINESS COVENANTS.
(i) The proceeds from the sale by the Company of the shares
of capital stock of the Company to Imprimis and UBS pursuant to this
Agreement (the "Proceeds") shall be used by the Company solely to make
the payments specifically contemplated by this Agreement and for
working capital and general corporate purposes. The Company, its
Subsidiaries and its Affiliates shall provide to representatives of
each Investor which is an SBIC and representatives of the SBA
reasonable access to its books and records for the purpose of
confirming such use of the Proceeds or for other purposes related to
the qualifications of the financing provided hereunder or under any of
the Related Documents. If the Company breaches its representations and
warranties made in the Small Business Sideletters in any respect, then
in addition to all other remedies available to each SBIC pursuant to
this Agreement, such SBIC may elect that any shares of the Company's
capital stock be repurchased by the Company at original cost plus
accrued dividends thereon.
(ii) So long an SBIC holds any securities of the Company, the
Company, its Subsidiaries and its Affiliates will comply at all times
with the non-discrimination requirements of 13 C.F.R. Parts 112, 113
and 117.
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(iii) Within 45 days after the end of each fiscal year, and
at any other time reasonably requested by any SBIC, the Company shall
deliver to such SBIC a written assessment, in form and substance
satisfactory to such SBIC, of the economic impact of such SBIC's
investment in the Company, specifying (i) the full-time equivalent jobs
created or retained in connection with the investment, and (ii) the
impact of the investment on the Company's business, in terms of revenue
and profits, and on taxes paid by the Company, its Subsidiaries and its
Affiliates and their respective employees. Upon request, the Company
promptly (and in any event within 20 days of such request) shall
furnish to any SBIC all information (i) reasonably requested by such
SBIC in order for such SBIC to comply with the requirements of 13
C.F.R. Section 107.620 or to prepare and file Small Business
Administration Form 468 or any other SBA forms requested by the
Investors and (ii) reasonably requested or required by any Governmental
Entity asserting jurisdiction over such SBIC. Any submission of
financial information pursuant to this Section shall be under cover of
a certificate executed by the president, chief executive officer, chief
financial officer or treasurer of the Company certifying that such
information (i) relates to the Company, its Subsidiaries and its
affiliates (ii) is accurate and (iii) if applicable, has been audited
by the Company's independent auditors.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The obligation of the parties hereto to consummate the transactions
contemplated by this Agreement (including the Purchase and the Redemption) are
subject to the fulfillment at or prior to the Closing Date of the following
conditions, any or all of which may be waived in whole or in part by the parties
hereto to the extent permitted by Law:
(a) Approvals. All authorizations, consents, Orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any Governmental Entity necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(c) Statutes. No action shall have been taken or threatened, and
no statute, rule, regulation or Order shall have been enacted, promulgated or
issued or deemed applicable to the transactions contemplated hereby or by the
Related Documents by any Governmental Entity that would (i) make the
consummation of the transactions contemplated hereby illegal or substantially
delay the consummation of any aspect of the transactions contemplated hereby,
(ii) affect the right of the Investors to exercise their rights as shareholders
of the Company, or (iii) render the Company or the Investors unable to
consummate the transactions contemplated hereby.
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9.2 CONDITIONS TO OBLIGATIONS OF THE INVESTORS.
The obligation of the Investors to consummate the transactions
contemplated by this Agreement (including the Purchase) is subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Investors:
(a) Representations and Warranties. The representations and
warranties of the Company and the Responsible Shareholders set forth in this
Agreement shall in each case be true and correct in all material respects
(except for such representations and warranties which are qualified by their
terms by a reference to materiality, which representations and warranties as so
qualified shall be true and correct in all respects) as of the Closing Date, as
though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Investors shall have
received a certificate signed by the Chief Executive Officer of the Company
(with respect to the Company only) and from the Shareholders' Representative
(with respect to the Responsible Shareholders only) to such effect.
(b) Performance of Obligations of the Company and the Responsible
Shareholders. The Company and the Responsible Shareholders shall have performed
in all respects all obligations and covenants required to be performed by such
Persons under this Agreement and the Related Documents as of the Closing Date,
and the Investors shall have received a certificate signed by the Chief
Executive Officer of the Company (with respect to the Company only) and the
Shareholders' Representative (with respect to the Shareholders only) to such
effect.
(c) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
by the Company and the Responsible Shareholders and the consummation of the
transactions contemplated hereby and thereby, shall have been duly and validly
taken by the Company, and the Company shall have full corporate power and right
to consummate the transactions contemplated hereby on the terms provided herein.
(d) Related Documents. All parties thereto other than the
Investors shall have executed and delivered to the Company and the Investors
each of the Related Documents and such Related Documents shall, but for the
Investors' execution and delivery thereof, be in full force and effect in
accordance with their terms and conditions.
(e) Opinion of the Company's and the Responsible Shareholders'
Counsel. The Investors shall have received a legal opinion dated the Closing
Date of Holland & Hart LLP, counsel to the Company, and Reinhart Boerner Van
Deuren Norris & Rieselbach, P.C. and Engel, Deiman & Lockwood pc counsel to the
Responsible Shareholders in form and substance reasonably satisfactory to the
Investors.
(f) Consents and Approvals. The Investors shall have received duly
executed copies of all consents and approvals, in form and substance
satisfactory to the Investors, that are (i) required of the Company or the
Responsible Shareholders for consummation of the
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transactions contemplated hereby, (ii) required in order to prevent a breach of
or a default under or a termination of any Contract set forth in Schedule 4.5.
(g) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery by the Company and the Responsible Shareholders of this Agreement
and the Related Documents and the consummation by the Company and the
Responsible Shareholders of the transactions contemplated hereby and thereby
shall have been obtained or made. In addition, the Responsible Shareholders and
the Investors shall have filed all notices and information required, if any,
under Part IX of the Competition Act (Canada) and satisfied any request for
additional information thereunder and the applicable waiting periods and any
extensions thereof shall have expired without the threat of restraint or
challenge, or the parties shall have received an Advance Ruling Certificate
("ARC") pursuant to section 102 of the Competition Act (Canada) stating that the
Director is satisfied that he would not have sufficient grounds on which to
apply for an order in respect of the transactions contemplated by the Agreement.
(h) Corporate Resolutions. The Investors shall have received
certified copies of the resolutions of the Company's board of directors
approving this Agreement, the Related Documents, all other agreements and
documents contemplated hereby and the consummation of the transactions
contemplated hereby and thereby.
(i) Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, there shall have been no Material Adverse Change with respect to the
Company or any Subsidiary.
(j) Officer's Certificate. The Company shall have delivered an
officer's certificate dated as of the Closing Date to the Investors certifying
(i) that attached thereto is a true and complete copy of the Company's
certificate of incorporation and all amendments thereto as in effect on such
date; (ii) that attached thereto is a true and complete copy of the Company's
bylaws as in effect on such date; (iii) as to the incumbency and genuineness of
the signature of each officer of the Company executing this Agreement, the
Related Documents or any of the other documents contemplated hereby; (iv) as to
the principal amount of the Funded Indebtedness as of the Closing Date; and (v)
that the Company is not as of the Closing Date, nor has it been at any time, a
"U.S. real property holding corporation" (as defined in Section 897 of the
Code). Each Subsidiary shall have delivered an officer's certificate dated as of
the Closing Date to the Investors certifying (i) that attached thereto is a true
and complete copy of the Subsidiary articles or certificate of incorporation and
all amendments thereto as in effect on such date; and (ii) that attached thereto
is a true and complete copy of the Subsidiary's bylaws as in effect on such date
(or, in each case, the relevant constating or governing documents).
(k) Stock Certificates. Each Shareholder shall have delivered the
stock certificates for the Purchased Shares and for the Redeemed Shares and the
related stock powers specified in Sections 1.7 and 1.8 hereof.
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(l) Charter Documents. The Shareholders or the Company shall have
delivered a long form good standing certificate as to the Company and each
Subsidiary, issued as of a recent date by the Secretary of State of each
jurisdiction where such Person is organized or qualified to do business.
(m) Directors and Officers of the Company. The new directors of
the Company shall have been elected in accordance with the terms of the
Shareholders' Agreement.
(n) Simultaneous Transactions. The EDS Transactions and the MTH
Transactions shall have been consummated.
(o) Employment Agreements. Each of the Responsible Shareholders
shall have terminated their existing Employment Agreements with the Company and
entered into new Employment Agreements (the "Employment Agreements") with the
Company upon terms and conditions satisfactory to the Investors.
(p) Credit Agreement. The Company shall have consummated the Bank
Financing.
(q) Small Business Sideletters. The Company shall have executed
and delivered the Small Business Sideletters to each of UBS and Imprimis.
(r) Option Exercises. The Investors shall have received
satisfactory evidence that all holders of the Company's outstanding options to
purchase Common Stock have validly exercised all of such options, have paid the
full exercise price therefor and are stockholders of record of the Company.
(s) Stock Purchase and Redemption Agreement. All parties thereto
other than the Investors shall have executed and delivered the Stock Purchase
and Redemption Agreement upon substantially the terms and conditions of the
draft attached as Exhibit F hereto.
9.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate the transactions
contemplated by this Agreement (including the Redemption) is subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Company:
(a) Representations and Warranties. The representations and
warranties of the Investors set forth in Article VI shall be true and correct in
all material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, which representations
and warranties as so qualified shall be true in all respects) as of the Closing
Date, as though the Closing Date was substituted for the date of this Agreement
throughout such representations and warranties, and the Company shall have
received a certificate signed by an authorized officer of the Investors'
Representative to such effect.
(b) Performance of Obligations of the Investors. Each of the
Investors shall have performed in all material respects its obligations and
covenants required to be performed by it
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under this Agreement prior to or as of the Closing Date, and the Company shall
have received a certificate signed by an authorized officer of the Investors'
Representative to such effect.
(c) Authorization. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
to which an Investor is a party and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by such
Investor.
(d) Government Consents, Authorizations, Etc. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery of this Agreement and the Related Documents by the Investors and
the consummation by the Investors of the transactions contemplated hereby or
thereby shall have been obtained or made.
(e) Consents and Approvals. The Company shall have received duly
executed copies of all consents and approvals, in form and substance reasonably
satisfactory to the Company and its counsel, that are required of the Investors
or the Company for consummation of the transactions contemplated hereby.
(f) Absence of Material Adverse Change. Since the Latest Balance
Sheet Date, there shall have been no Material Adverse Change with respect to the
Company or any Subsidiary.
(g) Simultaneous Transactions. The EDS Transactions and the MTH
Transactions shall have been consummated.
(h) Employment Agreements. Each of the Responsible Shareholders
shall have terminated his existing Employment Agreement with the Company and
entered into new Employment Agreements with the Company upon terms and
conditions satisfactory to the Investors.
(i) Credit Agreement. The Company shall have executed a Credit
Agreement with Fleet National Bank and certain other banks providing sufficient
financing to consummate the transactions contemplated hereby.
(j) Option Exercises. The Company shall have received satisfactory
evidence that all holders of the Company's outstanding options to purchase
Common Stock have validly exercised all of such options, have paid the full
exercise price therefor and are stockholders of record of the Company.
(k) Stock Purchase and Redemption Agreement. All parties thereto
other than the Company shall have executed and delivered the Stock Purchase and
Redemption Agreement upon substantially the terms and conditions of the draft
attached as Exhibit F hereto.
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9.4 RELEASE BY RESPONSIBLE SHAREHOLDERS
(a) Anything contained herein to the contrary notwithstanding,
upon receipt by each Responsible Shareholder of the consideration to be received
by such Responsible Shareholder pursuant to Section 1., each such Responsible
Shareholder hereby agrees, solely in his or its capacity as a stockholder of the
Company, that (without any further action on the part of such Responsible
Shareholder) the Company (for the benefit of the Company, the Investors and
their respective parents, subsidiaries, Affiliates, divisions and predecessors
and their past and present directors, officers, employees and agents, and each
of their respective successors, heirs, assigns, executors and administrators
(collectively, the "Released Persons")) shall be irrevocably released and
forever discharged of and from all manner of action and actions, cause and
causes of action, suits, rights, debts, dues, sums of money, accounts, bonds,
bills, covenants, Contracts, controversies, omissions, promises, variances,
trespasses, damages, liabilities, judgments, executions, claims and demands
whatsoever, in law or in equity which against the Released Persons such
Responsible Shareholder ever had, now has or which he or it hereafter can, shall
or may have, whether known or unknown, suspected or unsuspected, matured or
unmatured, fixed or contingent, for, upon or by reason of any matter or cause
relating to such Responsible Shareholders' interest as a shareholder in the
Company and arising at any time on or prior to the Closing, including the
consummation of the Transactions.
(b) Each Responsible Shareholder specifically represents and
warrants to the Released Persons that he or it has not assigned any such claim
set forth in paragraph (a) above, and agrees to indemnify and hold harmless the
Released Persons from and against any and all Losses arising from or in any way
related to (i) any such assignment, and (ii) any action by any third party
arising from or in any way related to the relationship among such Responsible
Shareholders and the Released Persons, which is the subject of this Section 9.4.
(c) Covenant Not to Sue. Each Party hereto hereby covenants, that
after execution of this Agreement and the consummation of the Transactions, he,
she or it shall not commence any action, lawsuit or other Proceeding in law or
in equity, or otherwise, based upon any claim, demand, Loss, cause of action or
Liability, which is released herein. However, nothing contained herein shall
prevent any Party from commencing any action to enforce any breach of any
obligation assumed by another Party hereto under this Agreement or the Related
Documents. Should any Party, at any time after the Parties execute this
Agreement, commence any action, lawsuit or other Proceeding, in law or in equity
or otherwise, in breach of the covenant not to sue contained in this Section 9.4
(c), such Party shall indemnify and hold harmless the other Parties to such
action, lawsuit or other Proceeding from and against any Liability, Loss, cost,
expense or judgement arising out of or occasioned by such action, including, but
not limited to, the amount or any judgement or settlement entered into in
resolution of said action and attorney's fees.
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ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION GENERALLY; ETC.
From and after the Closing Date:
(a) By the Responsible Shareholders in Favor of the Company. Each
of the Responsible Shareholders hereby agrees severally but not jointly to
indemnify and hold harmless the Company for any and all Losses it may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any representation
or warranty of such Responsible Shareholder contained in Article V of
this Agreement, any Related Document, any Schedule or Exhibit thereto
or any certificate delivered in connection therewith at or before the
Closing; and
(ii) the breach of any agreement or covenant of such
Responsible Shareholder contained in this Agreement or any Related
Document.
(b) By the Company in Favor of the Investors. The Company shall
indemnify and hold harmless the Investors for any and all Losses they may
suffer, sustain or incur as a result of:
(i) the untruth, inaccuracy or breach or any representation
or warranty of the Company contained in this Agreement, any Related
Document, any Schedule or Exhibit thereto, or any certificate delivered
in connection therewith at or before the Closing;
(ii) the breach of any agreement or covenant of the Company
contained in this Agreement or in any Related Document to be performed
on or prior to the Closing Date; or
(iii) any Proceeding (including, any settlement thereof)
brought by any Shareholder (solely in his, her or its capacity as a
stockholder of the Company) arising from the Company's consummation of
the Transactions.
(c) By the Responsible Shareholders in Favor of the Company. Each
of the Responsible Shareholders hereby agrees, severally but not jointly, to
indemnify and hold harmless the Company for any and all Losses it may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach or any representation
or warranty of the Company contained in this Agreement, any Related
Document, any Schedule or Exhibit thereto, or any certificate delivered
in connection therewith at or before the Closing;
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(ii) the breach of any agreement or covenant of the Company
contained in this Agreement or in any Related Document to be performed
on or prior to the Closing Date; or
(iii) any Proceeding (including any settlement thereof)
brought by any Shareholder (solely in his, her or its capacity as a
stockholder of the Company) arising from the Company's consummation of
the Transactions.
(d) By the Investors in Favor of the Company. Each of the
Investors hereby agrees severally but not jointly to indemnify and hold harmless
the Company for any and all Losses it may suffer, sustain or incur as a result
of:
(i) the untruth, inaccuracy or breach of any representation
or warranty of such Investor contained in Article VI; or
(ii) the breach of any agreement or covenant of such Investor
contained in this Agreement or in any Related Document.
(e) Indemnification for Losses. Subject to the provisions of
Section 10.1(f)(i), Losses sustained or incurred pursuant to Section 10.1(b) or
10.1(c) shall be satisfied by the Company or the Responsible Shareholders, as
set forth in this Section 10.1(e) in the following order:
(i) first, the Company shall pay to the Investors up to one
million, five hundred thousand dollars ($1,500,000) in cash; provided,
however, that if the Company is contractually prohibited (including
pursuant to the Loan Agreement with Fleet) from making such payment
(after using commercially reasonable efforts to remove or suspend such
restriction), it shall pay any amount so prohibited in the form of an
unsecured subordinated promissory note providing for a ten percent
(10%) interest rate, a maturity of not more than five years, payment of
interest in the form of additional subordinated promissory notes (with
identical terms) to the extent that the Company is contractually
prohibited (after using commercially reasonable efforts to remove or
suspend such prohibition) from paying interest in cash, and such other
reasonable and customary terms and conditions as are reasonably
acceptable to the Investors; provided further however, that the Company
shall not enter into any Contract after the date hereof that would
further impair or restrict its ability to make cash payments to the
Investors pursuant to this Section 10.1(e)(i).
(ii) second, to the extent that aggregate Losses exceed
$1,500,000, the Company shall issue up to three million dollars
($3,000,000) of New Series A Preferred Stock to the Investors, which
shares shall be valued at $1.085 per share; and
(iii) third, to the extent that aggregate Losses exceed four
million, five hundred thousand dollars ($4,500,000) the Responsible
Shareholders shall, severally but not jointly, pay to the Company up to
ten million, three hundred thousand dollars
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<PAGE> 52
($10,300,000) in the aggregate, in accordance with each such
Responsible Shareholder's Proportionate Percentage set forth on
Schedule 10.1 hereto.
(f) Limits to Indemnification. Notwithstanding the foregoing
provisions of this Section 10.1:
(i) neither the Investors nor the Company shall be entitled
to be indemnified for Losses pursuant to Section 10.1(b) or Section
10.1(c), respectively (other than for breaches of Sections 4.1, 4.2,
4.3, 4.4, 4.5, 4.10, 4.11 and 4.24 of this Agreement (collectively, the
"Fundamental Representations and Warranties")) unless and until the
amount of all Losses incurred on a cumulative basis since the Closing
Date exceeds $500,000, in which case the Investors or the Company (as
the case may be) shall be indemnified for Losses exceeding $500,000
incurred since the Closing Date. The parties hereto acknowledge and
agree that any Losses that are incurred in connection with the breach
of the Fundamental Representations and Warranties shall not be applied
against or subject to either any threshold or limitation on liability
set forth in this Section 10.1(f).
(ii) the Responsible Shareholders shall have no obligation to
indemnify the Company for any Losses unless and until the aggregate
amount of all Losses sustained or incurred pursuant to Section 10.1(b)
and Section 10.1(c) exceeds $4,500,000.
(iii) no Responsible Shareholder shall be obligated to pay to
the Company more than his Proportionate Percentage (as set forth on
Schedule 10.1) for Losses payable pursuant to Section 10.1(e)(iii).
(iv) except as provided in Section 10.1(c)(iii) the
Responsible Shareholders shall have no obligation to indemnify the
Company for Losses for which a claim by an Indemnified Person was first
made after the date which is thirty (30) days after the Investors
receive the Company's 1999 audited consolidated financial statements
(which financial statements shall have been audited by a nationally
recognized "big five" accounting firm, Grant Thorton LLP or any other
Person that is reasonably acceptable to the Investors). With respect to
Losses incurred pursuant to Section 10.1(c)(iii), the Responsible
Shareholders shall have no obligation to indemnify the Company for such
Losses unless an Indemnified Person shall have initiated a Proceeding
therefor on or prior to December 31, 2000.
(g) Indemnity Baskets/Limitations for the Investors. The Company
shall not have the right to be indemnified pursuant to Section 10.1(d) unless
and until the Company shall have incurred on a cumulative basis since the
Closing Date aggregate Losses otherwise entitled to indemnification hereunder in
an amount exceeding $500,000, in which event the Company shall be indemnified
for Losses exceeding $500,000 incurred since the Closing Date. The sum of all
Losses pursuant to which indemnification is payable by the Investors pursuant to
Section 10.1(d) shall not exceed the Purchased Shares Consideration. The
indemnification obligations of the Investors may, at the option of the
Investors, be satisfied by the forfeiture to the Company of the appropriate
number of shares of New Series A Preferred Stock, based upon a valuation of the
Company to be made on the date that such obligation is due, by a third party
appraisal firm
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<PAGE> 53
selected by the Board of Directors (which shall not be an Affiliate of the
Company or any Responsible Shareholder).
(h) Guaranty.
(i) Glenn E. Montgomery, Jr. shall personally guaranty (the
"Montgomery Guaranty") the obligations of GMJM Stock Partnership, Ltd.
Such obligations of Glenn E. Montgomery, Jr. are independent of the
obligations of GMJM Stock Partnership, Ltd. set forth in Section
10.1(c), and a separate action or actions may be brought and prosecuted
against Glenn E. Montgomery, Jr. for Losses irrespective of whether any
action is brought, and prosecuted against Glenn E. Montgomery, Jr. for
Losses or whether any action is brought against GMJM Stock Partnership,
Ltd., or GMJM Stock Partnership, Ltd. is joined in any such action or
actions.
(A) The Montgomery Guarranty is a guaranty of payment
when due and not merely of collection.
(B) The Montgomery Guaranty shall be unconditional
irrespective of any lack of enforceability of this Agreement as to GMJM
Stock Partnership, Ltd. or any bankruptcy, insolvency or similar
proceeding with respect to GMJM Stock Partnership, Ltd.; provided,
however, that the foregoing shall not be deemed to preclude Glenn E.
Montgomery, Jr. from asserting any of the defenses that would have been
available to GMJM Stock Partnership, Ltd.
(v) Mark L. Epstein shall personally guaranty (the "Epstein
Guaranty") the obligations of the Mark L. Epstein Trust. Such
obligations of Mark L. Epstein are independent of the obligations of
the Mark L. Epstein Trust set forth in Section 10.1(c), and a separate
action or actions may be brought and prosecuted against Mark L. Epstein
for Losses irrespective of whether any action is brought, and
prosecuted against Mark L. Epstein for Losses or whether any action is
brought against the Mark L. Epstein Trust, or the Mark L. Epstein Trust
is joined in any such action or actions.
(A) The Epstein Guarranty is a guaranty of payment when
due and not merely of collection.
(B) The Epstein Guaranty shall be unconditional
irrespective of any lack of enforceability of this Agreement as to the
Mark L. Epstein Trust or any bankruptcy, insolvency or similar
proceeding with respect to the Mark L. Epstein Trust; provided,
however, that the foregoing shall not be deemed to preclude Mark L.
Epstein from asserting any of the defenses that would have been
available to the Mark L. Epstein Trust.
(vi) Larry J. Engelken shall personally guaranty (the
"Engelken Guaranty") the obligations of LEHE Family Partners, Ltd. Such
obligations of Larry J. Engelken are independent of the obligations of
LEHE Family Partners, Ltd. set forth in Section 10.1(c), and a separate
action or actions may be brought and prosecuted against Larry J.
Engelken
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<PAGE> 54
for Losses irrespective of whether any action is brought, and
prosecuted against Larry J. Engelken for Losses or whether any action
is brought against LEHE Family Partners, Ltd., or LEHE Family Partners,
Ltd. is joined in any such action or actions.
(A) The Engelken Guarranty is a guaranty of payment when
due and not merely of collection.
(B) The Engelken Guaranty shall be unconditional
irrespective of any lack of enforceability of this Agreement as to LEHE
Family Partners, Ltd. or any bankruptcy, insolvency or similar
proceeding with respect to LEHE Family Partners, Ltd.; provided,
however, that the foregoing shall not be deemed to preclude Larry J.
Engelken from asserting any of the defenses that would have been
available to LEHE Family Partners, Ltd.
10.2 ASSERTION OF CLAIMS.
No claim shall be brought under Section 10.1 unless the Indemnified
Persons, or any of them, at any time prior to the applicable Survival Date, give
the Indemnifying Persons (a) written notice of the existence of any such claim,
specifying the nature and basis of such claim and the amount thereof, to the
extent known or (b) written notice pursuant to Section 10.3 of any Third-Party
Claim, the existence of which might give rise to such a claim. Upon the giving
of such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal Proceedings subsequent to the Survival
Date for the enforcement of their rights under Section 10.1.
10.3 NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS.
The obligations and Liabilities of an Indemnifying Person with respect
to Losses resulting from the assertion of liability by third parties (each, a
"Third-Party Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third-Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such
Third-Party Claim and the amount thereof to the extent known; provided, however,
that no delay on the part of the Indemnified Person in notifying any
Indemnifying Person shall relieve the Indemnifying Person from any Liability
hereunder unless (and then solely to the extent) the Indemnifying Person thereby
is materially prejudiced by the delay. Such notice shall be accompanied by
copies of all relevant documentation with respect to such Third-Party Claim,
including, but not limited to, any summons, complaint or other pleading which
may have been served, any written demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall be
obligated under the terms of their indemnification obligations hereunder in
connection with such Third-Party Claim, then the Indemnifying Persons shall have
the right to assume and control the defense of any Third-Party Claim at their
own expense and by their own counsel, which counsel shall be satisfactory to the
Indemnified Persons; provided, however, that the Indemnifying Persons shall not
have the right to assume and control the defense of any Third-Party
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<PAGE> 55
Claim, notwithstanding the giving of such written acknowledgment, if (i) the
Indemnified Persons shall have one or more legal or equitable defenses available
to them which are different from or in addition to those available to the
Indemnifying Persons, and, in the opinion of the Indemnified Persons, counsel
for the Indemnifying Persons could not adequately represent the interests of the
Indemnified Persons because such interests could be in conflict with those of
the Indemnifying Persons, (ii) such action or Proceeding is reasonably likely to
have an effect on any other matter beyond the scope of the indemnification
obligation of the Indemnifying Persons or (iii) the Indemnifying Persons shall
not have assumed the defense of the Third-Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a
Third-Party Claim (under circumstances in which the proviso to Section 10.3(b)
is not applicable), the Indemnifying Persons shall not be responsible for any
legal or other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not exercise
their right to assume the defense of a Third-Party Claim by giving the written
acknowledgement referred to in Section 10.3(b), or are otherwise restricted from
so assuming by the proviso to Section 10.3(b), the Indemnifying Persons shall
nevertheless be entitled to participate in such defense with their own counsel
and at their own expense; and in any such case, the Indemnified Persons may
assume the defense of the Third-Party Claim, with counsel which shall be
satisfactory to the Indemnifying Persons, and shall act reasonably and in
accordance with their good faith business judgment and shall not effect any
settlement without the consent of the Indemnifying Persons, which consent shall
not unreasonably be withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third-Party Claim, they shall not make any settlement of any claims
without obtaining in connection therewith a full release of the Indemnified
Persons, in form and substance satisfactory to the Indemnified Persons.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Subject to the further provisions of this Section 10.4, the
representations and warranties of the Company contained in this Agreement shall
survive the Closing until the first anniversary of the Closing Date; provided,
however, that (i) the representations and warranties of the Company set forth in
Section 4.20 shall survive the Closing until the seventh anniversary of the
Closing Date, (ii) the representations and warranties of the Company set forth
in Section 4.10 and Section 4.11 shall survive the closing until the expiration
of all applicable statues of limitation and (iii) the representations and
warranties of the Responsible Shareholders contained in Article V of this
Agreement, the representations and warranties of the Investors contained in
Article VI of this Agreement and the Fundamental Representations and Warranties
(other than Section 4.10 and Section 4.11) shall survive the Closing and remain
in full force and effect indefinitely without time limit. The covenants and
other agreements of the parties contained in this Agreement shall survive the
Closing until they are otherwise terminated, whether by their terms or as a
matter of applicable Law.
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<PAGE> 56
10.5 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company and the Responsible Shareholders
contained in this Agreement and the Related Documents (a) are being given by the
Company and the Responsible Shareholders as an inducement to the Investors to
enter into this Agreement and the Related Documents to which the Investors are a
party (and the Company and the Responsible Shareholders acknowledge that the
Investors have expressly relied thereon) and (b) are solely for the benefit of
the Investors and the Company. Accordingly, no third party or anyone acting on
behalf of any thereof other than the Indemnified Persons, and each of them,
shall be a third party or other beneficiary of such representations and
warranties and no such third party shall have any rights of contribution
against, the Investors, the Company, any Responsible Shareholder or the Company
with respect to such representations or warranties or any matter subject to or
resulting in indemnification under this Article X, or otherwise.
10.6 REMEDIES EXCLUSIVE.
The remedies provided for in this Article X shall be the exclusive
contractual remedies of the Indemnified Persons in connection with any
Proceedings or Loss arising under this Agreement, the Related Documents or in
connection with the transactions contemplated hereby; provided, however, that
nothing in this Section 10.6 shall be construed to limit in any way the rights
and benefits of, or the remedies available to, any party to this Agreement or
the Related Documents under or in respect of any other instrument or agreement
to which such Person may be a party or for fraud.
ARTICLE XI
[INTENTIONALLY OMITTED]
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 EXPENSES.
Except as otherwise provided herein, the Company shall bear all
Transaction Related Expenses and the Responsible Shareholders shall bear all of
their out-of-pocket fees and expenses incurred by them relating to the
consummation of the Transactions.
12.2 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Investors' Representative, the Shareholders' Representative and
the Company.
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<PAGE> 57
12.3 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the Schedules and the Exhibits (in their
executed form) attached hereto) contain all of the agreements among the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements or understandings among the parties with respect thereto
(including, but not limited to, the letter of intent dated as of June 23, 1999,
as amended, among the Investors' Representative, and the Company).
12.4 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
12.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
Except as expressly provided herein, this Agreement shall not confer
any rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, representatives, heirs and estates, as the
case may be. This Agreement shall not be assignable by the Company or any
Responsible Shareholder without the consent of the Investors' Representative.
12.6 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
12.7 NOTICES.
All notices or other communications pursuant to this Agreement shall be
in writing and shall be deemed to be sufficient if delivered personally, sent by
nationally-recognized, overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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<PAGE> 58
(a) if to the Company or any Responsible Shareholder, to:
Convergent Group Corporation
6200 South Syracuse Way
Suite 200
Englewood, Colorado 80111
Attention: Glenn E. Montgomery, CEO;
with a copy to:
Holland & Hart, LLP
555 Seventeenth Street
Suite 3200
Denver, Colorado 80202
Attention: Kevin S. Crandell, Esq.;
(b) if to the Shareholders' Representative:
Scott M. Schley, Shareholders' Representative
c/o Convergent Group Corporation
6200 South Syracuse Way
Suite 200
Englewood, Colorado 80111
(c) if to the Investors' Representative or any Investor:
InSight Capital Partners III, L.P.
527 Madison Avenue
10th Floor
New York, New York 10022
Attention: Jerry Murdock;
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Ilan S. Nissan, Esq.
All such notices and other communications shall be deemed to have been given and
received (d) in the case of personal delivery, on the date of such delivery, (e)
in the case of delivery by nationally-recognized, overnight courier or in the
case of mailing, on the delivery or refusal date as indicated in the return
receipt.
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<PAGE> 59
12.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
12.9 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the Laws of the State of New York without giving effect to any choice or
conflict of law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of New York.
12.10 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof. Any disclosure made in
any Schedule to this Agreement which should, based on the substance or such
disclosure, be applicable to another Schedule to this Agreement shall be deemed
to be made with respect to such other Schedule regardless of whether or not a
specific reference is made thereto; provided, that the description of such item
on a Schedule is such that the Investors can reasonably ascertain that such
disclosure relates to such other provision of this Agreement.
12.11 CONSTRUCTION.
Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
12.12 NON-MERGER OF REPRESENTATIONS AND WARRANTIES.
Except as otherwise expressly provided in this Agreement, the
covenants, representations and warranties shall not merge on and shall survive
the Closing in accordance with the express terms of this Agreement,
notwithstanding the Closing or any investigation made by or on behalf of any
party, and shall continue in full force and effect. The Closing shall not
prejudice any right of one party against any other party in respect of anything
done or omitted under this Agreement or in respect of any right to damages or
other remedies.
12.13 REMEDIES; SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and
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<PAGE> 60
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
12.14 JURISDICTION, ETC.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in the State of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any Related Document or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Nothing in this Agreement shall affect any right that any party
may otherwise have to bring any action or proceeding relating to this Agreement
in the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any Related
Document in any New York State or federal court. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
12.15 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
12.16 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder. The Exhibits and Schedules attached
hereto are hereby made part of this Agreement in all respects.
* * *
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<PAGE> 61
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first written above.
CONVERGENT GROUP CORPORATION
By: /s/ GLENN E. MONTGOMERY, JR.
-----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
SHAREHOLDERS' REPRESENTATIVE
Name: /s/ SCOTT M. SCHLEY
---------------------------------
Scott M. Schley
RESPONSIBLE SHAREHOLDERS:
GMJM STOCK PARTNERSHIP, LTD.
By: /s/ GLENN E. MONTGOMERY, JR.
-----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: General Partner
<PAGE> 62
MARK L. EPSTEIN TRUST
By: /s/ Glenn E. Montgomery, Jr.
-----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Trustee
By: /s/ Harry J. Schmidt
-----------------------------------
Name: Harry J. Schmidt
Title: Trustee
LEHE FAMILY PARTNERS, LTD.
By: /s/ Larry J. Engelken
-----------------------------------
Name: Larry J. Engelken
Title: General Partner
By: /s/ Holly S. Storm-Engelken
-----------------------------------
Name: Holly S. Storm-Engelken
Title: General Partner
/s/ Scott M. Schley
--------------------------------------
Scott M. Schley
RESPONSIBLE PERSONS:
Agreed and accepted, solely with respect
to the matters set forth in Section 8.3
and Section 10.1(h):
/s/ Larry J. Engelken
--------------------------------------
Larry J. Engelken
<PAGE> 63
/s/ Mark L. Epstein
--------------------------------------
Mark L. Epstein
/s/ Glenn E. Montgomery, Jr.
--------------------------------------
Glenn E. Montgomery, Jr.
INVESTORS' REPRESENTATIVE
INSIGHT CAPITAL PARTNERS III, L.P.
(Solely in respect of its obligations as
the Investors' Representative)
By: InSight Venture Associates III,
L.L.C. its General Partner
By: /s/ JERRY MURDOCK
----------------------------------
Name:
Title:
INVESTORS:
INSIGHT CAPITAL PARTNERS III, L.P.
By: InSight Venture Associates III,
L.L.C. its General Partner
<PAGE> 64
By: /s/ JERRY MURDOCK
----------------------------------
Name:
Title:
INSIGHT CAPITAL PARTNERS III (CAYMAN),
L.P.
By: InSight Venture Associates III,
L.L.C. its General Partner
By: /s/ JERRY MURDOCK
----------------------------------
Name:
Title:
<PAGE> 65
INSIGHT CAPITAL PARTNERS III
(CO-INVESTORS), L.P.
InSight Venture Associates III, L.L.C.,
its General Partner
By: /s/ JERRY MURDOCK
----------------------------------
Name:
Title:
UBS CAPITAL II LLC
By: /s/ JUSTIN MACCARONE
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
WI SOFTWARE INVESTORS LLC
By: Wexferd Management LLC, its
investment manager
By: /s/ ROBERT HOLTZ
----------------------------------
Name: Robert Holtz
Title: Vice President
IMPRIMIS SB LP
By: Imprimis GP LLC, its General Partner
By: /s/ ROBERT HOLTZ
----------------------------------
Name: Robert Holtz
Title: Vice President
<PAGE> 66
GS PRIVATE EQUITY PARTNERS II, L.P.
By: GS PEP II Advisors, L.L.C., its
General Partner
By: GSAM Gen-Par, L.L.C., its Managing
Member
By: /s/ DAVID B. FORD
----------------------------------
Name: David B. Ford
--------------------------------
Title: Director
-------------------------------
GS PRIVATE EQUITY PARTNERS II OFFSHORE,
L.P.
By: GS PEP II Offshore Advisors, Inc.,
its General Partner
By: /s/ DAVID B. FORD
----------------------------------
Name: David B. Ford
--------------------------------
Title: Director
-------------------------------
GS PRIVATE EQUITY PARTNERS III, L.P.
By: GS PEP III Advisors, L.L.C., its
General Partner
By: GSAM Gen-Par, L.L.C., its Managing
Member
By: /s/ DAVID B. FORD
----------------------------------
Name: David B. Ford
--------------------------------
Title: Director
-------------------------------
GS PRIVATE EQUITY PARTNERS III OFFSHORE,
L.P.
By: GS PEP III Offshore Advisors, Inc.,
its General Partner
By: /s/ DAVID B. FORD
----------------------------------
Name: David B. Ford
--------------------------------
Title: Director
-------------------------------
<PAGE> 67
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
By: GS PEP Offshore Advisors (NBK), Inc.,
its General Partner
By: /s/ DAVID B. FORD
----------------------------------
Name: David B. Ford
--------------------------------
Title: Director
-------------------------------
/s/ STEPHEN FRIEDMAN
--------------------------------------
STEPHEN FRIEDMAN
<PAGE> 68
ANNEX I
DEFINITIONS
The following terms used in the Recapitalization Agreement shall have
the following respective meanings:
"Affiliate" means, with respect to any Person, (i) a director, officer
or stockholder of such Person, (ii) a spouse, parent, sibling or descendant of
such Person (or spouse, parent, sibling or descendant of any director or
executive officer of such Person), or (iii) any other Person that, directly or
indirectly through one or more intermediaries, controls, or is Controlled by, or
is under common Control with, such Person.
"Agreement" has the meaning set forth in the caption.
"ARC" has the meaning set forth in Section 9.2(g).
"ARC Transactions" means the transactions described in the Mutual
Agreement and Release made and entered into as of April 14, 1997 by and among
the Company, Convergent Group Asia Pacific Pty. Ltd. and the other parties
thereto and all transactions contemplated therein and related thereto, including
the Agreement for Reorganization among the Company, ARC Systems Pty. Ltd., an
Australian corporation, and the other parties thereto.
"Bank Financing" shall have the meaning set forth in the recitals to
this Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Books and Records" means all books of account, tax records, sales and
purchase records, customer and supplier lists, computer software, formulae,
business reports, plans and projections and all other documents, files,
correspondence and other information of the Company and its Subsidiaries
(whether in written, printed, electronic or computer printout form).
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"Canadian Benefit Plans" means any plan, program or arrangement
involving direct or indirect compensation by a Canadian Subsidiary on behalf of
its employees, former employees, or contractual employees in Canada or their
dependents or beneficiaries.
"Canadian Pension Plans" means any pension plan governed by the Income
Tax Act (Canada) or the Pension Benefits Act (Ontario) or comparable legislation
in any other province, or territory of Canada.
"Canadian Subsidiaries" means, collectively, all Subsidiaries of the
Company which are organised and existing under the laws of Canada or any
province or territory of Canada, and each one thereof is a "Canadian
Subsidiary."
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and liability Act.
"Class A Common Stock" means shares of the Company's Class A Common
Stock, $0.01 par value per share.
"Class B Common Stock" means shares of the Company's Class B Common
Stock, $0.01 par value per share.
"Closing Date" has the meaning set forth in Article III.
<PAGE> 69
"Closing" has the meaning set forth in Article III.
"COBRA" has the meaning set forth in Section 4.11(b)(vi).
"Code" has the meaning set forth in Section 4.10(a).
"Common Stock" means the common stock of the Company, $0.01 par value
per share.
"Company" has the meaning set forth in the caption.
"Competition Act (Canada)" means the Competition Act (Canada), R.S.C.
1985 c.E-34, as amended from time to time.
"Competitive Business" means any Person which derives or which expects
during the two (2) years following a termination of a Responsible Shareholder's
employment with the Company for any reason to derive either (i) ten percent
(10%) or more of its revenues, or (ii) more than $10,000,000 in revenues from
providing technical management consulting and/or systems integration services
for Automated Mapping/Facilities Management Systems and/or Geographic
Information Systems and/or utility transmission and distribution systems. The
term "Competitive Business" is not intended to include mere vendors or suppliers
of the Company.
"Confidential Information" means information that is not generally
known to the public and that is used, developed or obtained by the Company or
any of its Subsidiaries in connection with the Subject Business, including, but
not limited to, (i) information, observations, procedures and data obtained by
any Shareholder while employed by the Company or any Subsidiary (including those
obtained prior to the date of this Agreement) concerning the business or affairs
of the Company or any Subsidiaries, (ii) products or services, (iii) costs and
pricing structures, (iv) analyses, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and customer lists, (xii) other
copyrightable works, (xiii) all production methods, processes, technology and
trade secrets, and (xiv) all similar and related information in whatever form.
Confidential information will not include any information that has ever been
published in a form generally available to the public prior to date any
Shareholder proposes to disclose or use such information. Confidential
information will not be deemed to have been published merely because individual
portions of the information have been published, but only if all material
features comprising such information have been published in combination.
"Contingent Payment" has the meaning set forth in Section 1.11.
"Contingent Payment Date" has the meaning set forth in Section 1.11.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement, instrument,
permit, concession, franchise or license.
"Control" means, with respect to any Person, the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Epstein Guaranty" shall have the meaning set forth in Section
10.1(h)(ii).
"EDS" means Electronic Data Systems Corporation, a Delaware
corporation.
"EDS Option Agreement" means the Option Agreement dated as of May 17,
1999 by and among the Company, EDS and the other parties thereto and attached as
Exhibit A hereto.
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<PAGE> 70
"EDS Transactions" has the meaning set forth in the Preamble.
"Employee Plan" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which the Company or any ERISA
Affiliate of the Company has any present or future obligations or liability on
behalf of its employees or former employees, contractual employees or their
dependents or beneficiaries.
"Encumbrances" means and includes security interests, mortgages, liens,
pledges, charges, easements, reservations, restrictions, clouds, equities,
rights of way, options, rights of first refusal and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
"Engelken Guaranty" shall have the meaning set forth in Section
10.1(h)(ii).
"Environmental Laws" has the meaning set forth in Section 4.20.
"ERISA Affiliate" means, with respect to any Person, any entity that is
a member of a "controlled group of corporations" with, or is under "common
control" with, or is a member of the same "affiliated service group" with such
Person as defined in Section 414(b), 414(c) or 414(m) of the Code.
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended.
"Excise Tax Act (Canada)" means the Excise Tax Act (Canada), R.S.C.
1985, C.E-15, as amended from time to time.
"Exclusive Period" has the meaning set forth in Section 8.9.
"Financial Statements" has the meaning set forth in Section 4.6(b).
"Foreign Employee Benefit Plan" means any employee benefit plan, other
than a Canadian Benefit Plan, that is structured like an employee benefit plan
described in Section 3(3) or ERISA which is maintained outside the United States
primarily for the benefit of Persons substantially all of whom are nonresident
aliens and who are employees of the Company or any of its ERISA Affiliates and
is not covered by ERISA pursuant to Section 4(b)(4) of ERISA.
"Foreign Pension Plan" means any pension plan, other than a Canadian
Pension Plan, that is structured like an employee pension benefit plan described
in Section 3(2) of ERISA which is (i) maintained outside the United States
primarily for the benefit of Persons substantially all of whom are nonresident
aliens and who are employees of the Company, or any of its ERISA Affiliates,
(ii) is not covered by ERISA pursuant to Section 4(b)(4) of ERISA, and (iii)
provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment.
"Fundamental Representations and Warranties" has the meaning set forth
in Section 10.1(f).
"Funded Indebtedness" means, without duplication, the aggregate amount
(including the current portions thereof) of all (i) indebtedness for money
borrowed from others and purchase money indebtedness (other than accounts
payable in the ordinary course) of the Company or any of its Subsidiaries; (ii)
indebtedness of the type described in clause (i) above guaranteed, directly or
indirectly, in any manner by the Company or any of its Subsidiaries, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the relevant debtor, or to purchase indebtedness, or to purchase and
pay for property if not delivered or pay for services if not performed,
primarily for the purpose of enabling such debtor to make payment of the
indebtedness or to assure the owners of the indebtedness against loss, but
excluding endorsements of checks and other instruments in the ordinary course;
(iii) indebtedness of the type described in clause (i) above secured by any
Encumbrances upon property owned by the Company or any of its Subsidiaries, even
though such Person has not in any manner become liable for the payment of such
indebtedness; (iv) interest expense accrued but unpaid, and all prepayment
premiums,
I-3
<PAGE> 71
on or relating to any of such indebtedness; (v) all obligations under leases of
the Company or its Subsidiaries which are required to be reflected as
liabilities on the balance sheet of such Person by Relevant GAAP; and (vi)
reference to existing Company bank facilities. The term Funded Indebtedness
shall specifically exclude any indebtedness incurred in connection with the
financing for the transactions contemplated hereunder.
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, federal, state, provincial or local.
"Hazardous Substance" has the meaning set forth in Section 4.20.
"HIPAA" has the meaning set forth in Section 4.11(b)(vi).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Imprimis" means Imprimis SB LP, a Delaware limited partnership.
"Income Tax Act (Canada)" means the Income Tax Act (Canada), R.S.C.
1985, c.1 (5th Supplement), as amended from time to time.
"Indemnified Persons" means the Persons entitled to indemnification
under Article X.
"Indemnifying Persons" means the Person with the obligation to
indemnify an Indemnified Person under Article X.
"InSight" means InSight Capital Partners III, L.P., a Delaware limited
partnership.
"InSight Cayman" means InSight Capital Partners III (Cayman), L.P., a
company of limited liability under the law of the Cayman Islands.
"InSight Co-Investors" means InSight Capital Partners III
(Co-Investors), L.P., a Delaware limited partnership.
"Intellectual Property Rights" means all industrial and intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
service mark applications, copyrights, copyright applications, know-how, trade
secrets, proprietary processes and formulae, confidential information,
franchises, licenses, inventions, instructions, marketing materials, trade
dress, logos and designs and all documentation and media constituting,
describing or relating to the foregoing, including, without limitation, manuals,
memoranda and records.
"Investor Percentage" means, with respect to each Investor, the
percentage of all shares of New Series A Preferred Stock held by such Investor
and its Affiliates.
"Investors" has the meaning set forth in the caption.
"Investors' Representative" has the meaning set forth in Section 8.12 .
"Knowledge" has the meaning set forth in Section 4.34.
"Labour Relations Act (Ontario)" means the Labour Relations Act 1995
(Ontario), s.o.1995, c.1, as amended from time to time.
"Latest Balance Sheet Date" has the meaning set forth in Section
4.6(a).
"Latest Balance Sheet" has the meaning set forth in Section 4.6(a).
I-4
<PAGE> 72
"Law" means all international, European Union, national, federal, state
or local laws (both common and statute law and civil and criminal law) and all
subordinated legislation and regulatory codes of practice (including without
limitation, statutory instruments, guidance notes, circulars, directives,
decisions, rules, regulations, treaties and conventions) or Order of any
Governmental Entity.
"Leased Property" has the meaning set forth in Section 4.13(b).
"Liability" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated and whether due or to become due, regardless of when
asserted.
"Losses" means any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments, Tax deficiencies and Taxes (including
interest or penalties thereon) arising from or in connection with any such
matter that is the subject of indemnification under Article X. The parties
acknowledge that in certain events a representation, warranty or covenant of the
Company or a Responsible Shareholder may be breached that may not entail an
actual "Loss" (as defined in the previous sentence) suffered by the Company.
Accordingly, for purposes of the indemnification obligations under Article X,
"Losses" suffered, sustained or incurred by the Company shall be deemed to be
those that would have been sustained by a purchaser of 100% of the shares of
Common Stock of the Company in reliance on such representations, warranties and
covenants.
"Material Adverse Change" means, with respect to any Person, any
material adverse change in the business, operations, assets (including levels of
working capital and components thereof), condition (financial or otherwise),
operating results, liabilities, or employee relations of such Person or any
material casualty loss or damage to the assets of such Person, whether or not
covered by insurance.
"Material Adverse Effect" on any Person means a material adverse effect
on the business, operations, assets (including levels of working capital and
components thereof), condition (financial or otherwise), operating results,
liabilities, or employee relations of such Person.
"MTH Option Agreement" means the Option Agreement dated as of June 23,
1999 by and between the Company and Murray T. Holland and attached as Exhibit B
hereto.
"MTH Transactions" has the meaning set forth in the Preamble.
"Montgomery Guaranty" shall have the meaning set forth in Section
10.1(h)(i).
"New Common Stock" means the Company's common stock, $0.001 par value,
authorized pursuant to the Restated Charter.
"New Series A Preferred Stock" means the Company's Series A Convertible
Participating Preferred Stock, $0.001 par value per share, having the rights,
privileges and preferences set forth in the Restated Charter.
"1997 Restructuring Transactions" means the transactions described in
the Restructuring Agreement dated as of December 31, 1997 by and among the
Company, EDS, MTH and the other parties thereto and all transactions
contemplated therein and related thereto.
"Non-Compete Period" has the meaning set forth in Section 8.3(c)(i).
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"Party" means any party to this Agreement now, or by amendment.
I-5
<PAGE> 73
"Pension Benefits Act (Ontario)" means the Pension Benefits Act
(Ontario), R.S.O.1990 c.p.8, as amended from time to time.
"Permits" means all permits, licenses, authorizations, registrations,
franchises, approvals, certificates, variances and similar rights obtained, or
required to be obtained, from Governmental Entities.
"Permitted Encumbrances" means (i) Encumbrances for Taxes not yet due
and payable or being contested in good faith by appropriate proceedings and for
which there are adequate reserves on the books, (ii) workers or unemployment
compensation liens arising in the ordinary course of business; and (iii)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
Governmental Entity (or any department, agency or political subdivision
thereof).
"Potential Transaction" has the meaning set forth in Section 8.9.
"Proceedings" means actions, suits, claims, investigations or legal or
administrative or arbitration proceedings.
"Proceeds" has the meaning set forth in Section 8.13.
"Purchase" has the meaning set forth in the Preamble.
"Purchased Shares" has the meaning set forth in Section 1.3(a).
"Purchased Shares Consideration" has the meaning set forth in Section
1.3(b).
"Recapitalization" has the meaning set forth in the Preamble.
"Redeemed Shares Consideration" has the meaning set forth in Section
1.5(b).
"Redeemed Shares" has the meaning set forth in Section 1.5(b).
"Redemption" has the meaning set forth in Section 1.5(b).
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date among the Company, the Investors and the other
parties thereto.
"Related Documents" means the Responsible Shareholders' Agreement, the
Employment Agreements, the Registration Rights Agreement and the Restated
Charter.
"Related Person" has the meaning set forth in Section 4.10(d)(vii).
"Relevant GAAP" means with respect to any Person, generally accepted
accounting principles consistently applied as in effect from time to time in the
jurisdiction in which such Person is organized or incorporated, as the case may
be. With respect to the Company's consolidated Financial Statements, the
Relevant GAAP shall mean generally accepted accounting principles in the United
States of America applied on a basis which is consistent with the Latest Balance
Sheet.
"Responsible Persons" means each of Glenn E. Montgomery, Jr., Mark L.
Epstein and Larry J. Engelken.
I-6
<PAGE> 74
"Responsible Shareholders" means the shareholders identified on the
signature pages hereto.
"Restated Charter" means the Company's Restated Certificate of
Incorporation, substantially in the form of Exhibit C.
"Retail Sales Tax Act (Ontario)" means the Retail Sales Tax Act
(Ontario), R.S.O. 1990, c.R.31, as amended from time to time.
"SBA" means the U.S. Small Business Administration.
"SBIC" means a Small Business Investment Company licensed under the
Small Business Investment Act of 1958, as amended.
"Series A Preferred Stock" means the Company's Series A Preferred
Stock, $0.01 par value per share, existing prior to the filing of the Restated
Charter.
"Series B Preferred Stock" means the Company's Series B Preferred
Stock, $0.01 par value per share, existing prior to the filing of the Restated
Charter.
"Shareholder Percentage" means with respect to any Shareholder, a
fraction; (x) the numerator of which is the total proceeds from the sale of
capital stock of the Company received by such Shareholder from the Company or
the Investors pursuant to this Agreement and the Stock Purchase and Redemption
Agreement and (y) the denominator of which is the aggregate amount of proceeds
from the sale of capital stock of the Company received by all Shareholders from
the Company or the Investors pursuant to this Agreement or the Stock Purchase
and Redemption Agreement.
"Shareholders" means all holders of the Company's outstanding capital
stock immediately prior to the consummation of the Transactions.
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
the Closing Date among the Company, the Investors and the other parties thereto.
"Shareholders' Representative" has the meaning set forth in the
Caption.
"Small Business Sideletters" means the sideletters and related
documents substantially in the form of Exhibit D hereto to be executed and
delivered by the Company to Imprimis and UBS at the Closing.
"Stock Purchase and Redemption Agreement" means the agreement dated of
even date among the Company, the Investors and the Shareholders named therein,
substantially in the form of Exhibit F hereto.
"Subject Business" has the meaning set forth in the preamble to this
Agreement.
"Subscription" has the meaning set forth in Section 1.4 hereof.
"Subsidiaries" has the meaning set forth in Section 4.1.
"Survival Date" means the date, if any, upon which any representation,
warranty, covenant or other agreement contained herein shall terminate in
accordance with the terms hereof.
"SWDA" means the Solid Waste Disposal Act, as amended.
"Tax Affiliate" has the meaning set forth in Section 4.10(a).
I-7
<PAGE> 75
"Tax Returns" means federal, state, provincial, local and foreign tax
returns, reports, statements, declarations of elections, notices, filings and
information return in respect of Taxes along with any schedules or attachments
thereto.
"Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, capital and transfer,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax, surtaxes and other additional amounts imposed by
any taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (i) as a result of (A) being a "transferee" (within the meaning
of Section 6901 of the Code or any other applicable Law) of another Person, (B)
being a member of an affiliated, consolidated or combined group or (c) a
contractual arrangement or otherwise.
"Termination Date" shall mean the date of the occurrence of the
termination of employment of (or by) a Shareholder for any reason.
"Territory" has the meaning set forth in Section 8.3(c)(i).
"Third-Party Claim" has the meaning set forth in Section 10.3.
"Transactions means the transactions expressly contemplated by this
Agreement, including the Purchase, the Redemption, the EDS Transactions, the MTH
Transactions, the New Issuance, the Subscription, the Bank Financing, the
Contingent Payments and any subsequent payment to any Person who is a party to
any of the foregoing.
"Transaction Related Expenses" means all fees and expenses (i) incurred
or charged by the Investors and each of their advisors, including the fees and
expenses of O'Sullivan Graev & Karabell, LLP and (ii) incurred or charged by the
Company and each of its advisors, including the fees and expenses of Holland &
Hart LLP and Grant Thorton LLP, in each case, relating to the transactions
contemplated by this Agreement and the Related Documents (including the
financing of such transactions, the EDS Transactions and the MTH Transactions).
"Transition Period" has the meaning set forth in Section 8.1.
"UBS" means UBS Capital II LLC, a Delaware limited liability company.
"UK Subsidiary" means GDS, Ltd., a company of limited liability in
England on August 5, 1993 under the Companies Act 1985 as a private company,
whose registered office is at 61 Thames Street, Windsor, Berkshire, SL4 1QW,
United Kingdom.
"WISI" means WI Software Investors LLC, a Delaware limited liability
company.
"Work Product" shall mean all inventions, innovations, improvements,
technical information, systems, software developments, methods, designs,
analyses, drawings, reports, service marks, trademarks, tradenames, logos and
all similar or related information (whether patentable or unpatentable) which
relates to the Company's or any of its Subsidiaries' actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by the Shareholder (whether or not
during usual business hours and whether or not alone or in conjunction with any
other Person) while employed by the Company (including those conceived,
developed or made prior to the date of this Agreement) together with all patent
application, letters patent, trademark, tradename and service mark application
or registrations, copyrights and reissues thereof that may be granted for or
upon any of the foregoing.
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<PAGE> 76
SCHEDULE I
- --------------------------------------------------------------------------------
LIST OF INVESTORS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
SHARES PURCHASED SHARES PURCHASED CONSIDERATION PAID
PURCHASED FROM CONSIDERATION FROM THE TO TOTAL SHARES TOTAL CONSIDERATION % OF TOTAL
INVESTOR SHAREHOLDERS PAID COMPANY THE COMPANY PURCHASED PAID INVESTMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
InSight 6,628,142 $ 7,191,323.00 4,764,238 $ 5,169,020.60 11,392,380 $12,360,343.11 27.1384
- ------------------------------------------------------------------------------------------------------------------------------------
InSight Cayman 2,819,769 $ 3,059,360.00 2,325 $ 2,516.04 2,822,094 $ 3,061,875.02 6.7226
- ------------------------------------------------------------------------------------------------------------------------------------
InSight Co-Investor 0 $ 0.00 1,705,632 $ 1,850,552.87 1,705,632 $ 1,850,552.87 4.0603
- ------------------------------------------------------------------------------------------------------------------------------------
UBS 0 $ 0.00 15,920,076 $17,272,741.00 15,920,076 $17,272,741.00 37.9241
- ------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners II, L.P. 0 $ 0.00 1,577,569 $ 1,711,610.00 1,577,569 $ 1,711,610.00 3.7580
- ------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners II Offshore
L.P. 0 $ 0.00 816,918 $ 886,329.00 816,918 $ 886,329.00 1.9461
- ------------------------------------------------------------------------------------------------------------------------------------
GS Private Equity
Partners III, L.P. 0 $ 0.00 1,653,515 $ 1,794,008.00 1,653,515 $ 1,794,008.00 3.9389
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
SHARES
SHARES PURCHASED SHARES PURCHASED CONSIDERATION PAID
PURCHASED FROM CONSIDERATION FROM THE TO TOTAL SHARES TOTAL CONSIDERATION % OF TOTAL
INVESTOR SHAREHOLDERS PAID COMPANY THE COMPANY PURCHASED PAID INVESTMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
GS Private Equity
Partners III Offshore,
L.P. 0 $ 0.00 385,475 $ 418,227.00 385,475 $ 418,227.00 0.9182
- ------------------------------------------------------------------------------------------------------------------------------------
NBK/GS Private
Equity Partners, L.P. 0 $ 0.00 174,902 $ 189,763.00 174,902 $ 189,763.00 0.4166
- ------------------------------------------------------------------------------------------------------------------------------------
Imprimis 0 $ 0.00 1,843,376 $ 2,000,000.00 1,843,376 $ 2,000,000.00 4.3912
- ------------------------------------------------------------------------------------------------------------------------------------
WISI 0 $ 0.00 2,765,064 $ 3,000,000.00 2,765,064 $ 3,000,000.00 6.5868
- ------------------------------------------------------------------------------------------------------------------------------------
Stephen Friedman 0 $ 0.00 921,688 $ 1,000,000.00 921,688 $ 1,000,000.00 2.1956
- ------------------------------------------------------------------------------------------------------------------------------------
Total 9,447,911 $10,250,683.00 32,530,778 $35,294,767.51 41,978,689 $45,545,449.00 100%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GMJM Stock Partnership, Ltd. 2,412,621 2,412,621 $2,617,617 509,012 5,814,549 6,323,561
- ------------------------------------------------------------------------------------------------------------------------------------
Mark L. Epstein Trust 2,412,621 2,412,621 $2,617,617 509,012 5,814,549 6,323,561
- ------------------------------------------------------------------------------------------------------------------------------------
LEHE Family Partners, Ltd. 2,412,621 2,412,621 $2,617,617 509,012 5,814,549 6,323,561
- ------------------------------------------------------------------------------------------------------------------------------------
EAS Trust 196,319 196,319 $ 213,000 195,750 210,922 406,672
- ------------------------------------------------------------------------------------------------------------------------------------
RBS Trust 196,319 196,319 $ 213,000 195,750 210,922 406,672
- ------------------------------------------------------------------------------------------------------------------------------------
James E. Hargis 211,342 211,342 $ 229,299 210,729 0 210,729
- ------------------------------------------------------------------------------------------------------------------------------------
Scott M. Schley 779,312 779,312 $ 847,983 0 1,619,312 1,619,312
- ------------------------------------------------------------------------------------------------------------------------------------
Richard G. Godin 56,100 56,100 $ 60,867 55,938 0 55,938
- ------------------------------------------------------------------------------------------------------------------------------------
Barry J. Kemble 102,974 102,974 $ 111,723 102,675 113,719 216,394
- ------------------------------------------------------------------------------------------------------------------------------------
Bart E. Elliott 98,360 98,360 $ 106,717 98,075 103,395 201,470
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. VanDenover 73,632 73,632 $ 79,888 73,418 75,819 149,237
- ------------------------------------------------------------------------------------------------------------------------------------
Eugene P. Kindrachuk 48,718 48,718 $ 52,858 48,577 48,427 97,004
- ------------------------------------------------------------------------------------------------------------------------------------
Dean A. Zastava 48,718 48,718 $ 52,858 48,577 48,427 97,004
- ------------------------------------------------------------------------------------------------------------------------------------
John A. Ramseur 376,383 376,383 $ 408,364 375,292 400,742 776,034
- ------------------------------------------------------------------------------------------------------------------------------------
Terrence R. Burns 19,142 19,142 $ 20,768 19,086 0 19,086
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Leeser 766 766 $ 831 763 0 763
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------
(1) All new Preferred Shares received upon exchange for Common Shares
are being sold to the Investors for the Purchase Price set forth in the
adjacent column.
(2) Issuances of options instead of shares indicated by an asterisk(*).
(3) Includes the number of options indicated in the immediately preceding
column.
<PAGE> 79
<TABLE>
<CAPTION>
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Eric E. Westover 1,963 1,963 $ 2,130 1,958 2,108 4,066
- ------------------------------------------------------------------------------------------------------------------------------------
Tom Bannon 54,775 $ 59,640 54,775 54,775* 109,550
- ------------------------------------------------------------------------------------------------------------------------------------
Jeremy Bisset 18,831 $ 20,503 18,831 18,831* 37,662
- ------------------------------------------------------------------------------------------------------------------------------------
Kern Blackburn 1,901 $ 2,070 1,901 1,901* 3,803
- ------------------------------------------------------------------------------------------------------------------------------------
Charles R. Blanks 5,869 $ 6,390 5,869 5,869* 11,737
- ------------------------------------------------------------------------------------------------------------------------------------
Jeff Boevingloh 978 $ 1,065 978 978* 1,956
- ------------------------------------------------------------------------------------------------------------------------------------
David Bowman 19,562 $ 21,300 19,562 19,562* 39,125
- ------------------------------------------------------------------------------------------------------------------------------------
David Breining 1,901 $ 2,070 1,901 1,901* 3,803
- ------------------------------------------------------------------------------------------------------------------------------------
Kathy Broderick 3,912 $ 4,260 3,912 3,912* 7,825
- ------------------------------------------------------------------------------------------------------------------------------------
Chris Cushenberry 1,588 $ 1,730 1,588 1,588* 3,177
- ------------------------------------------------------------------------------------------------------------------------------------
Loretta L. Davis 9,441 $ 10,279 9,441 9,441* 18,882
- ------------------------------------------------------------------------------------------------------------------------------------
Bart E. Elliott 49,521 $ 53,919 49,521 49,521* 99,041
- ------------------------------------------------------------------------------------------------------------------------------------
Greg Foster 66,512 $ 72,420 66,512 66,512* 133,025
- ------------------------------------------------------------------------------------------------------------------------------------
Dale Frazier 22,008 $ 23,963 22,008 22,008* 44,016
- ------------------------------------------------------------------------------------------------------------------------------------
Andrew D. Gay 42,302 $ 46,059 42,302 42,302* 84,604
- ------------------------------------------------------------------------------------------------------------------------------------
Pat Giarritano 978 $ 1,065 978 978* 1,956
- ------------------------------------------------------------------------------------------------------------------------------------
Glenn Goodrich 1,588 $ 1,730 1,588 1,588* 3,177
- ------------------------------------------------------------------------------------------------------------------------------------
Adley D. Harms 12,594 $ 13,713 12,594 12,594* 25,189
- ------------------------------------------------------------------------------------------------------------------------------------
Ken Heitman 16,507 $ 17,973 16,507 16,507* 33,014
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas K. Helmer 23,596 $ 25,692 23,596 23,596* 47,193
- ------------------------------------------------------------------------------------------------------------------------------------
Randy Huston 19,562 $ 21,300 19,562 19,562* 39,125
- ------------------------------------------------------------------------------------------------------------------------------------
Jason Ihaia 1,565 $ 1,704 1,565 1,565* 3,130
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David W. Jones 2,543 $ 2,769 2,543 2,543* 5,086
- ------------------------------------------------------------------------------------------------------------------------------------
Jim Jones 978 $ 1,065 978 978* 1,956
- ------------------------------------------------------------------------------------------------------------------------------------
Ginger L. Juhl 35,212 $ 38,340 35,212 35,212* 70,425
- ------------------------------------------------------------------------------------------------------------------------------------
James Keane 39,125 $ 42,600 39,125 39,125* 78,250
- ------------------------------------------------------------------------------------------------------------------------------------
Barry J. Kemble 39,371 $ 42,868 39,371 39,371* 78,743
- ------------------------------------------------------------------------------------------------------------------------------------
Eugene P. Kindrachuk 32,278 $ 35,145 32,278 32,278* 64,556
- ------------------------------------------------------------------------------------------------------------------------------------
Cordelia S. Kirby 5,501 $ 5,990 5,501 5,501* 11,002
- ------------------------------------------------------------------------------------------------------------------------------------
James Kling 3,912 $ 4,260 3,912 3,912* 7,825
- ------------------------------------------------------------------------------------------------------------------------------------
Jennifer Krabbenhoeft 13,083 $ 14,245 13,083 13,083* 26,167
- ------------------------------------------------------------------------------------------------------------------------------------
Chris Lewis 9,781 $ 10,650 9,781 9,781* 19,562
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. Lonski 20,419 $ 22,233 20,419 20,419* 40,839
- ------------------------------------------------------------------------------------------------------------------------------------
Brian Martin 11,737 $ 12,780 11,737 11,737* 23,475
- ------------------------------------------------------------------------------------------------------------------------------------
Kathy McAllister 5,869 $ 6,390 5,869 5,869* 11,737
- ------------------------------------------------------------------------------------------------------------------------------------
Mark Merryman 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Paul Newell 9,781 $ 10,650 9,781 9,781* 19,562
- ------------------------------------------------------------------------------------------------------------------------------------
Patrick J. Noonan 14,429 $ 15,711 14,429 14,429* 28,859
- ------------------------------------------------------------------------------------------------------------------------------------
Milton Y. Omoto 9,586 $ 10,437 9,586 9,586* 19,171
- ------------------------------------------------------------------------------------------------------------------------------------
Rolland J. Pate 18,831 $ 20,503 18,831 18,831* 37,662
- ------------------------------------------------------------------------------------------------------------------------------------
Tim Peach 65,534 $ 71,355 65,534 65,534* 131,069
- ------------------------------------------------------------------------------------------------------------------------------------
Mike Peterson 978 $ 1,065 978 978* 1,956
- ------------------------------------------------------------------------------------------------------------------------------------
Mark Post 5,869 $ 6,390 5,869 5,869* 11,737
- ------------------------------------------------------------------------------------------------------------------------------------
Vicky Pierce 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bob Preis 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Gayle F. Robinson 1,588 $ 1,730 1,588 1,588* 3,177
- ------------------------------------------------------------------------------------------------------------------------------------
Charles M. Scott 11,006 $ 11,983 11,006 11,006* 22,012
- ------------------------------------------------------------------------------------------------------------------------------------
Martha Sievert 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
John Sullivan 7,848 $ 8,546 7,848 7,848* 15,697
- ------------------------------------------------------------------------------------------------------------------------------------
Michael Tao 31,300 $ 34,080 31,300 31,300* 62,600
- ------------------------------------------------------------------------------------------------------------------------------------
Randall D. Tidd 47,196 $ 51,388 47,196 47,196* 94,393
- ------------------------------------------------------------------------------------------------------------------------------------
Hahn Tram 13,694 $ 14,910 13,694 13,694* 27,387
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas E. VanDenover 145,533 $ 158,459 145,533 145,533* 291,067
- ------------------------------------------------------------------------------------------------------------------------------------
Martin Walls 50,620 $ 55,116 50,620 50,620* 101,240
- ------------------------------------------------------------------------------------------------------------------------------------
Eric Westover 11,370 $ 12,380 11,370 11,370* 22,739
- ------------------------------------------------------------------------------------------------------------------------------------
Roger Wielgus 1,588 $ 1,730 1,588 1,588* 3,177
- ------------------------------------------------------------------------------------------------------------------------------------
Paul J. Yarka 27,387 $ 29,820 27,387 27,387* 54,775
- ------------------------------------------------------------------------------------------------------------------------------------
Terry L. Yaryan 275,636 $ 300,117 275,636 275,636* 551,271
- ------------------------------------------------------------------------------------------------------------------------------------
Dean A. Zastava 19,684 $ 21,432 19,684 19,684* 39,368
- ------------------------------------------------------------------------------------------------------------------------------------
Minjian Zhou 782 $ 852 782 782* 1,565
- ------------------------------------------------------------------------------------------------------------------------------------
Adam Sicker 0 $ 0 0 0* 0
- ------------------------------------------------------------------------------------------------------------------------------------
Jay Lasiter 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Steve Brown 3,912 $ 4,260 3,912 3,912* 7,825
- ------------------------------------------------------------------------------------------------------------------------------------
Ruth Craven 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Stewart Cooper 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Cory Probasco 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
NEW POST-
COMMON PREFERRED COMMON CLOSING
SHARES SHARES PURCHASE REDEEMED REDEMPTION SHARES SHARES SHARES
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE RETAINED ISSUED(2) OPTIONS(3)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Kussie 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
Susan Chamberlain 1,956 $ 2,130 1,956 1,956* 3,912
- ------------------------------------------------------------------------------------------------------------------------------------
TOTALS 9,447,911 9,447,911 $10,253,135 1,389,024 $1,512,394 4,342,648 21,666,464 26,009,111
====================================================================================================================================
</TABLE>
<PAGE> 83
SCHEDULE III
Employment Agreement Terminations
Employee Consideration
Glenn E. Montgomery $813,383
Mark L. Epstein $813,383
Larry J. Engelken $813,383
<PAGE> 84
SCHEDULE IV
CONTINGENT PAYMENTS
<TABLE>
<CAPTION>
ADDITIONAL
PARTY PAYMENT DESCRIPTION
<S> <C> <C>
Glenn E. Montgomery $ 711,978 Deferred Compensation
- ------------------------------------------------------------------------------------------------------------------------
$ 492,000 Finance Fee paid in connection with the Recapitalization
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CONTINGENT PAYMENTS TO MONTGOMERY $1,203,978
- ------------------------------------------------------------------------------------------------------------------------
Mark L. Epstein $ 711,978 Deferred Compensation
- ------------------------------------------------------------------------------------------------------------------------
Larry J. Engelken $ 711,978 Deferred Compensation
- ------------------------------------------------------------------------------------------------------------------------
Murray T. Holland $ 100,000 Deferred Compensation
- ------------------------------------------------------------------------------------------------------------------------
$ 245,000 Finance Fee paid in connection with the Recapitalization
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CONTINGENT PAYMENTS TO HOLLAND $ 345,000
- ------------------------------------------------------------------------------------------------------------------------
Scott M. Schley $ 246,000 Finance Fee paid in connection with the Recapitalization.
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CONTINGENT PAYMENTS $3,218,934
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 85
INDEX OF ATTACHMENTS
--------------------
Annex I Definitions
Schedule I Investors
Schedule II Shareholders
Schedule III Employment Agreement Terminations
Schedule IV Contingent Payments
Schedule 1.6 Certain Funded Indebtedness
Schedule 4.1 Organization
Schedule 4.2 Equity Investments
Schedule 4.3 Capital Stock
Schedule 4.4 Approvals
Schedule 4.5 Authority
Schedule 4.6 Financial Statements
Schedule 4.7 Absence of Undisclosed Liabilities
Schedule 4.8 Absence of Changes
Schedule 4.9 Employment Agreements
Schedule 4.10 Tax Matters
Schedule 4.11 ERISA Compliance
Schedule 4.12 Title to Assets
Schedule 4.13 Real Property
Schedule 4.14 Intellectual Property
Schedule 4.15 Agreements
Schedule 4.16 Compliance with Laws
<PAGE> 86
Schedule 4.17 Litigation
Schedule 4.18 Insurance
Schedule 4.19 Labor Relations
Schedule 4.20 Environmental Matters
Schedule 4.21 Change in Control
Schedule 4.23 Conflicts of Interest
Schedule 4.24 Company Brokers
Schedule 4.25 Related Transaction
Schedule 4.27 Accounts and Notes Receivable
Schedule 4.29 Bank Accounts: Power of Attorney
Schedule 4.33 Post-Closing Ownership
Schedule 4.35 Prior Transactions
Schedule 5.5 Responsible Shareholder Brokers
Schedule 6.3 Investor Brokers
Schedule 10.1 Proportionate Percentages
Exhibit A EDS Option Agreement
Exhibit B MTH Option Agreement
Exhibit C Restated Charter
Exhibit D Small Business Sideletter
Exhibit E Deferred Payment Agreements
o Glenn L. Montgomery
o Mark L. Epstein
o Larry J. Engelken
o Scott M. Schley
o MTH
Exhibit F Stock Purchase and Redemption Agreement
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
================================================================================
STOCK PURCHASE AND REDEMPTION AGREEMENT
BY AND AMONG
CONVERGENT GROUP CORPORATION,
CERTAIN SHAREHOLDERS OF CONVERGENT GROUP CORPORATION,
SCOTT M. SCHLEY, AS THE SHAREHOLDERS' REPRESENTATIVE,
AND
THE INVESTORS NAMED HEREIN
AUGUST 13, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I.....................................................................1
I.1 Sale and Purchase of Purchased Shares..................................1
I.2 Redemption of Redeemed Shares..........................................2
I.3 Consideration..........................................................2
I.4 Delivery of Purchased Shares...........................................2
I.5 Delivery of Redeemed Shares............................................2
I.6 No Other Transaction: Release..........................................2
ARTICLE II RELATED MATTERS....................................................3
II.1 Stamp and Other Taxes................................................3
ARTICLE III CLOSING...........................................................3
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................3
IV.1 Authority; Noncontravention; Consents.................................3
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS..................4
V.1 Title to Shares........................................................4
V.2 Authority..............................................................4
V.3 Noncontravention.......................................................4
V.4 Consents...............................................................5
V.5 Brokers................................................................5
V.6 Information Statement, Sufficient Information..........................5
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE INVESTORS....................5
VI.1 Authority; Noncontravention; Consents.................................5
VI.2 Brokers...............................................................6
ARTICLE VII CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL
AGREEMENTS........................................................6
VII.1 Affirmative Covenants of the Shareholders............................6
VII.2 Consents.............................................................8
VII.3 Public Announcements.................................................8
VII.4 Shareholders' Representative.........................................8
VII.5 Release by Shareholders.............................................10
ARTICLE VIII MISCELLANEOUS PROVISIONS........................................11
VIII.1 Survival of Representations and Warranties.........................11
VIII.2 Indemnification....................................................11
VIII.3 Amendment..........................................................11
VIII.4 Entire Agreement...................................................11
VIII.5 Severability.......................................................12
VIII.6 No Third-Party Beneficiaries; Successors and Assigns...............12
VIII.7 Headings...........................................................12
VIII.8 Notices............................................................12
VIII.9 Counterparts.......................................................13
VIII.10 Governing Law.....................................................13
VIII.11 Incorporation of Exhibits and Schedules...........................14
VIII.12 Construction......................................................14
VIII.13 Non-Merger of Representations and Warranties......................14
VIII.14 Remedies; Specific Performance....................................14
VIII.15 Jurisdiction, Etc.................................................14
VIII.16 Waiver of Jury Trial..............................................15
VIII.17 Independence of Covenants and Representations and Warranties......15
</TABLE>
<PAGE> 3
STOCK PURCHASE AND REDEMPTION AGREEMENT
(as amended, modified or supplemented, this
"Agreement"), dated as of August 13, 1999, by
and among CONVERGENT GROUP CORPORATION, a
Delaware corporation (the "Company"), certain
shareholders of the Company listed on the
signature pages hereto (the "Shareholders"),
Scott M. Schley, solely in his capacity as the
Shareholders' Representative and the Investors
listed on Schedule I hereto (the "Investors").
RECITALS
Simultaneously with the execution and delivery of this Agreement, the
Company, the Investors and the other parties thereto are consummating the
transactions contemplated by that certain Recapitalization Agreement dated of
even date (the "Recapitalization Agreement"). As a condition to the Investors'
obligations to consummate the transactions contemplated by the Recapitalization
Agreement, the Investors desire that the parties hereto execute and deliver this
Agreement.
Prior to the date hereof, the Shareholders have authorized and approved
the Company's filing of the Restated Charter.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, the parties hereto hereby
agree as follows:
ARTICLE I
I.1 SALE AND PURCHASE OF PURCHASED SHARES.
(a) Immediately following the effectiveness of the Restated Charter, the
Shareholders identified on Schedule II shall exchange certain shares of New
Common Stock held by them for an equivalent number of shares of New Series A
Preferred Stock, and upon the terms and subject to the conditions set forth
herein, at the Closing the Shareholders identified on Schedule II hereto shall,
severally but not jointly, sell, transfer, convey and assign to the Investors,
that number of shares of New Series A Preferred Stock (the "Purchase") set forth
opposite such Shareholder's name on Schedule II (the "Purchased Shares").
(b) Subject to the terms and conditions hereof, each Investor shall
purchase from the Shareholders identified on Schedule II, severally but not
jointly, that number of Purchased Shares specified opposite such Investor's name
on Schedule I hereto, for an aggregate purchase price for all Investors of
$1,552,301 (the "Purchased Shares Consideration").
<PAGE> 4
I.2 REDEMPTION OF REDEEMED SHARES.
(a) The Company will have authorized before the Closing the redemption
of 1,389,024 shares of New Common Stock.
(b) Upon the terms and subject to the conditions set forth herein, at
the Closing the Shareholders identified on Schedule II hereto shall, severally
but not jointly sell, transfer, convey and assign to the Company, and the
Company shall redeem and purchase from such Shareholders (the "Redemption"),
that number of shares of New Common Stock (the "Redeemed Shares") set forth
opposite such Shareholder's name on Schedule II hereto. As payment for the
Redeemed Shares, the Company shall pay to the Shareholders by wire transfer or
check the amount set forth opposite each such Shareholder's name on Schedule II
hereto ($1,512,394 in the aggregate) (the "Redeemed Shares Consideration").
I.3 CONSIDERATION.
(a) The consideration to be paid to the Shareholders by the Investors
or the Company, as the case may be, shall be deemed to be good and sufficient
consideration for the Purchased Shares, the Redeemed Shares and the covenants
contained in Section 7.1(c) herein.
I.4 DELIVERY OF PURCHASED SHARES.
At the Closing, in consideration of the Investor's delivery of the
Purchased Shares Consideration, each Shareholder shall deliver to the Investors
a certificate or certificates representing the Purchased Shares owned by such
Shareholder as set forth on Schedule II, duly endorsed in blank for transfer or
accompanied by stock powers duly executed in blank, sufficient in form and
substance to convey to the Investors, good and marketable title to the Purchased
Shares free and clear of all Encumbrances.
I.5 DELIVERY OF REDEEMED SHARES.
At the Closing, in consideration of the Company's delivery of the
Redeemed Shares Consideration, each Shareholder shall deliver to the Company a
certificate or certificates representing the number of Redeemed Shares being
redeemed and purchased from each Shareholder, set forth on Schedule II, duly
endorsed in blank for transfer or accompanied by stock powers duly executed in
blank, sufficient in form and substance to convey to the Company, good and
marketable title to the Redeemed Shares free and clear of all Encumbrances.
I.6 NO OTHER TRANSACTIONS; RELEASE.
Each of the Shareholders party hereto agrees and acknowledges that as a
result of the Transactions, certain payments, consideration and benefits are
being provided to certain stockholders of the Company but not all stockholders
of the Company and that certain stockholders of the Company are receiving
different consideration, taken as a whole, for the sale of their shares of
capital stock of the Company than other Shareholders are receiving for the sale
of their shares of capital stock of the Company. The Shareholders party hereto
hereby release the Company, its Subsidiaries and the Investors, their
Affiliates, members, partners (including limited
-2-
<PAGE> 5
partners), officers, directors, employees, independent advisors and agents from
any claims, Losses, damages or costs arising from the Transactions, including
claims, Losses, damages or costs in connection with the fact that certain
Shareholders may be, taken as a whole, receiving disparate treatment in
connection with the Transactions.
ARTICLE II
RELATED MATTERS
II.1 STAMP AND OTHER TAXES.
The Company shall pay all stamp, filing and similar Taxes and fees
payable with respect to the transactions contemplated by this Agreement.
ARTICLE III
CLOSING
The closing of the Purchase, the Redemption and the other transactions
contemplated hereby (the "Closing") shall take place (a) at the offices of
O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York
10112, as promptly as practicable after satisfaction or waiver of the conditions
set forth in Article IX in accordance with this Agreement or (b) at such other
place, time and date as the Investors and the Company may agree in writing. The
date and time of such Closing are referred to herein as the "Closing Date".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Shareholders as
follows:
IV.1 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary action on the part of the Company; and this
Agreement has been duly and validly executed and delivered by it, and this
Agreement is the valid and binding obligation of the Company, enforceable
against it in accordance with its terms, except as enforceability thereof may be
limited by any applicable bankruptcy, reorganization, insolvency or other Laws
affecting creditors rights generally or by general principles of equity.
(b) Neither the execution, delivery and performance of this Agreement
nor the consummation by the Company of the transactions contemplated hereby will
(i) conflict with, or result in any violation of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any benefit under, or result in the creation of any
Encumbrance upon any of the properties or assets of the Company under any term,
condition or
-3-
<PAGE> 6
provision of (x) the Company's certificate or articles of incorporation or
bylaws or (y) any Contract to which the Company is a party or by which its
properties or assets are bound, (ii) result in any investigatory, remedial or
reporting obligation under any environmental and safety requirement or (iii)
violate any Laws applicable to the Company or any of its properties.
(c) Except as is expressly contemplated by this Agreement, no consent,
approval, Order or authorization of, registration, declaration or filing with,
or notification to any Governmental Entity or any other third party is required
in connection with the execution, delivery and performance by the Company of
this Agreement or the consummation by the Company of the transactions
contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants severally (as to
himself or herself and not as to any other Shareholder) to the Investors and the
Company as follows:
V.1 TITLE TO SHARES.
Such Shareholder is the lawful owner, of record and beneficially, of the
shares of Common Stock being sold, transferred, conveyed and assigned by it, him
or her hereunder pursuant to each of the Purchase and the Redemption and has
good and marketable title to such shares, free and clear of any Encumbrances
whatsoever and with no restrictions on the voting rights and other incidents of
record and beneficial ownership pertaining thereto. There are no agreements
between such Shareholder and any other Person with respect to voting of, or any
other matters pertaining to, the capital stock of the Company.
V.2 AUTHORITY.
Such Shareholder has full and absolute legal right, capacity, power and
authority to enter into this Agreement and the Related Documents to which such
Shareholder is a party, and this Agreement is, and the Related Documents to
which such Shareholder is a party, when executed and delivered by such
Shareholder as contemplated hereby, will be, the valid and binding obligation of
such Shareholder, enforceable against such Shareholder in accordance with their
respective terms, except as enforceability thereof may be limited by any
applicable bankruptcy, reorganization, insolvency or other Laws affecting
creditors rights generally or by general principles of equity.
V.3 NONCONTRAVENTION.
Neither the execution, delivery and performance of this Agreement and
the Related Documents to which it, he or she is a party nor the consummation of
the transactions contemplated hereby or thereby nor compliance by such
Shareholder with any of the provisions hereof or thereof will (i) conflict with,
or result in any violations of, or cause a default (with or
-4-
<PAGE> 7
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligations
contained in or the loss of any benefit under any term, condition or provision
of: (x) such Shareholder's organizational or constating documents or (y) any
Contract to which such Shareholder is a party, or by which such Shareholder or
any of its, his or her properties may be bound or (ii) violate any Law
applicable to such Shareholder or any of its, his or her properties, which in
the case of either clause (i) or (ii) could prevent the consummation of the
transactions contemplated by this Agreement.
V.4 CONSENTS.
Except as specified in this Agreement, no Permit, Order, authorization,
consent or approval of or by, or any notification of or filing with, any Person
(governmental or private) is required in connection with the execution, delivery
and performance by such Shareholder of this Agreement and the Related Documents
to which he or she is a party or the consummation by such Shareholder of the
transactions contemplated hereby or thereby.
V.5 BROKERS.
Such Shareholder has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement or the Related Documents.
V.6 INFORMATION STATEMENT; SUFFICIENT INFORMATION.
Such Shareholder has received and read the Information Statement (the
"Information Statement") and has asked such additional questions and received
such additional information from the Company relating to the Transactions and
other relevant matters (including, without limitation, additional information to
verify the accuracy of the information set forth in the Information Statement)
as such Shareholder deems necessary in connection with his or her consummation
of the transactions contemplated therein and in this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor represents and warrants to the Shareholders severally (as
to itself and not as to any other Investor) as follows:
VI.1 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby has been duly and validly
authorized by all necessary action on the part of such Investor; and this
Agreement has been duly and validly executed and delivered by such Investor and
this Agreement is, the valid and binding obligations of such Investor,
enforceable against such Investor in accordance with its terms, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors rights generally or
by general principles of equity.
-5-
<PAGE> 8
(b) Neither the execution, delivery and performance of this Agreement,
nor the consummation by such Investor of the transactions contemplated hereby
will (i) conflict with, or result in any violation of, or cause a default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any benefit under, or result in the creation of any
Encumbrance upon any of the properties or assets of such Investor under any
term, condition or provision of (x) such Investor's constating or governing
documents or (y) any Contract to which such Investor is a party or by which its
properties or assets are bound or (ii) violate any Laws applicable to such
Investor.
(c) No consent, approval, Order or authorization of, registration,
declaration or filing with, or notification to any Governmental Entity or any
other third party is required in connection with the execution, delivery and
performance by such Investor of this Agreement or the consummation of the
transactions contemplated hereby.
VI.2 BROKERS.
Except as set forth on Schedule 6.2 such Investor has not employed any
broker or finder or incurred any Liability for any brokerage fees, commissions
or finders' fees in connection with the transactions contemplated by this
Agreement.
ARTICLE VII
CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL AGREEMENTS
VII.1 AFFIRMATIVE COVENANTS OF THE SHAREHOLDERS.
From and after the Closing Date, each Shareholder:
(a) shall not disclose or use at any time, either during his or her
employment period or thereafter, any Confidential Information of which such
Shareholder is or becomes aware, whether or not such information is developed by
him or her, except to the extent that such disclosure or use is directly related
to and required by such Shareholder's performance of duties assigned to the him
or her by the Company or any Subsidiary;
(b) agrees that all Work Product belongs to the Company or any
Subsidiary. Such Shareholder will promptly disclose such Work Product to the
Company and perform all actions reasonably requested by the Company (whether
during or after the employment period) to establish and confirm such ownership
(including, without limitation, the execution and delivery of assignments,
consents, powers of attorney and other instruments) and to provide reasonable
assistance to the Company or any Subsidiary in connection with the prosecution
of any applications for patents, trademarks, trade names, service marks or
reissues thereof or in the prosecution or defense of interferences relating to
any Work Product;
(c) acknowledges and agrees with the Company that during the course of
such Shareholder's employment with the Company or any Subsidiary, such
Shareholder has had and
-6-
<PAGE> 9
will continue to have the opportunity to develop relationships with existing
employees, customers and other business associates of the Company and its
Subsidiaries which relationships constitute goodwill of the Company and its
Subsidiaries, and the Company and its Subsidiaries would be irreparably damaged
if such Shareholder were to take actions that would damage or misappropriate
such goodwill and accordingly agrees as follows:
(i) Such Shareholder acknowledges that the Company and its
Subsidiaries currently conduct the Subject Business throughout the world
(the "Territory"). Accordingly, during the Non-Compete Period, such
Shareholder shall not, directly or indirectly, enter into, engage in,
assist, give or lend funds to or otherwise finance, be employed by or
consult with, or have a financial or other interest in, any business
which engages in the Subject Business in the Territory, whether for or
by himself or herself or as an independent contractor, agent,
stockholder, partner or joint venturor for any other Person. As used in
this Agreement, "Non-Compete Period" means the period beginning on the
Closing Date and ending: upon the termination of such shareholder's
employment with the Company for any reason. To the extent that the
covenant provided for in this Section 7.1(c)(i) may later be deemed by
a court to be too broad to be enforced with respect to its duration or
with respect to any particular activity or geographic area, the court
making such determination shall have the power to reduce the duration or
scope of this Section 7.1(c)(i), and to add or delete specific words or
phrases. This Section 7.1(c)(i) as modified shall then be enforced.
(ii) Notwithstanding Section 7(c)(i), the aggregate ownership by
a Shareholder of no more than two percent (on a fully-diluted basis) of
the outstanding equity securities of any Person, which securities are
traded on a national or foreign securities exchange, quoted on the
NASDAQ Stock Market or other automated quotation system, and which
Person competes with the Company (or any part thereof) within the
Territory, shall not be deemed to be a violation of Section 7(c)(i). In
the event that any Person in which a Shareholder has any financial or
other interest directly or indirectly enters into a line of business
during the Non-Compete Period that competes with the Company within the
Territory, such Shareholder shall divest all of his or her interest
(other than as permitted to be held pursuant to the first sentence of
this Section 7.1(c)(ii)) in such Person within 15 days after such
Person enters into such line of business that competes with the Company
within the Territory.
(iii) Such Shareholder covenants and agrees that during the
Non-Compete Period, such Shareholder will not, directly or indirectly,
either for himself or herself or for any other Person (A) solicit any
employee of the Company or any of its Subsidiaries to terminate his or
her employment with the Company or any of its Subsidiaries or employ any
such individual during his or her employment with the Company or any of
its Subsidiaries and for a period of one year after such individual
terminates his or her employment with the Company or any of its
Subsidiaries, (B) solicit any customer of the Company or any of its
Subsidiaries to purchase products or services of or on behalf of such
Shareholder or such other Person that are competitive with the products
or services provided by the Company or any of its Subsidiaries, or (c)
take any action that may cause injury to the relationships between the
Company or any of its Subsidiaries or any of their
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<PAGE> 10
employees and any lessor, lessee, vendor, supplier, customer,
distributor, employee, consultant or other business associate of the
Company or any of its Subsidiaries as such relationship relates to the
Company's or any of its Subsidiaries' conduct of their business.
(d) Such Shareholder understands that the foregoing restrictions may
limit his or her ability to earn a livelihood in a business similar to the
business of the Company and any of its Subsidiaries, but he or she nevertheless
believes that he or she has received and will receive sufficient consideration
and other benefits as an employee of the Company and as otherwise provided
hereunder to clearly justify such restrictions which, in any event (given his or
her education, skills and ability), he or she does not believe would prevent him
or her from otherwise earning a living.
(e) Such Shareholder shall deliver to the Company at the termination
of his or her employment period or at any time the Company may request all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, Work Product or the Subject Business which he or she may then
possess or have under his or her control regardless of the location or form of
such material and, if requested by the Company, will provide the Company with
written confirmation that all such materials have been delivered to the Company.
VII.2 CONSENTS.
Each party shall use its best efforts, and the other parties shall
cooperate with such efforts, to obtain any consents and approvals of, or effect
the notification of or filing with, each Person or authority, whether private or
governmental, whose consent or approval is required in order to permit the
consummation of the transactions contemplated hereby.
VII.3 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (i) as otherwise required by Law
(including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976) and
(ii) for disclosure to its respective directors, officers, employees, financial
advisors, potential financing sources, legal counsel, independent certified
public accountants or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential relationship, it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement, the Related Documents or the transactions contemplated hereby or
thereby, without the prior written consent of the Company, the Shareholders'
Representative or the Investors, as the case may be, which consent shall not
unreasonably be withheld or delayed.
VII.4 SHAREHOLDERS' REPRESENTATIVE.
The Shareholders agree among themselves (without prejudice to or
affecting in any way the rights provided in this Agreement or otherwise to the
Company or any Investor) as follows:
(a) Appointment. The Shareholders, for themselves and their personal
representatives and other successors, hereby constitute and appoint Scott M.
Schley, as their agent (the "Shareholders' Representative"), with full power and
authority, except as otherwise
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<PAGE> 11
expressly provided in this Agreement, in the name of and for and on behalf of
the Shareholders, to take all action required or permitted under this Agreement
or any of the Related Documents (including, without limitation, the giving and
receiving of all accountings, reports, notices, waivers and consents). In the
event of the death, physical or mental incapacity or resignation of Scott M.
Schley or any successor Shareholders' Representative, the Shareholders
Representative as appointed pursuant to the Recapitalization Agreement shall be
appointed as the substitute Shareholders' Representative hereunder. The
authority conferred under this Section 7.5(a) is an agency coupled with an
interest and all authority conferred hereby is irrevocable and not subject to
termination by the Shareholders or by the Shareholders' Representative or by
operation of Law, whether by the death or incapacity of any Shareholder, the
termination of any trust or estate or the occurrence of any other event. If any
Shareholder should die or become incapacitated, if any trust or estate should
terminate or if any other such event should occur, any action taken by the
Shareholders' Representative pursuant to this Section 7.5(a) shall be as valid
as if such death or incapacity, termination or other event had not occurred,
regardless of whether or not any Person shall have received notice of such
death, incapacity, termination or other event.
(b) Reliance by Shareholders' Representative. The Shareholders'
Representative shall be entitled to rely, and shall be fully protected in
relying, upon any statements furnished to him by any Person or any other
evidence deemed by the Shareholders' Representative to be reasonably reliable,
and the Shareholders' Representative shall be entitled to act on the advice of
counsel selected by him. The Shareholders' Representative shall be fully
justified in failing or refusing to take any action under this Agreement unless
he shall have received such advice or concurrence of the Shareholders as he
deems appropriate or he shall have been expressly indemnified to his
satisfaction by the Shareholders severally according to their respective
Shareholder Percentages against any and all Liability and expense that the
Shareholders' Representative may incur by reason of taking or continuing to take
any such action. The Shareholders' Representative shall in all cases be fully
protected in acting, or refraining from acting, under this Agreement in
accordance with a request of Shareholders whose aggregate Shareholder
Percentages equal or exceed 50%, and such request, and any action taken or
failure to act pursuant thereto, shall be binding upon all of the Shareholders.
(c) Expenses of Shareholders' Representative. The Shareholders'
Representative shall be entitled to retain counsel and to incur such expenses
(including litigation expenses) as the Shareholders' Representative deems to be
necessary or appropriate in connection with his performance of his obligations
under this Agreement. All such fees and expenses (including reasonable
attorneys' fees) incurred by the Shareholders' Representative prior to the
Closing shall be borne by the Company, and all such fees and expenses (including
reasonable attorneys' fees) incurred by the Shareholders' Representative after
the Closing shall be borne by the Shareholders severally according to their
respective Shareholder Percentages.
(d) Indemnification. The Shareholders hereby agree severally to
indemnify the Shareholders' Representative (in his capacity as such) ratably
according to their respective Shareholder Percentages against, and to hold the
Shareholders' Representative (in his capacity as such) harmless from, any and
all Liabilities, Losses, penalties, actions, judgments, suits, costs, expenses
or disbursements of whatever kind which may at any time be imposed upon,
incurred by or asserted against the Shareholders' Representative in such
capacity in any way relating to or
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<PAGE> 12
arising out of his action or failure to take action pursuant to this Agreement
or in connection herewith or therewith in such capacity; provided, however, that
no Shareholder shall be liable for the payment of any portion of such
Liabilities, Losses, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting solely from the gross negligence or willful misconduct
of the Shareholders' Representative as determined by a final decision of a court
of competent jurisdiction no longer subject to appeal. The agreements in this
paragraph shall survive the termination of this Agreement.
(e) No Personal Liability. Except for liability to the Shareholders
resulting solely from his gross negligence or willful misconduct as determined
by a final decision of a court of competent jurisdiction no longer subject to
appeal, the Shareholders' Representative shall have no liability to any Person
as a result of his status as the Shareholders' Representative.
VII.5 RELEASE BY SHAREHOLDERS.
(a) Anything contained herein to the contrary notwithstanding, upon
receipt by each Shareholder of the consideration to be received by such
Shareholder pursuant to Section 1., each such Shareholder hereby agrees, solely
in his or her capacity as a shareholder of the Company, and not as an employee
or in any other capacity, that (without any further action on the part of such
Shareholder) the Company (for the benefit of the Company, the Investors and
their respective parents, subsidiaries, Affiliates, divisions and predecessors
and their past and present directors, officers, employees and agents, and each
of their respective successors, heirs, assigns, executors and administrators
(collectively, the "Released Persons")) shall be irrevocably released and
forever discharged of and from all manner of action and actions, cause and
causes of action, suits, rights, debts, dues, sums of money, accounts, bonds,
bills, covenants, Contracts, controversies, omissions, promises, variances,
trespasses, damages, liabilities, judgments, executions, claims and demands
whatsoever, in law or in equity which against the Released Persons such
Shareholder ever had, now has or which he or it hereafter can, shall or may
have, whether known or unknown, suspected or unsuspected, matured or unmatured,
fixed or contingent, for, upon or by reason of any matter or cause relating to
such Shareholder's interest as a shareholder in the Company and arising at any
time on or prior to the Closing, including the consummation of the Transactions.
(b) Each Shareholder specifically represents and warrants to the
Released Persons that he or it has not assigned any such claim set forth in
paragraph (a) above, and agrees to indemnify and hold harmless the Released
Persons from and against any and all Losses arising from or in any way related
to (i) any such assignment, and (ii) any action by any third party arising from
or in any way related to the relationship among such Shareholders and the
Released Persons, which is the subject of this Section 7.6.
(c) Covenant Not to Sue. Each Party hereto hereby covenants, that
after execution of this Agreement and the consummation of the Transactions, he,
she or it shall not commence any action, lawsuit or other Proceeding in law or
in equity, or otherwise, based upon any claim, demand, Loss, cause of action or
Liability, which is released herein. However, nothing contained herein shall
prevents any Party from commencing any action to enforce any breach of any
obligation assumed by another Party hereto under this Agreement or the Related
Documents
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<PAGE> 13
Should any Party, at any time after the Parties execute this Agreement, commence
any action, lawsuit or other Proceeding, in law or in equity or otherwise, in
breach of the covenant not to sue contained in this Section 7.6(c), such Party
shall indemnify and hold harmless the other Parties to such action, lawsuit or
other Proceeding from and against any Liability, Loss, cost, expense or
judgement arising out of or occasioned by such action, including, but not
limited to, the amount or any judgement or settlement entered into in resolution
of said action and attorney's fees.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
VIII.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties contained in this Agreement shall
survive the Closing of the transactions contemplated by this Agreement
indefinitely.
VIII.2 INDEMNIFICATION.
(a) Each Shareholder who is receiving any portion of the Redeemed
Shares Consideration shall, severally and not jointly, indemnify and hold the
Company harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including reasonable legal fees
and expenses), relating to or arising from the untruth, inaccuracy or breach of
any of the representations, warranties, covenants, or agreements of such
Shareholder contained in this Agreement.
(b) Each Shareholder who is receiving any portion of the Purchased
Shares Consideration shall, severally and not jointly, indemnify and hold the
Investors harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including reasonable legal fees
and expenses), relating to or arising from the untruth, inaccuracy or breach of
any of the representations, warranties, covenants, or agreements of such
Shareholder contained in this Agreement.
VIII.3 AMENDMENT.
This Agreement may not be amended except by an instrument in writing
signed by the Investors' Representative, the Shareholders' Representative and
the Company.
VIII.4 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the Schedules and the Exhibits (in their
executed form) attached hereto) contain all of the agreements among the parties
hereto with respect to the transactions contemplated hereby and supersede all
prior agreements or understandings among the parties with respect thereto
(including, but not limited to, the letter of intent dated as of June 23, 1999,
as amended, among the Investors' Representative and the Company).
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<PAGE> 14
VIII.5 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
VIII.6 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
Except as expressly provided herein, this Agreement shall not confer any
rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, representatives, heirs and estates, as the
case may be. This Agreement shall not be assignable by the Company or the
Shareholders without the consent of the Investors' Representative.
VIII.7 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
VIII.8 NOTICES.
All notices or other communications pursuant to this Agreement shall be
in writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to the Company or any Shareholder, to:
Convergent Group Corporation
6200 South Syracuse Way
Suite 200
Englewood, Colorado 80111
Attention: Glenn E. Montgomery
with a copy to:
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<PAGE> 15
Holland & Hart, LLP
555 Seventeenth Street
Suite 3200
Denver, Colorado 80202
Attention: Kevin S. Crandell, Esq.
if to the Shareholders' Representative:
Scott M. Schley
15952 Parkside Drive
Parker, Colorado 80134
(b) if to any Investor:
InSight Capital Partners, III, L.P.
527 Madison Avenue
10th Floor
New York, New York 10022
Attention: Jerry Murdock
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Ilan S. Nissan, Esq.
All such notices and other communications shall be deemed to have been given and
received (d) in the case of personal delivery, on the date of such delivery, (e)
in the case of delivery by telecopy, on the date of such delivery, (f) in the
case of delivery by nationally-recognized, overnight courier, on the Business
Day following dispatch, and (g) in the case of mailing, on the third Business
Day following such mailing.
VIII.9 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
VIII.10 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
Laws of the State of New York without giving effect to any choice or conflict of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the Laws of any jurisdiction
other than the State of New York.
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<PAGE> 16
VIII.11 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof. Any disclosure made in any Schedule
to this Agreement which should, based on the substance or such disclosure, be
applicable to another Schedule to this Agreement shall be deemed to be made with
respect to such other Schedule regardless of whether or not a specific reference
is made thereto; provided, that the description of such item on a Schedule is
such that the Investors can reasonably ascertain that such disclosure relates to
such other provision of this Agreement.
VIII.12 CONSTRUCTION.
Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict constitution shall be applied against any party.
VIII.13 NON-MERGER OF REPRESENTATIONS AND WARRANTIES.
Except as otherwise expressly provided in this Agreement, the covenants,
representations and warranties shall not merge on and shall survive the Closing
in accordance with the express terms of this Agreement, notwithstanding the
Closing or any investigation made by or on behalf of any party, and shall
continue in full force and effect. The Closing shall not prejudice any right of
one party against any other party in respect of anything done or omitted under
this Agreement or in respect of any right to damages or other remedies.
VIII.14 REMEDIES; SPECIFIC PERFORMANCE.
The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
VIII.15 JURISDICTION, ETC.
(a) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or federal court of the United States
of America sitting in the State of New York, and any appellate court from any
thereof, in any action or proceeding arising out of or relating to this
Agreement or any Related Document or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by
-14-
<PAGE> 17
suit on the judgment or in any other manner provided by Law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement in the courts of any
jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any Related
Document in any New York State or federal court. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by Law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
VIII.16 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
VIII.17 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder. The Exhibits and Schedules attached
hereto are hereby made part of this Agreement in all respects.
* * *
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<PAGE> 18
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first written above.
CONVERGENT GROUP CORPORATION
By: /s/ GLENN E. MONTGOMERY, JR.
--------------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
SHAREHOLDERS' REPRESENTATIVE
By: /s/ SCOTT M. SCHLEY
--------------------------------------
Name: Scott M. Schley
INVESTORS' REPRESENTATIVE
INSIGHT CAPITAL PARTNERS III, L.P.
(Solely in respect of its obligations
as the Investors' Representative)
By: InSight Venture Associates III, L.L.C.
its General Partner
By: /s/ JERRY MURDOCK
--------------------------------------
Name:
Title:
<PAGE> 19
INVESTORS:
INSIGHT CAPITAL PARTNERS III, L.P.
By: InSight Venture Associates III, L.L.C.
its General Partner
By: /s/ JERRY MURDOCK
------------------------------------
Name:
Title:
INSIGHT CAPITAL PARTNERS III
(CAYMAN), L.P.
By: InSight Venture Associates III, L.L.C.
its General Partner
By: /s/ JERRY MURDOCK
------------------------------------
Name:
Title:
<PAGE> 20
INSIGHT CAPITAL PARTNERS III (CO-
INVESTORS), L.P.
By: InSight Venture Associates III,
L.L.C., its General Partner
By: /s/ JERRY MURDOCK
--------------------------------
Name:
Title:
UBS CAPITAL II LLC
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
Title:
By: /s/ [ILLEGIBLE]
--------------------------------
Name:
Title:
WI SOFTWARE INVESTORS LLC
By: Wexford Management LLC, its
investment manager
By: /s/ ROBERT HOLTZ
--------------------------------
Name: Robert Holtz
Title: Vice President
IMPRIMIS SB LP
By: Imprimis GP LLC, its General
Partner
By: /s/ ROBERT HOLTZ
--------------------------------
Name: Robert Holtz
Title: Vice President
<PAGE> 21
GS PRIVATE EQUITY PARTNERS II, L.P.
By: GS PEP II Advisors, L.L.C., General Partner
By: GSAM Gen-Par, L.L.C., Managing Member
By: /s/ DAVID B. FORD
---------------------------
Name: David B. Ford
Title: Director
GS PRIVATE EQUITY PARTNERS II
OFFSHORE, L.P.
By: GS PEP II Offshore Advisors, Inc., General
Partner
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
Title: Director
GS PRIVATE EQUITY PARTNERS III, L.P.
By: GS PEP III Advisors, L.L.C., General Partner
By: GSAM Gen-Par, L.L.C., Managing Member
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
Title: Director
GS PRIVATE EQUITY PARTNERS III
OFFSHORE, L.P.
By: GS PEP III Offshore Advisors, Inc., General
Partner
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
Title: Director
<PAGE> 22
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
By: GS PEP Offshore Advisors (NBK), Inc.,
General Partner
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
Title: Director
--------------------------
Stephen Friedman
--------------------------
Charles A. Davis
<PAGE> 23
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
By: GS PEP Offshore Advisors (NBK), Inc.,
General Partner
By:
---------------------------------
Name:
Title:
/s/ STEPHEN FRIEDMAN
------------------------------------
Stephen Friedman
[SIGNATURE PAGE TO THE STOCK PURCHASE AND REDEMPTION AGREEMENT]
<PAGE> 24
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder James E. Hargis
------------------------------
Signature of Shareholder /s/ James E. Hargis
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Thomas W. Bannon
------------------------------
Signature of Shareholder /s/ Thomas W. Bannon
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Jeremy Bisset
------------------------------
Signature of Shareholder /s/ Jeremy Bisset
-------------------------
Date
----------------------------------------------
<PAGE> 25
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Kern Blackburn
------------------------------
Signature of Shareholder /s/ Kern Blackburn
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Charles Blanks
------------------------------
Signature of Shareholder /s/ Charles Blanks
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Jeffrey Boevingloh
------------------------------
Signature of Shareholder /s/ Jeffrey Boevingloh
-------------------------
Date
----------------------------------------------
<PAGE> 26
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder David Bowman
------------------------------
Signature of Shareholder /s/ David Bowman
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder David Breining
------------------------------
Signature of Shareholder /s/ David Breining
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Kathryn A. Broderick
------------------------------
Signature of Shareholder /s/ Kathryn A. Broderick
-------------------------
Date
----------------------------------------------
<PAGE> 27
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Susan Chamberlain
------------------------------
Signature of Shareholder /s/ Susan Chamberlain
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Thomas E. VanDenover
------------------------------
Signature of Shareholder /s/ Thomas E. VanDenover
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Stewart Cooper
------------------------------
Signature of Shareholder /s/ Stewart Cooper
-------------------------
Date
----------------------------------------------
<PAGE> 28
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Ruth Craven
------------------------------
Signature of Shareholder /s/ Ruth Craven
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Loretta L. Davis
------------------------------
Signature of Shareholder /s/ Loretta L. Davis
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Dale Frazier
------------------------------
Signature of Shareholder /s/ Dale Frazier
-------------------------
Date
----------------------------------------------
<PAGE> 29
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Andrew D. Gay
------------------------------
Signature of Shareholder /s/ Andrew D. Gay
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Pat Giarritano
------------------------------
Signature of Shareholder /s/ Pat Giarritano
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Glenn Goodrich
------------------------------
Signature of Shareholder /s/ Glenn Goodrich
-------------------------
Date
----------------------------------------------
<PAGE> 30
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Adley D. Harms
------------------------------
Signature of Shareholder /s/ Adley D. Harms
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Thomas K. Helmer
------------------------------
Signature of Shareholder /s/ Thomas K. Helmer
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Victor R. Huston
------------------------------
Signature of Shareholder /s/ Victor R. Huston
-------------------------
Date
----------------------------------------------
<PAGE> 31
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder David Jones
------------------------------
Signature of Shareholder /s/ David Jones
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Jim Jones
------------------------------
Signature of Shareholder /s/ Jim Jones
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Ginger Juhl
------------------------------
Signature of Shareholder /s/ Ginger Juhl
-------------------------
Date
----------------------------------------------
<PAGE> 32
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder James Keane
------------------------------
Signature of Shareholder /s/ James Keane
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Cordelia S. Kirby
------------------------------
Signature of Shareholder /s/ Cordelia S. Kirby
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Jennifer Krabbenhoeft
------------------------------
Signature of Shareholder /s/ Jennifer Krabbenhoeft
-------------------------
Date
----------------------------------------------
<PAGE> 33
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder David Kussie
------------------------------
Signature of Shareholder /s/ David Kussie
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Chris Lewis
------------------------------
Signature of Shareholder /s/ Chris Lewis
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Thomas E. Lonski
------------------------------
Signature of Shareholder /s/ Thomas E. Lonski
-------------------------
Date
----------------------------------------------
<PAGE> 34
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Brian Martin
------------------------------
Signature of Shareholder /s/ Brian Martin
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Kathy McAllister
------------------------------
Signature of Shareholder /s/ Kathy McAllister
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Mark Merrymah
------------------------------
Signature of Shareholder /s/ Mark Merrymah
-------------------------
Date
----------------------------------------------
<PAGE> 35
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Paul Newell
------------------------------
Signature of Shareholder /s/ Paul Newell
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Patrick Noonan
------------------------------
Signature of Shareholder /s/ Patrick Noonan
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Milton Omoto
------------------------------
Signature of Shareholder /s/ Milton Omoto
-------------------------
Date
----------------------------------------------
<PAGE> 36
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Roland J. Pate
------------------------------
Signature of Shareholder /s/ Roland J. Pate
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Mike Peterson
------------------------------
Signature of Shareholder /s/ Mike Peterson
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Vicky Pierce
------------------------------
Signature of Shareholder /s/ Vicky Pierce
-------------------------
Date
----------------------------------------------
<PAGE> 37
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Mark Post
------------------------------
Signature of Shareholder /s/ Mark Post
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Cory Probasco
------------------------------
Signature of Shareholder /s/ Cory Probasco
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Gayle F. Robinson
------------------------------
Signature of Shareholder /s/ Gayle F. Robinson
-------------------------
Date
----------------------------------------------
<PAGE> 38
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Martha Sievert
------------------------------
Signature of Shareholder /s/ Martha Sievert
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder John Sullivan
------------------------------
Signature of Shareholder /s/ John Sullivan
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Michael Tao
------------------------------
Signature of Shareholder /s/ Michael Tao
-------------------------
Date
----------------------------------------------
<PAGE> 39
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Randall D. Tidd
------------------------------
Signature of Shareholder /s/ Randall D. Tidd
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Hahn Tram
------------------------------
Signature of Shareholder /s/ Hahn Tram
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Martin Walls
------------------------------
Signature of Shareholder /s/ Martin Walls
-------------------------
Date
----------------------------------------------
<PAGE> 40
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Roger Wielgus
------------------------------
Signature of Shareholder /s/ Roger Wielgus
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Paul J. Yarka
------------------------------
Signature of Shareholder /s/ Paul J. Yarka
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Terry L. Yaryan
------------------------------
Signature of Shareholder /s/ Terry L. Yaryan
-------------------------
Date
----------------------------------------------
<PAGE> 41
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Richard G. Godin
------------------------------
Signature of Shareholder /s/ Richard G. Godin
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Mark Epstein
------------------------------
Signature of Shareholder /s/ Mark Epstein
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Thomas E. VanDenover
------------------------------
Signature of Shareholder /s/ Thomas E. VanDenover
-------------------------
Date
----------------------------------------------
<PAGE> 42
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Bart E. Elliott
------------------------------
Signature of Shareholder /s/ Bart E. Elliott
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Barry J. Kemble
------------------------------
Signature of Shareholder /s/ Barry J. Kemble
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Eugene P. Kindrachuk
------------------------------
Signature of Shareholder /s/ Eugene P. Kindrachuk
-------------------------
Date
----------------------------------------------
<PAGE> 43
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Dean A. Zastava
------------------------------
Signature of Shareholder /s/ A. Zastava
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder John A. Ramseur
------------------------------
Signature of Shareholder /s/ John A. Ramseur
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Richard Leeser
------------------------------
Signature of Shareholder /s/ Richard Leeser
-------------------------
Date
----------------------------------------------
<PAGE> 44
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Terence R. Burns
------------------------------
Signature of Shareholder /s/ Terence R. Burns
-------------------------
Date
----------------------------------------------
SHAREHOLDERS:
Stock Purchase Redemption Agreement
Name of Shareholder Thomas E. VanDenover
------------------------------
Signature of Shareholder /s/ Thomas E. VanDenover
-------------------------
Date
----------------------------------------------
<PAGE> 45
ANNEX I
DEFINITIONS
The following terms used in this Agreement shall have the following
respective meanings:
"Affiliate" means, with respect to any Person, (i) a director, officer
or stockholder of such Person, (ii) a spouse, parent, sibling or descendant of
such Person (or spouse, parent, sibling or descendant of any director or
executive officer of such Person), or (iii) any other Person that, directly or
indirectly through one or more intermediaries, controls, or is Controlled by, or
is under common Control with, such Person.
"Agreement" has the meaning set forth in the caption.
"Business Day" means any day that is not a Saturday, Sunday or a day on
which banking institutions in New York, New York are not required to be open.
"Closing Date" has the meaning set forth in Article III.
"Closing" has the meaning set forth in Article III.
"Common Stock" means the common stock of the Company, $0.01 par value
per share.
"Company" has the meaning set forth in the caption.
"Confidential Information" means information that is not generally known
to the public and that is used, developed or obtained by the Company or any of
its Subsidiaries in connection with the Subject Business, including, but not
limited to, (i) information, observations, procedures and data obtained by any
Shareholder while employed by the Company or any Subsidiary (including those
obtained prior to the date of this Agreement) concerning the business or affairs
of the Company or any Subsidiaries, (ii) products or services, (iii) costs and
pricing structures, (iv) analyses, (v) drawings, photographs and reports, (vi)
computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and customer lists, (xii) other
copyrightable works, (xiii) all production methods, processes, technology and
trade secrets, and (xiv) all similar and related information in whatever form.
Confidential information will not include any information that has ever been
published in a form generally available to the public prior to date any
Shareholder proposes to disclose or use such information. Confidential
information will not be deemed to have been published merely because individual
portions of the information have been published, but only if all material
features comprising such information have been published in combination.
"Contract" means any loan or credit agreement, note, bond, mortgage,
indenture, lease, sublease, purchase order or other agreement, instrument,
permit, concession, franchise or license.
"Control" means, with respect to any Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Encumbrances" means and includes security interests, mortgages, liens,
pledges, charges, easements, reservations, restrictions, clouds, equities,
rights of way, options, rights of first refusal and all other encumbrances,
whether or not relating to the extension of credit or the borrowing of money.
A-1
<PAGE> 46
"Governmental Entity" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, federal, state, provincial or local.
"Imprimis" means Imprimis SB LP, a Delaware limited partnership.
"InSight" means InSight Capital Partners III, L.P., a Delaware limited
partnership.
"InSight Cayman" means InSight Capital Partners III (Cayman), L.P., a
company of limited liability under the law of the Cayman Islands.
"InSight Co-Investor" means InSight Capital Partners III (Co-Investor),
L.P., a Delaware limited partnership.
"Investors" has the meaning set forth in the caption.
"Investors' Representative" means Insight.
"Law" means all international, European Union, national, federal, state
or local laws (both common and statute law and civil and criminal law) and all
subordinated legislation and regulatory codes of practice (including without
limitation, statutory instruments, guidance notes, circulars, directives,
decisions, rules, regulations, treaties and conventions) or Order of any
Governmental Entity.
"Liability" means any liability or obligation, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due or to become due, regardless of when asserted.
"Losses" means any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments, Tax deficiencies and Taxes (including
interest or penalties thereon) arising from or in connection with any such
matter that is the subject of indemnification under Article VIII.
"New Common Stock" means the Company's common stock, $0.001 par value,
created in the Restated Charter.
"New Series A Preferred Stock" means the Company's Series A Convertible
Participating Preferred Stock, $0.001 par value per share, having the rights,
privileges and preferences set forth in the Restated Charter.
"Non-Compete Period" has the meaning set forth in Section 7.l(c)(i).
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"Party" means any party to this Agreement now, or by amendment.
"Permits" means all permits, licenses, authorizations, registrations,
franchises, approvals, certificates, variances and similar rights obtained, or
required to be obtained, from Governmental Entities.
"Person" shall be construed broadly and shall include an individual, a
partnership, a corporation, a limited liability company, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization or a
Governmental Entity (or any department, agency or political subdivision
thereof).
"Potential Transaction" has the meaning set forth in Section 7.4.
A-2
<PAGE> 47
"Purchase" has the meaning set forth in Section 1.1(a).
"Purchased Shares" has the meaning set forth in Section 1.1(a).
"Purchased Shares Consideration" has the meaning set forth in Section
1.1(b).
"Redeemed Shares Consideration" has the meaning set forth in Section
1.2(b).
"Redeemed Shares" has the meaning set forth in Section 1.2(b).
"Redemption" has the meaning set forth in Section 1.2(b).
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Closing Date among the Company, the Investors and the other
parties thereto.
"Related Documents" means the Shareholders' Agreement, the Employment
Agreements, the Registration Rights Agreement and the Restated Charter.
"Released Persons" has the meaning set forth in Section 7.6.
"Restated Charter" means the Company's Restated Certificate of
Incorporation.
"Shareholders" has the meaning set forth in the caption.
"Shareholders' Agreement" means the Shareholders' Agreement dated as of
the Closing Date among the Company, the Investors and the other parties thereto.
"Shareholders' Percentages" means such shareholder's pro rata portion of
the Common Stock.
"Shareholders' Representative" has the meaning set forth in Section
7.5(a).
"Subject Business" means consulting and software integration services to
the utility industry, state and local governments and other Persons or
entities.
"Subsidiary" means, with respect to any Person, any other Person of
which the securities having a majority of the ordinary voting power in electing
the board of directors (or other governing body), at the time as of which any
determination is being made, are owned by such first Person either directly or
through one or more of its Subsidiaries.
"Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, capital and transfer,
transfer, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall profits taxes,
alternative or add-on minimum taxes, customs duties and other taxes, fees,
assessments or charges of any kind whatsoever, together with all interest and
penalties, additions to tax, surtaxes and other additional amounts imposed by
any taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of being a "transferee" (within the meaning of
Section 6901 of the Code or any other applicable Law) of another entity or a
member of an affiliated or combined group.
"Territory" has the meaning set forth in Section 7.1(c)(i).
"Transactions" means the transactions relating to the recapitalization
of the Company, as the same are described in the Information Statement.
A-3
<PAGE> 48
"UBS" means UBS Capital II LLC, a Delaware limited liability company.
"WISI" means WI Software Investors LLC, a Delaware limited liability
company.
"Work Product" shall mean all inventions, innovations, improvements,
technical information, systems, software developments, methods, designs,
analyses, drawings, reports, service marks, trademarks, tradenames, logos and
all similar or related information (whether patentable or unpatentable) which
relates to the Company's or any of its Subsidiaries' actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by the Shareholder (whether or not
during usual business hours and whether or not alone or in conjunction with any
other Person) while employed by the Company (including those conceived,
developed or made prior to the date of this Agreement) together with all patent
application, letters patent, trademark, tradename and service mark application
or registrations, copyrights and reissues thereof that may be granted for or
upon any of the foregoing.
A-4
<PAGE> 49
SCHEDULE 6.2
------------
INVESTORS' BROKERS
None.
A-5
<PAGE> 50
SCHEDULE I
- --------------------------------------------------------------------------------
LIST OF INVESTORS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES PURCHASED SHARES
PURCHASED FROM CONSIDERATION
INVESTOR SHAREHOLDERS PAID
- -------------- --------------------- -----------------
<S> <C> <C>
InSight 1,003,727 $ 1,089,010
--------- -------------
InSight Cayman 427,009 $ 463,291
--------- -------------
Total 1,430,736 $1,552,301.00
--------- -------------
</TABLE>
<PAGE> 51
<TABLE>
<CAPTION>
Common New Preferred
Shares Shares Purchase Redeemed Redemption
Shareholder Exchanged Received(1) Price Shares Price
- ----------- --------- ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
EAS Trust 196,319 196,319 $213,000
RBS Trust 196,319 196,319 $213,000
James E. Hargis 211,342 211,342 $229,299
Richard G. Godin 56,100 56,100 $ 60,867
Barry J. Kemble 102,974 102,974 $111,723
Bart E. Elliott 98,360 98,360 $106,717
Thomas E. VanDenover 73,632 73,632 $ 79,888
Eugene P. Kindrachuk 48,718 48,718 $ 52,858
Dean A. Zastava 48,718 48,718 $ 52,858
John A. Ramseur 376,383 376,383 $408,364
Terrence R. Burns 19,142 19,142 $ 20,768
Richard J. Leeser 766 766 $ 831
Eric E. Westover 1,963 1,963 $ 2,130
Tom Bannon 54,775 $59,640
Jeremy Bisset 18,831 $20,503
Kern Blackburn 1,901 $ 2,070
Charles R. Blanks 5,869 $ 6,390
Jeff Boevingloh 978 $ 1,065
David Bowman 19,562 $21,300
David Breining 1,901 $ 2,070
Kathy Broderick 3,912 $ 4,260
Chris Cushenberry 1,588 $ 1,730
Loretta L. Davis 9,441 $10,279
Bart E. Elliot 49,521 $53,919
Greg Foster 66,512 $72,420
Dale Frazier 22,008 $23,963
</TABLE>
- ------------------------
(1) All new Preferred Shares received upon exchange for Common Shares are
being sold to the Investors for the Purchase Price set forth in the adjacent
column.
<PAGE> 52
<TABLE>
<CAPTION>
COMMON NEW PREFERRED
SHARES SHARES PURCHASE REDEEMED REDEMPTION
SHAREHOLDER EXCHANGED RECEIVED(1) PRICE SHARES PRICE
- ----------- --------- ------------- -------- -------- ----------
<S> <C> <C>
Andrew D. Gay 42,302 $46,059
Pat Giarritano 978 $1,065
Glenn Goodrich 1,588 $1,730
Adley D. Harms 12,594 $13,713
Ken Heitman 16,507 $17,973
Thomas K. Helmer 23,596 $25,692
Randy Huston 19,562 $21,300
Jason Ihaia 1,565 $1,704
David W. Jones 2,543 $2,769
Jim Jones 978 $1,065
Ginger L. Juhl 35,212 $38,340
James Keane 39,125 $42,600
Barry J. Kemble 39,371 $42,868
Eugene P. Kindrachuk 32,278 $35,145
Cordelia S. Kirby 5,501 $5,990
James Kling 3,912 $4,260
Jennifer Krabbenhoeft 13,083 $14,245
Chris Lewis 9,781 $10,650
Thomas E. Lonski 20,419 $22,233
Brian Martin 11,737 $12,780
Kathy McAllister 5,869 $6,390
Mark Merryman 1,956 $2,130
Paul Newell 9,781 $10,650
Patrick J. Noonan 14,429 $15,711
Milton Y. Omoto 9,586 $10,437
Rolland J. Pate 18,831 $20,503
Tim Peach 65,534 $71,355
Mike Peterson 978 $1,065
Mark Post 5,869 $6,390
Vicky Pierce 1,956 $2,130
Bob Preis 1,956 $2,130
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
Common New Preferred
Shares Shares Purchase Redeemed Redemption
Shareholder Exchanged Received(1) Price Shares Price
- ----------- --------- ------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Gayle F. Robinson 1,588 $1,730
Charles M. Scott 11,006 $11,983
Martha Sievert 1,956 $2,130
John Sullivan 7,848 $8,546
Michael Tao 31,300 $34,080
Randall D. Tidd 47,196 $51,388
Hahn Tram 13,694 $14,910
Thomas E. VanDenover 145,533 $158,459
Martin Walls 50,620 $55,116
Eric Westover 11,370 $12,380
Roger Wielgus 1,588 $1,730
Paul J. Yarka 27,387 $29,820
Terry L. Yaryan 275,636 $300,117
Dean A. Zastava 19,684 $21,432
Minjian Zhou 782 $852
Adam Sicker 0 $0
Jay Lasiter 1,956 $2,130
Steve Brown 3,912 $4,260
Ruth Craven 1,956 $2,130
Stewart Cooper 1,956 $2,130
Cory Probasco 1,956 $2,130
David Kussie 1,956 $2,130
Susan Chamberlain 1,956 $2,310
TOTALS 1,430,736 1,430,736 $1,552,301 1,389,024 $1,512,394
</TABLE>
<PAGE> 54
INDEX OF ATTACHMENTS
--------------------
Exhibit A Information Statement
Annex I Definitions
Schedule I Investors
Schedule II Shareholders
<PAGE> 1
EXHIBIT 10.3
CONVERGENT GROUP CORPORATION
1999 STOCK OPTION PLAN
SECTION 1: PURPOSE
The purpose of the Convergent Group Corporation 1999 Stock Option Plan
(the "Plan") is to further the growth and development of Convergent Group
Corporation (the "Company") by affording an opportunity for stock ownership to
selected employees, directors and consultants of the Company and its
subsidiaries who are responsible for the conduct and management of its business
or who are involved in endeavors significant to its success.
SECTION 2: DEFINITIONS
Unless otherwise indicated, the following words when used herein shall
have the following meanings:
(a) "Affiliate" shall mean, with respect to any person or entity,
a person or entity that directly or indirectly through one or more
intrmediaries, controls, or is controlled by, or is under common
control with, such person or entity.
(b) "Board of Directors" shall mean the Board of Directors of the
Company.
(c) "Cause" shall mean as to any Optionee, either: (A) termination
for "Cause" as such term is defined in his or her Employment Agreement,
if any, or: (B) any one of the following: (i) the commission of a crime
involving fraud, theft or dishonesty by the Optionee; (ii) the Optionee
's willful and continuing disregard of lawful instructions of the Board
of Directors or superiors (if any), which conduct continues for a
period of five (5) days after receipt of written notice from the
Company, or the Optionee 's willful misconduct in carrying out his or
her position and duties; (iii) conduct of a nature that would
materially discredit the Company or any Subsidiary were the Company to
continue to retain the services of the Optionee; (iv) the continued use
of alcohol or drugs by the Optionee to an extent that, in the good
faith determination of the Plan Administrator , such use materially
interferes in any manner with the performance of the Optionee 's duties
and responsibilities; or (v) the violation of any law (including the
Foreign Corrupt Practices Act of 1977, but excluding misdemeanor
traffic or other similar violations).
(d) "Change in Control" shall be deemed to have occurred:
(1) At such time as a third person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended from time to time, and any successor act (the
"Exchange Act"), becomes the "beneficial owner," as defined in the
Exchange Act, of shares of the Company having 50% or more of the
total number of votes that may be cast for the election of any of
the Directors of the Company; or; or
<PAGE> 2
(2) On the date on which at least two-thirds of the
directors of the Company constitute persons who were not, at the
time of their first election to the Board of Directors of the
Company, candidates proposed by a majority of the Board of
Directors in office prior to the time of such first election; or
(3) On the date on which the Board of Directors or the
stockholder(s) of the Company approve: (i) any agreement for a
merger or consolidation or like business recombination or
reorganization of the Company with another entity, the
consummation of which would result in the occurrence of any event
described in paragraphs (1) or (2) above or (ii) any sale,
exchange or other disposition of all or substantially all of the
Company's assets; or
(4) On the effective date of any sale, exchange or other
disposition of greater than 67% in fair market value of the
Company's total assets, other than in the ordinary course of
business, whether in a single transaction or a series of related
transactions; provided, however, that no sale or disposition of
assets shall be taken into account to the extent that the proceeds
of such sale or disposition (whether in cash or in-kind) are
reinvested or are, in the case of proceeds received in-kind, used
in the ongoing conduct of the Company, provided further that such
a reinvestment shall not be deemed to have occurred unless made
within six (6) months of such sale or disposition and provided
further that, the term reinvestment shall include the use of
proceeds to repay debt incurred in connection with the operation
of the business in which the assets sold or disposed of were used.
In determining whether clause (1) of the preceding sentence has been
satisfied, the third person owning shares must be someone other than a
person or an Affiliate of a person that, as of August __, 1999, was the
beneficial owner of shares of the Company having 25% or more of the
total number of votes that may be cast for the election of Directors of
the Company. The Plan Administrator's reasonable determination as to
whether such an event has occurred shall be final and conclusive.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Common Stock" shall mean the Company's common stock (par
value $.001 per share) and any share or shares of the Company's capital
stock hereafter issued or issuable in substitution for such shares.
(g) "Director" shall mean a member of the Board of Directors.
(h) "Early Exercise Stock Purchase Agreement" shall mean an
agreement for the repurchase by the Company of shares acquired upon
exercise of any portion of an Option prior to its vesting.
2
<PAGE> 3
(i) "Incentive Stock Option" shall mean any option granted to an
eligible employee under the Plan, which the Company intends at the time
the option is granted to be an Incentive Stock Option within the
meaning of Section 422 of the Code.
(j) "Non-Employee Director" shall mean a Director who is a
Non-Employee Director within the meaning of Rule 16b-3 as promulgated
by the Securities and Exchange Commission under the Securities Act of
1933, as amended from time to time.
(k) "Nonqualified Stock Option" shall mean any option granted to
an eligible employee, Director or consultant under the Plan which is
not an Incentive Stock Option.
(l) "Option" shall mean and refer collectively to Incentive Stock
Options and Nonqualified Stock Options.
(m) "Option Agreement" means the agreement specified in
Section 7.2.
(n) "Optionee" shall mean any employee, Director or consultant who
is granted an Option under the Plan. "Optionee" shall also mean the
personal representative of an Optionee and any other person who
acquires the right to exercise an Option by bequest or inheritance.
(o) "Parent" shall mean a parent corporation of the Company as
defined in Section 424(e) of the Code.
(p) "Plan Administrator" shall mean the body which is responsible
for the administration of the Plan, as determined pursuant to
Section 4.1.
(q) "Shareholders' Agreement" shall mean an agreement placing
certain restrictions upon the Optionee's right to transfer shares,
including without limitation the creation of an irrevocable right of
first refusal upon the transfer of shares in favor of the Company and
its designees and provisions requiring the Optionee to transfer the
shares to the Company or the Company's designees upon a termination of
employment, as described in Section 12.4.
(r) "Subsidiary" shall mean a subsidiary corporation of the
Company as defined in Section 424(f) of the Code.
SECTION 3: EFFECTIVE DATE
The effective date of the Plan is August __, 1999; provided, however,
that the adoption of the Plan by the Board of Directors is subject to approval
and ratification by the shareholders of the Company within 12 months of the
effective date. Options granted under the Plan prior to approval of the Plan by
the shareholders of the Company shall be subject to approval of the Plan by the
shareholders of the Company.
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<PAGE> 4
SECTION 4: ADMINISTRATION
4.1 Plan Administrator. The Plan shall be administered by the Board of
Directors, unless and until such time as the Board of Directors delegates the
administration of the Plan to a committee. Any such committee shall be appointed
by and shall serve at the pleasure of the Board of Directors and shall consist
solely of two or more Non-Employee Directors. The Board of Directors may from
time to time remove members from or add members to any such committee, and
vacancies on the committee, howsoever caused, shall be filled by the Board of
Directors.
4.2 Meetings and Actions. The Plan Administrator shall hold meetings at
such times and places as it may determine. A majority of the members of the Plan
Administrator shall constitute a quorum, and the acts of the majority of the
members present at a meeting or a consent in writing signed by all members of
the Plan Administrator shall be the acts of the Plan Administrator and shall be
final, binding and conclusive upon all persons, including the Company, its
Subsidiaries, its shareholders, and all persons having any interest in Options
which may be or have been granted pursuant to the Plan.
4.3 Powers of Plan Administrator. The Plan Administrator shall have the
full and exclusive right to grant and determine terms and conditions of all
Options granted under the Plan and to prescribe, amend and rescind rules and
regulations for administration of the Plan. In granting Options, the Plan
Administrator shall take into consideration the contribution the Optionee has
made or may make to the success of the Company or its Subsidiaries and such
other factors as the Plan Administrator shall determine.
4.4 Interpretation of Plan. The determination of the Plan Administrator
as to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
persons, including the Company, its Subsidiaries, its shareholders, and all
persons having any interest in Options which may be or have been granted
pursuant to the Plan.
4.5 Indemnification. Each person who is or shall have been a member of
the Plan Administrator or of the Board of Directors shall be indemnified and
held harmless by the Company against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred in connection with or
resulting from any claim, action, suit or proceeding to which such person may be
a party or in which such person may be involved by reason of any action taken or
failure to act under the Plan and against and from any and all amounts paid in
settlement thereof, provided that the Company approved such settlement, or paid
in satisfaction of a judgment in any such action, suit or proceeding, provided
such person shall give the Company an opportunity, at its own expense, to handle
and defend the same before undertaking to handle and defend it on such person's
own behalf. The foregoing right of indemnification shall not be exclusive of,
and is in addition to, any other rights of indemnification to which any person
may be entitled under the Company's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.
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<PAGE> 5
SECTION 5: STOCK SUBJECT TO THE PLAN
5.1 Number. The aggregate number of shares of Common Stock which may be
issued under Options granted pursuant to the Plan shall not exceed 8,943,212
shares. Shares which may be issued under Options may consist, in whole or in
part, of authorized but unissued stock or treasury stock of the Company not
reserved for any other purpose.
5.2 Unused Stock. If any outstanding Option under the Plan expires or
for any other reason ceases to be exercisable, in whole or in part, other than
upon exercise of the Option, the shares which were subject to such Option and as
to which the Option had not been exercised shall continue to be available for
issuance under the Plan. Any shares which are repurchased by the Company in
accordance with the terms of an Early Exercise Stock Purchase Agreement shall
upon such repurchase once again be available for issuance under the Plan.
5.3 Adjustment for Change in Outstanding Shares. If there is any
change, increase or decrease, in the outstanding shares of Common Stock which is
effected without receipt of additional consideration by the Company, by reason
of a stock dividend, recapitalization, merger, consolidation, stock split,
combination or exchange of stock, or other similar circumstances, then in each
such event, the Plan Administrator shall make an appropriate adjustment in the
aggregate number of shares of stock available under the Plan, the number of
shares of stock subject to each outstanding Option and the Option prices in
order to prevent the dilution or enlargement of any Optionee's rights. In making
such adjustments, fractional shares shall be rounded to the nearest whole share.
The Plan Administrator's determinations in making adjustments shall be final and
conclusive.
5.4 Reorganization or Sale of Assets. In the event of (i) a
dissolution, liquidation or sale of all or substantially all of the Company's
assets; (ii) a merger or consolidation of the Company with another entity; or
(iii) any other capital reorganization in which the persons and entities who
were the stockholders of the Company immediately before such capital
reorganization own, directly or indirectly, less than two-thirds of the
outstanding voting securities of the Company following such capital
reorganization (each of such events being referred to hereinafter as a
"Reorganization Event"), the Plan Administrator shall, as to outstanding
Options, either (1) make appropriate provision for the protection of any such
outstanding Options by the substitution on an equitable basis of appropriate
stock of the Company, or of the merged, consolidated or otherwise reorganized
corporation, which will be issuable in respect of the Common Stock, provided
that no additional benefits shall be conferred upon Optionees as a result of
such substitution, and provided further that the excess of the aggregate fair
market value of the shares subject to the Options immediately after such
substitution over the purchase price thereof is not more than the excess of the
aggregate fair market value of the shares subject to such Options immediately
before such substitution over the purchase price thereof, or (2) upon written
notice to all Optionees, which notice shall be given not less than 20 days prior
to the effective date of the Reorganization Event, provide that all unexercised
Options must be exercised within a specified number of days (which shall not be
less than 20) of the date of such notice or such Options will terminate. In
response to a notice provided pursuant to clause (2) of the preceding sentence,
an Optionee may make an irrevocable election to exercise the Optionee's Option
contingent upon and effective as of the effective date of the Reorganization
Event. Options which are not exercised within the specified period following the
receipt of such a notice shall terminate and cease to be outstanding. The Plan
Administrator may, in its sole discretion, accelerate the exercise dates of
outstanding Options in connection with any Reorganization Event which does not
also result in a Change in Control.
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<PAGE> 6
SECTION 6: ELIGIBILITY
All full- or part-time salaried employees of the Company and its
Subsidiaries who are responsible for the conduct and management of its business
or who are involved in endeavors significant to its success shall be eligible to
receive both Incentive Stock Options and Nonqualified Stock Options under the
Plan. Directors and consultants who are neither full- nor part-time salaried
employees of the Company or its Subsidiaries but who are involved in endeavors
significant to its success shall be eligible to receive Nonqualified Stock
Options, but not Incentive Stock Options, under the Plan.
SECTION 7: GRANT OF OPTIONS
7.1 Grant of Options. The Plan Administrator may from time to time in
its discretion determine which of the eligible employees, Directors and
consultants of the Company or its Subsidiaries should receive Options, the type
of Options to be granted (whether Incentive Stock Options or Nonqualified Stock
Options), the number of shares subject to such Options, and the dates on which
such Options are to be granted. No employee may be granted Incentive Stock
Options to the extent that the aggregate fair market value (determined as of the
time each Option is granted) of the Common Stock with respect to which any such
Options are exercisable for the first time during a calendar year (under all
incentive stock option plans of the Company and its Parent and Subsidiaries)
would exceed $100,000. To the extent that the limitation set forth in the
preceding sentence has been exceeded, the Options which exceed the annual
limitation shall be deemed to be Nonqualified Stock Options rather than
Incentive Stock Options.
7.2 Option Agreement. Each Option granted under the Plan shall be
evidenced by a written Option Agreement setting forth the terms upon which the
Option is granted. Each Option Agreement shall designate the type of Options
being granted (whether Incentive Stock Options or Nonqualified Stock Options),
and shall state the number of shares of Common Stock, as designated by the Plan
Administrator, to which that Option pertains. More than one Option may be
granted to an eligible person.
7.3 Option Price. The option price per share of Common Stock under each
Option shall be determined by the Plan Administrator and stated in the Option
Agreement. The option price for Incentive Stock Options granted under the Plan
shall not be less than 100% of the fair market value (determined as of the day
the Option is granted) of the shares subject to the Option. The option price for
Nonqualified Stock Options granted under the Plan shall not be less than 25% of
the fair market value (determined as of the day the Option is granted) of the
shares subject to the Option. Notwithstanding the foregoing, in no event shall
the option price per share be less than the par value of the Common Stock.
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<PAGE> 7
7.4 Determination of Fair Market Value. If the Common Stock is listed
upon an established stock exchange or exchanges, then the fair market value per
share shall be deemed to be the average of the quoted closing prices of the
Common Stock on such stock exchange or exchanges on the day for which the
determination is made, or if no sale of the Common Stock shall have been made on
any stock exchange on that day, on the next preceding day on which there was
such a sale. If the Common Stock is not listed upon an established stock
exchange but is traded in the NASDAQ National Market System, the fair market
value per share shall be deemed to be the closing price of the Common Stock in
the National Market System on the day for which the determination is made, or if
there shall have been no trading of the Common Stock on that day, on the next
preceding day on which there was such trading. If the Common Stock is not listed
upon an established stock exchange and is not traded in the National Market
System, the fair market value per share shall be deemed to be the mean between
the dealer "bid" and "ask" closing prices of the Common Stock on the NASDAQ
System on the day for which the determination is made, or if there shall have
been no trading of the Common Stock on that day, on the next preceding day on
which there was such trading. If none of these conditions apply, the fair market
value per share shall be deemed to be an amount as determined in good faith by
the Plan Administrator by applying any reasonable valuation method.
7.5 Duration of Options. Each Option shall be of a duration as
specified in the Option Agreement; provided, however, that the term of each
Option shall be no more than ten years from the date on which the Option is
granted and shall be subject to early termination as provided herein.
7.6 Additional Limitations on Grant. No Incentive Stock Option shall be
granted to an employee who, at the time the Incentive Stock Option is granted,
owns stock (as determined in accordance with Section 424(d) of the Code)
representing more than 10% of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary, unless the option price of
such Incentive Stock Option is at least 110% of the fair market value
(determined as of the day the Incentive Stock Option is granted) of the stock
subject to the Incentive Stock Option and the Incentive Stock Option by its
terms is not exercisable more than five years from the date it is granted.
7.7 Early Exercise. The Option Agreement may, but need not, provide
that the Optionee may elect to exercise all or any portion of the Option prior
to its vesting. Any shares purchased upon exercise of an unvested portion of the
Option shall be subject to a right of repurchase in favor of the Company in
accordance with the terms of an Early Exercise Stock Purchase Agreement which
shall be set forth as an attachment to the Stock Option Agreement.
7.8 Other Terms and Conditions. The Option Agreement may contain such
other provisions, which shall not be inconsistent with the Plan, as the Plan
Administrator shall deem appropriate, including, without limitation, provisions
that relate the Optionee's ability to exercise an Option to the passage of time
or the achievement of specific goals or the occurrence of certain events, as
specified by the Plan Administrator.
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<PAGE> 8
SECTION 8: EXERCISE OF OPTIONS
8.1 Manner of Exercise. Subject to the limitations and conditions of
the Plan or the Option Agreement, an Option shall be exercisable, in whole or in
part, from time to time, by giving written notice of exercise to the Secretary
of the Company, which notice shall specify the number of shares of Common Stock
to be purchased and shall be accompanied by (1) payment in full to the Company
of the purchase price of the shares to be purchased, plus (2) payment in full of
such amount as the Company shall determine to be sufficient to satisfy any
liability it may have for any withholding of federal, state or local income or
other taxes incurred by reason of the exercise of the Option, (3)
representations meeting the requirements of Sections 12.3 and/or 12.5 if
requested by the Company, and (4) a Shareholders' Agreement meeting the
requirements of Section 12.4 if requested by the Company.
8.2 Payment of Purchase Price. Payment for shares and withholding taxes
shall be in the form of either (1) cash, (2) a certified or bank cashier's check
to the order of the Company, or (3) shares of the Common Stock, properly
endorsed to the Company, in an amount the fair market value of which on the date
of receipt by the Company (as determined in accordance with Section 7.4) equals
or exceeds the aggregate option price of the shares with respect to which the
Option is being exercised, (4) any other form of legal consideration that may be
acceptable to the Plan Administrator, or (5) in any combination thereof;
provided, however, that no payment may be made in shares of Common Stock unless
the Plan Administrator has approved of payment in such form by such Optionee
with respect to the Option exercise in question. Should the Common Stock be
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended, at the time an Option is exercised, and to the extent the option is
exercised for vested shares, then payment may also be made through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable written instructions (A) to a brokerage firm designated by
the Company to effect the immediate sale of the purchased shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable withholding taxes, and (B) to the Company to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale. The Company, in its sole discretion, may permit the
deferred payment of the purchase price upon the exercise of any Option, on such
terms and conditions as the Company shall specify.
SECTION 9: CHANGE IN CONTROL
Notwithstanding any vesting requirements contained in any Option
Agreement, all outstanding Options shall become immediately exercisable in full
upon the occurrence of a Change in Control.
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<PAGE> 9
SECTION 10: EFFECT OF TERMINATION OF EMPLOYMENT
10.1 Termination of Employment Other Than Upon Death or Disability.
Subject to any limitations set forth in the Option Agreement, and provided that
the notice of exercise is provided prior to the expiration of the Option, the
Optionee shall be entitled to exercise the Option (i) during the Optionee's
employment by the Company or a Subsidiary and (ii) for a period of three months
after the date of a termination of employment other than for Cause. Any vesting
of the Option shall cease upon termination of employment, and the Option shall
be exercisable only to the extent that it was exercisable on the date of such
termination. Any Options not exercisable as of the date of termination, and any
Options or portions of Options not exercised within the period specified herein,
shall terminate.
10.2 Termination By Death of Optionee. Notwithstanding Section 10.1, if
an Optionee should die while in the employ of the Company or a Subsidiary or
within a period of three months after termination of employment with the Company
or a Subsidiary under circumstances in which Section 10.1 would permit the
exercise of the Option following termination, the personal representatives of
the Optionee's estate or the person or persons who shall have acquired the
Option from the Optionee by bequest or inheritance may exercise the Option at
any time within the year after the date of death, but not later than the
expiration date of the Option. Any vesting of the Option shall cease upon
termination of employment, and the Option shall be exercisable only to the
extent that it was exercisable on the date of such termination. Any Options not
exercisable as of the date of termination, and any Options or portions of
Options not exercised within the period specified herein, shall terminate.
10.3 Termination By Disability of Optionee. Notwithstanding Section
10.1, if an Optionee should terminate employment with the Company or a
Subsidiary by reason of the Optionee's disability (within the meaning of Section
22(e)(3) of the Code), the Optionee may exercise the Option at any time within
one year after the date of termination but not later than the expiration date of
the Option. Any vesting of the Option shall cease upon termination of
employment, and the Option shall be exercisable only to the extent that it was
exercisable on the date of such termination. Any Options not exercisable as of
the date of termination, and any Options or portions of Options not exercised
within the period specified herein, shall terminate.
10.4 Termination of Directors and Consultants. For purposes of this
Section 10, a termination of employment shall be deemed to include the
termination of a Director's service as a member of the Board of Directors and
the termination of a consulting arrangement in the case of consultants, provided
that immediately following such termination the Director or consultant is not
employed by the Company or a Subsidiary.
10.5 Breach of Covenant Not to Compete. Notwithstanding anything herein
to the contrary, Options granted to the Optionee shall terminate immediately if
the Optionee breaches any obligation under a covenant not to compete with the
Company or any of its Subsidiaries or if the Optionee's employment is terminated
for Cause.
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<PAGE> 10
10.6 Extension of Option Termination Date. The Plan Administrator, in
its sole discretion, may extend the termination date of an Option granted under
the Plan without regard to the preceding provisions of this Section 10. In such
event, the termination date shall be a date selected by the Plan Administrator
in its sole discretion, but not later than the latest expiration date of the
Option permitted pursuant to Section 7.5. Such extension may be made in the
Option Agreement as originally executed or by amendment to the Option Agreement,
either prior to or following termination of an Optionee's employment. The Plan
Administrator shall have no power to extend the termination date of an Incentive
Stock Option beyond the periods provided in Sections 10.1, 10.2 and 10.3 prior
to the termination of the Optionee's employment or without the approval of the
Optionee, which may be granted or withheld in the Optionee's sole discretion.
Any extension of the termination date of an Incentive Stock Option shall be
deemed to be the grant of a new Option for purposes of the Code.
SECTION 11: NON-TRANSFERABILITY OF OPTION
Options granted pursuant to the Plan are not transferable by the
Optionee other than by Will or the laws of descent and distribution and shall be
exercisable during the Optionee's lifetime only by the Optionee. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of the
Option contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon the Option, the Option shall immediately become null and
void.
SECTION 12: ISSUANCE OF SHARES
12.1 Transfer of Shares to Optionee. As soon as practicable after the
Optionee has given the Company written notice of exercise of an Option and has
otherwise met the requirements of Section 8.1, the Company shall issue or
transfer to the Optionee the number of shares of Common Stock as to which the
Option has been exercised and shall deliver to the Optionee a certificate or
certificates therefor, registered in the Optionee's name. If the Optionee has
made an early exercise in accordance with the Option Agreement, the Company may
retain the non-vested shares of Common Stock until they have vested pursuant to
the Early Exercise Stock Purchase Agreement. In no event shall the Company be
required to transfer fractional shares to the Optionee, and in lieu thereof, the
Company may pay an amount in cash equal to the fair market value (as determined
in accordance with Section 7.4) of such fractional shares on the date of
exercise.
12.2 Compliance with Laws. If the issuance or transfer of shares by the
Company would for any reason, in the opinion of counsel for the Company, violate
any applicable federal or state laws or regulations, the Company may delay
issuance or transfer of such shares to the Optionee until compliance with such
laws can reasonably be obtained. In no event shall the Company be obligated to
effect or obtain any listing, registration, qualification, consent or approval
under any applicable federal or state laws or regulations or any contract or
agreement to which the Company is a party with respect to the issuance of any
such shares. If, after reasonable efforts, the Company is unable to obtain the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of shares upon exercise of Options under the Plan, the Company shall be
relieved from any liability for failure to issue and sell shares upon exercise
of such Options unless and until such authority is obtained.
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<PAGE> 11
12.3 Investment Representation. The Company may require any Optionee,
as a condition precedent to exercising any Option, to provide a written
representation providing assurances satisfactory to the Company (i) as to the
Optionee's knowledge and experience in financial and business matters and/or
that the Optionee has engaged a purchaser representative reasonably satisfactory
to the Company who is knowledgeable and experienced in financial and business
matters, (ii) that the Optionee is capable of evaluating, alone or together with
the purchaser representative, the merits and risks of exercising the Option; and
(iii) that the Optionee is acquiring the stock subject to the Option for such
person's own account and not with any present intention of selling or otherwise
distributing the stock. Such a representation shall not be required if (A) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (B) as to any particular
requirement, a determination is made by counsel for the Company that such
representation is not required. Certificates representing Common Stock acquired
upon exercise of Options may contain such legends and transfer restrictions as
the Company shall deem reasonably necessary or desirable, including, without
limitation, legends restricting transfer of the Common Stock until there has
been compliance with federal and state securities laws and until the Optionee or
any other holder of the Common Stock has paid the Company such amounts as may be
necessary in order to satisfy any withholding tax liability of the Company.
12.4 Shareholders' Agreement. Upon demand by the Company, the Optionee
shall execute and deliver to the Company a Shareholders' Agreement in such form
as the Company may provide at the time of exercise of the Option. Such Agreement
may include, without limitation, restrictions upon the Optionee's right to
transfer shares, including the creation of an irrevocable right of first refusal
in the Company and its designees, and provisions requiring the Optionee to
transfer the shares to the Company or the Company's designees upon a termination
of employment. Upon such demand, execution of the Shareholders' Agreement by the
Optionee prior to the transfer or delivery of any shares and prior to the
expiration of the option period shall be a condition precedent to the right to
purchase such shares, unless such condition is expressly waived in writing by
the Company.
12.5 Lock-Up Agreement. Upon demand by the Company, the Optionee shall
execute and deliver to the Company a representation that, in connection with the
first underwritten registered offering of any securities of the Company under
the Securities Act of 1933, as amended, the Optionee will not sell or otherwise
transfer or dispose of any shares of Common Stock which are owned either or
record or beneficially by the Optionee, whether acquired upon exercise of an
Option or otherwise, or any shares of Common Stock acquired with respect
thereto, during such period following the effective date of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters for the Company; provided, however,
that such restriction shall apply only if the executive officers and directors
of the Company agree with the representatives of the underwriters not to
transfer shares of Common Stock owned by them for the same or a greater period.
Such representation shall further state that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
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<PAGE> 12
SECTION 13: AMENDMENTS
The Board of Directors may at any time and from time to time alter,
amend, suspend or terminate the Plan or any part thereof as it may deem proper,
except that no such action shall diminish or impair the rights under an Option
previously granted. Unless the shareholders of the Company shall have given
their approval, the total number of shares for which Options may be issued under
the Plan shall not be increased, except as provided in Section 5.3, and no
amendment shall be made which reduces the price at which the Common Stock may be
offered under the Plan below the minimum required by Section 7.3, except as
provided in Section 5.3, or which materially modifies the requirements as to
eligibility for participation in the Plan. Subject to the terms and conditions
of the Plan, the Board of Directors may modify, extend or renew outstanding
Options granted under the Plan, or accept the surrender of outstanding Options
to the extent not theretofore exercised and authorize the granting of new
Options in substitution therefor, except that no such action shall diminish or
impair the rights under an Option previously granted without the consent of the
Optionee.
SECTION 14: TERM OF PLAN
This Plan shall terminate on August __, 2009; provided, however, that
the Board of Directors may at any time prior thereto suspend or terminate the
Plan. No such suspension or termination shall diminish or impair the rights
under an Option previously granted without the consent of the Optionee.
SECTION 15: RIGHTS AS STOCKHOLDER
An Optionee shall have no rights as a stockholder of the Company with
respect to any shares of Common Stock covered by an Option until the date of the
issuance of the stock certificate for such shares.
SECTION 16: NO EMPLOYMENT RIGHTS
Nothing contained in this Plan or in any Option granted under the Plan
shall confer upon any Optionee any right with respect to the continuation of
such Optionee's employment by the Company or any Subsidiary or interfere in any
way with the right of the Company or any Subsidiary, subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Optionee from the
rate in existence at the time of the grant of the Option.
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SECTION 17: GOVERNING LAW
This Plan, and all Options granted under this Plan, shall be construed
and shall take effect in accordance with the laws of the State of Colorado,
without regard to the conflicts of laws rules of such State.
SECTION 18: USE OF PROCEEDS
Any cash proceeds received by the Company from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
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<PAGE> 14
INCENTIVE STOCK OPTION AGREEMENT
OPTIONEE:
--------------------
DATE OF GRANT:
---------------
AGREEMENT between Convergent Group Corporation (the "Company"), and the
above named Optionee ("Optionee"), an employee of the Company or a Subsidiary
thereof.
The Company and Optionee agree as follows:
1. Grant of Option.
Optionee is hereby granted an Incentive Stock Option, within the
meaning of Section 422 of the Code (the "Option"), to purchase Common Stock of
the Company pursuant to the Convergent Group Corporation 1999 Stock Option Plan
(the "Plan"). The Option and this Agreement are subject to and shall be
construed in accordance with the terms and conditions of the Plan, as now or
hereinafter in effect. Any terms which are used in this Agreement without being
defined and which are defined in the Plan shall have the meaning specified in
the Plan.
2. Date of Grant.
The date of the grant of the Option is the date first set forth above,
the date of the action by the Plan Administrator in granting the same.
3. Number and Price of Shares.
The number of shares as to which the Option is granted is the number
set forth in Schedule 3A to this Agreement. The purchase price per share is the
amount set forth in Schedule 3B to this Agreement.
4. Expiration Date.
Unless sooner terminated as provided in Section 5.4 or Section 10 of
the Plan, the Option shall expire and terminate on the date set forth in
Schedule 4 to this Agreement, and in no event shall the Option be exercisable
after that date.
5. Manner of Exercise.
Except as provided in this Agreement, the Option shall be exercisable,
in whole or in part, from time to time, in the manner provided in Section 8 of
the Plan.
6. Time of Exercise.
The Option granted hereby shall become vested in and exercisable by
Optionee in the installments, on the dates and subject to the conditions set
forth in Schedule 6 to this Agreement; provided, however, that Optionee must
have been continuously employed by the Company or a Subsidiary thereof from the
date of grant of the Option until the date specified on Schedule 6 or until the
conditions specified on Schedule 6 have been satisfied.
<PAGE> 15
7. Shareholders' Agreement.
Upon exercise of the Option, Optionee shall execute and deliver to the
Company a Shareholders' Agreement in substantially the form attached to this
Agreement as Exhibit A. Execution and delivery of the Shareholders' Agreement
prior to the transfer or delivery of any shares and prior to the expiration of
the option period shall be a condition precedent to the right to purchase such
shares.
8. Lock-Up.
In connection with the first underwritten registered offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Act"), Optionee will not sell or otherwise transfer or dispose of any shares of
Common Stock which are owned either or record or beneficially by the Optionee,
whether acquired upon exercise of an Option or otherwise, upon exercise of this
Option, or any shares of Common Stock acquired with respect thereto, during such
period following the effective date of the registration statement of the Company
filed under the Act as may be requested by the Company or the representative of
the underwriters for the Company; provided, however, that such restriction shall
apply only if the executive officers and directors of the Company agree with the
representatives of the underwriters not to transfer shares of Common Stock owned
by them for the same or a greater period. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
9. Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or the
laws of descent and distribution, and the Option shall be exercisable during
Optionee's lifetime only by Optionee. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Option, the Option shall immediately become null and void.
10. Withholding for Taxes.
Optionee shall reimburse the Company, in cash or by certified or bank
cashier's check, for any federal, state or local taxes required by law to be
withheld with respect to the exercise of the Option or any disqualifying
disposition of the Common Stock acquired upon exercise of the Option. The
Company shall have the right to deduct from any salary or other payments to be
made to Optionee any federal, state or local taxes required by law to be so
withheld. The Company's obligation to deliver a certificate representing the
Common Stock acquired upon exercise of the Option is subject to the payment by
Optionee of any applicable federal, state and local withholding tax.
2
<PAGE> 16
11. Legends.
Certificates representing Common Stock acquired upon exercise of this
Option may contain such legends and transfer restrictions as the Company shall
deem reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws and until Optionee or any other holder of the
Common Stock has paid the Company such amounts as may be necessary in order to
satisfy any withholding tax liability of the Company resulting from a
disqualifying disposition described in Section 422(a) of the Code.
12. Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will constitute
special incentive compensation that will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement, profit sharing or other remuneration plan of the Company.
13. Amendment.
Subject to the terms and conditions of the Plan, the Plan Administrator
may modify, extend or renew the Option, or accept the surrender of the Option to
the extent not theretofore exercised and authorize the granting of new Options
in substitution therefor, except that no such action shall diminish or impair
the rights under the Option without the consent of Optionee.
14. Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement shall be
made by the Plan Administrator, and all such interpretations, constructions and
determinations shall be final and conclusive as to all parties.
15. Receipt of Plan.
By entering into this Agreement, Optionee acknowledges (i) that he or
she has received and read a copy of the Plan and (ii) that this Agreement is
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect.
16. Governing Law.
This Agreement shall be construed and shall take effect in accordance
with the laws of the State of Colorado, without regard to the conflicts of laws
rules of such State.
3
<PAGE> 17
17. Miscellaneous.
This Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto. If
any provision of this Agreement, or the application thereof, shall for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
All notices or other communications which are required to be given or may be
given to either party pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following the
signature of such party. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail. Either party may
change its address for such communications by giving notice thereof to the other
party in conformity with this Section 17.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the
Company and Optionee have executed this Agreement on _____________, effective as
of the date of grant.
CONVERGENT GROUP CORPORATION
By:
-------------------------------
Title:
----------------------------
Address:
--------------------------
----------------------------------
----------------------------------
OPTIONEE
----------------------------------
Address:
--------------------------
----------------------------------
----------------------------------
4
<PAGE> 18
SCHEDULES
TO
INCENTIVE STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
------------------------
3B Purchase Price per Share:
-------------------------
4 Expiration Date:
----------------------------------
6 Vesting Schedule:
Number of Shares
Date Which Become Exercisable
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
Additional Conditions to Vesting: Notwithstanding the foregoing, no
portion of the Option shall be vested and exercisable until the following
conditions have been satisfied:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE> 19
INCENTIVE STOCK OPTION AGREEMENT
(With Authorization for Early Exercise)
OPTIONEE:
--------------------
DATE OF GRANT:
---------------
AGREEMENT between Convergent Group Corporation (the "Company"), and the
above named Optionee ("Optionee"), an employee of the Company or a Subsidiary
thereof.
The Company and Optionee agree as follows:
1. Grant of Option.
Optionee is hereby granted an Incentive Stock Option, within the
meaning of Section 422 of the Code (the "Option"), to purchase Common Stock of
the Company pursuant to the Convergent Group Corporation 1999 Stock Option Plan
(the "Plan"). The Option and this Agreement are subject to and shall be
construed in accordance with the terms and conditions of the Plan, as now or
hereinafter in effect. Any terms which are used in this Agreement without being
defined and which are defined in the Plan shall have the meaning specified in
the Plan.
2. Date of Grant.
The date of the grant of the Option is the date first set forth above,
the date of the action by the Plan Administrator in granting the same.
3. Number and Price of Shares.
The number of shares as to which the Option is granted is the number
set forth in Schedule 3A to this Agreement. The purchase price per share is the
amount set forth in Schedule 3B to this Agreement.
4. Expiration Date.
Unless sooner terminated as provided in Section 5.4 or Section 10 of
the Plan, the Option shall expire and terminate on the date set forth in
Schedule 4 to this Agreement, and in no event shall the Option be exercisable
after that date.
5. Manner of Exercise.
Except as provided in this Agreement, the Option shall be exercisable,
in whole or in part, from time to time, in the manner provided in Section 8 of
the Plan.
<PAGE> 20
6. Time of Exercise.
The Option granted hereby shall become vested in and exercisable by
Optionee in the installments, on the dates and subject to the conditions set
forth in Schedule 6 to this Agreement; provided, however, that Optionee must
have been continuously employed by the Company or a Subsidiary thereof from the
date of grant of the Option until the date specified on Schedule 6 or until the
conditions specified on Schedule 6 have been satisfied.
7. Early Exercise.
Notwithstanding the provisions of Section 6, Optionee may elect at any
time prior to the termination of Optionee's employment with the Company or a
Subsidiary thereof to exercise the Option as to any part or all of the shares
subject to this Option, including without limitation, shares with respect to
which the Option has not yet vested pursuant to Section 6; provided, however,
that (i) a partial exercise of this Option shall be deemed to apply first to
vested shares and then to the earliest vesting installment of unvested shares,
and (ii) upon exercise of the Option with respect to unvested shares, Optionee
shall execute and deliver to the Company an Early Exercise Stock Repurchase
Agreement in substantially the form attached to this Agreement as Exhibit A,
which Agreement shall apply with respect to the unvested shares. Execution and
delivery of the Early Exercise Stock Repurchase Agreement prior to the transfer
or delivery of any shares and prior to the expiration of the option period shall
be a condition precedent to the right to purchase such shares. The election
provided in this Section 7 to purchase shares prior to the vesting of the Option
shall cease upon termination of your employment with the Company or a Subsidiary
thereof and may not be exercised after the date of such termination.
8. Shareholders' Agreement.
Upon exercise of the Option, Optionee shall execute and deliver to the
Company a Shareholders' Agreement in substantially the form attached to this
Agreement as Exhibit B. Execution and delivery of the Shareholders' Agreement
prior to the transfer or delivery of any shares and prior to the expiration of
the option period shall be a condition precedent to the right to purchase such
shares.
9. Lock-Up.
In connection with the first underwritten registered offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Act"), Optionee will not sell or otherwise transfer or dispose of any shares of
Common Stock which are owned either or record or beneficially by the Optionee,
whether acquired upon exercise of an Option or otherwise, upon exercise of this
Option, or any shares of Common Stock acquired with respect thereto, during such
period following the effective date of the registration statement of the Company
filed under the Act as may be requested by the Company or the representative of
the underwriters for the Company; provided, however, that such restriction shall
apply only if the executive officers and directors of the Company agree with the
representatives of the underwriters not to transfer shares of Common Stock owned
by them for the same or a greater period. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
2
<PAGE> 21
10. Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or the
laws of descent and distribution, and the Option shall be exercisable during
Optionee's lifetime only by Optionee. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Option, the Option shall immediately become null and void.
11. Withholding for Taxes.
Optionee shall reimburse the Company, in cash or by certified or bank
cashier's check, for any federal, state or local taxes required by law to be
withheld with respect to the exercise of the Option or any disqualifying
disposition of the Common Stock acquired upon exercise of the Option. The
Company shall have the right to deduct from any salary or other payments to be
made to Optionee any federal, state or local taxes required by law to be so
withheld. The Company's obligation to deliver a certificate representing the
Common Stock acquired upon exercise of the Option is subject to the payment by
Optionee of any applicable federal, state and local withholding tax.
12. Legends.
Certificates representing Common Stock acquired upon exercise of this
Option may contain such legends and transfer restrictions as the Company shall
deem reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws and until Optionee or any other holder of the
Common Stock has paid the Company such amounts as may be necessary in order to
satisfy any withholding tax liability of the Company resulting from a
disqualifying disposition described in Section 422(a) of the Code.
13. Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will constitute
special incentive compensation that will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement, profit sharing or other remuneration plan of the Company.
3
<PAGE> 22
14. Amendment.
Subject to the terms and conditions of the Plan, the Plan Administrator
may modify, extend or renew the Option, or accept the surrender of the Option to
the extent not theretofore exercised and authorize the granting of new Options
in substitution therefor, except that no such action shall diminish or impair
the rights under the Option without the consent of Optionee.
15. Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement shall be
made by the Plan Administrator, and all such interpretations, constructions and
determinations shall be final and conclusive as to all parties.
16. Receipt of Plan.
By entering into this Agreement, Optionee acknowledges (i) that he or
she has received and read a copy of the Plan and (ii) that this Agreement is
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect.
17. Governing Law.
This Agreement shall be construed and shall take effect in accordance
with the laws of the State of Colorado, without regard to the conflicts of laws
rules of such State.
18. Miscellaneous.
This Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto. If
any provision of this Agreement, or the application thereof, shall for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
All notices or other communications which are required to be given or may be
given to either party pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following the
signature of such party. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail. Either party may
change its address for such communications by giving notice thereof to the other
party in conformity with this Section 18.
4
<PAGE> 23
IN WITNESS WHEREOF, the Company by a duly authorized officer of the
Company and Optionee have executed this Agreement on _____________, effective as
of the date of grant.
CONVERGENT GROUP CORPORATION
By:
-------------------------------
Title:
----------------------------
Address:
--------------------------
----------------------------------
----------------------------------
OPTIONEE
----------------------------------
Address:
--------------------------
----------------------------------
----------------------------------
5
<PAGE> 24
SCHEDULES
TO
INCENTIVE STOCK OPTION AGREEMENT
Schedule
3A Number of Shares of Stock:
------------------------
3B Purchase Price per Share:
-------------------------
4 Expiration Date:
----------------------------------
6 Vesting Schedule:
Number of Shares
Date Which Become Exercisable
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
Additional Conditions to Vesting: Notwithstanding the foregoing, no
portion of the Option shall be vested and exercisable until the following
conditions have been satisfied:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6
<PAGE> 25
NONQUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES
OPTIONEE:
--------------------
DATE OF GRANT:
---------------
AGREEMENT between Convergent Group Corporation (the "Company"), and the
above named Optionee ("Optionee"), an employee of the Company or a Subsidiary
thereof.
The Company and Optionee agree as follows:
1. Grant of Option.
Optionee is hereby granted a Nonqualified Stock Option (the "Option")
to purchase Common Stock of the Company pursuant to the Convergent Group
Corporation 1999 Stock Option Plan (the "Plan"). The Option is not intended to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code. The Option and this Agreement are subject to and shall be construed in
accordance with the terms and conditions of the Plan, as now or hereinafter in
effect. Any terms which are used in this Agreement without being defined and
which are defined in the Plan shall have the meaning specified in the Plan.
2. Date of Grant.
The date of the grant of the Option is the date first set forth above,
the date of the action by the Plan Administrator in granting the same.
3. Number and Price of Shares.
The number of shares as to which the Option is granted is the number
set forth in Schedule 3A to this Agreement. The purchase price per share is the
amount set forth in Schedule 3B to this Agreement.
4. Expiration Date.
Unless sooner terminated as provided in Section 5.4 or Section 10 of
the Plan, the Option shall expire and terminate on the date set forth in
Schedule 4 to this Agreement, and in no event shall the Option be exercisable
after that date.
5. Manner of Exercise.
Except as provided in this Agreement, the Option shall be exercisable,
in whole or in part, from time to time, in the manner provided in Section 8 of
the Plan.
<PAGE> 26
6. Time of Exercise.
The Option granted hereby shall become vested in and exercisable by
Optionee in the installments, on the dates and subject to the conditions set
forth in Schedule 6 to this Agreement; provided, however, that Optionee must
have been continuously employed by the Company or a Subsidiary thereof from the
date of grant of the Option until the date specified on Schedule 6 or until the
conditions specified on Schedule 6 have been satisfied.
7. Shareholders' Agreement.
Upon exercise of the Option, Optionee shall execute and deliver to the
Company a Shareholders' Agreement in substantially the form attached to this
Agreement as Exhibit A. Execution and delivery of the Shareholders' Agreement
prior to the transfer or delivery of any shares and prior to the expiration of
the option period shall be a condition precedent to the right to purchase such
shares.
8. Lock-Up.
In connection with the first underwritten registered offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Act"), Optionee will not sell or otherwise transfer or dispose of any shares of
Common Stock which are owned either or record or beneficially by the Optionee,
whether acquired upon exercise of an Option or otherwise, upon exercise of this
Option, or any shares of Common Stock acquired with respect thereto, during such
period following the effective date of the registration statement of the Company
filed under the Act as may be requested by the Company or the representative of
the underwriters for the Company; provided, however, that such restriction shall
apply only if the executive officers and directors of the Company agree with the
representatives of the underwriters not to transfer shares of Common Stock owned
by them for the same or a greater period. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
9. Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or the
laws of descent and distribution, and the Option shall be exercisable during
Optionee's lifetime only by Optionee. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Option, the Option shall immediately become null and void.
10. Withholding for Taxes.
Optionee shall reimburse the Company, in cash or by certified or bank
cashier's check, for any federal, state or local taxes required by law to be
withheld with respect to the exercise of the Option. The Company shall have the
right to deduct from any salary or other payments to be made to Optionee any
federal, state or local taxes required by law to be so withheld. The Company's
obligation to deliver a certificate representing the Common Stock acquired upon
exercise of the Option is subject to the payment by Optionee of any applicable
federal, state and local withholding tax.
2
<PAGE> 27
11. Legends.
Certificates representing Common Stock acquired upon exercise of this
Option may contain such legends and transfer restrictions as the Company shall
deem reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws.
12. Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will constitute
special incentive compensation that will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement, profit sharing or other remuneration plan of the Company.
13. Amendment.
Subject to the terms and conditions of the Plan, the Plan Administrator
may modify, extend or renew the Option, or accept the surrender of the Option to
the extent not theretofore exercised and authorize the granting of new Options
in substitution therefor, except that no such action shall diminish or impair
the rights under the Option without the consent of Optionee.
14. Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement shall be
made by the Plan Administrator, and all such interpretations, constructions and
determinations shall be final and conclusive as to all parties.
15. Receipt of Plan.
By entering into this Agreement, Optionee acknowledges (i) that he or
she has received and read a copy of the Plan and (ii) that this Agreement is
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect.
16. Governing Law.
This Agreement shall be construed and shall take effect in accordance
with the laws of the State of Colorado, without regard to the conflicts of laws
rules of such State.
3
<PAGE> 28
17. Miscellaneous.
This Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto. If
any provision of this Agreement, or the application thereof, shall for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
All notices or other communications which are required to be given or may be
given to either party pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following the
signature of such party. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail. Either party may
change its address for such communications by giving notice thereof to the other
party in conformity with this Section 17.
IN WITNESS WHEREOF, the Company by a duly authorized officer of the
Company and Optionee have executed this Agreement on _____________, effective as
of the date of grant.
CONVERGENT GROUP CORPORATION
By:
-------------------------------
Title:
----------------------------
Address:
--------------------------
----------------------------------
----------------------------------
OPTIONEE
----------------------------------
Address:
--------------------------
----------------------------------
----------------------------------
4
<PAGE> 29
SCHEDULES
TO
NONQUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES
Schedule
3A Number of Shares of Stock:
------------------------
3B Purchase Price per Share:
-------------------------
4 Expiration Date:
----------------------------------
6 Vesting Schedule:
Number of Shares
Date Which Become Exercisable
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
Additional Conditions to Vesting: Notwithstanding the foregoing, no
portion of the Option shall be vested and exercisable until the following
conditions have been satisfied:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE> 30
NONQUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES
(With Authorization for Early Exercise)
OPTIONEE:
--------------------
DATE OF GRANT:
---------------
AGREEMENT between Convergent Group Corporation (the "Company"), and the
above named Optionee ("Optionee"), an employee of the Company or a Subsidiary
thereof.
The Company and Optionee agree as follows:
1. Grant of Option.
Optionee is hereby granted a Nonqualified Stock Option (the "Option")
to purchase Common Stock of the Company pursuant to the Convergent Group
Corporation 1999 Stock Option Plan (the "Plan"). The Option is not intended to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code. The Option and this Agreement are subject to and shall be construed in
accordance with the terms and conditions of the Plan, as now or hereinafter in
effect. Any terms which are used in this Agreement without being defined and
which are defined in the Plan shall have the meaning specified in the Plan.
2. Date of Grant.
The date of the grant of the Option is the date first set forth above,
the date of the action by the Plan Administrator in granting the same.
3. Number and Price of Shares.
The number of shares as to which the Option is granted is the number
set forth in Schedule 3A to this Agreement. The purchase price per share is the
amount set forth in Schedule 3B to this Agreement.
4. Expiration Date.
Unless sooner terminated as provided in Section 5.4 or Section 10 of
the Plan, the Option shall expire and terminate on the date set forth in
Schedule 4 to this Agreement, and in no event shall the Option be exercisable
after that date.
5. Manner of Exercise.
Except as provided in this Agreement, the Option shall be exercisable,
in whole or in part, from time to time, in the manner provided in Section 8 of
the Plan.
<PAGE> 31
6. Time of Exercise.
The Option granted hereby shall become vested in and exercisable by
Optionee in the installments, on the dates and subject to the conditions set
forth in Schedule 6 to this Agreement; provided, however, that Optionee must
have been continuously employed by the Company or a Subsidiary thereof from the
date of grant of the Option until the date specified on Schedule 6 or until the
conditions specified on Schedule 6 have been satisfied.
7. Early Exercise.
Notwithstanding the provisions of Section 6, Optionee may elect at any
time prior to the termination of Optionee's employment with the Company or a
Subsidiary thereof to exercise the Option as to any part or all of the shares
subject to this Option, including without limitation, shares with respect to
which the Option has not yet vested pursuant to Section 6; provided, however,
that (i) a partial exercise of this Option shall be deemed to apply first to
vested shares and then to the earliest vesting installment of unvested shares,
and (ii) upon exercise of the Option with respect to unvested shares, Optionee
shall execute and deliver to the Company an Early Exercise Stock Repurchase
Agreement in substantially the form attached to this Agreement as Exhibit A,
which Agreement shall apply with respect to the unvested shares. Execution and
delivery of the Early Exercise Stock Repurchase Agreement prior to the transfer
or delivery of any shares and prior to the expiration of the option period shall
be a condition precedent to the right to purchase such shares. The election
provided in this Section 7 to purchase shares prior to the vesting of the Option
shall cease upon termination of your employment with the Company or a Subsidiary
thereof and may not be exercised after the date of such termination.
8. Shareholders' Agreement.
Upon exercise of the Option, Optionee shall execute and deliver to the
Company a Shareholders' Agreement in substantially the form attached to this
Agreement as Exhibit B. Execution and delivery of the Shareholders' Agreement
prior to the transfer or delivery of any shares and prior to the expiration of
the option period shall be a condition precedent to the right to purchase such
shares.
9. Lock-Up.
In connection with the first underwritten registered offering of any
securities of the Company under the Securities Act of 1933, as amended (the
"Act"), Optionee will not sell or otherwise transfer or dispose of any shares of
Common Stock which are owned either or record or beneficially by the Optionee,
whether acquired upon exercise of an Option or otherwise, upon exercise of this
Option, or any shares of Common Stock acquired with respect thereto, during such
period following the effective date of the registration statement of the Company
filed under the Act as may be requested by the Company or the representative of
the underwriters for the Company; provided, however, that such restriction shall
apply only if the executive officers and directors of the Company agree with the
representatives of the underwriters not to transfer shares of Common Stock owned
by them for the same or a greater period. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
2
<PAGE> 32
10. Nontransferability of Option.
The Option is not transferable by Optionee other than by Will or the
laws of descent and distribution, and the Option shall be exercisable during
Optionee's lifetime only by Optionee. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of the Option contrary to the
provisions hereof, or upon the levy of any attachment or similar process upon
the Option, the Option shall immediately become null and void.
11. Withholding for Taxes.
Optionee shall reimburse the Company, in cash or by certified or bank
cashier's check, for any federal, state or local taxes required by law to be
withheld with respect to the exercise of the Option. The Company shall have the
right to deduct from any salary or other payments to be made to Optionee any
federal, state or local taxes required by law to be so withheld. The Company's
obligation to deliver a certificate representing the Common Stock acquired upon
exercise of the Option is subject to the payment by Optionee of any applicable
federal, state and local withholding tax.
12. Legends.
Certificates representing Common Stock acquired upon exercise of this
Option may contain such legends and transfer restrictions as the Company shall
deem reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Common Stock until there has been compliance with
federal and state securities laws.
13. Employee Benefits.
Optionee agrees that the grant and vesting of the Option and the
receipt of shares of Common Stock upon exercise of the Option will constitute
special incentive compensation that will not be taken into account as "salary"
or "compensation" or "bonus" in determining the amount of any payment under any
pension, retirement, profit sharing or other remuneration plan of the Company.
14. Amendment.
Subject to the terms and conditions of the Plan, the Plan Administrator
may modify, extend or renew the Option, or accept the surrender of the Option to
the extent not theretofore exercised and authorize the granting of new Options
in substitution therefor, except that no such action shall diminish or impair
the rights under the Option without the consent of Optionee.
3
<PAGE> 33
15. Interpretation.
The interpretations and constructions of any provision of and
determinations on any question arising under the Plan or this Agreement shall be
made by the Plan Administrator, and all such interpretations, constructions and
determinations shall be final and conclusive as to all parties.
16. Receipt of Plan.
By entering into this Agreement, Optionee acknowledges (i) that he or
she has received and read a copy of the Plan and (ii) that this Agreement is
subject to and shall be construed in accordance with the terms and conditions of
the Plan, as now or hereinafter in effect.
17. Governing Law.
This Agreement shall be construed and shall take effect in accordance
with the laws of the State of Colorado, without regard to the conflicts of laws
rules of such State.
18. Miscellaneous.
This Agreement constitutes the entire understanding and agreement of
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties with respect hereto. If
any provision of this Agreement, or the application thereof, shall for any
reason and to any extent be invalid or unenforceable, the remainder of this
Agreement and the application of such provision to other circumstances shall be
interpreted so as best to reasonably effect the intent of the parties hereto.
All notices or other communications which are required to be given or may be
given to either party pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally or by registered or certified mail,
postage prepaid, to the address of the parties as set forth following the
signature of such party. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail. Either party may
change its address for such communications by giving notice thereof to the other
party in conformity with this Section 18.
4
<PAGE> 34
IN WITNESS WHEREOF, the Company by a duly authorized officer of the
Company and Optionee have executed this Agreement on _____________, effective as
of the date of grant.
CONVERGENT GROUP CORPORATION
By:
-------------------------------
Title:
----------------------------
Address:
--------------------------
----------------------------------
----------------------------------
OPTIONEE
----------------------------------
Address:
--------------------------
----------------------------------
----------------------------------
7
<PAGE> 35
SCHEDULES
TO
NONQUALIFIED STOCK OPTION AGREEMENT FOR EMPLOYEES
Schedule
3A Number of Shares of Stock:
------------------------
3B Purchase Price per Share:
-------------------------
4 Expiration Date:
----------------------------------
6 Vesting Schedule:
Number of Shares
Date Which Become Exercisable
------------- -------------
------------- -------------
------------- -------------
------------- -------------
------------- -------------
Additional Conditions to Vesting: Notwithstanding the foregoing, no
portion of the Option shall be vested and exercisable until the following
conditions have been satisfied:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6
<PAGE> 36
AMENDMENT NO. 1 TO THE
CONVERGENT GROUP CORPORATION
1999 STOCK OPTION PLAN
1. Plan Sponsor: Convergent Group Corporation.
2. Amendment of Plan: The following amendments to the Convergent Group
Corporation 1999 Stock Option Plan (the "Plan") are adopted, effective as
hereinafter provided:
A. Section 5.1 shall be amended to read as follows:
5.1 Number. The aggregate number of shares of Common Stock which
may be issued under Options granted pursuant to the Plan shall not
exceed 14,986,570 shares. Shares which may be issued under Options may
consist, in whole or in part, of authorized but unissued stock or
treasury stock of the Company not reserved for any other purpose.
B. Section 7.3 shall be amended to read as follows:
7.3 Option Price. The option price per share of Common Stock under
each Option shall be determined by the Plan Administrator and stated in
the Option Agreement. The option price for Incentive Stock Options
granted under the Plan shall not be less than 100% of the fair market
value (determined as of the day the Option is granted) of the shares
subject to the Option, provided, however, that in no event shall the
option price per share be less than the par value of the Common Stock.
The option price for Nonqualified Stock Options granted under the Plan
shall not be less than the par value of the shares subject to the
Option.
C. Section 9 shall be amended to read as follows:
Notwithstanding any vesting requirements contained in any Option
Agreement, upon the occurrence of a Change in Control, all outstanding
Options granted before October 1, 1999 shall become immediately
exercisable in full. Options granted on or after October 1, 1999 shall
become immediately exercisable in full upon the occurrence of a Change
in Control if and only if, and only to the extent that, (1) such
vesting is specifically provided for in the Option Agreement between
the Company and the Optionee, or (2) the Plan Administrator, in its
sole discretion, chooses to make such an acceleration, either as to all
outstanding Options or as to such Options as shall be designated by the
Plan Administrator.
3. Effective Date: The effective date of Sections 2.B. and 2.C. of this
Amendment shall be August 13, 1999. The effective date of Section 2.A. of this
Amendment shall be January 1, 2000; provided, however, that to the extent the
Company grants options to purchase more than
<PAGE> 37
8,943,212 shares under the Plan, such grants (or the portion thereof which
exceeds 8,943,212 shares) shall be subject to the approval and ratification of
this Amendment by the shareholders of the Company not later than December 31,
2000.
4. Terms and Conditions of Plan: Except for the above amendments, all terms and
conditions of the Plan are unamended and shall remain in full force and effect.
5. Execution: This Amendment has been executed by a duly authorized officer of
the Company on the date set forth below.
CONVERGENT GROUP CORPORATION
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
2
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 13th day of
August, 1999 (the "Effective Date"), and entered into by and between Glenn E.
Montgomery, Jr. (subsequently called the "Executive") and Convergent Group
Corporation, a Delaware corporation, having its principal office at 6200 South
Syracuse Way, Suite 200, Englewood, Colorado 80111 (subsequently called the
"Corporation"). In consideration of the mutual promises and the terms and
conditions set forth below, the Executive and the Corporation (together, the
"Parties," and each, a "Party") agree as follows:
1. Nature and Purpose of Agreement. The laws of the State of Colorado permit
consultants to incorporate under the Colorado Corporation Code. The Executive
desires to practice consulting with and provide essential management to the
Corporation. The Board of Directors of the Corporation has determined the
reasonable method of compensation of the Executive and has offered him
compensation of an annual base salary and bonuses as set forth in Sections 3 and
4, participation in a 401(k) Plan in accordance with law, Key Man Insurance,
together with the other employee benefits generally set forth in the
Corporation's policies and procedures manual.
2. Employment; Term. The Corporation hereby employs the Executive as a
consultant and the Executive hereby agrees to be employed by the Corporation
under the terms and conditions set forth in this Agreement. The term of this
Agreement shall begin on the date hereof and shall end on December 31, 2002,
unless terminated prior to that date as provided herein.
3. Compensation and Benefits.
(a) For all services rendered by the Executive under this Agreement,
the Corporation shall pay compensation to the Executive consisting of an annual
base salary and bonuses. The annual base salary effective as of August 15, 1999,
is $200,000. The Executive's annual base salary shall not be reduced during the
term of this Agreement and shall be subject to annual adjustments as set forth
herein. Effective on January 1 of each year during the term of this Agreement,
the Executive's base salary shall be increased by $25,000. The Executive's
annual base salary shall be paid in twenty-six (26) bi-weekly payments during
each annual period.
(b) The Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of the Executive's level or its
employees generally (the "Benefits").
<PAGE> 2
4. Bonus Arrangements.
(a) Bonus Opportunities. The Corporation and the Executive acknowledge
that the Executive is critical to the success of the Corporation both as a
consultant for the Corporation and as an essential part of the management of the
Corporation. The Corporation desires to retain the Executive and ensure that the
Executive receives reasonable compensation for his critical role. The
Corporation therefore agrees to pay the balance of the Executive's reasonable
compensation by way of an At-Plan Bonus (as defined below) and an Over-Plan
Bonus (as defined below). The At-Plan Bonus and the Over-Plan Bonus are referred
to collectively as the "Incentive Bonuses".
(b) At-Plan Bonus. Commencing with calendar year 1999, the Executive
shall be eligible to earn an "At-Plan Bonus" for each year in addition to his
annual base salary, based upon the attainment of three corporate performance
factors: revenue, bookings and EBITDA. The maximum amount of the At-Plan Bonus
shall be $150,000 for calendar year 1999, $250,000 for calendar year 2000,
$300,000 for calendar year 2001, and $325,000 for calendar year 2002 and any
year thereafter unless there is an adjustment to the targeted At-Plan Bonus for
such additional year by mutual agreement of the parties (the "At-Plan Target").
For calendar year 1999, twenty percent (20%) of the At-Plan Bonus shall be
earned based upon the attainment by the Corporation of targeted revenue during
the period (the "At-Plan Revenue Bonus"), twenty percent (20%) of the At-Plan
Bonus shall be earned based upon the attainment by the Corporation of targeted
bookings during the period (the "At-Plan Bookings Bonus"), and sixty percent
(60%) of the At-Plan Bonus shall be earned based upon the attainment by the
Corporation of targeted EBITDA (as defined in Section 4(f) below) during the
period (the "At-Plan EBITDA Bonus"). The weighting for each of the At-Plan
Revenue Bonus, At-Plan Bookings Bonus, and At-Plan EBITDA Bonus for future years
may be revised by a majority vote of the Board of Directors of the Corporation,
provided that at least one of the members of the Board of Directors designated
by the Investors, as such term is defined in that certain Recapitalization
Agreement (the "Recapitalization Agreement") by and among the Corporation and
the additional parties named therein dated as of August 13, 1999 (each, an
"Investor Director"), in accordance with that certain Shareholders' Agreement
(the "Shareholders' Agreement") by and among the Corporation and the parties
named therein dated as of August 13, 1999, must have voted in favor of the
adoption thereof, and provided further, that the total of the three weightings
continues to be 100%. The revenue, bookings, and EBITDA targets used for
purposes of determining the At-Plan Revenue Bonus, At-Plan Bookings Bonus and
At-Plan EBITDA Bonus shall be set forth in the Annual Operating Plan (as defined
in Section 4(e) below). Separate calculations shall be made with respect to each
of the At-Plan Revenue Bonus, At-Plan Bookings Bonus, and At-Plan EBITDA Bonus.
Notwithstanding anything herein to the contrary, the Corporation must achieve
more than 90% of the targeted revenue, bookings, or EBITDA, whichever is being
tested, during the period for the Executive to receive a bonus with respect to
that component. The amount of the At-Plan Bonus for each component shall be
based upon the following formula:
2
<PAGE> 3
Percentage Attainment of Targeted Revenue, Bookings, or EBITDA
(each tested separately) for the Period
(Determined to the nearest hundredth of a percent, with a maximum of 100%)
Minus
-----
90
Divided By
----------
10
For example, if the Corporation achieves 95% of the targeted revenue, 85% of the
targeted bookings, and 105% of the targeted EBITDA for the year under the Annual
Operating Plan, the Executive shall receive an At-Plan Bonus equal to 70% of the
At-Plan Target for the year, determined as follows:
Targeted Revenue = 20% of total At-Plan Target ("At-Plan Revenue Target")
% of At-Plan Revenue Target = (95-90) / 10 = 50%
% of total At-Plan Target from Revenue = 20% x 50% = 10%
Targeted Bookings = 20% of total At-Plan Target ("At-Plan Bookings Target")
% of At-Plan Bookings Target = 0% (performance below 90%)
% of total At-Plan Target from Bookings = 20% x 0% = 0%
Targeted EBITDA = 60% of total At-Plan Target ("At-Plan EBITDA Target")
% of At-Plan EBITDA Target = 100% (maximum of 100%)
% total At-Plan Target from EBITDA = 60% x 100% = 60%
% of total At-Plan Target from revenue, bookings and EBITDA = 10% + 0%
+ 60% = 70%
Notwithstanding anything herein to the contrary, for the year 1999, (i) the
maximum amount of the At-Plan Target shall be $62,500, which is the $150,000 for
the entire year pro-rated based upon the period August 1, 1999 through December
31, 1999, and (ii) the amount of the At-Plan Bonus earned by the Executive shall
be determined based upon revenues, bookings and EBITDA and targeted revenues,
bookings and EBITDA for the entire calendar year 1999.
(c) Over-Plan Bonus. Commencing with calendar year 1999, the Executive
shall be eligible to earn an "Over-Plan Bonus" for each year in addition to his
annual base salary, based upon the attainment of three corporate performance
factors: revenue, bookings and EBITDA. The maximum amount of the Over-Plan Bonus
shall be an amount between $0 and $500,000 for each calendar year (the
"Over-Plan Target"), which amount is based upon (i) $10,000 of Over-Plan Bonus
for every one percent (1%) by which the targeted performance is exceeded for the
first ten percent (10%), and
3
<PAGE> 4
(ii) $20,000 of Over-Plan Bonus for every one percent (1%) by which the targeted
performance is exceeded for percentages between ten percent (10%) and thirty
percent (30%), as set forth in the following examples:
Percent Over Target
up to 10% Over-Plan Target
--------- ----------------
1% $10,000
5% $50,000
10% $100,000
Excess over 10% Over-Plan Target
--------------- ----------------
15% $200,000
20% $300,000
25% $400,000
30% $500,000
The Over-Plan Target is capped at $500,000, and the Executive may not earn more
than $500,000 in any given year pursuant to this Section 4(c). For calendar year
1999, twenty percent (20%) of the Over-Plan Bonus shall be earned based upon the
attainment by the Corporation of targeted revenue during the period (the
"Over-Plan Revenue Bonus"), twenty percent (20%) of the Over-Plan Bonus shall be
earned based upon the attainment by the Corporation of targeted bookings during
the period (the "Over-Plan Bookings Bonus"), and sixty percent (60%) of the
Over-Plan Bonus shall be earned based upon the attainment by the Corporation of
targeted EBITDA during the period (the "Over-Plan EBITDA Bonus"). The weighting
for each of the Over-Plan Revenue Bonus, Over-Plan Bookings Bonus, and Over-Plan
EBITDA Bonus for future years may be revised by a majority vote of the Board of
Directors of the Corporation, provided that at least one Investor Director must
have voted in favor of the adoption of such revision, and provided further, that
the total of the three weightings continues to be 100%. The revenue, bookings,
and EBITDA targets used for purposes of determining the Over-Plan Revenue Bonus,
Over-Plan Bookings Bonus and Over-Plan EBITDA Bonus shall be set forth in the
Annual Operating Plan. Separate calculations shall be made with respect to each
of the Over-Plan Revenue Bonus, Over-Plan Bookings Bonus, and Over-Plan EBITDA
Bonus. Notwithstanding anything herein to the contrary, the Corporation must
achieve more than 100% of the targeted revenue, bookings, or EBITDA, whichever
is being tested, during the period for the Executive to receive a bonus with
respect to that component.
For example, if the Corporation achieves 95% of the targeted revenue, 117.5% of
the targeted bookings, and 150% of the targeted EBITDA for the year under the
Annual Operating Plan, the Executive shall receive an Over-Plan Bonus equal to
$350,000, determined as follows:
Maximum Over-Plan Revenue Bonus = 20% of total Over-Plan Target
Over-Plan Target for Revenue = $0 (performance below 100%)
Amount of Over-Plan Revenue Bonus = 20% x $0 = $0
4
<PAGE> 5
Maximum Over-Plan Bookings Bonus = 20% of total Over-Plan Target
Over-Plan Target for Bookings = $250,000 (performance at 117.5%)
Amount of Over-Plan Bonus from Bookings = 20% x $250,000 = $50,000
Maximum Over-Plan EBITDA Bonus = 60% of total Over-Plan Target
Over-Plan Target for EBITDA = $500,000 (performance at 150%)
Amount of Over-Plan Bonus from EBITDA = 60% x $500,000 = $300,000
Total Over-Plan Bonus = $0 + $50,000 + $300,000 = $350,000
Notwithstanding anything herein to the contrary, the Corporation must achieve at
least 90% of each of targeted revenues, bookings, and EBITDA during the period
for the Executive to receive any Over-Plan Bonus. In the event that the
Corporation fails to achieve at least 90% of any one or more of the targets, the
Executive may, in his sole discretion and for purposes of meeting the 90%
threshold only, allocate any excess over 90% in any category to any category in
which less than 90% of the target was achieved such that the category to which
such excess is moved then meets the 90% threshold; provided, however, that no
more than 5% in the aggregate shall be moved between categories and the amount
moved must be allocated to one or more targets that are below the 90% threshold.
For example, if the Corporation achieves 115% of targeted revenues, 86% of
targeted bookings, and 93% of targeted EBITDA, then in order to meet the 90%
minimum achievement in the bookings category, the Executive could move 1% of the
excess revenues and 3% of the excess EBITDA to the bookings category, such that
the figures used in determining the Over-Plan Bonus would be 112% of targeted
revenues, 90% of targeted bookings, and 90% of targeted EBITDA.
Notwithstanding anything herein to the contrary, for the year 1999, (i) the
amount of the Over-Plan Target shall be pro-rated based upon the period August
1, 1999 through December 31, 1999 (i.e. 5/12 of the Over-Plan Target), and (ii)
the amount of the Over-Plan Bonus earned by the Executive shall be determined
based upon revenues, bookings and EBITDA and targeted revenues, bookings and
EBITDA for the entire calendar year 1999.
(d) Payment of Incentive Bonuses. The entire amount of the At-Plan
Bonus shall be paid in cash or by check. One-third of the Over-Plan Bonus shall
be paid in cash or by check, and the remaining two-thirds shall be paid by the
issuance to the Executive of a nonqualified stock option (the "Option") to
purchase Common Stock of the Corporation, par value $0.001 per share ("Common
Stock"). The cash amounts of the At-Plan Bonus and the Over-Plan Bonus shall be
paid, and the Option portion of the Over-Plan Bonus shall be issued, within ten
(10) days after the Calculation Date (as defined herein). In any event, the
effective date of the grant of the Option shall be the last day of the period
for which the Over-Plan Bonus was calculated. The exercise price per share of
the Option shall be twenty-five percent (25%) of the Fair Market Value per share
of the Common Stock as of the last day of the period for which the Over-Plan
Bonus was calculated. For purposes of this Section 4(d), Fair Market Value per
share shall be determined in accordance with Section 4(g). The number of shares
subject to
5
<PAGE> 6
the Option shall be determined by dividing the dollar amount of the Over-Plan
Bonus payable in the form of the Option by an amount equal to seventy-five
percent (75%) of the Fair Market Value per share of the Common Stock as of the
last day of the period for which the Over-Plan Bonus was calculated. The Option
shall be fully vested and exercisable as of the date of its grant and shall have
a ten (10) year term. An example of the above calculation is as follows: Assume
the Over-Plan Bonus amount is $150,000.00. Assume further that the Fair Market
Value per share is $12.00. The exercise price per share would be $12.00 x .25,
or $3.00. The number of shares subject to the Option would be ($150,000 x .6667)
/ ($12.00 x .75), or 11,111 shares.
(e) Annual Operating Plan. On or before December 15 of the preceding
calendar year, management of the Corporation shall prepare in good faith and
submit to the Board of Directors, and the Board of Directors shall adopt an
annual business plan for the Corporation. In preparing the annual business plan,
management shall consider, among other factors, the past performance of the
Corporation and the Corporation's current outlook based upon the Corporation's
backlog and such other factors as management shall deem appropriate. Upon
adoption by the Board of Directors by a majority vote, provided that the
Executive and at least one of the Investor Directors (assuming that there is
then such a member on the Board of Directors) must have voted in favor of
adoption, the annual business plan shall be the "Annual Operating Plan" for
purposes of this Agreement. If the Board of Directors (including the Executive
and at least one Investor Director) fails to approve the annual business plan as
set forth herein, the plan for the prior year multiplied by 140% shall be the
"Annual Operating Plan" for purposes of this Agreement. Notwithstanding the
foregoing, the Annual Operating Plan to be used for purposes of calendar year
1999 shall be the annual business plan adopted by the Corporation's Board of
Directors on December 14, 1998, as amended by the Corporation's Forecast dated
May 23, 1999.
(f) Determination of Revenues, Bookings and EBITDA. For purposes of
this Agreement, "EBITDA" means earnings before interest, taxes, depreciation and
amortization; provided, however, that notwithstanding anything herein to the
contrary, EBITDA shall be adjusted as necessary to exclude the effects of (i)
the payment of transaction costs associated with the consummation of the
transactions contemplated by the Recapitalization Agreement, which shall include
but not be limited to bank fees, finance fees, legal fees, accounting fees, and
any other similar types of fees or expenses; (ii) the payment of transaction
costs associated with the consummation of a major capital event such as a sale
of all or substantially all of the Corporation's stock or assets, a merger or
consolidation, or an initial public offering; and (iii) payment of any
"Transaction Fee" or "Management Fee", as those terms are defined in the
Shareholders' Agreement. When calculated for a full calendar year, (1) revenues
and EBITDA shall be as set forth in the Corporation's audited financial
statements for the year, which statements shall be prepared in accordance with
generally accepted accounting principles consistently applied as in effect from
time to time in the United States, and (2) bookings shall be determined by the
Corporation's Chief Financial Officer in accordance with the past practices of
the Corporation consistently applied, and shall be reviewed and certified by the
Corporation's independent certified public accountants.
6
<PAGE> 7
When calculated for any period which is less than a full calendar year,
revenues, bookings and EBITDA shall initially be determined based upon the
Corporation's unaudited financial statements for such period, which statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied as in effect from time to time in the United States and
shall be certified by the Corporation's Chief Financial Officer. When an
Incentive Bonus is calculated for a partial year as described above, fifty
percent (50%) of such Incentive Bonus (including both cash and options,
pro-rata) shall be paid or issued immediately to the Executive and the remaining
fifty percent (50%) shall be retained by the Corporation until the regular audit
of the financial statements for such year has been completed. The amount of the
Incentive Bonus for such period shall then be re-determined based upon the
Corporation's audited financial statements and bookings as reviewed and
certified by the Corporation's independent certified public accountants, and the
Corporation shall pay and issue to the Executive any shortfall, and the
Executive shall refund or return for cancellation to the Corporation any
over-payment, based upon the amount of the Incentive Bonus as re-determined and
the amount previously paid and issued. The amount of revenues, bookings and
EBITDA for a full calendar year period shall be determined within fifteen (15)
days after the release of the Corporation's audited financial statements for the
year. The amount of revenues, bookings and EBITDA for a period which is less
than a full calendar year shall be determined within fifteen (15) days after the
end of the month in which such period terminates. The date by which the amount
of revenues, bookings and EBITDA are to be determined or re-determined is
referred to as the "Calculation Date." The Corporation shall use its best
efforts to cause audited financial statements prepared by an independent
certified public accountant and a certification of bookings for any period to be
released no later than April 15th of the following year. The Corporation shall
notify the Executive of the amount of the At-Plan Bonus and the Over-Plan Bonus
(the "Bonus Notice") no later than five (5) days after the Calculation Date.
(g) Determination of Fair Market Value. If the Common Stock is listed
upon an established stock exchange or exchanges, then the fair market value per
share shall be deemed to be the average of the quoted closing prices of the
Common Stock on such stock exchange or exchanges on each of the thirty (30) days
immediately preceding the day for which the determination is made. If the Common
Stock is not listed upon an established stock exchange but is traded in the
NASDAQ National Market System, the fair market value per share shall be deemed
to be the average of the closing prices of the Common Stock in the National
Market System on each of the thirty (30) days immediately preceding the day for
which the determination is made. If the Common Stock is not listed upon an
established stock exchange and is not traded in the National Market System, the
fair market value per share shall be deemed to be the average of the mean
between the dealer "bid" and "ask" closing prices of the Common Stock on the
NASDAQ System on each of the thirty (30) days immediately preceding the day for
which the determination is made. If none of these conditions apply, Fair Market
Value shall be the amount (the "Formula Price") determined as follows: (i) if
the date of determination is on or before the date which is six (6) months after
the closing of the
7
<PAGE> 8
transactions contemplated by the Recapitalization Agreement, an amount equal to
$1.085 per share, subject to equitable adjustment in the event of any increase
or decrease in the shares of Common Stock by way of stock split, share
reclassification, stock dividend or other similar transaction, or (ii) if the
date of determination is after the date which is six (6) months after the
closing of the transactions contemplated by the Recapitalization Agreement, the
fair value of each share determined by multiplying EBITDA for the twelve month
period ending on the day for which the determination is made times an industry
multiple equal to the average multiples of a list of ten comparable,
publicly-traded companies, which list has initially been determined by mutual
agreement of the Executive and InSight Capital Partners and is attached hereto
as Exhibit A. Such list shall be revised each year on January 1 upon the mutual
agreement of the Executive and InSight Capital Partners. A minority/liquidity
discount of 20% shall be applied in determining the Formula Price pursuant to
clause (ii) above; provided, however, that no minority/liquidity discount shall
be applied if the Formula Price is being determined in connection with the
exercise of the Put Option (as defined in Section 22(a)) subsequent to (i) the
Corporation's termination of the Executive without Cause or (ii) the Executive's
termination of this Agreement for Good Reason.
(h) Determination of Incentive Bonuses Following Termination of
Employment. In the event of the termination of the Executive's employment by the
Corporation for Cause (as defined in Section 20(a)) or by the Executive without
Good Reason (as defined in Section 20(c)), the Executive shall be entitled to
receive Incentive Bonuses for any calendar year concluded prior to such
termination of employment but shall not be entitled to receive Incentive Bonuses
for the calendar year in which such termination of employment occurs. In the
event of the termination of the Executive's employment for any reason other than
by the Corporation for Cause or by the Executive without Good Reason, including
without limitation the Executive's death or disability, the Executive shall be
entitled to receive Incentive Bonuses both with respect to any calendar year
concluded prior to such termination of employment and with respect to the
calendar year in which such termination of employment occurs. The amount of the
At-Plan Target and the Over-Plan Target for a year in which a termination occurs
shall be prorated based upon the portion of the year during which the Executive
was employed by the Corporation, and the determination of the At-Plan Bonus and
the Over-Plan Bonus for such year shall be determined based upon revenue,
bookings, and EBITDA and targeted revenues, bookings and EBITDA under the Annual
Operating Plan for that year through either the end of the calendar month in
which the termination occurs or the end of the preceding calendar month,
whichever is more favorable to the Executive.
5. Executive's Duties.
(a) The Executive is employed on a full-time basis as a consultant and
as an essential member of the management of the Corporation. So long as this
Agreement is in effect, the Executive will not engage in the practice of
consulting except as an Executive of the Corporation unless otherwise authorized
in writing by the Board of Directors of the Corporation. Any and all
compensation received in money or other property from any person or entity other
than the Corporation for professional
8
<PAGE> 9
services rendered by the Executive shall be deemed to be the property of the
Corporation. The Executive agrees that upon the receipt of any such money or
property, he shall promptly remit such compensation to the Corporation together
with a full accounting thereof. Notwithstanding the foregoing, with the approval
of the Board of Directors, the Executive shall be entitled to serve as a member
of the board of directors of companies not affiliated with the Corporation, and
in such event any and all compensation received in money or other property with
respect to such service shall be retained by the Executive.
(b) The Executive, in conjunction with the other executive officers of
the Corporation, shall have the responsibility and the authority to manage and
direct the day-to-day operations of the Corporation, including, but not limited
to, the hiring and termination of all employees.
(c) So long as this Agreement is in effect, the Executive shall be
elected as the Chief Executive Officer and the Chairman of the Board of
Directors. Failure of the Executive to be elected as the Chief Executive Officer
and Chairman of the Board of Directors shall be deemed to be a breach of this
Agreement by the Corporation.
(d) The Executive, in his sole discretion, shall be entitled to
allocate at any time, and from time to time, options to purchase an aggregate of
3,021,680 shares of the Common Stock subject to equitable adjustment in the
event of any increase or decrease in the shares of Common Stock by way of stock
split, share reclassification, stock dividend or other similar transaction under
the Corporation's 1999 Employee Stock Plan among current management of the
Corporation, including the Executive.
6. Facilities. The Corporation shall furnish facilities, equipment,
services and assistance suitable to the Executive's position for the performance
of the Executive's duties. The Executive's principal office shall be located in
Keystone, Colorado (the "Keystone Office"). The Corporation shall reimburse the
Executive, consistent with the Corporation's practice in years prior to the
execution of this Agreement, for the reasonable expenses of maintaining the
Keystone Office; provided, however, that the Executive shall make himself
available at the Corporation's main office in Denver, Colorado, and/or at
customer premises at such times as are reasonably necessary for the satisfactory
performance of the Executive's duties pursuant to this Agreement.
7. No Copies of Documents and Materials. The Executive shall not (except in the
performance of his duties in the ordinary course of business for which he is
employed by the Corporation) at any time or in any manner make or cause to be
made any copies, pictures, duplicates, facsimiles or other reproductions or
recordings or any abstracts or summaries of any reports, studies, memoranda,
correspondence, manuals, records, plans or other written, printed, computerized
or otherwise recorded materials of any kind or nature whatsoever belonging to or
in the possession of the Corporation or any of its subsidiaries.
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8. Materials Remain on Premises. The Executive shall have no right, title or
interest in any material referenced in Section 7. The Executive agrees that,
except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation, the Executive will not, without the
prior written consent of the Corporation, remove any such material from any
premises of the Corporation provided, however, that this Agreement shall serve
as the prior written consent of the Corporation for the Executive to keep any
such material and/or any copies thereof at the Keystone Office. The Executive
further agrees that, immediately upon the termination of his employment with the
Corporation or upon the termination of this Agreement, whichever occurs earlier,
or at any time prior thereto upon the request of the Corporation, he shall
surrender all such material to the Corporation and execute a document
acknowledging that he has complied with the provisions of this Agreement.
9. Trade Secrets. The Executive shall not at any time, whether during or after
the term of this Agreement, use for the Executive's own benefit or purposes or
for the benefit or purposes of any other person, firm, partnership, association,
corporation or business organization, entity or enterprise, or disclose (except
in the performance of his duties in the ordinary course of business for which he
is employed by the Corporation) in any manner to any person, firm, partnership,
association, corporation or business organization, entity or enterprise any
trade secret, information, data, know how or knowledge (including, but not
limited to, that relating to service techniques, purchasing organization and
methods, sales organization and methods, inventories, client lists, market
development and expansion plans, personnel training and development programs and
client and supplier relationships) or any other Discoveries (as defined in
Section 11) belonging to or relating to the affairs of the Corporation or any of
its subsidiaries or to the clients of the Corporation or any of its
subsidiaries; provided, however, that this Section 9 shall not apply to any
trade secret, information, data, know how, knowledge, or Discovery that is or
becomes generally available to the public through no fault or action of the
Executive.
10. Customers. In furtherance of and not in limitation of Section 9, the
Executive acknowledges that the list of the Corporation's and its subsidiaries'
customers as it may exist from time to time constitutes a valuable and unique
asset of the Corporation, and the Executive agrees that he shall not, during or
after the term of his employment, disclose such list or any part thereof to any
person, firm, partnership, association, corporation, or business organization,
entity or enterprise for any reason or purpose whatsoever, nor shall the
Executive use such customer list for his own benefit or purposes or for the
benefit or purposes of any business with whom the Executive may become
associated.
11. Discoveries. The Executive agrees with the Corporation that any and all
inventions, discoveries, improvements, designs, methods, systems, developments,
know how, ideas, suggestions, devices, trade secrets and processes (hereinafter
collectively referred to as "Discoveries"), whether patentable or not, which are
discovered, disclosed to or otherwise obtained by the Executive during his
employment with the Corporation are confidential, proprietary information and
are the sole and absolute property of the
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Corporation. The Executive agrees to disclose promptly to the Corporation all
such Discoveries and to assist the Corporation in making any application in the
United States and in foreign jurisdictions for patents of any kind with respect
thereto.
12. Works for Hire. All works and writings of a professional nature which are
produced by the Executive during his employment with the Corporation constitute
works made for hire and are the sole and absolute property of the Corporation.
The Executive grants the Corporation the exclusive right to copyright all such
works and writings in the United States and in foreign jurisdictions. To the
extent any such works or writings are deemed to not be works for hire, the
Executive hereby assigns and agrees to assign all his interests therein to the
Corporation or its nominee. Whenever requested to do so by the Corporation, the
Executive shall execute any and all applications, assignments, or other
instruments that the Corporation may deem necessary to protect the Corporation's
interest therein.
13. Non-Competition.
(a) The Executive acknowledges that his employment as a member of the
Corporation's executive management team creates a relationship of confidence and
trust between the Executive and the Corporation with respect to confidential and
proprietary information applicable to the business of the Corporation, its
subsidiaries and its clients. The Executive further acknowledges the highly
competitive nature of the business of the Corporation. Accordingly, the
Corporation and the Executive agree that the restrictions contained in this
Section 13 are reasonable and necessary for the protection of the immediate
interests of the Corporation and that any violation of these restrictions would
cause substantial injury to the Corporation.
(b) For purposes of this Agreement, the term "Competitive Business"
means any person, firm, partnership, association, corporation, or business
organization, entity or enterprise which derives or which expects during the
following two (2) years to derive either (i) ten percent (10%) or more of its
revenues, or (ii) more than $10,000,000 in revenues from providing technical
management consulting and/or systems integration services for Automated
Mapping/Facilities Management Systems and/or Geographic Information Systems
and/or utility transmission and distribution systems. The term "Competitive
Business" is not intended to include mere vendors or suppliers of the
Corporation.
(c) For purposes of this Agreement, the term "Existing Client" means a
client for whom the Corporation or any of its subsidiaries is performing
consulting services as of the date of the termination of the Executive's
employment with the Corporation or for whom the Corporation or any of its
subsidiaries performed consulting services within the two (2) year period
immediately preceding the termination of the Executive's employment with the
Corporation. The term "Existing Client" is not intended to include mere vendors
or suppliers of the Corporation.
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(d) During the Executive's employment with the Corporation and for a
period of one (1) year following the termination of the Executive's employment
with the Corporation for any reason other than termination occasioned by the
expiration of this Agreement (provided, however, that if the termination occurs
prior to August 13, 2000, for any reason other than by the Executive for Good
Reason, such period shall continue for two (2) years), the Executive shall not
(nor shall the Executive cause, or provide assistance to anyone else to):
i. Employ or otherwise engage, or attempt to employ or otherwise
engage, in or on behalf of the Executive or any Competitive Business, any person
who is employed or engaged as an employee, consultant, agent or representative
of the Corporation or any of its subsidiaries as of the date of the Executive's
termination or at any time during the one-year period following such
termination; or
ii. Solicit directly or indirectly on behalf of the Executive or
any Competitive Business, the customer business or account of any Existing
Client of the Corporation.
(e) If any court shall determine that the duration, geographic
limitations, subject or scope of any restriction contained in this Section 13 is
unenforceable, it is the intention of the Parties that this Section 13 shall not
thereby be terminated but shall be deemed amended to the extent required to make
it valid and enforceable, such amendment to apply only with respect to the
operation of this Section 13 in the jurisdiction of the court that has made the
adjudication.
(f) Notwithstanding anything herein to the contrary, the provisions of
this Section 13 shall not be applicable to any termination which occurs after
December 31, 2002.
14. Employability. The Executive recognizes and acknowledges that he has
sufficient abilities and talents to be able to obtain, upon the termination of
this Agreement, comparable employment from another business organization or
entity while fully honoring and complying with the above covenants concerning
confidential information and contacts with the Corporation's or any of its
subsidiaries' existing customers or employees. The Executive recognizes and
acknowledges the importance to the Corporation and its subsidiaries of the above
covenants and, therefore, agrees that, for a period of one (1) year following
the termination of the Executive's employment with the Corporation and upon the
Corporation's reasonable request of the Executive, he will advise the
Corporation of the identity of his new employer and will provide a general
description, in reasonable detail, of his new duties and responsibilities
sufficient to inform the Corporation of its need to request a court order to
enforce the above covenants.
15. Remedies. The Executive acknowledges and agrees that the provisions of this
Agreement are essential to the Corporation and are reasonable and necessary to
protect the legitimate interests of the Corporation and its subsidiaries and
that the damages
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sustained by the Corporation or its subsidiaries as a result of a breach of the
agreements contained herein will subject the Corporation or its subsidiaries to
immediate, irreparable harm and damage, the amount of which, although
substantial, cannot be reasonably ascertained, and that recovery of damages at
law will not be an adequate remedy. The Executive therefore agrees that the
Corporation and its subsidiaries, in addition to any other remedy they may have
under this Agreement or at law, shall be entitled to injunctive and other
equitable relief to prevent or curtail any breach of any provision of this
Agreement. In the event suit or action is instituted to enforce this Agreement
or any of the terms and conditions hereof, including, but not limited to, suit
for preliminary injunction, the prevailing Party shall be entitled to costs and
reasonable attorneys' fees. The Executive waives any right to the posting of a
bond in the event of an issuance of a temporary restraining order, preliminary
injunction or permanent injunction upon the issuance of said order by a court of
competent jurisdiction.
16. Expenses. In the promotion and execution of the business of the Corporation,
the Executive is expected to incur certain reasonable expenses for
entertainment, travel, company automobile expenses (including insurance,
maintenance, fuel and depreciation, if applicable), and business fax and
telephone bills which shall be subject to approval by the Corporation. The
Corporation recognizes the necessity for such expenditures in order to retain
and further the professional skills, abilities and standing of the Executive and
to properly maintain, promote and develop the Corporation's consulting practice.
The Corporation shall pay all reasonably appropriate and necessary premiums on
life insurance owned by the Corporation on the life of the Executive, and shall
reimburse the Executive for insurance premiums paid by the Executive for a
policy providing a death benefit of four million dollars ($4,000,000) to the
Executive's estate or designated beneficiary. Such reimbursement shall be
"grossed-up" based upon the highest combined federal and applicable state
marginal tax rate in effect (assuming that the Executive is married and filing a
joint return) on the date of payment. The Corporation shall also pay the
Executive's dues and fees for attending professional meetings and institutes,
costs of professional books and periodicals and promotion, entertainment and
travel expenses reasonably related to the business of the Corporation. The
Corporation shall also pay the Executive's business-related legal, accounting
and financial planning fees, up to a maximum of $20,000 per calendar year. All
payments made by the Corporation pursuant to this Section 16 shall be made in a
manner consistent with the Corporation's practices in years prior to the
execution of this Agreement. Unusual and extraordinary expenses incurred by the
Executive and not approved in advance by the Corporation may not be reimbursed.
17. Vacation Leave Time. Vacation leave shall accrue at the rate of six (6)
weeks per year. Any unused vacation leave time accumulated during the year shall
carry over to subsequent years.
18. Disability. The Corporation may terminate this Agreement upon written notice
to the Executive if the Executive is physically or mentally incapacitated and
unable to perform his duties under this Agreement for a period of (i) any one
hundred eighty (180) days out of any three hundred sixty (360) days, if the
Common Stock of the Corporation
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is not then publicly traded, or (ii) ninety (90) out of any one hundred eighty
(180) days if the Common Stock of the Corporation is then publicly traded. If at
any time a question arises as to the incapacity of the Executive, then the
Corporation shall promptly employ one physician who is a member of the American
Medical Association and who is mutually agreeable to the Corporation and the
Executive to examine the Executive and determine if his physical and/or mental
condition is such as to render him unable to perform his duties under this
Agreement. The decision of the physician shall be certified in writing to the
Corporation, shall be sent by the Corporation to the Executive or his
representative and shall be conclusive for purposes of this Agreement. Any
compensation payments payable to the Executive hereunder shall be reduced by the
amount of any disability payments the Executive receives as a result of
disability policies on which the Corporation has paid the premiums.
19. Death During Employment. This Agreement shall terminate upon the Executive's
death. In such event, the Corporation shall pay a death benefit equal to the
Executive's base monthly salary for the balance of the month of the Executive's
death and for the month following his death. Any amounts payable under this
Agreement following the Executive's death shall be paid to the beneficiary named
in writing by the Executive, or if none, to the Executive's surviving spouse, or
if none, to the executors and administrators of the Executive's estate and shall
be paid within sixty (60) days of the Executive's death.
20. Termination for Other Than for Disability or Death. This Agreement may
terminate for reasons other than the Executive's disability or death upon the
occurrence of any of the following events; provided, however, that neither the
Executive nor the Corporation may terminate this Agreement pursuant to this
Section 20 in 1999 except for a termination by the Corporation for Cause as
provided in Section 20(a) or a termination by the Executive for Good Reason as
provided in Section 20(c).
(a) The Corporation, at its option, may terminate the Executive for
Cause (as defined below) upon thirty (30) days' advance written notice by the
Corporation to the Executive fully setting forth such Cause, which notice of
termination may be appealed to the Board of Directors of the Corporation.
Termination shall be effective on the thirtieth (30th) day following the
Executive's receipt of written notice from the Corporation. "Cause" shall be
limited to a situation in which the Executive has:
(1) Committed a criminal offense that, if committed in the State
of Colorado, would have constituted a felony under the laws of the
State of Colorado or the United States (other than a traffic offense or
other similar violation); or
(2) Committed a fraudulent act which is materially harmful to the
Corporation (materiality, for purposes of this clause, means in excess
of $50,000); or
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(3) Committed an act of willful misconduct which results in actual
damages against the Corporation of $500,000 or more; or
(4) Committed an act of gross insubordination by refusing to obey
written directions of the Board of Directors (so long as such
directions do not involve illegal or immoral acts), which refusal
continues for a period of ten (10) days after written notice to the
Executive by the Corporation which notice references such refusal and
this Section 20(a); or
(5) Committed repeated acts of alcohol or illegal drug abuse, and
has failed to take reasonable steps to address such issues within ten
(10) days after written notice to the Executive by the Corporation
which notice references such acts and this Section 20(a); or
(6) Except during periods of vacation leave permitted pursuant to
Section 17, failed to devote substantially all of his professional time
and attention to the performance of his obligations under this
Agreement, as determined by the Board of Directors of the Corporation,
which failure continues for a period of fifteen (15) days after Actual
Receipt (as defined in Section 20(b) below) of written notice by the
Executive from the Corporation which notice references such failure and
this Section 20(a).
(b) The Corporation shall have the right to terminate this Agreement
without Cause at any time after thirty (30) days after Actual Receipt of written
notice by the Executive from the Corporation. Non-renewal of this Agreement
shall not be deemed to be a termination of employment for purposes of this
Agreement. For purposes of this Agreement, "Actual Receipt" of notice shall mean
actual physical receipt (or refusal of acceptance) of notice by the Executive;
provided, however, that in the event the Executive has been away from the office
for more than two weeks and either the Executive's whereabouts are unknown to
the Corporation or the Executive is at a location where the Corporation cannot
reasonably communicate with him, the Executive will be deemed to have refused
delivery of notice on the day such notice is delivered (or delivery is
attempted) to the Executive's last known residence. In such event, the
Corporation shall nonetheless provide a copy of the notice to the Executive as
soon as it is reasonably possible to do so.
(c) The Executive at his option, may terminate this Agreement for Good
Reason (as defined below) upon thirty (30) days' advance written notice by the
Executive to the Corporation, which notice shall reference this Section 20(c)
and shall describe in reasonable detail the cause for such Good Reason. Such
termination shall be effective on the thirtieth (30th) day following the
Corporation's receipt of written notice from the Executive; provided, however,
that such termination shall not be effective if the Corporation has cured the
cause for such Good Reason to the Executive's reasonable satisfaction within
such thirty (30) day period. For purposes of this Section 20(c), "Good Reason"
shall mean any of the following:
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i. A material breach of this Agreement by the Corporation;
ii. The Corporation's requiring the Executive to be based at any
office or location other than the Keystone Office, except for required travel on
the Corporation's business to an extent substantially consistent with the
Executive's obligations immediately prior to the Effective Date;
iii. Any purported termination by the Corporation of the
Executive's employment other than as permitted in this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement, and it being further understood that the nonrenewal
of this Agreement shall not be deemed to be a termination of employment for
purposes of this Agreement; or
iv. A material reduction in the character of the duties assigned
to the Executive or in the Executive's level of work responsibility, unless such
reduction has been approved by each of the Executive and the Board of Directors
of the Corporation;
(d) The Executive shall have the right to terminate this Agreement
without cause at any time upon sixty (60) days' advance written notice to the
Corporation.
21. Rights Upon Termination.
(a) Upon termination of the Executive's employment with the
Corporation, the Corporation shall have no further obligation to the Executive
except as specifically provided under this Agreement. Termination of the
Executive's employment shall not affect the Executive's right to receive any
compensation or bonuses which have accrued but have not been paid through the
date of termination, including, but not limited to, Incentive Bonuses for that
portion of the calendar year prior to the termination.
(b) In addition to any accrued compensation or bonuses, and depending
upon the circumstances of the Executive's termination of employment, the
Corporation shall pay or provide certain severance benefits (the "Severance
Benefits"). The nature and extent of the Severance Benefits to be provided shall
be determined in accordance with the table set forth in Exhibit B attached
hereto. For purposes of Exhibit B, the following terms shall have the following
meanings:
(1) "Severance Pay" shall be expressed as a monthly amount and
shall mean one-twelfth of (i) the Executive's annual base salary
pursuant to Section 3 at the rate in effect immediately prior to the
termination of employment, plus (ii) the Executive's aggregate At-Plan
Bonus (including without limitation any amounts payable therefor
pursuant to Section 4(h)), pro-rated on a straight-line basis for any
partial year periods, for the one year period immediately preceding the
date of termination, plus (iii) any amounts contributed
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by the Corporation to a qualified pension, profit sharing or retirement
plan or other deferred compensation arrangement (each a "Retirement
Plan") for the benefit of the Executive (excluding salary deferrals or
similar contributions made by the Executive which offset amounts
included in this calculation pursuant to clauses (i) or (ii) above)
during the one year period immediately preceding the date of
termination. Any Severance Pay due to the Executive shall be paid in
cash in a single lump sum within sixty (60) days after the termination
of employment.
(2) "Continuation Benefits" shall mean the continuation of the
Benefits, including any Benefits which cover the Executive's family,
but excluding any contribution to any Retirement Plan.
(3) "Option Vesting" shall mean that any outstanding stock options
or compensatory restricted stock grants (which shall not include grants
made to the Executive as contemplated by the Recapitalization
Agreement) granted to the Executive shall immediately and fully vest to
the extent that such options or grants have not yet vested solely due
to the failure of the passage of time, and with respect to any such
options, the Executive shall have the period set forth in such options,
but not less than ninety (90) days in which to exercise such options.
(4) "Put Option" shall mean that the Executive shall be entitled
to exercise the Put Option in accordance with the terms of Section 22.
(5) A "Change in Control" shall mean and shall be deemed to have
occurred if (i) any of the following events shall have occurred, and
(ii) the occurrence of such event is not within one (1) year after a
failure of the Corporation to meet the operating targets for any two of
revenues, bookings, and EBITDA (as set forth in the Annual Operating
Plan) for any three (3) out of any five (5) consecutive quarters:
(a) A Third Person (as defined below), including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended from time to time, and any successor act (the "Exchange Act"),
becomes the "beneficial owner," as defined in the Exchange Act, of
shares of the Corporation having 50% or more of the total number of
votes that may be cast for the election of any of the Directors of the
Corporation; or
(b) At least two-thirds of the directors of the Corporation
constitute persons who were not, at the time of their first election to
the Board of Directors of the Corporation, candidates proposed by a
majority of the Board of Directors in office prior to the time of such
first election; or
(c) The Board of Directors or the stockholder(s) of the
Corporation approve: (i) any agreement for a merger or consolidation or
like
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business recombination or reorganization of the Corporation with
another entity, the consummation of which would result in the
occurrence of any event described in Section 21(b)(6)(a) or (b) above
or (ii) any sale, exchange or other disposition of all or substantially
all of the Corporation's assets; or
(d) Any sale, exchange or other disposition of greater than
67% in fair market value of the Corporation's total assets, other than
in the ordinary course of business, whether in a single transaction or
a series of related transactions; provided, however, that no sale or
disposition of assets shall be taken into account to the extent that
the proceeds of such sale or disposition (whether in cash or in-kind)
are reinvested or are, in the case of proceeds received in-kind, used
in the ongoing conduct of the Corporation, provided further that such a
reinvestment shall not be deemed to have occurred unless made within
six (6) months of such sale or disposition and provided further that,
the term reinvestment shall include the use of proceeds to repay debt
incurred in connection with the operation of the business in which the
assets sold or disposed of were used; or
(e) Any other event which the Board of Directors, including
at least one Investor Director, determines, in its discretion, would
materially alter the structure of the Corporation or its ownership.
A Change in Control shall be deemed to have occurred on the effective date of
such Change in Control; provided, however, that anything in this Agreement to
the contrary notwithstanding, if the Executive's employment with the Corporation
is terminated during the six (6) months prior to a Change in Control and the
Executive can reasonably demonstrate that such termination (a) was at the
request of a third party who has taken steps reasonably calculated to effect the
Change in Control, or (b) otherwise arose in connection with the Change in
Control, then for all purposes of this Agreement, the Change in Control shall be
deemed to have occurred on the date immediately prior to the date of such
termination. For purposes of determining whether there has been a Change in
Control, the Third Person owning shares must be someone other than a person or
entity, or an Affiliate of a person or entity, that, as of the Effective Date,
was the beneficial owner of shares of the Corporation having 25% or more of the
total number of votes that may be cast for the election of any of the Directors
of the Corporation. "Affiliate" shall mean, with respect to any person or
entity, a person or entity that directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such person or entity.
(c) Upon termination of this Agreement by the Corporation other than
for Cause pursuant to Section 20(a), or by the Executive for any reason
whatsoever, the Corporation shall, both verbally and in writing, acknowledge
that the Executive performed the services provided under this Agreement in a
good and proficient manner and shall provide a positive reference to any person
or entity that may request a reference with regard to the Executive.
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(d) Upon the termination of the Executive's employment with the
Corporation for any reason other than by the Corporation for Cause pursuant to
Section 20(a), the Executive shall be entitled to keep, free and clear of any
liens and encumbrances and any claim of title by the Corporation, (i) equipment
owned by the Corporation and used by the Executive in the Keystone Office, to
the extent that the value of such equipment does not exceed $10,000, and (ii)
the automobile provided by the Corporation for the Executive's use.
(e) If any portion of the Benefits (excluding any contributions to any
Retirement Plan) cannot reasonably be made available to the Executive, then the
Corporation shall pay to the Executive an amount in cash equal to 150% of the
cost which must be incurred by the Executive to acquire benefits equivalent to
any tax-exempt Benefits previously provided by the Corporation and 100% of the
cost which must be incurred by the Executive to acquire benefits equivalent to
any taxable Benefits previously provided by the Corporation. The Corporation
shall determine the cost to the Executive of such Benefits in good faith and
shall provide reasonable documentation to support its findings to the Executive.
22. Put Option.
(a) Upon the termination of Executive's employment under those
circumstances designated in Exhibit B as entitling Executive to receive the Put
Option, the Executive shall have the option to offer for sale and require the
Corporation to purchase all or any portion of any shares of Common Stock in the
Corporation beneficially owned by the Executive under the terms and conditions
provided in this Section 22(a) (the "Put Option"). For purposes of this
Agreement, shares of Common Stock in the Corporation beneficially owned by the
Executive shall include shares held by a trust, partnership, custodian,
fiduciary or other person or entity for the benefit of the Executive and/or any
parent, child, descendant or sibling of the Executive, the spouse of any of the
foregoing, or the Executive's spouse. The Executive may elect to exercise the
Put Option by delivering written notice to the Corporation of such election (the
"Put Notice") within ninety (90) days of the Termination, which notice shall
state the number of shares of Common Stock offered for sale (the "Offered
Shares"). The Put Option shall be exercised only once during such ninety (90)
day period. Upon receipt of the Put Notice by the Corporation, the Corporation
shall be bound to purchase the Offered Shares from the Executive. The purchase
price per share of the Offered Shares shall be the Fair Market Value of such
shares as determined in accordance with Section 4(g).
(b) The Executive shall receive one-third (1/3) of the purchase price
of the Offered Shares at a closing to take place at the principal office of the
Corporation within not more than one hundred twenty (120) days after the
Termination. The Executive shall receive the balance of the purchase price in
equal monthly installments over the 24-month period commencing on the day of
said closing. The Corporation's obligation to pay the remaining two-thirds (2/3)
of the purchase price shall be evidenced by a promissory note in substantially
the form attached hereto as Exhibit C (the "Note")
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which shall bear interest at the rate of ten percent (10%) per annum. Subject to
the Corporation's ability to obtain any necessary lender approvals which may be
required, such Note shall be secured by a security interest in the Corporation's
accounts receivable, second only to the security interests held in such accounts
by the lender under that certain Loan Agreement dated August ___, 1999, by and
between Convergent Group, Inc. and Fleet National Bank, as Agent and a Lender
and the other financial institutions now or hereafter parties thereto for a
$25,000,000 secured revolving credit loan, and by the lender for the
Corporation's primary line of credit. Such security interest shall be evidenced
by a security agreement in a form substantially similar to the one attached
hereto as Exhibit D. Payments to be made to the Executive pursuant to this
Section 22(c) are referred to as the "Put Payments."
(c) Notwithstanding anything herein to the contrary, if while the Note
is outstanding the Corporation experiences a major capital event such as a sale
of all or substantially all of the Corporation's stock or assets, a merger or
consolidation, or an initial public offering, the Put Payments shall be
accelerated and shall be due and payable and shall be paid in full thirty (30)
days after the closing of such major capital event.
(d) In the event that the Corporation shall be legally prevented
(whether by contract or statutorily) from making the Put Payments to the
Executive as described above, the Corporation shall use commercially reasonable
efforts to take such steps as shall be reasonably necessary to remove such
restriction. If the Corporation is unable to remove such restriction, the
Corporation's obligation to pay the Put Payments shall be deferred until such
time as the Corporation is able to remove such restrictions; provided, however,
that in no event shall such deferral continue beyond the second anniversary of
the closing referred to in Section 22(b). Any Put Payments which are deferred
shall be added to and evidenced by the Note. After the issuance of the Note, the
Corporation shall continue to use commercially reasonable efforts and take such
steps as shall be reasonably necessary to remove such restriction, and in the
event that the Corporation is successful in so doing, the Corporation shall
immediately thereafter pre-pay in full any Put Payments which have been so
deferred.
23. Default in Payments. If any payment is due and payable to the Executive
under Section 21 or Section 22 and such non-payment continues for a period of
ten (10) days after written notice thereof from the Executive to the
Corporation, which notice describes such payment default and references this
Section 23, the following shall occur:
(a) Any Put Payments shall be accelerated and shall be immediately due
and payable and shall be paid in full.
(b) The Executive shall be immediately released from Section 13 hereof
regarding non-competition; and
(c) The Executive shall retain all other rights and remedies against
the Corporation.
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24. Mitigation. The Executive shall not be required to mitigate the
Corporation's obligations with respect to the provision of Continuation Benefits
or the payment of any amount described in this Agreement by seeking or accepting
any offer of employment or otherwise, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer. Continuation Benefits shall be subject to
mitigation under the limited circumstances described in Exhibit B if and only if
Executive, in his sole discretion, has accepted employment with a third party
and is eligible to receive benefits which are equivalent in all material
respects to the Continuation Benefits. In determining benefit equivalence, the
parties shall consider all factors, including the level of coverage, the cost,
if any, to the Executive, and the effect, if any, of provisions limiting
coverage for pre-existing conditions.
25. Withholding Tax. The Corporation shall be entitled to withhold from any
compensatory payments which it makes to the Executive under this Agreement or
otherwise an amount sufficient to satisfy all Federal, state and local income
and employment tax withholding requirements with respect to any and all
compensation paid to the Executive by the Corporation.
26. Registration Rights. The Executive shall be entitled to registration rights
with respect to shares of Common Stock of the Corporation held by the Executive
as set forth in that certain Registration Rights Agreement by and among the
Corporation and the parties named therein dated as of August 13, 1999.
27. Arbitration. Any controversy or claim arising out of or related to this
Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final and binding upon the Parties,
shall not be appealed from or contested in any court and may, in appropriate
circumstances, include injunctive relief. Should any Party fail to appear or be
represented at the arbitration proceedings after due notice in accordance with
the Rules, then the arbitrator may nevertheless render a decision in the absence
of said Party, and such decision shall have the same force and effect as if the
absent Party had been present, whether or not it shall be adverse to the
interests of that Party. Any award rendered hereunder may be entered for
enforcement, if necessary, in any court of competent jurisdiction, and the Party
against whom enforcement is sought shall bear the expenses, including attorneys'
fees, of enforcement. Notwithstanding the foregoing, the Corporation shall be
entitled to seek injunctive or other equitable relief to enforce any of the
provisions in Sections 7 through 13 from any court of competent jurisdiction
without the need to resort to arbitration.
28. Survival. The covenants contained in this Agreement shall survive any
termination of the Executive's employment with the Corporation and shall survive
any termination of this Agreement. The existence of any claim or cause of action
of the
21
<PAGE> 22
Executive against the Corporation, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Corporation
of any of the covenants contained in this Agreement.
29. Severability. If the scope of any restriction contained in this Agreement is
too broad to permit enforcement of such restriction to its fullest extent, then
such restriction shall be enforced to the maximum extent permitted by law, and
the Executive and the Corporation hereby consent and agree that the scope of
such restriction may be judicially modified in any proceeding brought to enforce
such restriction. To the extent any provision of this Agreement shall be invalid
or unenforceable, it shall be considered deleted from this Agreement and the
remainder of this Agreement shall remain in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or
geographical extent of or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then such provision shall be construed to cover only that duration or
extent or those activities which may validly and enforceably be covered.
30. Subsidiaries. The "subsidiaries" of the Corporation as that term is used in
this Agreement include Utility Graphics Consultants Corporation, Graphic Data
Systems Corporation and their subsidiaries, together with any other corporation
in which the Corporation or its subsidiaries hold more than a fifty percent
(50%) interest at any time during the term of this Agreement.
31. Notice. Any notices required or permitted to be given under this Agreement
shall be sufficient if in writing and delivered by personal delivery, air
courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of the Executive as it appears in the
corporate records for notice to the Executive, or to the principal office of the
Corporation for notice to the Corporation. All notices delivered in accordance
with this Section shall be deemed to have been received and shall be deemed
effective if delivered in person or by air courier, upon actual receipt by the
intended recipient, or if mailed, upon the date of delivery or refusal to accept
delivery as shown by the return receipt therefor.
32. No Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel to enforce any provision of this
Agreement, except by a statement in writing signed by the Party against whom
enforcement of the waiver or estoppel is sought. Any written waiver shall not be
deemed a continuing waiver unless specifically stated, and shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.
33. Amendments. No amendment or modification of this Agreement shall be deemed
effective unless made in writing and signed by the Parties hereto.
34. Assignment. The rights and obligations of the Corporation under this
Agreement shall, with the prior written consent of the Executive, inure to the
benefit of and be
22
<PAGE> 23
binding upon the successors and assigns of the Corporation. If the Corporation
shall at any time be merged or consolidated with any other corporation or shall
sell or otherwise transfer a substantial portion of its assets to another
corporation or entity, the provisions of this Agreement shall be binding upon
and inure to the benefit of the corporation or entity surviving or resulting
from such merger or consolidation or to which such assets have been sold or
transferred. Upon the Executive's request, the Corporation shall obtain an
agreement to expressly assume this Agreement from any such successor. This is a
personal service contract and may not be assigned by the Executive.
35. Entire Agreement. This instrument contains the entire agreement of the
Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
including, but not limited to, the Amended and Restated Employment Agreement
between the Executive and the Corporation dated December 31, 1997, and the
Parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement that are not set forth herein.
36. Governing Law. This Agreement is made under and shall be governed by and
construed in accordance with the internal laws of the State of Colorado
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
37. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ Scott M. Schley
-----------------------------------
Scott M. Schley
Chief Financial Officer
"EXECUTIVE"
/s/ Glenn E. Montgomery, Jr.
--------------------------------------
Glenn E. Montgomery, Jr.
Executive
23
<PAGE> 24
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
GLENN E. MONTGOMERY, JR.
AND
CONVERGENT GROUP CORPORATION
LIST OF COMPARABLE COMPANIES
1. American Management Systems, Inc.
2. Cambridge Technology Partners
3. Sapient Corporation
4. Diamond Technology Partners, Inc.
5. USWeb Corporation
6. Answerthink Consulting Group
7. Technology Solutions Co.
8. Keane, Inc.
9. Braun Consulting Inc.
10. Navigant Consulting Inc.
NOTE: Companies with earnings of zero or less will be disregarded
for purposes of the calculation required by Section 4(g).
A-1
<PAGE> 25
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
BETWEEN
GLENN E. MONTGOMERY, JR.
AND
CONVERGENT GROUP CORPORATION
TABLE OF SEVERANCE BENEFITS
---------------------------
<TABLE>
<CAPTION>
ADDITIONAL ADDITIONAL
MONTHS OF MONTHS OF
EVENT OF CONTINUATION SEVERANCE OPTION PUT
TERMINATION BENEFITS PAY VESTING OPTION
---------------------- ------------------ -------------- ------------ -----------
<S> <C> <C>
1. BY 0 0 No No
CORPORATION
FOR CAUSE
---------------------------------------------------------------------------------
2. BY 6 6 Yes Yes
CORPORATION
WITHOUT
CAUSE
---------------------------------------------------------------------------------
3. BY
EXECUTIVE
WITHOUT
GOOD REASON
A) PRIOR TO A 0 0 No No
CHANGE IN
CONTROL
B) WITHIN ONE 6 6 Yes Yes
YEAR AFTER A
CHANGE IN
CONTROL
C) MORE THAN 6 6 No Yes
ONE YEAR
AFTER A
CHANGE IN
CONTROL
---------------------------------------------------------------------------------
5. DISABILITY 6 6 Yes Yes
---------------------------------------------------------------------------------
6. DEATH 6 0 No Yes
---------------------------------------------------------------------------------
</TABLE>
DENVER:0913082.11
B-1
<PAGE> 1
EXHIBIT 10.5
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
AMONG
CONVERGENT GROUP CORPORATION,
THE CONTINUING SHAREHOLDERS
AND
THE INVESTORS
(EACH AS DEFINED HEREIN)
AUGUST 13, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. DEFINITIONS ................................................... 1
SECTION 2. REQUIRED REGISTRATION ......................................... 4
SECTION 3. PIGGYBACK REGISTRATION ........................................ 5
SECTION 4. REGISTRATIONS ON FORM S-3 ..................................... 6
SECTION 5. HOLDBACK AGREEMENT ............................................ 6
SECTION 6. PREPARATION AND FILING ........................................ 7
SECTION 7. EXPENSES ...................................................... 10
SECTION 8. INDEMNIFICATION ............................................... 10
SECTION 9. UNDERWRITING AGREEMENT ........................................ 13
SECTION 10. INFORMATION BY HOLDER ......................................... 13
SECTION 11. EXCHANGE ACT COMPLIANCE ....................................... 13
SECTION 12. MERGERS, ETC. ................................................. 13
SECTION 13. NEW CERTIFICATES .............................................. 14
SECTION 14. NO CONFLICT OF RIGHTS; SELECTION OF UNDERWRITER ............... 14
SECTION 15. TERMINATION ................................................... 14
SECTION 16. MISCELLANEOUS ................................................. 14
</TABLE>
<PAGE> 3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT dated
as of August 13, 1999 among CONVERGENT GROUP
CORPORATION., a Delaware corporation (the
"Company"), the INVESTORS listed on Schedule
I hereto and the CONTINUING SHAREHOLDERS
listed on Schedule II hereto (the
"Continuing Shareholders").
Simultaneously herewith, the Company, the Investors and the
Continuing Shareholders are consummating the transactions contemplated by the
Recapitalization Agreement. The Investors and the Continuing Shareholders are
referred to collectively as the "Shareholders" and individually as a
"Shareholder." The Shareholders own or have the right to purchase or otherwise
acquire Registrable Shares (as defined below). The Company and the Shareholders
deem it to be in their respective best interests to enter into this Agreement to
set forth the rights of the Shareholders in connection with public offerings and
sales of the Registrable Shares.
NOW THEREFORE, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Company and the
Shareholders hereby agree as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms have the
following meanings:
"Board" means the Board of Directors of the Company.
"Commission" means the Securities and Exchange Commission or
any other governmental body or agency succeeding to the functions thereof.
"Common Stock" means the common stock, $0.01 par value, of
the Company.
"Continuing Shareholders" has the meaning set forth in the
caption.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"GS" means GS Private Equity Partners II, L.P., GS Private
Equity Partners II Offshore, L.P., GS Private Equity Partners III, L.P., GS
Private Equity Partners III Offshore, L.P. and NBK/GS Private Equity Partners,
L.P.
<PAGE> 4
"InSight" means InSight Capital Partners III, L.P., a Delaware
limited partnership, InSight Capital Partners III (Cayman), L.P. and InSight
Capital Partners III (Co-Investors), L.P.
"Investors" means, collectively, InSight, UBS and GS,
including any successor to, or assignee or transferee of, any such Person who or
which agrees in writing to be treated as an Investor hereunder and to be bound
by the terms and comply with all applicable provisions hereof.
"Investor Shares" means all Registrable Shares held by the
Investors.
"Majority of Shareholders" means (i) holders of at least a
majority of the Registrable Shares then held by all Shareholders and (ii)
holders of a majority of all Investor Shares (an "Investor Majority") as such.
"Other Shares" means at any time those shares of Common Stock
that do not constitute Primary Shares or Registrable Shares.
"Person" shall be construed broadly and shall include an
individual, a partnership, a limited partnership, a corporation, an association,
a joint stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.
"Primary Shares" means at any time the authorized but unissued
shares of Common Stock and shares of Common Stock held by the Company in its
treasury.
"Prospectus" means the prospectus included in a Registration
Statement, including any prospectus subject to completion, and any such
prospectus as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Shares and, in
each case, by all other amendments and supplements to such prospectus,
including post-effective amendments, and in each case including all material
incorporated by reference therein.
"Public Offering" means the closing of a public offering of
Common Stock pursuant to a Registration Statement declared effective under the
Securities Act, except that a Public Offering shall not include an offering of
securities to be issued as consideration in connection with a business
acquisition or an offering of securities issuable pursuant to an employee
benefit plan.
"Recapitalization Agreement" means the Recapitalization
Agreement dated as of the date hereof, by and among the Company, the Investors
and the other parties thereto, as the same may be amended, supplemented or
modified from time to time.
"Registrable Shares" means the shares of Common Stock held by
any Shareholder which constitute Restricted Shares.
2
<PAGE> 5
"Registration Date" means the date upon which a Registration
Statement pursuant to which the Company shall have initially registered shares
of Common Stock under the Securities Act for sale in a Public Offering shall
have been declared effective by the Commission.
"Registration Statement" shall mean any registration statement
of the Company which covers any of the Registrable Shares and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Required Registration" means a registration requested by a
Shareholder or group of Shareholders pursuant to Section 2.
"Restricted Shares" means shares of Common Stock, and includes
(i) shares of Common Stock which may be issued as a dividend or distribution,
(ii) any shares of Common Stock issued or issuable with respect to any other
securities which by their terms are exercisable or exchangeable for or
convertible into Common Stock, and (iii) any shares of Common Stock issued or
issuable with respect to any securities received in respect of the foregoing
(including securities described in Section 12), in each case in clauses (i)
through (iii) which at any time are held by the Shareholders. As to any
particular Restricted Shares, once issued, such Restricted Shares shall cease to
be Restricted Shares when (A) they have been registered under the Securities
Act, the Registration Statement in connection therewith has been declared
effective and they have been disposed of pursuant to and in the manner described
in such effective Registration Statement, (B) they have been otherwise
transferred and new certificates or other evidences of ownership for them not
bearing a restrictive legend and not subject to any stop transfer order or other
restriction on transfer have been delivered by the Company or the issuer of
other securities issued in exchange for the Restricted Shares, or (C) they have
ceased to be outstanding.
"Rule 144" means Rule 144 promulgated under the Securities Act
or any successor rule thereto or any complementary rule thereto.
"Securities Act" means the Securities Act of 1933, as amended,
or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Shareholders" means, collectively, the Investors and the
Continuing Shareholders listed on SCHEDULE I and SCHEDULE II hereto,
respectively, and includes any successor to, or assignee or transferee of, any
such Person who or which agrees in writing to be treated as a Shareholder
hereunder and to be bound by the terms and comply with all applicable provisions
hereof.
"Subsidiary" means, with respect to any Person, any other
Person of which the securities having a majority of the ordinary voting power in
electing the board of
3
<PAGE> 6
directors (or other governing body), at the time as of which any determination
is being made, are owned by such first Person either directly or through one or
more of its Subsidiaries.
"UBS" means UBS Capital II LLC a Delaware limited liability
company.
SECTION 2. REQUIRED REGISTRATION.
(a) Subject to Section 2(b), if the Company shall be requested
by the holders of a majority of all Investor Shares at any time to effect the
registration under the Securities Act of Registrable Shares. Then the Company
shall (subject to the managing underwriter's discretion) promptly give written
notice of such proposed registration to all holders of Registrable Shares and
shall (subject to the managing underwriter's discretion) offer to include in
such proposed registration any Registrable Shares requested to be included in
such proposed registration by all holders of Registrable Shares who respond in
writing to the Company's notice within 30 days after delivery of such notice
(which response shall specify the number of Registrable Shares proposed to be
included in such registration). The Company shall use its best efforts to
promptly effect the registration under the Securities Act of the Registrable
Shares which the Company has been so requested to register. The number of
requests permitted pursuant to this Section 2(a) shall be unlimited.
(b) Anything contained in Section 2(a) to the contrary
notwithstanding, the Company shall not be obligated to effect any registration
under the Securities Act pursuant to Section 2(a) except in accordance with the
following provisions:
(i) with respect to any registration pursuant to this
Section 2, the Company may include in such registration any Primary
Shares or Other Shares; provided, however, that if the managing
underwriter advises the Company that the inclusion of all Registrable
Shares, Primary Shares and/or Other Shares proposed to be included in
such registration would interfere with the successful marketing
(including pricing) of the Registrable Shares proposed to be included
in such registration, then the number of Registrable Shares, Primary
Shares and/or Other Shares proposed to be included in such registration
shall be included in the following order:
(A) first, all Registrable Shares requested
to be included in such registration by the Shareholders who
requested such registration or made timely notice to the
Company of their request to include Registrable Shares in such
registration pursuant to Section 2(a), pro rata among such
requesting Shareholders based on the number of Registrable
Shares requested by each such requesting Shareholder to be so
registered;
(B) second, all Registrable Shares requested
to be included in such registration by the other Shareholders
who requested the inclusion of their Registrable Shares in
such registration pursuant to Section 3, pro
4
<PAGE> 7
rata among all such Shareholders based on the number of
Registrable Shares requested by each such Shareholder to be so
registered;
(C) third, the Primary Shares; and
(D) fourth, the Other Shares;
(ii) at any time before the Registration Statement
covering Registrable Shares becomes effective, the Shareholder or group
of Shareholders which requested such registration pursuant to Section
2(a) may request the Company to withdraw or not to file the
Registration Statement; and
(iii) the Company may, at its sole option, elect to
satisfy a request for a registration pursuant to Section 2(a) on Form
S-2 or Form S-3 promulgated under the Securities Act (or any successor
forms thereto), if such forms are then available to the Company.
(c) The Company shall file a registration statement with
respect to each registration requested pursuant to Section 2(a) as soon as
practicable after receipt of the demand of the requesting Shareholders;
provided, however, that if in the good faith judgment of the Board of Directors
of the Company, such registration would be seriously detrimental to the Company
in that such registration would interfere with a proposed primary registration
of securities by the Company or any other material corporate transaction and the
Board of Directors concludes, as a result, that it is advisable to defer the
filing of such registration statement at such time (as evidenced by an
appropriate resolution of the Board), then the Company shall have the right to
defer such filing for the period during which such registration would be
seriously detrimental; provided, further, however, that (i) the Company may not
defer the filing for a period of more than one hundred and twenty (120) days
after receipt of the demand of the requesting Shareholders, (ii) the Company
shall not exercise its right to defer such a registration more than once, and
(iii) if the Company undertakes a primary registration following an exercise of
its deferral right, the holders of Registrable Shares shall have "piggyback"
rights under Section 3 hereof with respect to not less than one-third (1/3) of
the number of shares of Registrable Shares to be sold in such offering.
SECTION 3. PIGGYBACK REGISTRATION.
If the Company at any time that is 180 days after its initial
Public Offering proposes for any reason to register shares of Common Stock under
the Securities Act (other than on Form S-4 or Form S-8 promulgated under the
Securities Act or any successor forms thereto), it shall promptly give written
notice to the Shareholders of its intention to so register such shares and, upon
the written request, delivered to the Company within 20 days after delivery of
any such notice by the Company, of any Shareholder to include in such
registration Registrable Shares (which request shall specify the number of
Registrable Shares proposed to be included in such registration), the Company
shall use its best efforts to cause all such Registrable Shares to be included
in
5
<PAGE> 8
such registration on the same terms and conditions as the Common Stock otherwise
being sold in such registration; provided, however, that if the managing
underwriter advises the Company that the inclusion of all Registrable Shares
requested to be included in such registration would interfere with the
successful marketing (including pricing) of the Primary Shares or Other Shares
proposed to be registered by the Company, then the number of Primary Shares,
Registrable Shares and Other Shares proposed to be included in such registration
shall be included in the following order:
(i) first, the Primary Shares or Other Shares
proposed to be registered by the Company; and
(ii) second, the Registrable Shares requested to be
included in such registration pursuant to this Section 3, pro rata
among the holders thereof based upon the number of Registrable Shares
requested to be registered by each such holder; and
(iii) any Other Shares.
SECTION 4. REGISTRATIONS ON FORM S-3.
Anything contained in Section 2 to the contrary
notwithstanding, at such time as the Company shall have qualified for the use of
Form S-3 promulgated under the Securities Act or any successor form thereto, a
Majority of Shareholders shall have the right to request in writing an unlimited
number of registrations of Registrable Shares on Form S-3 or such successor
form, which request or requests shall (i) specify the number of Registrable
Shares intended to be sold or disposed of and the holders thereof, (ii) state
the intended method of disposition of such Registrable Shares and (iii) relate
to Registrable Shares having an anticipated aggregate gross offering price
(before underwriting discounts and commissions) of at least $10,000,000, and
upon receipt of any such request, the Company shall use its best efforts
promptly to effect the registration under the Securities Act of the Registrable
Shares so requested to be registered. A requested registration on Form S-3 or
any such successor form in compliance with this Section 4 shall be treated as a
registration initiated pursuant to, and shall be subject to, the provisions of
Section 2.
SECTION 5. HOLDBACK AGREEMENT.
(a) If the Company at any time shall register shares of Common
Stock under the Securities Act (including any registration pursuant to Section
2, Section 3 or Section 4) for sale to the public pursuant to an underwritten
offering, the Shareholders shall not sell publicly, make any short sale of,
grant any option for the purchase of, or otherwise dispose publicly of, any
Registrable Shares (other than those shares of Common Stock included in such
registration pursuant to Sections 2, 3 or 4) without the prior written consent
of the Company, for a period designated by the Company in writing to the
Shareholders, which period shall not begin more than 10 days prior to the
effectiveness of the Registration Statement pursuant to which such public
offering shall be made and shall not last more than 180 days after the closing
of sale of shares pursuant to such
6
<PAGE> 9
Registration Statement. The Company shall use reasonable efforts to obtain the
agreement of any Person permitted to sell shares of Common Stock in a
registration to be bound by and to comply with this Section 5 with respect to
such registration as if such Person was a Shareholder hereunder.
(b) If the Company at any time pursuant to Section 2 or
Section 3 of this Agreement shall register under the Securities Act Registrable
Shares held by Shareholders for sale to the public pursuant to an underwritten
offering, the Company shall not effect any public sale or distribution of
securities similar to those being registered, or any securities convertible into
or exercisable or exchangeable for such securities, for such period as shall be
determined by the managing underwriters, which period shall not begin more than
10 days prior to the effectiveness of the Registration Statement pursuant to
which such public offering shall be made and shall not last more than 180 days
after the closing of sale of shares pursuant to such Registration Statement.
SECTION 6. PREPARATION AND FILING.
(a) If and whenever the Company is under an obligation
pursuant to the provisions of this Agreement to use its best efforts to effect
the registration of, and keep effective a Registration Statement for, any
Registrable Shares, the Company shall, as expeditiously as practicable:
(i) use its best efforts to cause a Registration
Statement that registers such Registrable Shares to become and remain
effective for a period of 90 days (extended for such period of time as
the Shareholders are required to discontinue disposition of Registrable
Shares pursuant to Section 6(b) below) or until all of such Registrable
Shares have been disposed of (if earlier);
(ii) use its best efforts to furnish, at least five
business days before filing a Registration Statement that relates to
the registration of such Registrable Shares, a Prospectus relating
thereto or any amendments or supplements relating to such a
Registration Statement or Prospectus, to one counsel (the
"Shareholders' Counsel") selected by a Majority of Shareholders, copies
of all such documents proposed to be filed;
(iii) [Intentionally omitted];
(iv) notify in writing the Shareholders' Counsel, and
the Shareholders whose Registrable Shares may be included in such
Registration Statement, promptly of (A) the receipt by the Company of
any notification with respect to any comments by the Commission with
respect to such Registration Statement or Prospectus or any amendment
or supplement thereto or any request by the Commission for the amending
or supplementing thereof or for additional information with respect
thereto, (B) the receipt by the Company of any notification or written
information with respect to the issuance or threatened issuance by the
Commission of any stop order suspending the effectiveness of such
7
<PAGE> 10
Registration Statement or Prospectus or any amendment or supplement
thereto or the initiation or threatening of any proceeding for that
purpose (and the Company shall use its best efforts to prevent the
issuance thereof or, if issued, to obtain its withdrawal) and (C) the
receipt by the Company of any notification with respect to the
suspension of the qualification of such Registrable Shares for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purposes;
(v) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as the Shareholders holding such Registrable Shares
reasonably request and do any and all other acts and things which may
be reasonably necessary or advisable to enable the Shareholders to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by the Shareholders; provided, however, that the Company
will not be required to qualify generally to do business, subject
itself to general taxation or consent to general service of process in
any jurisdiction where it would not otherwise be required to do so but
for this clause (v);
(vi) furnish to the Shareholders holding such
Registrable Shares such number of copies of a summary Prospectus, if
any, or other Prospectus, including a preliminary Prospectus, in
conformity with the requirements of the Securities Act, and such other
documents as such Shareholders may reasonably request in order to
facilitate the public sale or other disposition of such Registrable
Shares;
(vii) use its best efforts to cause such Registrable
Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Company to enable the Shareholders holding such
Registrable Shares to consummate the disposition of such Registrable
Shares;
(viii) notify the Shareholders holding such
Registrable Shares on a timely basis at any time when a Prospectus
relating to such Registrable Shares is required to be delivered under
the Securities Act within the appropriate period mentioned in clause
(i) of this Section 6(a), of the happening of any event as a result of
which the Prospectus included in such Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, and prepare and furnish to such
Shareholders a reasonable number of copies of, and file with the
Commission, a supplement to or an amendment of such Prospectus as may
be necessary so that, as thereafter delivered to the offerees of such
shares, such Prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
8
<PAGE> 11
(ix) subject to the execution of confidentiality
agreements in form and substance reasonably satisfactory to the
Company, make available upon reasonable notice and during normal
business hours, for inspection by the Shareholders holding Registrable
Shares requested to be included in such registration, any underwriter
participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by the
Shareholders or underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records"), and cause
the Company's officers, directors and employees to supply all
information (together with the Records, the "Information") reasonably
requested by any such Inspector, in each case as shall be reasonably
necessary to enable them to exercise their due diligence responsibility
in connection with such Registration Statement; provided, however, that
any of the Information that the Company determines in good faith to be
confidential, and of which determination the Inspectors are so
notified, shall not be disclosed by the Inspectors unless (A) the
disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the Registration Statement or Prospectus,
(B) the release of such Information is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction or, upon the
written advice of counsel, is otherwise required by law, or (C) such
Information has been made generally available to the public, and the
Shareholders agree that they will, upon learning that disclosure of
such Information is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the Company's expense,
to undertake appropriate action to prevent disclosure of the
Information deemed confidential;
(x) use its best efforts to obtain from its
independent certified public accountants "cold comfort" letters in
customary form and at customary times and covering matters of the type
customarily covered by cold comfort letters;
(xi) use its best efforts to obtain from its counsel
an opinion or opinions in customary form naming the Shareholders as
additional addressees or parties who may rely thereon;
(xii) provide a transfer agent and registrar (which
may be the same entity and which may be the Company) for such
Registrable Shares;
(xiii) issue to any underwriter to which the
Shareholders holding such Registrable Shares may sell shares in such
offering certificates evidencing such Registrable Shares;
(xiv) list such Registrable Shares on any national
securities exchange on which any shares of the Common Stock are listed
or, if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Registrable Shares for
inclusion on the Nasdaq National Market;
9
<PAGE> 12
(xv) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its securityholders, as soon as reasonably practicable, earnings
statements (which need not be audited) covering a period of 12 months
beginning within three months after the effective date of the
Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(xvi) use its best efforts to take all other steps
necessary to effect the registration of, and maintain an effective
Registration Statement with respect to, such Registrable Shares
contemplated hereby.
(b) Each holder of the Registrable Shares, upon receipt of any
notice from the Company of any event of the kind described in Section 6(a)(viii)
hereof, shall forthwith discontinue disposition of the Registrable Shares
pursuant to the Registration Statement covering such Registrable Shares until
such holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(a)(viii) hereof, and, if so directed by the Company,
such holder shall deliver to the Company all copies, other than permanent file
copies then in such holder's possession, of the most recent Prospectus covering
such Registrable Shares at the time of receipt of such notice.
SECTION 7. EXPENSES.
All expenses (other than underwriting discounts and
commissions relating to the Registrable Shares) incurred by the Company and the
Shareholders in complying with this Agreement, including, without limitation,
all registration and filing fees (including all expenses incident to filings
with the National Association of Securities Dealers, Inc.), fees and expenses of
complying with securities and blue sky laws, printing expenses, fees and
expenses of the Company's counsel and accountants and fees and expenses of the
Shareholders' Counsel, shall be paid by the Company in connection with
registrations requested under Section 2 or Section 4; provided, however, that
all underwriting discounts and selling commissions applicable to the Registrable
Shares and Other Shares shall be borne by the holders selling such Registrable
Shares and Other Shares, in proportion to the number of Registrable Shares and
Other Shares sold by each such holder.
SECTION 8. INDEMNIFICATION.
(a) In connection with any registration of any Registrable
Shares under the Securities Act pursuant to this Agreement, the Company shall
indemnify and hold harmless, to the fullest extent permitted by law, each holder
of Registrable Shares, each underwriter, broker or any other Person acting on
behalf of the holders of Registrable Shares and each other Person, if any, who
controls any of the foregoing Persons within the meaning of the Securities Act
(each such indemnified Person being referred to herein as an "Indemnified
Person") against any losses, claims, damages or liabilities, joint or several
(or actions in respect thereof), to which any of the foregoing Persons may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities
10
<PAGE> 13
(or actions in respect thereof) arise out of or are based upon an untrue
statement or allegedly untrue statement of a material fact contained in or
incorporated by reference in the Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
Prospectus or final Prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any Prospectus, necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any violation by the Company of the Securities Act or state
securities or blue sky laws applicable to the Company and relating to action or
inaction required of the Company in connection with such registration or
qualification under such state securities or blue sky laws; and shall promptly
reimburse the Indemnified Persons for any legal or other expenses reasonably
incurred by any of them in connection with investigating or defending any such
loss, claim, damage, liability or action; provided, however, that the Company
shall not be liable in any such case to any such Indemnified Person to the
extent that any such loss, claim, damage, liability or action (including any
legal or other expenses incurred) arises out of or is based upon: (i) an untrue
statement or allegedly untrue statement or omission or alleged omission made in
said Registration Statement, preliminary Prospectus, final Prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
Indemnified Person specifically for use in the preparation thereof or (ii) any
Indemnified Person's failure to deliver a copy of the Prospectus (including any
amendment or supplement thereto) after the Company has delivered to such
Indemnified Person a sufficient number of copies of the same.
(b) In connection with any registration of Registrable Shares
under the Securities Act pursuant to this Agreement, each holder of Registrable
Shares being registered shall, severally and not jointly, to the fullest extent
permitted by law, indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 8(a) above) the Company, each director of
the Company, each officer of the Company who shall have signed such Registration
Statement, each other holder of Registrable Shares or Other Shares, each agent,
underwriter, broker or other Person acting on behalf of the Company, each other
holder of Registrable Shares or Other Shares and each Person who controls any of
the foregoing Persons within the meaning of the Securities Act with respect to
any statement or omission from such Registration Statement, any preliminary
Prospectus or final Prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, if such statement or
omission was made in reliance upon and in conformity with written information
furnished to the Company or such underwriter through an instrument duly executed
by such holder specifically for use in connection with the preparation of such
Registration Statement, preliminary Prospectus, final Prospectus, amendment,
supplement or document; provided, however, that the
11
<PAGE> 14
maximum amount of liability in respect of such indemnification shall be
limited, in the case of each seller of Registrable Shares, to an amount equal to
the net proceeds actually received by such seller from the sale of Registrable
Shares effected pursuant to such registration.
(c) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving a claim referred to in Section 8(a)
or Section 8(b), such indemnified party will, if a claim in respect thereof is
made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, however, that the indemnified party's
failure to give such notice shall not release, relieve or in any way affect the
indemnifying party's obligation hereunder to indemnify the indemnified party
unless and to the extent that the rights of the indemnifying party are
prejudiced thereby. In case any such action is brought against an indemnified
party, the indemnifying party will be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that he, she, or it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of his, her or its election so to assume the
defense thereof, the indemnifying party shall not be responsible for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof; provided, however, that if any indemnified party shall
have reasonably concluded (based on the written advice of counsel) that there
may be one or more legal or equitable defenses available to such indemnified
party which are additional to or conflict with those available to the
indemnifying party, or that such claim or litigation involves or could have an
effect upon matters beyond the scope of the indemnity agreement provided in this
Section 8, the indemnifying party shall not have the right to assume the defense
of such action on behalf of such indemnified party and such indemnifying party
shall reimburse such indemnified party and any Person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section 8.
(d) If the indemnification provided for in this Section 8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or action referred to
herein (other than as a result of the applicability of the proviso in Section
8(a)), then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amounts paid or payable by such
indemnified party as a result of such loss, claim, damage, liability or action
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions which resulted in such loss, claim,
damage, liability or action as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
12
<PAGE> 15
SECTION 9. UNDERWRITING AGREEMENT.
(a) If any registration pursuant to Section 2 or Section 4 is
requested to be an underwritten offering, the Company shall negotiate in good
faith to enter into a reasonable and customary underwriting agreement with the
underwriters thereof. The Company shall be entitled to receive indemnities from
lead institutions, underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Prospectus or Registration
Statement and to the extent customary given their role in such distribution.
(b) No Shareholder may participate in any registration
hereunder that is underwritten unless such Shareholder agrees to (i) sell such
Shareholder's Registrable Shares proposed to be included therein on the basis
provided in any underwriting arrangements approved by the Company and a Majority
of Shareholders and (ii) as expeditiously as possible, notify the Company of the
occurrence of any event concerning such Shareholder as a result of which the
Prospectus relating to such registration contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
SECTION 10. INFORMATION BY HOLDER.
The Shareholders shall furnish to the Company such written
information regarding the Shareholders and the distribution proposed by the
Shareholders as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Agreement.
SECTION 11. EXCHANGE ACT COMPLIANCE.
From the Registration Date or such earlier date as a
Registration Statement filed by the Company pursuant to the Exchange Act
relating to any class of the Company's securities shall have become effective,
the Company shall comply with all of the reporting requirements of the Exchange
Act applicable to it (whether or not it shall be required to do so) and shall
comply with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Company shall cooperate with the Shareholders in supplying
such information as may be necessary for the Shareholders to complete and file
any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
SECTION 12. MERGERS, ETC.
The Company shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Company shall not be the
surviving
13
<PAGE> 16
corporation unless the surviving corporation shall, prior to such merger,
consolidation or reorganization, agree in writing to assume the obligations of
the Company under this Agreement, and for that purpose references hereunder to
"Registrable Shares" shall be deemed to include the shares of common stock, if
any, or other securities that the Shareholders would be entitled to receive in
exchange for Common Stock under any such merger, consolidation or
reorganization; provided, however, that, to the extent the Shareholders receive
securities that are by their terms convertible into shares of common stock of
the issuer thereof, then any such shares of common stock as are issued or
issuable upon conversion of said convertible securities shall be included within
the definition of "Registrable Shares."
SECTION 13. NEW CERTIFICATES.
As expeditiously as possible after the effectiveness of any
Registration Statement filed pursuant to this Agreement, the Company will
deliver in exchange for any legended certificate evidencing Registrable Shares
so registered, new stock certificates not bearing any restrictive legends.
SECTION 14. NO CONFLICT OF RIGHTS; SELECTION OF UNDERWRITER.
The Company shall not, at any time after the date hereof,
grant any registration rights that conflict with or impair, or have any parity
with or priority over, the registration rights granted hereby. In any Public
Offering, the managing underwriter shall be a nationally recognized investment
banking firm chosen by the Board.
SECTION 15. TERMINATION.
This Agreement shall terminate and be of no further force or
effect upon the written agreement of the Company, a majority of Registrable
Shares held by the Investors (which majority must include the affirmative vote
of all Registrable Shares then held by UBS) and a majority of Registrable Shares
held by the Continuing Shareholders or when there shall no longer be any
Restricted Shares outstanding.
SECTION 16. MISCELLANEOUS.
(a) Successors and Assigns. Except as expressly set forth
herein, this Agreement shall bind and inure to the benefit of the Company and
the Shareholders and, subject to Section 16(b), the respective successors and
assigns of the Company and the Shareholders. This Agreement is not intended to
create any third party beneficiaries.
(b) Assignment. Each Shareholder may assign its rights
hereunder to any purchaser or transferee of Registrable Shares; provided,
however, that such purchaser or transferee shall, as a condition to the
effectiveness of such assignment, unless already a party to this Agreement, be
required to execute a counterpart to this Agreement agreeing to be treated as
Shareholder hereunder, whereupon such purchaser or transferee shall have the
benefits of and shall be subject to the restrictions contained in this Agreement
as if
14
<PAGE> 17
such purchaser or transferee was originally included in the definition of a
Shareholder and had originally been a party hereto.
(c) Severability. It is the desire and intent of the parties
hereto that the provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
(d) Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior and contemporaneous arrangements or understandings with
respect hereto and thereto.
(e) Notices. All communications hereunder to any party shall
be deemed to be sufficient if contained in a written instrument delivered in
person or sent by nationally-recognized overnight courier guaranteeing next day
delivery or first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at its address below or such other
address as such party may hereafter designate in writing:
if to the Company, to:
Convergent Group Corporation
6200 South Syracuse Way
Suite 200
Englewood, CO 80111
Attention: Chief Executive Officer
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Ilan S. Nissan, Esq.
if to an Investor to each of the Investors listed on
Schedule I
15
<PAGE> 18
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Ilan S. Nissan, Esq.
if to the Continuing Shareholders, at the address of
the Company set forth above, or if so noted on
Schedule II hereto, at the addresses set forth on
Schedule II hereto.
with a copy to:
Holland & Hart LLP
555 East 17th Street
Suite 3200
Denver, Colorado 80202
Attention: Kevin S. Crandell, Esq.
All such notices, requests, consents and other communications
shall be deemed to have been given and received (i) in the case of personal
delivery, on the date of such delivery, (ii) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (iii) in the case of mailing, on the third business day after the
posting thereof.
(f) Modifications; Amendments; Waivers. The terms and
provisions of this Agreement may not be modified or amended, nor may any
provision be waived, except pursuant to a writing signed by the Company, a
majority of all Registrable Shares held by the Investors (which majority must
include the affirmative vote of all Registrable Shares then held by UBS) and a
majority of all Registrable Shares held by the Continuing Shareholders. The
failure of any party to enforce any of the provisions of this Agreement shall in
no way be construed as a waiver of such provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
(g) Counterparts. This Agreement may be executed in any number
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
(h) Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE
STATE OF
16
<PAGE> 19
DELAWARE OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE TO BE APPLIED. IN FURTHERANCE OF
THE FOREGOING, THE INTERNAL LAWS OF THE STATE OF DELAWARE WILL CONTROL THE
INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH
JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF
SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
(j) Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Nouns and Pronouns. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice-versa.
(1) Construction. Where specific language is used to clarify
by example a general statement contained herein, such specific language shall
not be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement shall
be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party.
(m) Effectiveness. This Agreement shall not be deemed
effective until it has been executed and delivered by all parties listed on the
signature pages hereto.
*****
17
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the day and year first above written.
CONVERGENT GROUP CORPORATION
By: /s/ GLENN E. MONTGOMERY, JR.
-------------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Chief Executive Officer
CONTINUING SHAREHOLDERS:
GMJM STOCK PARTNERSHIP, LTD.
By: /s/ GLENN E. MONTGOMERY, JR.
-----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: General Partner
MARK L. EPSTEIN TRUST
By: /s/ GLENN E. MONTGOMERY, JR.
-----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Trustee
By: /s/ SCOTT M. SCHLEY by POA
-----------------------------------
for Name: Scott M. Schley
Title: Trustee
LEHE FAMILY PARTNERS, LTD.
By: /s/ LARRY L. ENGELKEN 8/12/99
-----------------------------------
Name: Larry L. Engelken
Title: General Partner
<PAGE> 21
By: /s/ HOLLY S. STORM-ENGELKEN
-------------------------------------
Name: Holly S. Storm-Engelken
Title: General Partner
/s/ GLENN E. MONTGOMERY, JR.
- ----------------------------------------
Glenn E. Montgomery, Jr.
/s/ SCOTT M. SCHLEY
- ----------------------------------------
Scott M. Schley
EAS TRUST
By: /s/ ROBERT SHARPE
-------------------------------------
Name: Robert Sharpe
Title: Trustee
RES TRUST
By: /s/ ROBERT SHARPE
-------------------------------------
Name: Robert Sharpe
Title: Trustee
- ----------------------------------------
Barry J. Kemble
- ----------------------------------------
Bart E. Elliott
- ----------------------------------------
Thomas E. VanDenover
[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the day and year first above written.
CONVERGENT GROUP
CORPORATION
By:
--------------------
Name:
Title:
CONTINUING SHAREHOLDERS:
GMJM STOCK PARTNERSHIP, LTD.
By:
-------------------------
Name:
Title:
MARK L. EPSTEIN TRUST
By:-------------------------
Name:
Title:
LEHE FAMILY PARTNERS, LTD.
By:
-------------------------
Name:
Title:
- ----------------------------
Glenn E. Montgomery, Jr.
- ----------------------------
Scott. M. Schley
/s/ BARRY J. KEMBLE
- ----------------------------
Barry J. Kemble
<PAGE> 23
/s/ BART E. ELLIOTT
- ----------------------------
Bart E. Elliott
/s/ THOMAS E. VANDENOVER
- ----------------------------
Thomas E. VanDenover
/s/ EUGENE P. KINDRACHUK
- ----------------------------
Eugene P. Kindrachuk
/s/ DEAN A. ZASTAVA
- ----------------------------
Dean A. Zastava
/s/ JOHN A. RAMSEUR
- ----------------------------
John A. Ramseur
/s/ GREGORY P. FOSTER
- ----------------------------
Gregory P. Foster
/s/ TERRY L. YARYAN
- ----------------------------
Terry L. Yaryan
<PAGE> 24
INVESTORS:
INSIGHT CAPITAL PARTNERS III, L.P.
By: InSight Venture Associates III, L.L.C.
its General Partner
By: /s/ JERRY MURDOCK
-------------------------------------
Name:
Title:
INSIGHT CAPITAL PARTNERS III (CAYMAN), L.P.
By: InSight Venture Associates III, L.L.C.
its General Partner
By: /s/ JERRY MURDOCK
-------------------------------------
Name:
Title:
INSIGHT CAPITAL PARTNERS III (CO-INVESTORS), L.P.
By: InSight Venture Associates III, L.L.C.
its General Partner
By: /s/ JERRY MURDOCK
-------------------------------------
Name:
Title:
<PAGE> 25
UBS CAPITAL II LLC
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
By: /s/ [ILLEGIBLE]
-------------------------------------
Name:
Title:
WI SOFTWARE INVESTORS LLC
By: Wexferd Management LLC, its investment manager
By: /s/ ROBERT HOLTZ
-------------------------------------
Name: Robert Holtz
Title: Vice President
IMPRIMIS SB LP
By: Imprimis GP LLC, its General Partner
By: /s/ ROBERT HOLTZ
-------------------------------------
Name: Robert Holtz
Title: Vice President
<PAGE> 26
GS PRIVATE EQUITY PARTNERS II, L.P.
By: GS PEP II Advisors, L.L.C., General Partner
By: GSAM Gen-Par, L.L.C., Managing Member
By: /s/ DAVID B. FORD
-------------------------------------
Name: DAVID B. FORD
Title: Director
GS PRIVATE EQUITY PARTNERS II OFFSHORE, L.P.
By: GS PEP II Offshore Advisors, Inc.,
General Partner
By: /s/ DAVID B. FORD
-------------------------------------
Name: DAVID B. FORD
Title: Director
GS PRIVATE EQUITY PARTNERS III, L.P.
By: GS PEP III Advisors, L.L.C., General Partner
By: GSAM Gen-Par, L.L.C., Managing Member
By: /s/ DAVID B. FORD
-------------------------------------
Name: DAVID B. FORD
Title: Director
GS PRIVATE EQUITY PARTNERS III OFFSHORE, L.P.
By: GS PEP III Offshore Advisors, Inc.,
General Partner
By: /s/ DAVID B. FORD
-------------------------------------
Name: DAVID B. FORD
Title: Director
<PAGE> 27
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
By: GS PEP Offshore Advisors (NBK), Inc.,
General Partner
By: /s/ DAVID B. FORD
-------------------------------------
Name: David B. Ford
Title: Director
/s/ STEPHEN FRIEDMAN
- ----------------------------------------
Stephen Friedman
- ----------------------------------------
Charles A. Davis
[SIGNATURE PAGE TO THE REGISTRATION RIGHTS AGREEMENT]
<PAGE> 28
SCHEDULE I
INVESTORS:
INSIGHT CAPITAL PARTNERS III, L.P.
527 Madison Avenue, 10th Floor
New York, New York 10022
Attention: Jerry Murdock
INSIGHT CAPITAL PARTNERS III (CAYMAN), L.P.
527 Madison Avenue, 10th Floor
New York, New York 10022
Attention: Jerry Murdock
INSIGHT CAPITAL PARTNERS III (CO-INVESTORS), L.P.
527 Madison Avenue, 10th Floor
New York, New York 10022
Attention: Jerry Murdock
UBS CAPITAL LLC
c/o UBS Capital LLC
299 Park Avenue
New York, New York 10171
Attention: Hyunja Laskin
IMPRIMUS SB LP
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert Holtz
WI SOFTWARE INVESTORS, LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Robert Holtz
<PAGE> 29
GS PRIVATE EQUITY PARTNERS II, L.P.
One New York Plaza
New York, NY 10004
GS PRIVATE EQUITY PARTNERS II OFFSHORE, L.P.
One New York Plaza
New York, NY 10004
GS PRIVATE EQUITY PARTNERS III, L.P.
One New York Plaza
New York, NY 10004
GS PRIVATE EQUITY PARTNERS III OFFSHORE, L.P.
One New York Plaza
New York, NY 10004
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
One New York Plaza
New York, NY 10004
STEPHEN FRIEDMAN
527 Madison Avenue, 10th Floor
New York, New York 10022
Attention: Jerry Murdock
<PAGE> 30
SCHEDULE II
CONTINUING SHAREHOLDERS:
GMJM Stock Partnership, Ltd.
Mark L. Epstein Trust
LEHE Family Partners, Ltd.
Glenn E. Montgomery, Jr.
Scott M. Schley
EAS Trust
RBS Trust
Barry J. Kemble
Bart E. Elliott
Thomas E. VanDenover
Eugene P. Kindrachuk
Dean A. Zastava
John A. Ramseur
Gregory P. Foster
Terry L. Yaryan
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EXHIBIT 10.6
STOCK PLEDGE AGREEMENT
THIS STOCK PLEDGE AGREEMENT ("Agreement") is effective as of the 13th
day of August, 1999, by and between Glenn E. Montgomery, Jr., whose address is
77 Phlox Lane, Keystone Ranch, Dillon, Colorado 80435 ("Pledgor") and Convergent
Group Corporation, whose address is 6200 South Syracuse Way, Suite 200,
Englewood, Colorado 80111 ("Pledgee").
RECITALS
A. Pledgee has made a loan to Pledgor in the amount of $2,000,000,
which is evidenced by a Promissory Note dated as of the date
hereof and payable by Pledgor in favor of Pledgee (the "Note").
B. As security for the Note, Pledgor and Pledgee have agreed that
Pledgor will provide Pledgee certain collateral, as described
herein.
C. Pledgor and Pledgee wish to enter into this Agreement in order to
establish the security arrangements contemplated hereby.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, conditions, and
mutual promises set forth below, the parties hereto agree as follows:
1. Defined Terms.
"Collateral" shall mean the Pledged Stock and any other or additional
stock or securities or property described in Section 5, including any other or
additional securities and moneys received and held by Pledgee hereunder,
together with all proceeds thereof.
"Common Stock" shall mean shares of $0.001 par value common stock of
Convergent Group Corporation.
"Event of Default" shall mean the occurrence of any one or more of the
following: (i) Pledgor applies for or consents to the appointment of a trustee
or receiver for all or any part of its properties, (ii) any bankruptcy,
reorganization, debt arrangement, dissolution or liquidation proceeding is
commenced or consented to by Pledgor; (iii) any application for an appointment
of a receiver or a trustee or any proceeding for bankruptcy, reorganization,
debt management or liquidation is filed for or commenced against Pledgor and is
not withdrawn or dismissed within 30 days thereafter; (iv) Pledgor shall fail to
pay any Obligation when due; (v) Pledgor shall by formal legal proceeding or in
response to a legal proceeding initiated by Pledgee contest for any reason the
validity of any Obligation; (vi) any court shall determine that all or
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any part of the Obligations of Pledgor are invalid or unenforceable; and (vii)
Pledgor commits a breach of this Agreement.
"Fair Market Value" shall have the meaning given that term in Section
3(c).
"Obligations" shall mean Pledgor's obligation to make all payments of
principal and interest and other amounts with respect to the Note when due to
Pledgee, and all other obligations of Pledgor to Pledgee under the Note or
hereunder.
"Pledged Stock" shall mean all of the Common Stock owned by Pledgor
together with all other or additional stock or securities described in Section 5
now or hereafter pledged hereunder.
2. Grant of Security Interest. As security for the punctual payment and
performance of the Obligations when and as due, Pledgor hereby (a) grants to
Pledgee a continuing first priority security interest in all of the Collateral;
(b) pledges and deposits as security with Pledgee the Pledged Stock, and
delivers to pledgee certificates therefor, accompanied by stock powers duly
executed in blank by Pledgor with signature guarantees or such other instruments
of transfer as are acceptable to Pledgee; and (c) assigns, transfers,
hypothecates, mortgages, charges and sets over to Pledgee all of Pledgor's
right, title and interest in and to such Pledged Stock (and in and to the
certificates or instruments evidencing such Stock), to be held by Pledgee, upon
the terms and conditions set forth in this Agreement.
3. Character of Obligations. The obligations of Montgomery under the Note shall
initially be with full recourse against Montgomery, but may become without
recourse against Montgomery in accordance with the terms and conditions of the
Note.
4. Voting Absent Event of Default. Unless and until an Event of Default shall
have occurred and be continuing, Pledgor shall be entitled to vote any and all
Pledged Stock and to give consents, waivers or ratifications in respect thereof,
provided that no vote shall be cast nor any consent, waiver or ratification
given nor any action taken which would violate or be inconsistent with any of
the terms of this Agreement. All such rights of Pledgor to vote and to give
consents, waivers and ratifications shall cease so long as an Event of Default
shall occur and be continuing, and Section 7 hereof shall become applicable.
5. Dividends and Other Distributions. Unless an Event of Default shall have
occurred and be continuing, and subject to the restrictions set forth below, all
cash dividends payable in respect of the Pledged Stock shall be paid to Pledgor,
provided that all cash dividends payable in respect of the Pledged Stock which
represent an extraordinary (i.e., a dividend in excess of 10% of the value of
the Pledged Stock at the time of the declaration of such dividend) liquidating
or other distribution in return of capital shall be paid to Pledgee and retained
by it as part of the Collateral. Pledgee shall also be entitled to receive
directly, and to retain as part of the Collateral:
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(a) All other or additional stock or securities or property (other than
cash) paid or distributed by way of dividend in respect of the Pledged Stock;
(b) All other or additional stock or other securities or property
(including cash) paid or distributed in respect of the Pledged Stock by way of
stock-split, spin-off, split-up, reclassification, combination of shares or
similar rearrangement; and
(c) All other or additional stock or other securities or property which
may be paid in respect of the Collateral by reason of any consolidation, merger,
exchange of stock, conveyance of assets, liquidation or similar corporate
reorganization.
6. Representations and Warranties. Pledgor represents and warrants as follows:
(a) Pledgor is the sole legal, record and beneficial owner of, and has
good and marketable title to, the Collateral free and clear of any lien,
security interest, charge, claim, or encumbrance of any third party;
(b) This Agreement creates a valid first priority security interest in
the Collateral;
(c) Pledgor has full power, authority and legal right to pledge all the
Collateral pursuant to this Agreement, and no additional authorization,
approval, or other action by Pledgor or any other individual or entity is
required in order to grant Pledgee the security interest granted by this
Agreement;
(d) The execution, delivery and performance of this Agreement does not
violate any provision of any applicable law or regulation or of any order,
judgment, writ, award or decree of any court, arbitrator or governmental
authority, domestic or foreign, or of any mortgage, indenture, lease, contract
or other agreement, instrument or undertaking to which Pledgor is a party or
which purports to be binding upon Pledgor or upon any of Pledgor's assets and
does not result in the creation or imposition of any lien on any of the assets
of Pledgor except as contemplated by this Agreement;
7. Remedies in Case of Event of Default. In case an Event of Default shall have
occurred and be continuing, Pledgee shall, to the extent permitted by applicable
law, be entitled to exercise all of the rights, powers and remedies vested in it
by this Agreement or by law (including, without limitation, the Uniform
Commercial Code) in respect of the Collateral, including, without limitation,
the following rights, which Pledgor hereby agrees to be commercially reasonable:
(a) To receive all amounts payable in respect of the collateral or
otherwise payable under the first sentence of Section 5 to Pledgor;
(b) To transfer all or any part of the Pledged Stock into Pledgee's
name or the name of its nominee or nominees;
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(c) To vote all or any part of the Pledged Stock (whether or not
transferred into the name of Pledgee) and give all consents, waivers and
ratifications in respect of the Collateral and otherwise act with respect
thereto as though it were the outright owner thereof (Pledgor hereby irrevocably
constituting and appointing Pledgee the proxy and attorney-in-fact of Pledgor,
with full power of substitution to do so); and
(d) At any time or from time to time to sell, assign and deliver, or
grant options to purchase, all or any part of the Collateral, or any interest
therein, at any public or private sale, without demand of performance,
advertisement or notice of intention to sell or of the time or place of sale or
adjournment thereof or to redeem or otherwise (all of which are hereby waived by
Pledgor), for cash, on credit or for other property, for immediate or future
delivery without any assumption of credit risk, and for such price or prices and
on such terms as Pledgee may in good faith deem reasonable under the
circumstances. Pledgor hereby waives and releases to the fullest extent
permitted by law any right or equity of redemption with respect to the
Collateral, whether before or after a sale hereunder, and all rights, if any, of
marshalling the Collateral and any other security for the Obligations or
otherwise. At any such sale, unless prohibited by applicable law, Pledgee may
bid for and purchase all or any part of the Collateral so sold free from any
such right or equity of redemption. Pledgee shall not be liable for failure to
collect or realize upon any or all of the collateral or for any delay in so
doing nor shall it be under any obligation to take any action whatsoever with
regard thereto.
8. Remedies Cumulative; Subrogation and Certain Procedures Waived. Each right,
power and remedy of Pledgee provided for in this Agreement or now or hereafter
existing at law or in equity or by contract or statute shall be cumulative and
concurrent and shall be in addition to every other such right, power or remedy.
The exercise or beginning of the exercise by Pledgee of any one or more of the
rights, powers or remedies provided for in this Agreement, or now or hereafter
existing at law or in equity or by statute or contract or otherwise shall not
preclude the simultaneous or later exercise by Pledgee of all such other rights,
powers or remedies, and no failure or delay on the part of Pledgee to exercise
any such right, power or remedy shall operate as a waiver thereof.
Notwithstanding the exercise by Pledgee of any remedies with respect to the
Collateral, Pledgor shall not be entitled to be subrogated to any of the rights
with respect to any of the Obligations until all Obligations shall have been
paid and performed in full. The right of Pledgee to proceed against the
collateral pledged hereunder shall not be conditioned or contingent upon the
pursuit by Pledgee of any right or remedy against any other person which may
become liable to make payment of or perform all or any part of the Obligations
or against any other collateral held by Pledgee or any other person therefor.
9. Application of Proceeds. All moneys collected by Pledgee upon any sale or
other disposition of the Collateral, together with all other moneys received by
Pledgee hereunder, shall be applied to the payment of all costs and expenses
incurred by Pledgee in connection with such sale, the delivery of the Collateral
or the collection of any such
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moneys (including, without limitation, attorneys' fees and expenses), and the
balance of such moneys shall be held by Pledgee and applied by it to satisfy the
Obligations. If, after such application, additional Obligations remain unpaid
and secured hereby which are not yet matured, Pledgee shall hold such proceeds
as security for the payment of such Obligations. If the proceeds of the
disposition of the Collateral are insufficient to pay all Obligations, then such
proceeds shall be applied to payment of the Obligations in such manner as
Pledgee shall elect. Any proceeds remaining after payment and performance in
full of the Obligations shall be distributed to Pledgor or the person lawfully
entitled thereto.
10. Purchasers of Collateral. Upon any sale of any Collateral by Pledgee
hereunder (whether by virtue of the power of sale herein granted, pursuant to
judicial process or otherwise), the receipt of Pledgee or the officer making the
sale shall be a sufficient discharge to the purchaser or purchasers of the
Collateral so sold, and such purchaser or purchasers shall not be obligated to
see to the application of any part of the purchase money paid over to Pledgee or
such officer or be answerable in any way for the misapplication or
nonapplication thereof.
11. Indemnity and Expenses. Pledgor agrees to indemnify and hold harmless
Pledgee from and against any and all claims, demands, losses, judgments and
liabilities (including liabilities for penalties) of whatsoever kind or nature,
and to reimburse Pledgee for all costs and expenses, including, without
limitation, reasonable attorneys' fees and any stamp, document, transfer,
recording and other taxes growing out of or resulting from this Agreement or the
proper exercise by Pledgee of any right or remedy granted to it hereunder. In no
event shall Pledgee be liable, in the absence of gross negligence or willful
misconduct on its part, for any matter or thing in connection with this
Agreement, other than to account for moneys actually received by it in
accordance with the terms hereof. If and to the extent that the obligations of
Pledgor under this Section 11 are unenforceable for any reason, Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
12. Further Assurances. Pledgor agrees that it will join with Pledgee in
executing and, at its own expense, file and refile under the Uniform Commercial
Code such financing statements, continuation statements and other documents in
such offices as Pledgee may deem necessary or appropriate in order to perfect
and preserve Pledgee's security interest in the Collateral, and hereby
authorizes Pledgee to file financing statements and amendments thereto relative
to all or any part of the Collateral without the signature of Pledgor where
permitted by law, and agrees to do such further acts and things and to execute
and deliver to Pledgee such additional conveyances, assignments, agreements and
instruments as Pledgee may reasonably require or deem advisable to carry into
effect the purposes of this Agreement or to further assure and confirm unto
Pledgee its rights, powers and remedies hereunder. Pledgor covenants and agrees
that it will defend Pledgee's right, title and security interest in and to the
Collateral against the claims and demands of all persons whomsoever. Pledgor
covenants and agrees that it
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shall give prompt written notice to Pledgee of any change of his address from
that referred to in the first paragraph of this Agreement.
13. Pledgee. Pledgee will hold in accordance with this Agreement all items of
the Collateral at any time received under this Agreement. It is expressly
understood and agreed that the obligations of Pledgee as holder of the
Collateral and with respect to the disposition thereof and otherwise under this
Agreement, are only those expressly set forth in this Agreement. Pledgee shall
exercise reasonable care in the custody of the Collateral in its possession or
control hereunder at any time, but shall be deemed to have exercised reasonable
care if such Collateral is accorded treatment substantially equal to that which
Pledgee accords its own property or if Pledgee takes such action with respect to
such Collateral as Pledgor shall request, but no failure to comply with any such
request shall of itself be deemed a failure to exercise reasonable care, nor
shall any failure of Pledgee to take steps to reserve rights against any parties
with respect to any such Collateral be deemed a failure to exercise reasonable
care.
14. Transfer by Pledgor. Pledgor will not sell, assign, pledge or otherwise
dispose of, grant any option with respect to, or mortgage, pledge or otherwise
encumber any of the Collateral or any interest therein (except pursuant to this
Agreement).
15. Pledgor's Obligations Absolute. The obligations of Pledgor under this
Agreement shall not be released, suspended, discharged, terminated or otherwise
affected by, any waiver, consent, extension, indulgence or other action or
inaction under or in respect of any obligations or this Agreement.
16. Private Sale by Pledgee. If at any time when Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Stock pursuant to
Section 7, such Pledged stock or the part thereof to be sold shall not, for any
reason whatsoever, be effectively registered under the Securities Act of 1933,
as then in effect, Pledgee may, in its sole and absolute discretion and to the
extent permitted by law, sell such Pledged Stock or part thereof by private sale
in such manner and under such circumstances as Pledgee may deem necessary or
advisable in order that such sale may legally be effected without such
registration, provided that at least 10 days' notice of the time and place of
any such sale shall be given to Pledgor. Without limiting the generality of the
foregoing, in any such event Pledgee, in its sole and absolute discretion may
(i) to the extent permitted by law, proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Stock or part thereof shall have been filed under the Securities
Act of 1933, (ii) approach and negotiate with a single possible purchaser to
effect such sale, and (iii) restrict such sale to a purchaser who will represent
and agree that such purchaser is purchasing for its own account, for investment,
and not with a view to the distribution or sale of such Pledged Stock or part
thereof. In the event of any such sale, Pledgee shall incur no responsibility or
liability for selling all or any part of the Pledged Stock at a price which
Pledgee, in its sole and discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a
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substantially higher price might be realized if the sale were deferred until
after registration as aforesaid.
17. Termination; Complete Release. When all obligations have been paid and
performed in full, this Agreement shall terminate, and Pledgee, at the request
and expense of Pledgor, will execute and deliver to Pledgor a proper instrument
or instruments acknowledging the satisfaction and termination of this Agreement,
and will duly assign, transfer and deliver to Pledgor (without recourse and
without any representation or warranty) such of the Collateral as has not
theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any moneys at the time held by Pledgee hereunder.
18. Pledgee May Perform. If Pledgor fails to perform any obligation contained in
this Agreement, Pledgee may itself perform, or cause performance of, such
obligation, and the expenses incurred by Pledgee in connection therewith shall
be payable to Pledgee by Pledgor upon demand by Pledgee.
19. Assignment. Neither party shall assign any of its rights or delegate any of
its duties hereunder without the prior written consent of the other, which
consent shall not be unreasonably withheld or delayed, and any assignment or
delegation made without such consent shall be void.
20. Amendments. No modification of or amendment to this Agreement shall be valid
and binding unless in writing and signed by both parties.
21. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado, without regard to the
conflicts of laws principles of such State.
22. Waiver. Failure by either party in any one or more instances to insist upon
strict performance of any of the terms and conditions of this Agreement or to
exercise any right herein conferred shall not be construed as a waiver or
relinquishment of that right or of the right to assert or rely upon the terms of
this Agreement.
23. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision.
24. Authority. Each party warrants that it has the full power and authority to
enter into and perform under this Agreement and to make all representations,
warranties, and grants set forth herein.
25. Notices. All notices or other communications which are required to be given
or may be given to the parties pursuant to the terms of this Agreement shall be
sufficient in all respects if given in writing and delivered personally, sent by
nationally-recognized, overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties addressed as
set forth in the first paragraph of this
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Agreement. All such notices and other communications shall be deemed to have
been given and received (A) in the case of personal delivery, on the date of
such delivery, and (B) in the case of delivery by nationally-recognized,
overnight courier, and in the case of mailing, on the delivery or refusal date
as indicated on the return receipt. Either party may change his or its address
for such notices or communications by giving notice thereof to the other party
in conformity with this Section 25.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement by their authorized representatives as of the date first written
above.
PLEDGOR:
/s/ GLENN E. MONTGOMERY, JR.
----------------------------------------
Glenn E. Montgomery, Jr.
PLEDGEE:
Convergent Group Corporation,
a Delaware corporation
By: /s/ SCOTT M. SCHLEY
-------------------------------------
Name: Scott M. Schley
Title: Chief Financial Officer
DENVER:0934750.02
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EXHIBIT 10.7
AGREEMENT
This Agreement (this "Agreement") is made this 13th day of August,
1999, by Glenn E. Montgomery, Jr. ("Montgomery"), GMJM Stock Partnership, Ltd.,
a Colorado limited partnership ("GMJM" and, together with Montgomery, the
"Montgomery Entities"), InSight Capital Partners III, L.P., a Delaware limited
partnership ("InSight") and Convergent Group Corporation, a Delaware corporation
("Convergent").
RECITALS
The parties wish to document certain agreements relating to the shares
of capital stock of Convergent, including without limitation amendments to that
certain Shareholders' Agreement (the "Shareholders' Agreement") of even date
herewith by and among Convergent, the "Company Shareholders" and the
"Investors", which amendments shall take effect upon approval by a "Shareholder
Majority" and an "Investor Majority" (as such terms are defined in the
Shareholders Agreement), as required by Section 16(a) of the Shareholders'
Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the premises and the mutual promises
and covenants herein, and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
1. SALE OF SHARES IN MEZZANINE OFFERING.
1.1 Introductions to Mezzanine Purchasers. InSight shall use
commercially reasonable efforts to introduce the Montgomery Entities to one or
more persons or entities, including without limitation Integral Partners, J.
Hogue and Amerendo, who have an interest in acquiring shares of Series A
Preferred Stock ("Preferred Stock") and/or Common Stock ("Common Stock") of
Convergent and to support a sale by the Montgomery Entities of Preferred Stock
and Common Stock to such persons and entities. Provided that InSight has
complied with its obligations as set forth in the preceding sentence and Section
1.3, InSight shall have no liability whatsoever with respect to a failure by the
Montgomery Entities to conclude a sale of Preferred Stock and/or Common Stock.
1.2 Terms of Purchase and Sale. Persons or entities interested in
acquiring Preferred Stock and/or Common Stock from the Montgomery Entities are
referred to hereinafter as the "Mezzanine Purchasers". It is the intention of
the parties that the Montgomery Entities shall sell, and the Mezzanine
Purchasers shall purchase, not less than $2,000,000 of Preferred Stock and
Common Stock
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(based upon the purchase and sale price with the Mezzanine Purchasers) from the
Montgomery Entities in a private placement to be concluded as soon as reasonably
possible, but not later than six months from the date of this Agreement. The
purchase price per share for the Preferred Stock shall be not less than $1.085
per share. The net proceeds of a sale of Preferred Stock or Common Stock to the
Mezzanine Purchasers shall be applied by the Montgomery Entities to repay any
outstanding obligations under that certain Promissory Note of even date herewith
issued by Montgomery, as Maker, in favor of Convergent, as Payee (the
"Montgomery Note").
1.3 Right of Co-Sale. If InSight or any of its affiliates wish to sell,
transfer, assign or otherwise dispose of (each a "Transfer") any of their shares
of Preferred Stock or any interest therein other than to an affilitate,
including without limitation shares of Common Stock acquired upon conversion of
the Preferred Stock (a "Preferred Interest"), InSight shall give at least 40
days prior written notice (a "Co-Sale Notice") to the Montgomery Entities, which
notice shall include the terms and conditions of such proposed Transfer
including the identity of each prospective transferee. The Montgomery Entities
may, within 30 days of the receipt of the Co-Sale Notice, give written notice (a
"Tag-Along Notice") to InSight that they or either of them wish to participate
in such proposed Transfer and specifying the number of shares of Preferred Stock
or Common Stock (to the extent that GMJM has sold all of its interest in the
original 509,012 shares of Common Stock held by it on the date of this
Agreement) they desire to include in such proposed Transfer. The number of
shares which may be included by the Montgomery Entities shall be (i) up to the
initial $2,000,000 of shares proposed to be Transferred (based upon the purchase
and sale price specified in the Co-Sale Notice), and (ii) up to one-third of the
total number of shares subject to the Tag-Along Notice over and above the
initial $2,000,000. Notwithstanding anything herein to the contrary, the
$2,000,000 referred to in the preceding sentence shall be reduced by the amount
of gross proceeds realized by the Montgomery entities in any prior sale of
Preferred Stock or Common Stock, and the aggregate amount which may be sold by
the Montgomery entities in one or more transactions pursuant to clause (ii) of
the preceding sentence shall not exceed $3,333,333. If the Montgomery Entities
fail to provide a timely Tag-Along Notice with respect to any Transfer proposed
in a Co-Sale Notice, InSight may Transfer the Preferred Interest specified in
the Co-Sale Notice to the proposed transferree(s) specified in the Co-Sale
Notice for a period of 90 days thereafter upon terms and conditions no more
favorable than those set forth in the Co-Sale Notice. This Section 1.3 shall
then apply to subsequent Transfers by InSight and its affiliates to persons
other than their affiliates. If the Montgomery Entities give InSight a timely
Tag-Along Notice, then InSight shall include shares of Preferred Stock and
Common Stock specified by the Montgomery Entities in the proposed Transfer upon
at least the same terms and conditions as set forth in the Co-Sale Notice (but
substituting Common Stock for Preferred Stock on a share-for-share basis without
any other change in terms
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to the extent GMJM has sold all of its interest in the original 509,012 shares
of Common Stock held by it on the date of this Agreement).
1.4 Conversion of Shares. In order to facilitate the sale of shares of
Common Stock by GMJM, Convergent, upon request from GMJM, shall exchange, on a
share for share basis, each of the 509,012 shares of Common Stock held by GMJM
on the date of this Agreement for Preferred Stock, provided that such shares
must be sold to a Mezzanine Purchaser within ten (10) days after the date of
such exchange, or such exchange shall be null and void and GMJM shall return any
shares of Preferred Stock received by it to Convergent in return for the shares
of Common Stock tendered by GMJM.
1.5 Termination. This Article 1 shall terminate upon a "Qualified
Public Offering," as that term is defined in the Shareholders' Agreement.
2. SHAREHOLDERS' AGREEMENT.
2.1 Mezzanine Transfer. Any Transfer of shares of capital stock of
Convergent by the Montgomery Entities as described in Article 1 of this
Agreement shall be considered to be an "Exempt Transfer" for purposes of the
Shareholders' Agreement. As an Exempt Transfer, such Transfer shall (i) be
deemed to not be in violation of Section 1(a); (ii) not be subject to a right of
first refusal by Convergent, the Investors and the Executive Shareholders
pursuant to Section 1(c); and (iii) not be subject to the co-sale provisions
specified in Section 2. In addition, Section 12 of the Shareholders' Agreement
shall not apply to the Mezzanine Purchasers with respect to the Montgomery
Entities' shares. Such Mezzanine Purchasers shall, as a condition to the
Transfer of the Montgomery Entities' Shares, become Investors for purposes of
the Shareholders' Agreement with respect to all of the Montgomery Entities'
shares, and will be required to execute and deliver to Convergent an Investor
Joinder with respect to such shares.
2.2 Promissory Note and Stock Pledge Agreements. Any Transfer of shares
of capital stock of Convergent by the Montgomery Entities in connection with the
Montgomery Note, including without limitation Transfers in payment of
obligations owed pursuant to the Note, the pledge of shares made pursuant to the
Stock Pledge Agreement of even date herewith between Montgomery and Convergent
and the Stock Pledge Agreement of even date herewith between GMJM and Convergent
(collectively, the "Stock Pledge Agreements"), and any subsequent Transfer of
shares in accordance with the terms of the Stock Pledge Agreements, shall be
considered an Exempt Transfer for purposes of the Shareholders' Agreement. As an
Exempt Transfer, such Transfer shall (i) be deemed to not be in violation of
Section 1(a); (ii) not be subject to a right of first refusal by Convergent, the
Investors and the Executive Shareholders pursuant to Section 1(c); and (iii) not
be subject to the co-sale provisions specified in Section 2. In addition, the
pledges pursuant to the Stock Pledge Agreements will be
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excepted from Section 6(d), which requires the approval of the Board of
Directors of Convergent for certain stock pledges.
2.3 Employment Agreement. Any Transfer of shares of capital stock of
Convergent by the Montgomery Entities in connection with the Employment
Agreement of even date herewith between Montgomery and Convergent (the
"Employment Agreement") shall be considered an Exempt Transfer for purposes of
the Shareholders' Agreement. As an Exempt Transfer, such Transfer shall (i) be
deemed to not be in violation of Section 1(a); (ii) not be subject to a right of
first refusal by Convergent, the Investors and the Executive Shareholders
pursuant to Section 1(c); and (iii) not be subject to the co-sale provisions
specified in Section 2. In addition, should Convergent exercise its right to
reacquire shares of Convergent's capital stock pursuant to Section 3 of the
Shareholders' Agreement following a termination of Montgomery's employment for
any reason whatsoever, including without limitation by Convergent with or
without "Cause", by Montgomery with or without "Good Reason" and as a result of
Montgomery's death or disability, the amount to be paid for the shares and the
terms and conditions applicable to the purchase and sale shall be the price and
the terms and conditions applicable as if Montgomery had exercised the "Put
Option" pursuant to Section 22 of the Employment Agreement, whether or not
Montgomery would have had the right to exercise such Put Option under such
circumstances in accordance with the Employment Agreement.
3. MONTGOMERY NOTE.
In the event that Montgomery is required to prepay all or any portion
of the Montgomery Note in accordance with Section 3 thereof, InSight shall
purchase from the Montgomery Entities a sufficient number of shares of Common
Stock to enable Montgomery to repay the outstanding balance, including both
principal and accrued interest, on the Montgomery Note in full; provided,
however, that InSight shall not be obligated to make such purchase unless, as of
the end of the month prior to the month in which such prepayment requirement
arises, Convergent had achieved at least eighty percent (80%) of each of
targeted revenues, bookings, and EBITDA (each as set forth in the Annual
Operating Plan approved by the Board of Directors of Convergent in the manner
described in the Employment Agreement), which targeted amounts shall be prorated
for that portion of the year for which such determination is made. The purchase
price of any shares transferred pursuant to this Section 3 shall be $1.085 per
share.
4. ASSIGNMENT.
Neither Montgomery nor GMJM may assign or delegate this Agreement or
any of its rights, duties or obligations hereunder to any person or entity
without the prior written approval of InSight, which shall not be unreasonably
withheld.
4
<PAGE> 5
5. MISCELLANEOUS.
5.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, oral or written, and all other communications relating to the
subject matter hereof. No amendment or modification of any provision of this
Agreement will be effective unless set forth in a document that is executed by
both parties.
5.2 Waivers. The forbearance, neglect or failure of either party to
enforce any or all of the terms of this Agreement or to insist upon strict
compliance by the other party of its terms shall not be construed as a waiver of
any of such party's rights hereunder.
5.3 Governing Law. The validity, construction, and performance of this
Agreement shall be governed by the internal laws of the State of Colorado,
without reference to the conflicts of laws principles thereof.
5.4 Severability. If any provision of this Agreement is held by a court
of competent jurisdiction to be contrary to law, the remaining provisions of
this Agreement shall remain in full force and effect.
5.5 Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall be an original, and all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CONVERGENT GROUP CORPORATION,
a Delaware corporation
By: /s/ SCOTT M. SCHLEY
----------------------------------
Name: Scott M. Schley
Title: Chief Financial Officer
/s/ GLENN E. MONTGOMERY, JR.
--------------------------------------
GLENN E. MONTGOMERY, JR.
5
<PAGE> 6
GMJM STOCK PARTNERSHIP, LTD.,
a Colorado limited partnership
By: /s/ GLENN E. MONTGOMERY, JR.
----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: General Partner
INSIGHT CAPITAL PARTNERS III, L.P.,
a Delaware limited partnership
By: InSight Venture Associates, III,
L.L.C., its General Partner
By: /s/ JERRY MURDOCK
----------------------------------
Name:
Title:
The undersigned, as the Company or as Company Shareholders or
Investors, as the case may be, under the Shareholders' Agreement, hereby approve
the foregoing Agreement as an amendment to the Shareholders' Agreement as
required under Section 16(a) of the Shareholders' Agreement. Such approval is
given solely for purposes of Section 16(a) of the Shareholders' Agreement, and
in no event shall any of the undersigned Company Shareholders or Investors,
other than the Montgomery Entities and InSight, be considered for any purpose to
be a party to the Agreement or have any obligation or liability whatsoever under
the Agreement other than as an amendment to the Shareholders' Agreement.
CONVERGENT GROUP CORPORATION,
a Delaware corporation
By: /s/ SCOTT M. SCHLEY
----------------------------------
Name: Scott M. Schley
Title: Chief Financial Officer
/s/ GLENN E. MONTGOMERY, JR.
--------------------------------------
GLENN E. MONTGOMERY, JR.
6
<PAGE> 7
GMJM STOCK PARTNERSHIP, LTD.,
a Colorado limited partnership
By: /s/ GLENN E. MONTGOMERY, JR.
----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: General Partner
LEHE FAMILY PARTNERS, LTD.,
a Colorado limited partnership
By: /s/ LARRY J. ENGELKEN
----------------------------------
Name: Larry J. Engelken
Title: General Partner
By: /s/ HOLLY S. STORM-ENGELKEN
----------------------------------
Name: Holly S. Storm-Engelken
Title: General Partner
MARK L. EPSTEIN TRUST
By: /s/ GLENN E. MONTGOMERY, JR.
----------------------------------
Name: Glenn E. Montgomery, Jr.
Title: Trustee
By: /s/ HARRY J. SCHMIDT
----------------------------------
Name: Harry J. Schmidt
Title: Trustee
/s/ SCOTT M. SCHLEY
--------------------------------------
SCOTT M. SCHLEY
7
<PAGE> 8
INSIGHT CAPITAL PARTNERS III, L.P.
a Delaware limited partnership
By: InSight Venture Associates III,
L.L.C., its General Partner
By: /s/ JERRY MURDOCK
--------------------------
Name:
------------------------
Title:
-----------------------
INSIGHT CAPITAL PARTNERS III
(CAYMAN), L.P.
By: InSight Venture Associates III,
L.L.C., its General Partner
By: /s/ JERRY MURDOCK
--------------------------
Name:
------------------------
Title:
-----------------------
INSIGHT CAPITAL PARTNERS III
(CO-INVESTORS), L.P.,
By: InSight Venture Associates III,
L.L.C., its General Partner
By: /s/ JERRY MURDOCK
--------------------------
Name:
------------------------
Title:
-----------------------
UBS CAPITAL II LLC
By: /s/ JUSTIN MACCARONE
--------------------------
Name: Justin Maccarone
------------------------
Title:
-----------------------
By: /s/ [ILLEGIBLE]
--------------------------
Name:
------------------------
Title:
-----------------------
8
<PAGE> 9
WI SOFTWARE INVESTORS LLC
By: Wexferd Management LLC, its
investment manager
By: /s/
--------------------------
Name:
------------------------
Title:
-----------------------
IMPRIMIS SB LP
By: Imprimis GP LLC, its General
Partner
By: /s/
--------------------------
Name:
------------------------
Title:
-----------------------
GS PRIVATE EQUITY PARTNERS II, L.P.
By: GS PEP II Advisors, L.L.C.,
its General Partner
By: GSAM Gen-Par, L.L.C.,
its Managing Member
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
------------------------
Title: Director
-----------------------
GS PRIVATE EQUITY PARTNERS II
OFFSHORE, L.P.
By: GS PEP II Offshore Advisors,
Inc., its General Partner
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
------------------------
Title: Director
-----------------------
9
<PAGE> 10
GS PRIVATE EQUITY PARTNERS III, L.P.
By: GS PEP III Advisors, L.L.C.,
its General Partner
By: GSAM Gen-Par, L.L.C.,
its Managing Member
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
------------------------
Title: Director
-----------------------
GS PRIVATE EQUITY PARTNERS III
OFFSHORE, L.P.
By: GS PEP III Offshore Advisors,
Inc., its General Partner
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
------------------------
Title: Director
-----------------------
NBK/GS PRIVATE EQUITY PARTNERS, L.P.
By: GS PEP Offshore Advisors (NBK),
Inc., its General Partner
By: /s/ DAVID B. FORD
--------------------------
Name: David B. Ford
------------------------
Title: Director
-----------------------
--------------------------------------
STEPHEN FRIEDMAN
--------------------------------------
CHARLES A. DAVIS
DENVER:0935402.05
10
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 13th day of
August, 1999 (the "Effective Date"), and entered into by and between Mark L.
Epstein (subsequently called the "Executive") and Convergent Group Corporation,
a Delaware corporation, having its principal office at 6200 South Syracuse Way,
Suite 200, Englewood, Colorado 80111 (subsequently called the "Corporation"). In
consideration of the mutual promises and the terms and conditions set forth
below, the Executive and the Corporation (together, the "Parties," and each, a
"Party") agree as follows:
1. Nature and Purpose of Agreement. The laws of the State of Colorado
permit consultants to incorporate under the Colorado Corporation Code. The
Executive desires to practice consulting with and provide essential management
to the Corporation. The Board of Directors of the Corporation has determined the
reasonable method of compensation of the Executive and has offered him
compensation of an annual base salary and bonuses as set forth in Sections 3 and
4, participation in a 401(k) Plan in accordance with law, Key Man Insurance,
together with the other employee benefits generally set forth in the
Corporation's policies and procedures manual.
2. Employment; Term. The Corporation hereby employs the Executive as a
consultant and the Executive hereby agrees to be employed by the Corporation
under the terms and conditions set forth in this Agreement. The term of this
Agreement shall begin on the date hereof and shall end on December 31, 2002,
unless terminated prior to that date as provided herein.
3. Compensation and Benefits.
(a) For all services rendered by the Executive under this
Agreement, the Corporation shall pay compensation to the Executive consisting of
an annual base salary and an incentive bonus. The annual base salary effective
as of August 15, 1999, is $200,000. The Executive's annual base salary shall not
be reduced during the term of this Agreement and shall be subject to annual
adjustments as set forth herein. Effective on January 1 of each year during the
term of this Agreement, the Executive's annual base salary shall be increased by
5% of the amount in effect immediately prior to such adjustment. The Executive's
annual base salary shall be paid in twenty-six (26) bi-weekly payments during
each annual period.
(b) The Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of the Executive's level or its
employees generally (the "Benefits").
<PAGE> 2
4. Bonus Arrangements.
(a) Bonus Opportunity. The Corporation and the Executive
acknowledge that the Executive is critical to the success of the Corporation
both as a consultant for the Corporation and as an essential part of the
management of the Corporation. The Corporation desires to retain the Executive
and ensure that the Executive receives reasonable compensation for his critical
role. The Corporation therefore agrees to pay the balance of the Executive's
reasonable compensation by way of a an Incentive Bonus (as defined below).
(b) Incentive Bonus. Commencing with calendar year 1999, the
Executive shall be eligible to earn an "Incentive Bonus" for each year in
addition to his annual base salary. The targeted amount of the Incentive Bonus
shall be 50% of the amount of the Executive's annual base salary as in effect
for such year (the "Bonus Target"). Two-thirds of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted revenue during
the period (the "Revenue Bonus"), and one-third of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted margins during
the period (the "Margins Bonus"). The revenue and margins targets used for
purposes of determining the Revenue Bonus and the Margins Bonus shall be set
forth in the Executive's Annual Operating Plan (as defined in Section 4(d)
below). Separate calculations shall be made with respect to each of the Revenue
Bonus and the Margins Bonus. Notwithstanding anything herein to the contrary,
the Corporation must achieve more than 90% of the targeted revenue or margins,
whichever is being tested, during the period for the Executive to receive a
bonus with respect to that component. To the extent that the Corporation
achieves 90% or more of the target, the Executive shall be entitled to receive
an Incentive Bonus based upon the following formula:
2
<PAGE> 3
Percentage Attainment of Targeted Revenue or Margins (each tested separately)
for the Period
(Determined to the Nearest Hundredth of a Percent)
Minus
-----
90
Divided By
----------
10
For example, if the Corporation achieves 95% of the targeted revenue and 85% of
the targeted margins as set forth in the Executive's Annual Operating Plan for
the period, the Executive shall receive 33.33% of the Bonus Target, determined
as follows:
Bonus Target for Revenue = 66.67% of total Bonus Target ("Revenue Target")
% of Revenue Target = (95-90) / 10 = 50%
% of total Bonus Target from Revenue = 66.67% x 50% = 33.33%
Bonus Target for Margins = 33.33% of total Bonus Target ("Margins Target")
% of Margin Target = 0% (performance below 90%)
% of total Bonus Target from Margins = 33.33% x 0% = 0%
% of total Bonus Target from Revenue and Margins = 33.33% + 0% = 33.33%
Notwithstanding anything herein to the contrary, for the year 1999, (i) the
Bonus Target shall be $41,667, which is 50% of the Executive's base salary for
the period August 1, 1999 through December 31, 1999 ($83,333), and (ii) the
amount of the Incentive Bonus earned by the Executive shall be determined based
upon actual revenues and margins and targeted revenues and margins for the
entire calendar year 1999.
(c) Payment of Incentive Bonuses. The entire amount of the Revenue
Bonus up to 100% of the Revenue Target amount and the entire amount of the
Margins Bonus up to 100% of the Margins Target amount (each determined
separately) shall be paid in cash or by check. To the extent the Revenue Bonus
or the Margins Bonus exceeds 100% of the Revenue Target or the Margins Target,
as applicable, one-third of such excess amount shall be paid in cash or by
check, and the remaining two-thirds shall be paid by the issuance to the
Executive of a nonqualified stock option (the "Option") to purchase Common Stock
of the Corporation, par value $0.001 per share ("Common Stock"). The cash amount
of the Incentive Bonus shall be paid, and the Option portion of the Incentive
Bonus shall be issued, within ten (10) days after the Calculation Date (as
defined herein). In any event, the effective date of the grant of the Option
shall be the last day of the period for which the Incentive Bonus was
calculated. The exercise price per share of the Option shall be twenty-five
percent (25%) of the Fair Market Value per share of the Common Stock as of the
last day of the period for which the
3
<PAGE> 4
Incentive Bonus was calculated. For purposes of this Section 4(c), Fair Market
Value per share shall be determined in accordance with Section 4(e). The number
of shares subject to the Option shall be determined by dividing the dollar
amount of the Incentive Bonus payable in the form of the Option by an amount
equal to seventy-five percent (75%) of the Fair Market Value per share of the
Common Stock as of the last day of the period for which the Incentive Bonus was
calculated. The Option shall be fully vested and exercisable as of the date of
its grant and shall have a ten (10) year term. An example of the above
calculation is as follows: Assume the Revenue Bonus exceeds the Revenue Target
by $50,000. Assume further that the Fair Market Value per share is $12.00. The
exercise price per share would be $12.00 x .25, or $3.00. The number of shares
subject to the Option would be ($50,000 x .667%) / ($12.00 x .75), or 3,704
shares.
(d) Executive's Annual Operating Plan. On or before December 15 of
the preceding calendar year, the Executive and the Chief Executive Officer of
the Corporation (or the Chief Executive Officer's designee) shall prepare in
good faith and submit to the Board of Directors, and the Board of Directors
shall adopt, annual revenue and margins targets for the operations of the
Corporation for which the Executive is responsible. Such annual revenue and
margins targets shall be based upon the Corporation's annual business plan. Upon
adoption by the Board of Directors by a majority vote, provided that the Chief
Executive Officer of the Corporation (the "CEO") and at least one of the members
of the Board of Directors designated by the Investors, as such term is defined
in that certain Recapitalization Agreement (the "Recapitalization Agreement") by
and among the Corporation and the additional parties named therein dated as of
August __, 1999 (each, an "Investor Director") in accordance with the
Shareholders' Agreement (the "Shareholders' Agreement) by and among the
Corporation and the parties named therein dated as of August 13, 1999 (assuming
that there are then such members on the Board of Directors) must have voted in
favor of adoption thereof, such revenue and margins targets shall be the
"Executive's Annual Operating Plan" for purposes of this Agreement. If the Board
of Directors (including the CEO and at least one Investor Director) fails to
approve the annual revenue and margins targets as set forth herein, the targets
for the prior year multiplied by 140% shall be the "Executive's Annual Operating
Plan" for purposes of this Agreement. Notwithstanding the foregoing, the
Executive's Annual Operating Plan to be used for purposes of calendar year 1999
shall be as set forth in Exhibit B to this Agreement.
(e) Determination of Fair Market Value. If the Common Stock is
listed upon an established stock exchange or exchanges, then the Fair Market
Value per share shall be deemed to be the average of the quoted closing prices
of the Common Stock on such stock exchange or exchanges on each of the thirty
(30) days immediately preceding the day for which the determination is made. If
the Common Stock is not listed upon an established stock exchange but is traded
in the NASDAQ National Market System, the Fair Market Value per share shall be
deemed to be the average of the closing prices of the Common Stock in the
National Market System on each of the thirty (30) days immediately preceding the
day for which the determination is made. If the Common Stock is not listed upon
an established stock exchange and is not traded in the National
4
<PAGE> 5
Market System, the Fair Market Value per share shall be deemed to be the average
of the mean between the dealer "bid" and "ask" closing prices of the Common
Stock on the NASDAQ System on each of the thirty (30) days immediately preceding
the day for which the determination is made. If none of these conditions apply,
Fair Market Value shall be the amount (the "Formula Price") determined as
follows: (i) if the date of determination is on or before the date which is six
(6) months after the closing of the transactions contemplated by the
Recapitalization Agreement, an amount equal to $1.085 per share, subject to
equitable adjustment in the event of any increase or decrease in the shares of
Common Stock by way of stock split, share reclassification, stock dividend or
other similar transaction, or (ii) if the date of determination is after the
date which is six (6) months after the closing of the transactions contemplated
by the Recapitalization Agreement, the fair value of each share determined by
multiplying EBITDA for the twelve month period ending on the day for which the
determination is made times an industry multiple equal to the average multiples
of a list of ten comparable, publicly-traded companies, which list has initially
been determined by mutual agreement of the CEO and InSight Capital Partners.
Such list shall be revised each year on January 1 upon the mutual agreement of
the CEO and InSight Capital Partners. A minority/liquidity discount of 20% shall
be applied in the Formula Price pursuant to clause (iii) above.
(f) Determination of Revenues and EBITDA. For purposes of this
Agreement, "EBITDA" means earnings before interest, taxes, depreciation and
amortization("EBITDA"); provided, however, that notwithstanding anything herein
to the contrary, EBITDA shall be adjusted as necessary to exclude the effects of
(i) the payment of transaction costs associated with the consummation of the
transactions contemplated by the Recapitalization Agreement, which shall include
but not be limited to bank fees, finance fees, legal fees, accounting fees, and
any other similar types of fees or expenses; (ii) the payment of transaction
costs associated with the consummation of a major capital event such as a sale
of all or substantially all of the Corporation's stock or assets, a merger or
consolidation, or an initial public offering; and (iii) payment of any
"Transaction Fee" or "Management Fee", as those terms are defined in the
Shareholders' Agreement. When calculated for a full calendar year, revenues,
margins, and EBITDA shall be as determined in connection with the preparation of
the Corporation's audited financial statements for the year, which statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied as in effect from time to time in the United States. When
calculated for any period which is less than a full calendar year, revenues,
margins, and EBITDA shall initially be determined in connection with the
preparation of the Corporation's unaudited financial statements for such period,
which statements shall be prepared in accordance with generally accepted
accounting principles consistently applied as in effect from time to time in the
United States and shall be certified by the Corporation's Chief Financial
Officer. When an Incentive Bonus is calculated for a partial year as described
above, fifty percent (50%) of such Incentive Bonus (including both cash and
options, pro-rata) shall be paid or issued immediately to the Executive and the
remaining fifty percent (50%) shall be retained by the Corporation until the
regular audit of the financial statements for such
5
<PAGE> 6
year has been completed. The amount of the Incentive Bonus for such period shall
then be re-determined based upon the Corporation's audited financial statements,
and the Corporation shall pay and issue to the Executive any shortfall, and the
Executive shall refund or return for cancellation to the Corporation any
over-payment, based upon the amount of the Incentive Bonus as re-determined and
the amount previously paid and issued. Revenues, margins, and EBITDA for a full
calendar year period shall be determined within fifteen (15) days after the
release of the Corporation's audited financial statements. Revenues, margins,
and EBITDA for a period which is less than a full calendar year shall be
determined within fifteen (15) days after the end of the month in which such
period terminates. The date by which revenues, margins, and EBITDA are to be
determined or re-determined is referred to as the "Calculation Date." The
Corporation shall use its best efforts to cause audited financial statements
prepared by an independent certified public accountant to be released no later
than April 15th of the following year. The Corporation shall notify the
Executive of the amount of the Incentive Bonus no later than five (5) days after
the Calculation Date.
(g) Determination of Incentive Bonus Following Termination of
Employment. In the event of the termination of the Executive's employment by the
Corporation for Cause (as defined in Section 20(a)), or by the Executive without
Good Reason (as defined in Section 20(c)) the Executive shall be entitled to
receive an Incentive Bonus for any calendar year concluded prior to such
termination of employment but shall not be entitled to receive an Incentive
Bonus for the calendar year in which such termination of employment occurs. In
the event of the termination of the Executive's employment for any reason other
than by the Corporation for Cause or by the Executive without Good Reason,
including without limitation the Executive's death or disability, the Executive
shall be entitled to receive an Incentive Bonus both with respect to any
calendar year concluded prior to such termination of employment and with respect
to the calendar year in which such termination of employment occurs. The amount
of the Bonus Target for a year in which a termination occurs shall be prorated
based upon the amount of the Executive's base salary which accrued during the
portion of the year during which the Executive was employed by the Corporation,
and the amount of the Incentive Bonus shall be determined based upon actual
revenues and margins and targeted revenue and margins under the Executive's
Annual Operating Plan for that year through either the end of the calendar month
in which the termination occurs or the end of the preceding calendar month,
whichever is more favorable to the Executive.
5. Executive's Duties. The Executive is employed on a full-time basis
as a consultant and as an essential member of the management of the Corporation.
So long as this Agreement is in effect, the Executive will not engage in the
practice of consulting except as an Executive of the Corporation unless
otherwise authorized in writing by the Board of Directors of the Corporation.
Any and all compensation received in money or other property from any person or
entity other than the Corporation for professional services rendered by the
Executive shall be deemed to be the property of the Corporation. The Executive
agrees that upon the receipt of any such money or property, he shall promptly
remit such compensation to the Corporation together with a
6
<PAGE> 7
full accounting thereof. So long as this Agreement is in effect, the Executive
shall be appointed the Executive Vice President of the Corporation.
6. Facilities. The Corporation shall furnish facilities, equipment,
services and assistance suitable to the Executive's position for the performance
of the Executive's duties.
7. No Copies of Documents and Materials. The Executive shall not
(except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation) at any time or in any manner make or
cause to be made any copies, pictures, duplicates, facsimiles or other
reproductions or recordings or any abstracts or summaries of any reports,
studies, memoranda, correspondence, manuals, records, plans or other written,
printed, computerized or otherwise recorded materials of any kind or nature
whatsoever belonging to or in the possession of the Corporation or any of its
subsidiaries.
8. Materials Remain on Premises. The Executive shall have no right,
title or interest in any material referenced in Section 7. The Executive agrees
that, except in the performance of his duties in the ordinary course of business
for which he is employed by the Corporation, the Executive will not, without the
prior written consent of the Corporation, remove any such material from any
premises of the Corporation. The Executive further agrees that, immediately upon
the termination of his employment with the Corporation or upon the termination
of this Agreement, whichever occurs earlier, or at any time prior thereto upon
the request of the Corporation, he shall surrender all such material to the
Corporation and execute a document acknowledging that he has complied with the
provisions of this Agreement.
9. Trade Secrets. The Executive shall not at any time, whether during
or after the term of this Agreement, use for the Executive's own benefit or
purposes or for the benefit or purposes of any other person, firm, partnership,
association, corporation or business organization, entity or enterprise, or
disclose (except in the performance of his duties in the ordinary course of
business for which he is employed by the Corporation) in any manner to any
person, firm, partnership, association, corporation or business organization,
entity or enterprise any trade secret, information, data, know how or knowledge
(including, but not limited to, that relating to service techniques, purchasing
organization and methods, sales organization and methods, inventories, client
lists, market development and expansion plans, personnel training and
development programs and client and supplier relationships) or any other
Discoveries (as defined in Section 11) belonging to or relating to the affairs
of the Corporation or any of its subsidiaries or to the clients of the
Corporation or any of its subsidiaries; provided, however, that this Section 9
shall not apply to any trade secret, information, data, know how, knowledge, or
Discovery that is or becomes generally available to the public through no fault
or action of the Executive.
10. Customers. In furtherance of and not in limitation of Section 9,
the Executive acknowledges that the list of the Corporation's and its
subsidiaries' customers
7
<PAGE> 8
as it may exist from time to time constitutes a valuable and unique asset of the
Corporation, and the Executive agrees that he shall not, during or after the
term of his employment, disclose such list or any part thereof to any person,
firm, partnership, association, corporation, or business organization, entity or
enterprise for any reason or purpose whatsoever, nor shall the Executive use
such customer list for his own benefit or purposes or for the benefit or
purposes of any business with whom the Executive may become associated.
11. Discoveries. The Executive agrees with the Corporation that any and
all inventions, discoveries, improvements, designs, methods, systems,
developments, know how, ideas, suggestions, devices, trade secrets and processes
(hereinafter collectively referred to as "Discoveries"), whether patentable or
not, which are discovered, disclosed to or otherwise obtained by the Executive
during his employment with the Corporation are confidential, proprietary
information and are the sole and absolute property of the Corporation. The
Executive agrees to disclose promptly to the Corporation all such Discoveries
and to assist the Corporation in making any application in the United States and
in foreign jurisdictions for patents of any kind with respect thereto.
12. Works for Hire. All works and writings of a professional nature
which are produced by the Executive during his employment with the Corporation
constitute works made for hire and are the sole and absolute property of the
Corporation. The Executive grants the Corporation the exclusive right to
copyright all such works and writings in the United States and in foreign
jurisdictions. To the extent any such works or writings are deemed to not be
works for hire, the Executive hereby assigns and agrees to assign all his
interests therein to the Corporation or its nominee. Whenever requested to do so
by the Corporation, the Executive shall execute any and all applications,
assignments, or other instruments that the Corporation may deem necessary to
protect the Corporation's interest therein.
13. Non-Competition.
(a) The Executive acknowledges that his employment as a member of
the Corporation's executive management team creates a relationship of confidence
and trust between the Executive and the Corporation with respect to confidential
and proprietary information applicable to the business of the Corporation, its
subsidiaries and its clients. The Executive further acknowledges the highly
competitive nature of the business of the Corporation. Accordingly, the
Corporation and the Executive agree that the restrictions contained in this
Section 13 are reasonable and necessary for the protection of the immediate
interests of the Corporation and that any violation of these restrictions would
cause substantial injury to the Corporation.
(b) For purposes of this Agreement, the term "Competitive
Business" means any person, firm, partnership, association, corporation, or
business organization, entity or enterprise which derives or which expects
during the following two (2) years to derive either (i) ten percent (10%) or
more of its revenues, or (ii) more than $10,000,000 in revenues from providing
technical management consulting and/or systems integration
8
<PAGE> 9
services for Automated Mapping/Facilities Management Systems and/or Geographic
Information Systems and/or utility transmission and distribution systems. The
term "Competitive Business" is not intended to include mere vendors or suppliers
of the Corporation.
(c) For purposes of this Agreement, the term "Existing Client"
means a client for whom the Corporation or any of its subsidiaries is performing
consulting services as of the date of the termination of the Executive's
employment with the Corporation or for whom the Corporation or any of its
subsidiaries performed consulting services within the two (2) year period
immediately preceding the termination of the Executive's employment with the
Corporation. The term "Existing Client" is not intended to include mere vendors
or suppliers of the Corporation.
(d) During the Executive's employment with the Corporation and for
a period of one (1) year following the termination of the Executive's employment
with the Corporation for any reason other than termination occasioned by the
expiration of this Agreement (provided, however, that if the termination occurs
prior to August __, 2000, for any reason other than by the Executive for Good
Reason, such period shall continue for two (2) years), the Executive shall not
(nor shall the Executive cause, or provide assistance to anyone else to):
i. Employ or otherwise engage, or attempt to employ or
otherwise engage, in or on behalf of the Executive or any Competitive Business,
any person who is employed or engaged as an employee, consultant, agent or
representative of the Corporation or any of its subsidiaries as of the date of
the Executive's termination or at any time during the one-year period following
such termination; or
ii. Solicit directly or indirectly on behalf of the Executive
or any Competitive Business, the customer business or account of any Existing
Client of the Corporation.
(e) If any court shall determine that the duration, geographic
limitations, subject or scope of any restriction contained in this Section 13 is
unenforceable, it is the intention of the Parties that this Section 13 shall not
thereby be terminated but shall be deemed amended to the extent required to make
it valid and enforceable, such amendment to apply only with respect to the
operation of this Section 13 in the jurisdiction of the court that has made the
adjudication.
(f) Notwithstanding anything herein to the contrary, the
provisions of this Section 13 shall not be applicable to any termination which
occurs after December 31, 2002.
14. Employability. The Executive recognizes and acknowledges that he
has sufficient abilities and talents to be able to obtain, upon the termination
of this Agreement, comparable employment from another business organization or
entity while fully honoring and complying with the above covenants concerning
confidential
9
<PAGE> 10
information and contacts with the Corporation's or any of its subsidiaries'
existing customers or employees. The Executive recognizes and acknowledges the
importance to the Corporation and its subsidiaries of the above covenants and,
therefore, agrees that, for a period of one (1) year following the termination
of the Executive's employment with the Corporation and upon the Corporation's
reasonable request of the Executive, he will advise the Corporation of the
identity of his new employer and will provide a general description, in
reasonable detail, of his new duties and responsibilities sufficient to inform
the Corporation of its need to request a court order to enforce the above
covenants.
15. Remedies. The Executive acknowledges and agrees that the provisions
of this Agreement are essential to the Corporation and are reasonable and
necessary to protect the legitimate interests of the Corporation and its
subsidiaries and that the damages sustained by the Corporation or its
subsidiaries as a result of a breach of the agreements contained herein will
subject the Corporation or its subsidiaries to immediate, irreparable harm and
damage, the amount of which, although substantial, cannot be reasonably
ascertained, and that recovery of damages at law will not be an adequate remedy.
The Executive therefore agrees that the Corporation and its subsidiaries, in
addition to any other remedy they may have under this Agreement or at law, shall
be entitled to injunctive and other equitable relief to prevent or curtail any
breach of any provision of this Agreement. In the event suit or action is
instituted to enforce this Agreement or any of the terms and conditions hereof,
including, but not limited to, suit for preliminary injunction, the prevailing
Party shall be entitled to costs and reasonable attorneys' fees. The Executive
waives any right to the posting of a bond in the event of an issuance of a
temporary restraining order, preliminary injunction or permanent injunction upon
the issuance of said order by a court of competent jurisdiction.
16. Expenses. In the promotion and execution of the business of the
Corporation, the Executive is expected to incur certain reasonable expenses for
entertainment, travel, company automobile expenses (including insurance,
maintenance, fuel and depreciation, if applicable), and business fax and
telephone bills which shall be subject to approval by the Corporation. The
Corporation recognizes the necessity for such expenditures in order to retain
and further the professional skills, abilities and standing of the Executive and
to properly maintain, promote and develop the Corporation's consulting practice.
The Corporation shall pay all reasonably appropriate and necessary premiums on
life insurance owned by the Corporation on the life of the Executive, and shall
reimburse the Executive for insurance premiums paid by the Executive for a
policy providing a death benefit of four million dollars ($4,000,000) to the
Executive's estate or designated beneficiary. Such reimbursement shall be
"grossed-up" based upon the highest combined federal and applicable state
marginal tax rate in effect (assuming that the Executive is married and filing a
joint return) on the date of payment. The Corporation shall also pay the
Executive's dues and fees for attending professional meetings and institutes,
costs of professional books and periodicals and promotion, entertainment and
travel expenses reasonably related to the business of the Corporation. The
Corporation shall also pay the Executive's business-related legal,
10
<PAGE> 11
accounting and financial planning fees, up to a maximum of $20,000 per calendar
year. All payments made by the Corporation pursuant to this Section 16 shall be
made in a manner consistent with the Corporation's practices in years prior to
the execution of this Agreement. Unusual and extraordinary expenses incurred by
the Executive and not approved in advance by the Corporation may not be
reimbursed.
17. Vacation Leave Time. Vacation leave shall accrue at the rate of six
(6) weeks per year. Any unused vacation leave time accumulated during the year
shall carry over to subsequent years.
18. Disability. The Corporation may terminate this Agreement upon
written notice to the Executive if the Executive is physically or mentally
incapacitated and unable to perform his duties under this Agreement for a period
of (i) any one hundred eighty (180) days out of any three hundred sixty (360)
days, if the Common Stock of the Corporation is not then publicly traded, or
(ii) ninety (90) out of any one hundred eighty (180) days if the Common Stock of
the Corporation is then publicly traded. If at any time a question arises as to
the incapacity of the Executive, then the Corporation shall promptly employ one
physician who is a member of the American Medical Association and who is
mutually agreeable to the Corporation and the Executive to examine the Executive
and determine if his physical and/or mental condition is such as to render him
unable to perform his duties under this Agreement. The decision of the physician
shall be certified in writing to the Corporation, shall be sent by the
Corporation to the Executive or his representative and shall be conclusive for
purposes of this Agreement. Any compensation payments payable to the Executive
hereunder shall be reduced by the amount of any disability payments the
Executive receives as a result of disability policies on which the Corporation
has paid the premiums.
19. Death During Employment. This Agreement shall terminate upon the
Executive's death. In such event, the Corporation shall pay a death benefit
equal to the Executive's base monthly salary for the balance of the month of the
Executive's death and for the month following his death. Any amounts payable
under this Agreement following the Executive's death shall be paid to the
beneficiary named in writing by the Executive, or if none, to the Executive's
surviving spouse, or if none, to the executors and administrators of the
Executive's estate and shall be paid within sixty (60) days of the Executive's
death.
20. Termination for Other Than for Disability or Death. This Agreement
may terminate for reasons other than the Executive's disability or death upon
the occurrence of any of the following events; provided, however, that neither
the Executive nor the Corporation may terminate this Agreement pursuant to this
Section 20 in 1999 except for a termination by the Corporation for Cause as
provided in Section 20(a) or a termination by the Executive for Good Reason as
provided in Section 20(c).
(a) The Corporation, at its option, may terminate the Executive
for Cause (as defined below) upon thirty (30) days' advance written notice by
the Corporation to the Executive fully setting forth such Cause, which notice of
termination
11
<PAGE> 12
may be appealed to the Board of Directors of the Corporation. Termination shall
be effective on the thirtieth (30th) day following the Executive's receipt of
written notice from the Corporation. "Cause" shall be limited to a situation in
which the Executive has:
i. Committed a criminal offense that, if committed in the
State of Colorado, would have constituted a felony under the laws of the State
of Colorado or the United States (other than a traffic offense or other similar
violation); or
ii. Committed a fraudulent act which is materially harmful to
the Corporation (materiality, for purposes of this clause, means in excess of
$50,000); or
iii. Committed an act of willful misconduct which results in
actual damages against the Corporation of $500,000 or more; or;
iv. Committed an act of gross insubordination by refusing to
obey written directions of the Board of Directors (so long as such directions do
not involve illegal or immoral acts), which refusal continues for a period of
ten (10) days after written notice to the Executive by the Corporation which
notice references such refusal and this Section 20(a); or
v. Committed repeated acts of alcohol or illegal drug abuse,
and has failed to take reasonable steps to address such issues within ten (10)
days after written notice to the Executive by the Corporation which notice
references such acts and this Section 20(a); or
vi. Except during periods of vacation leave permitted
pursuant to Section 17, failed to devote substantially all of his professional
time and attention to the performance of his obligations under this Agreement,
as determined by the Board of Directors of the Corporation, which failure
continues for a period of fifteen (15) days after Actual Receipt (as defined in
Section 20(b) below) of written notice by the Executive from the Corporation
which notice references such failure and this Section 20(a).
(b) The Corporation shall have the right to terminate this
Agreement without Cause at any time after thirty (30) days after Actual Receipt
of written notice by the Executive from the Corporation. Failure to renew this
Agreement shall not be deemed to be a termination of employment for purposes of
this Agreement. For purposes of this Agreement, "Actual Receipt" of notice shall
mean actual physical receipt (or refusal of acceptance) of notice by the
Executive; provided, however, that in the event the Executive has been away from
the office for more than two weeks and either the Executive's whereabouts are
unknown to the Corporation or the Executive is at a location where the
Corporation cannot reasonably communicate with him, the Executive will be deemed
to have refused delivery of notice on the day such notice is delivered (or
delivery is attempted) to the Executive's last known residence. In such
12
<PAGE> 13
event, the Corporation shall nonetheless provide a copy of the notice to the
Executive as soon as it is reasonably possible to do so.
(c) The Executive at his option, may terminate this Agreement for
Good Reason (as defined below) upon thirty (30) days' advance written notice by
the Executive to the Corporation, which notice shall reference this Section
20(c) and shall describe in reasonable detail the cause for such Good Reason.
Such termination shall be effective on the thirtieth (30th) day following the
Corporation's receipt of written notice from the Executive; provided, however,
that such termination shall not be effective if the Corporation has cured the
cause for such Good Reason to the Executive's reasonable satisfaction within
such thirty (30) day period. For purposes of this Section 20(c), "Good Reason"
shall mean any of the following:
i. A material breach of this Agreement by the Corporation;
ii. The Corporation's requiring the Executive to be based at
any office or location other than one within the Denver, Colorado metropolitan
area, except for required travel on the Corporation's business to an extent
substantially consistent with the Executive's obligations immediately prior to
the Effective Date;
iii. Any purported termination by the Corporation of the
Executive's employment other than as permitted in this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement, and it being further understood that the nonrenewal
of this Agreement shall not be deemed to be a termination of employment for
purposes of this Agreement; or
iv. A material reduction in the character of the duties
assigned to the Executive or in the Executive's level of work responsibility,
unless mutually agreed upon by the Executive and the Corporation;
(d) The Executive shall have the right to terminate this Agreement
without cause at any time upon sixty (60) days' advance written notice to the
Corporation.
21. Rights Upon Termination.
(a) Upon termination of the Executive's employment with the
Corporation, the Corporation shall have no further obligation to the Executive
except as specifically provided under this Agreement. Termination of the
Executive's employment shall not affect the Executive's right to receive any
compensation or bonuses which have accrued but have not been paid through the
date of termination, including, but not limited to, the Incentive Bonus for that
portion of the calendar year prior to the termination.
(b) In addition to any accrued compensation or bonuses, and
depending upon the circumstances of the Executive's termination of employment,
the Corporation shall pay or provide certain severance benefits (the "Severance
Benefits"). The nature
13
<PAGE> 14
and extent of the Severance Benefits to be provided shall be determined in
accordance with the table set forth in Exhibit A attached hereto. For purposes
of Exhibit A, the following terms shall have the following meanings:
(1) "Severance Pay" shall be expressed as a monthly amount
and shall mean one-twelfth of the Executive's annual base salary
pursuant to Section 3 at the rate in effect immediately prior to the
termination of employment. Any Severance Pay due to the Executive shall
be paid in cash in a single lump sum within sixty (60) days after the
termination of employment.
(2) "Continuation Benefits" shall mean the continuation of
the Benefits, including any Benefits which cover the Executive's
family, but excluding any contribution to any qualified pension, profit
sharing or retirement plan or other deferred compensation arrangement.
(3) A "Change in Control" shall mean and shall be deemed to
have occurred if (i) any of the following events shall have occurred,
and (ii) the occurrence of such event is not within one (1) year after
a failure of the Corporation to meet the operating targets for any two
of revenues, bookings, and EBITDA, as set forth in the Annual Operating
Plan (as defined in Section 21(b)(5) below), for any three (3) out of
any five (5) consecutive quarters:
(a) A Third Person (as defined below), including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended from time to time, and any successor act (the
"Exchange Act"), becomes the "beneficial owner," as defined in the
Exchange Act, of shares of the Corporation having 50% or more of the
total number of votes that may be cast for the election of any of the
Directors of the Corporation; or
(b) At least two-thirds of the directors of the
Corporation constitute persons who were not, at the time of their first
election to the Board of Directors of the Corporation, candidates
proposed by a majority of the Board of Directors in office prior to the
time of such first election; or
(c) The Board of Directors or the stockholder(s) of the
Corporation approve: (i) any agreement for a merger or consolidation or
like business recombination or reorganization of the Corporation with
another entity, the consummation of which would result in the
occurrence of any event described in Section 21(b)(6)(a) or (b) above
or (ii) any sale, exchange or other disposition of all or substantially
all of the Corporation's assets; or
(d) Any sale, exchange or other disposition of greater
than 67% in fair market value of the Corporation's total assets, other
than in the ordinary course of business, whether in a single
transaction or a series of related transactions; provided, however,
that no sale or disposition of assets shall be
14
<PAGE> 15
taken into account to the extent that the proceeds of such sale or
disposition (whether in cash or in-kind) are reinvested or are, in the
case of proceeds received in-kind, used in the ongoing conduct of the
Corporation, provided further that such a reinvestment shall not be
deemed to have occurred unless made within six (6) months of such sale
or disposition and provided further that, the term reinvestment shall
include the use of proceeds to repay debt incurred in connection with
the operation of the business in which the assets sold or disposed of
were used; or
(e) Any other event which the Board of Directors,
including at least one Investor Director, determines, in its
discretion, would materially alter the structure of the Corporation or
its ownership.
A Change in Control shall be deemed to have occurred on the effective
date of such Change in Control; provided, however, that anything in
this Agreement to the contrary notwithstanding, if the Executive's
employment with the Corporation is terminated during the six (6) months
prior to a Change in Control and the Executive can reasonably
demonstrate that such termination (a) was at the request of a third
party who has taken steps reasonably calculated to effect the Change in
Control, or (b) otherwise arose in connection with the Change in
Control, then for all purposes of this Agreement, the Change in Control
shall be deemed to have occurred on the date immediately prior to the
date of such termination. For purposes of determining whether there has
been a Change in Control, the Third Person owning shares must be
someone other than a person or entity, or an Affiliate of a person or
entity, that, as of the Effective Date, was the beneficial owner of
shares of the Corporation having 25% or more of the total number of
votes that may be cast for the election of any of the Directors of the
Corporation. "Affiliate" shall mean, with respect to any person or
entity, a person or entity that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, such person or entity.
(4) Annual Operating Plan. On or before December 15 of the
preceding calendar year, management of the Corporation shall prepare in
good faith and submit to the Board of Directors, and the Board of
Directors shall adopt, an annual business plan for the Corporation. In
preparing the annual business plan, management shall consider, among
other factors, the past performance of the Corporation and the
Corporation's current outlook based upon the Corporation's backlog and
such other factors as management shall deem appropriate. Upon adoption
by the Board of Directors by a majority vote, provided that the CEO and
at least one Investor Director (assuming that there are then such
members on the Board of Directors) must have voted in favor of
adoption, the annual business plan shall be the "Annual Operating Plan"
for purposes of this Agreement. If the Board of Directors (including
the CEO and at least one Investor Director) fails to approve the annual
business plan as set forth herein, the plan for the prior year
multiplied by 140% shall be the "Annual Operating Plan" for purposes of
this Agreement. Notwithstanding the foregoing, the Annual Operating
Plan to be used for purposes of calendar year 1999 shall be the annual
business plan adopted
15
<PAGE> 16
by the Corporation's Board of Directors on December 14, 1998, as
amended by the Corporation's Forecast dated May 23, 1999.
(c) Upon termination of this Agreement by mutual agreement of the
parties, or by the Corporation other than for Cause pursuant to Section 20(a),
or by the Executive for any reason whatsoever, the Corporation shall, both
verbally and in writing, acknowledge that the Executive performed the services
provided under this Agreement in a good and proficient manner and shall provide
a positive reference to any person or entity that may request a reference with
regard to the Executive.
(d) Upon the termination of the Executive's employment with the
Corporation for any reason other than by the Corporation for Cause pursuant to
Section 20(a), the Executive shall be entitled to keep, free and clear of any
liens and encumbrances and any claim of title by the Corporation, (i) equipment
owned by the Corporation and used by the Executive with the approval of the
Corporation in the Executive's home, to the extent that the value of such
equipment does not exceed $10,000, and (ii) the automobile provided by the
Corporation for the Executive's use.
(e) If any portion of the Benefits (excluding any contributions to
any Retirement Plan) cannot reasonably be made available to the Executive, then
the Corporation shall pay to the Executive an amount in cash equal to 150% of
the cost which must be incurred by the Executive to acquire benefits equivalent
to any tax-exempt Benefits previously provided by the Corporation and 100% of
the cost which must be incurred by the Executive to acquire benefits equivalent
to any taxable Benefits previously provided by the Corporation. The Corporation
shall determine the cost to the Executive of such Benefits in good faith and
shall provide reasonable documentation to support its findings to the Executive.
22. Default in Payments. If any payment is due and payable to the
Executive under Section 21 and such payment is not made when due and such
non-payment continues for a period of ten (10) days after written notice thereof
from the Executive to the Corporation, which notice describes such payment
default and references this Section 22, the following shall occur:
(a) The Executive shall be immediately released from Section 13
hereof regarding non-competition; and
(b) The Executive shall retain all other rights and remedies
against the Corporation.
23. Mitigation. The Executive shall not be required to mitigate the
Corporation's obligations with respect to the provision of Continuation Benefits
or the payment of any amount described in this Agreement by seeking or accepting
any offer of employment or otherwise, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer. Continuation Benefits shall be subject to
mitigation under the limited
16
<PAGE> 17
circumstances described in Exhibit A if and only if Executive, in his sole
discretion, has accepted employment with a third party and is eligible to
receive benefits which are equivalent in all material respects to the
Continuation Benefits. In determining benefit equivalence, the parties shall
consider all factors, including the level of coverage, the cost, if any, to the
Executive, and the effect, if any, of provisions limiting coverage for
pre-existing conditions.
24. Withholding Tax. The Corporation shall be entitled to withhold from
any compensatory payments which it makes to the Executive under this Agreement
or otherwise an amount sufficient to satisfy all Federal, state and local income
and employment tax withholding requirements with respect to any and all
compensation paid to the Executive by the Corporation.
25. Registration Rights. The Executive shall be entitled to
registration rights with respect to shares of Common Stock of the Corporation
held by the Executive as set forth in that certain Registration Rights Agreement
by and among the Corporation and the parties named therein dated as of August
13, 1999.
26. Arbitration. Any controversy or claim arising out of or related to
this Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final and binding upon the Parties,
shall not be appealed from or contested in any court and may, in appropriate
circumstances, include injunctive relief. Should any Party fail to appear or be
represented at the arbitration proceedings after due notice in accordance with
the Rules, then the arbitrator may nevertheless render a decision in the absence
of said Party, and such decision shall have the same force and effect as if the
absent Party had been present, whether or not it shall be adverse to the
interests of that Party. Any award rendered hereunder may be entered for
enforcement, if necessary, in any court of competent jurisdiction, and the Party
against whom enforcement is sought shall bear the expenses, including attorneys'
fees, of enforcement. Notwithstanding the foregoing, the Corporation shall be
entitled to seek injunctive or other equitable relief to enforce any of the
provisions in Sections 7 through 13 from any court of competent jurisdiction
without the need to resort to arbitration.
27. Survival. The covenants contained in this Agreement shall survive
any termination of the Executive's employment with the Corporation and shall
survive any termination of this Agreement. The existence of any claim or cause
of action of the Executive against the Corporation, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Corporation of any of the covenants contained in this Agreement.
28. Severability. If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such
17
<PAGE> 18
restriction shall be enforced to the maximum extent permitted by law, and the
Executive and the Corporation hereby consent and agree that the scope of such
restriction may be judicially modified in any proceeding brought to enforce such
restriction. To the extent any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted from this Agreement and the
remainder of this Agreement shall remain in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or
geographical extent of or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then such provision shall be construed to cover only that duration or
extent or those activities which may validly and enforceably be covered.
29. Subsidiaries. The "subsidiaries" of the Corporation as that term is
used in this Agreement include Utility Graphics Consultants Corporation, Graphic
Data Systems Corporation and their subsidiaries, together with any other
corporation in which the Corporation or its subsidiaries hold more than a fifty
percent (50%) interest at any time during the term of this Agreement.
30. Notice. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered by personal delivery,
air courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of the Executive as it appears in the
corporate records for notice to the Executive, or to the principal office of the
Corporation for notice to the Corporation. All notices delivered in accordance
with this Section shall be deemed to have been received and shall be deemed
effective if delivered in person or by air courier, upon actual receipt by the
intended recipient, or if mailed, upon the date of delivery or refusal to accept
delivery as shown by the return receipt therefor.
31. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the Party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, and shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
32. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Parties hereto.
33. Assignment. The rights and obligations of the Corporation under
this Agreement shall, with the prior written consent of the Executive, inure to
the benefit of and be binding upon the successors and assigns of the
Corporation. If the Corporation shall at any time be merged or consolidated with
any other corporation or shall sell or otherwise transfer a substantial portion
of its assets to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
have been sold or transferred. Upon the Executive's request, the
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<PAGE> 19
Corporation shall obtain an agreement to expressly assume this Agreement from
any such successor. This is a personal service contract and may not be assigned
by the Executive.
34. Entire Agreement. This instrument contains the entire agreement of
the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
including, but not limited to, the Amended and Restated Employment Agreement
between the Executive and the Corporation dated December 31, 1997, and the
Parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement that are not set forth herein.
35. Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the internal laws of the State of Colorado
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
36. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ GLENN E. MONTGOMERY, JR.
---------------------------------
Glenn E. Montgomery, Jr.
Chief Executive Officer
"EXECUTIVE"
/s/ MARK L. EPSTEIN
-------------------------------------
Mark L. Epstein
Executive
19
<PAGE> 20
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
MARK L. EPSTEIN
AND
CONVERGENT GROUP CORPORATION
TABLE OF SEVERANCE BENEFITS
---------------------------
<TABLE>
<CAPTION>
ADDITIONAL
EVENT OF ADDITIONAL MONTHS OF MONTHS OF
CONTINUATION BENEFITS SEVERANCE PAY
- ---------------------- ------------------------ -----------------
<S> <C> <C>
1. BY 0 0
CORPORATION
FOR CAUSE
- -----------------------------------------------------------------
2. BY 6 6
CORPORATION
WITHOUT
CAUSE
- -----------------------------------------------------------------
3. BY 6 6
EXECUTIVE
WITH GOOD
REASON
- -----------------------------------------------------------------
4. BY
EXECUTIVE
WITHOUT
GOOD
REASON
A) PRIOR TO A 0 0
CHANGE IN
CONTROL
B) AFTER A 6 6
CHANGE IN
CONTROL
- -----------------------------------------------------------------
5. DISABILITY 6 6
- -----------------------------------------------------------------
6. DEATH 6 0
- -----------------------------------------------------------------
</TABLE>
A-1
<PAGE> 21
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
BETWEEN
MARK L. EPSTEIN
AND
CONVERGENT GROUP CORPORATION
EXECUTIVE'S ANNUAL OPERATING PLAN
---------------------------------
DENVER:0936558.01
D-1
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 13th day of
August, 1999 (the "Effective Date"), and entered into by and between Larry J.
Engelken (subsequently called the "Executive") and Convergent Group Corporation,
a Delaware corporation, having its principal office at 6200 South Syracuse Way,
Suite 200, Englewood, Colorado 80111 (subsequently called the "Corporation"). In
consideration of the mutual promises and the terms and conditions set forth
below, the Executive and the Corporation (together, the "Parties," and each, a
"Party") agree as follows:
1. Nature and Purpose of Agreement. The laws of the State of Colorado
permit consultants to incorporate under the Colorado Corporation Code. The
Executive desires to practice consulting with and provide essential management
to the Corporation. The Board of Directors of the Corporation has determined the
reasonable method of compensation of the Executive and has offered him
compensation of an annual base salary and bonuses as set forth in Sections 3 and
4, participation in a 401(k) Plan in accordance with law, Key Man Insurance,
together with the other employee benefits generally set forth in the
Corporation's policies and procedures manual.
2. Employment; Term. The Corporation hereby employs the Executive as a
consultant and the Executive hereby agrees to be employed by the Corporation
under the terms and conditions set forth in this Agreement. The term of this
Agreement shall begin on the date hereof and shall end on December 31, 2002,
unless terminated prior to that date as provided herein.
3. Compensation and Benefits.
(a) For all services rendered by the Executive under this
Agreement, the Corporation shall pay compensation to the Executive consisting of
an annual base salary and an incentive bonus. The annual base salary effective
as of August 15, 1999, is $200,000. The Executive's annual base salary shall not
be reduced during the term of this Agreement and shall be subject to annual
adjustments as set forth herein. Effective on January 1 of each year during the
term of this Agreement, the Executive's annual base salary shall be increased by
5% of the amount in effect immediately prior to such adjustment. The Executive's
annual base salary shall be paid in twenty-six (26) bi-weekly payments during
each annual period.
(b) The Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of the Executive's level or its
employees generally (the "Benefits").
<PAGE> 2
4. Bonus Arrangements.
(a) Bonus Opportunity. The Corporation and the Executive
acknowledge that the Executive is critical to the success of the Corporation
both as a consultant for the Corporation and as an essential part of the
management of the Corporation. The Corporation desires to retain the Executive
and ensure that the Executive receives reasonable compensation for his critical
role. The Corporation therefore agrees to pay the balance of the Executive's
reasonable compensation by way of a an Incentive Bonus (as defined below).
(b) Incentive Bonus. Commencing with calendar year 1999, the
Executive shall be eligible to earn an "Incentive Bonus" for each year in
addition to his annual base salary. The targeted amount of the Incentive Bonus
shall be 50% of the amount of the Executive's annual base salary as in effect
for such year (the "Bonus Target"). Two-thirds of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted revenue during
the period (the "Revenue Bonus"), and one-third of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted margins during
the period (the "Margins Bonus"). The revenue and margins targets used for
purposes of determining the Revenue Bonus and the Margins Bonus shall be set
forth in the Executive's Annual Operating Plan (as defined in Section 4(d)
below). Separate calculations shall be made with respect to each of the Revenue
Bonus and the Margins Bonus. Notwithstanding anything herein to the contrary,
the Corporation must achieve more than 90% of the targeted revenue or margins,
whichever is being tested, during the period for the Executive to receive a
bonus with respect to that component. To the extent that the Corporation
achieves 90% or more of the target, the Executive shall be entitled to receive
an Incentive Bonus based upon the following formula:
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<PAGE> 3
Percentage Attainment of Targeted Revenue or Margins (each tested separately)
for the Period
(Determined to the Nearest Hundredth of a Percent)
Minus
-----
90
Divided By
----------
10
For example, if the Corporation achieves 95% of the targeted revenue and 85% of
the targeted margins as set forth in the Executive's Annual Operating Plan for
the period, the Executive shall receive 33.33% of the Bonus Target, determined
as follows:
Bonus Target for Revenue = 66.67% of total Bonus Target ("Revenue Target")
% of Revenue Target = (95-90) / 10 = 50%
% of total Bonus Target from Revenue = 66.67% x 50% = 33.33%
Bonus Target for Margins = 33.33% of total Bonus Target ("Margins Target")
% of Margin Target = 0% (performance below 90%)
% of total Bonus Target from Margins = 33.33% x 0% = 0%
% of total Bonus Target from Revenue and Margins = 33.33% + 0% = 33.33%
Notwithstanding anything herein to the contrary, for the year 1999, (i) the
Bonus Target shall be $41,667, which is 50% of the Executive's base salary for
the period August 1, 1999 through December 31, 1999 ($83,333), and (ii) the
amount of the Incentive Bonus earned by the Executive shall be determined based
upon actual revenues and margins and targeted revenues and margins for the
entire calendar year 1999.
(c) Payment of Incentive Bonuses. The entire amount of the Revenue
Bonus up to 100% of the Revenue Target amount and the entire amount of the
Margins Bonus up to 100% of the Margins Target amount (each determined
separately) shall be paid in cash or by check. To the extent the Revenue Bonus
or the Margins Bonus exceeds 100% of the Revenue Target or the Margins Target,
as applicable, one-third of such excess amount shall be paid in cash or by
check, and the remaining two-thirds shall be paid by the issuance to the
Executive of a nonqualified stock option (the "Option") to purchase Common Stock
of the Corporation, par value $0.001 per share ("Common Stock"). The cash amount
of the Incentive Bonus shall be paid, and the Option portion of the Incentive
Bonus shall be issued, within ten (10) days after the Calculation Date (as
defined herein). In any event, the effective date of the grant of the Option
shall be the last day of the period for which the Incentive Bonus was
calculated. The exercise price per share of the Option shall be twenty-five
percent (25%) of the Fair Market Value per share of the Common Stock as of the
last day of the period for which the
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Incentive Bonus was calculated. For purposes of this Section 4(c), Fair Market
Value per share shall be determined in accordance with Section 4(e). The number
of shares subject to the Option shall be determined by dividing the dollar
amount of the Incentive Bonus payable in the form of the Option by an amount
equal to seventy-five percent (75%) of the Fair Market Value per share of the
Common Stock as of the last day of the period for which the Incentive Bonus was
calculated. The Option shall be fully vested and exercisable as of the date of
its grant and shall have a ten (10) year term. An example of the above
calculation is as follows: Assume the Revenue Bonus exceeds the Revenue Target
by $50,000. Assume further that the Fair Market Value per share is $12.00. The
exercise price per share would be $12.00 x .25, or $3.00. The number of shares
subject to the Option would be ($50,000 x .667%) / ($12.00 x .75), or 3,704
shares.
(d) Executive's Annual Operating Plan. On or before December 15 of
the preceding calendar year, the Executive and the Chief Executive Officer of
the Corporation (or the Chief Executive Officer's designee) shall prepare in
good faith and submit to the Board of Directors, and the Board of Directors
shall adopt, annual revenue and margins targets for the operations of the
Corporation for which the Executive is responsible. Such annual revenue and
margins targets shall be based upon the Corporation's annual business plan. Upon
adoption by the Board of Directors by a majority vote, provided that the Chief
Executive Officer of the Corporation (the "CEO") and at least one of the members
of the Board of Directors designated by the Investors, as such term is defined
in that certain Recapitalization Agreement (the "Recapitalization Agreement") by
and among the Corporation and the additional parties named therein dated as of
August 13, 1999 (each, an "Investor Director") in accordance with the
Shareholders' Agreement (the "Shareholders' Agreement) by and among the
Corporation and the parties named therein dated as of August 13, 1999 (assuming
that there are then such members on the Board of Directors) must have voted in
favor of adoption thereof, such revenue and margins targets shall be the
"Executive's Annual Operating Plan" for purposes of this Agreement. If the Board
of Directors (including the CEO and at least one Investor Director) fails to
approve the annual revenue and margins targets as set forth herein, the targets
for the prior year multiplied by 140% shall be the "Executive's Annual Operating
Plan" for purposes of this Agreement. Notwithstanding the foregoing, the
Executive's Annual Operating Plan to be used for purposes of calendar year 1999
shall be as set forth in Exhibit B to this Agreement.
(e) Determination of Fair Market Value. If the Common Stock is
listed upon an established stock exchange or exchanges, then the Fair Market
Value per share shall be deemed to be the average of the quoted closing prices
of the Common Stock on such stock exchange or exchanges on each of the thirty
(30) days immediately preceding the day for which the determination is made. If
the Common Stock is not listed upon an established stock exchange but is traded
in the NASDAQ National Market System, the Fair Market Value per share shall be
deemed to be the average of the closing prices of the Common Stock in the
National Market System on each of the thirty (30) days immediately preceding the
day for which the determination is made. If the Common Stock is not listed upon
an established stock exchange and is not traded in the
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<PAGE> 5
National Market System, the Fair Market Value per share shall be deemed to be
the average of the mean between the dealer "bid" and "ask" closing prices of the
Common Stock on the NASDAQ System on each of the thirty (30) days immediately
preceding the day for which the determination is made. If none of these
conditions apply, Fair Market Value shall be the amount (the "Formula Price")
determined as follows: (i) if the date of determination is on or before the date
which is six (6) months after the closing of the transactions contemplated by
the Recapitalization Agreement, an amount equal to $1.085 per share, subject to
equitable adjustment in the event of any increase or decrease in the shares of
Common Stock by way of stock split, share reclassification, stock dividend or
other similar transaction, or (ii) if the date of determination is after the
date which is six (6) months after the closing of the transactions contemplated
by the Recapitalization Agreement, the fair value of each share determined by
multiplying EBITDA for the twelve month period ending on the day for which the
determination is made times an industry multiple equal to the average multiples
of a list of ten comparable, publicly-traded companies, which list has initially
been determined by mutual agreement of the CEO and InSight Capital Partners.
Such list shall be revised each year on January 1 upon the mutual agreement of
the CEO and InSight Capital Partners. A minority/liquidity discount of 20% shall
be applied in the Formula Price pursuant to clause (iii) above.
(f) Determination of Revenues and EBITDA. For purposes of this
Agreement, "EBITDA" means earnings before interest, taxes, depreciation and
amortization("EBITDA"); provided, however, that notwithstanding anything herein
to the contrary, EBITDA shall be adjusted as necessary to exclude the effects of
(i) the payment of transaction costs associated with the consummation of the
transactions contemplated by the Recapitalization Agreement, which shall include
but not be limited to bank fees, finance fees, legal fees, accounting fees, and
any other similar types of fees or expenses; (ii) the payment of transaction
costs associated with the consummation of a major capital event such as a sale
of all or substantially all of the Corporation's stock or assets, a merger or
consolidation, or an initial public offering; and (iii) payment of any
"Transaction Fee" or "Management Fee", as those terms are defined in the
Shareholders' Agreement. When calculated for a full calendar year, revenues,
margins, and EBITDA shall be as determined in connection with the preparation of
the Corporation's audited financial statements for the year, which statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied as in effect from time to time in the United States. When
calculated for any period which is less than a full calendar year, revenues,
margins, and EBITDA shall initially be determined in connection with the
preparation of the Corporation's unaudited financial statements for such period,
which statements shall be prepared in accordance with generally accepted
accounting principles consistently applied as in effect from time to time in the
United States and shall be certified by the Corporation's Chief Financial
Officer. When an Incentive Bonus is calculated for a partial year as described
above, fifty percent (50%) of such Incentive Bonus (including both cash and
options, pro-rata) shall be paid or issued immediately to the Executive and the
remaining fifty percent (50%) shall be retained by the Corporation until the
regular audit of the financial statements for such
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<PAGE> 6
year has been completed. The amount of the Incentive Bonus for such period shall
then be re-determined based upon the Corporation's audited financial statements,
and the Corporation shall pay and issue to the Executive any shortfall, and the
Executive shall refund or return for cancellation to the Corporation any
over-payment, based upon the amount of the Incentive Bonus as re-determined and
the amount previously paid and issued. Revenues, margins, and EBITDA for a full
calendar year period shall be determined within fifteen (15) days after the
release of the Corporation's audited financial statements. Revenues, margins,
and EBITDA for a period which is less than a full calendar year shall be
determined within fifteen (15) days after the end of the month in which such
period terminates. The date by which revenues, margins, and EBITDA are to be
determined or re-determined is referred to as the "Calculation Date." The
Corporation shall use its best efforts to cause audited financial statements
prepared by an independent certified public accountant to be released no later
than April 15th of the following year. The Corporation shall notify the
Executive of the amount of the Incentive Bonus no later than five (5) days after
the Calculation Date.
(g) Determination of Incentive Bonus Following Termination of
Employment. In the event of the termination of the Executive's employment by the
Corporation for Cause (as defined in Section 20(a)), or by the Executive without
Good Reason (as defined in Section 20(c)) the Executive shall be entitled to
receive an Incentive Bonus for any calendar year concluded prior to such
termination of employment but shall not be entitled to receive an Incentive
Bonus for the calendar year in which such termination of employment occurs. In
the event of the termination of the Executive's employment for any reason other
than by the Corporation for Cause or by the Executive without Good Reason,
including without limitation the Executive's death or disability, the Executive
shall be entitled to receive an Incentive Bonus both with respect to any
calendar year concluded prior to such termination of employment and with respect
to the calendar year in which such termination of employment occurs. The amount
of the Bonus Target for a year in which a termination occurs shall be prorated
based upon the amount of the Executive's base salary which accrued during the
portion of the year during which the Executive was employed by the Corporation,
and the amount of the Incentive Bonus shall be determined based upon actual
revenues and margins and targeted revenue and margins under the Executive's
Annual Operating Plan for that year through either the end of the calendar month
in which the termination occurs or the end of the preceding calendar month,
whichever is more favorable to the Executive.
5. Executive's Duties. The Executive is employed on a full-time basis
as a consultant and as an essential member of the management of the Corporation.
So long as this Agreement is in effect, the Executive will not engage in the
practice of consulting except as an Executive of the Corporation unless
otherwise authorized in writing by the Board of Directors of the Corporation.
Any and all compensation received in money or other property from any person or
entity other than the Corporation for professional services rendered by the
Executive shall be deemed to be the property of the Corporation. The Executive
agrees that upon the receipt of any such money or property, he shall promptly
remit such compensation to the Corporation together with a
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<PAGE> 7
full accounting thereof. So long as this Agreement is in effect, the Executive
shall be appointed the Executive Vice President of the Corporation.
6. Facilities. The Corporation shall furnish facilities, equipment,
services and assistance suitable to the Executive's position for the performance
of the Executive's duties.
7. No Copies of Documents and Materials. The Executive shall not
(except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation) at any time or in any manner make or
cause to be made any copies, pictures, duplicates, facsimiles or other
reproductions or recordings or any abstracts or summaries of any reports,
studies, memoranda, correspondence, manuals, records, plans or other written,
printed, computerized or otherwise recorded materials of any kind or nature
whatsoever belonging to or in the possession of the Corporation or any of its
subsidiaries.
8. Materials Remain on Premises. The Executive shall have no right,
title or interest in any material referenced in Section 7. The Executive agrees
that, except in the performance of his duties in the ordinary course of business
for which he is employed by the Corporation, the Executive will not, without the
prior written consent of the Corporation, remove any such material from any
premises of the Corporation. The Executive further agrees that, immediately upon
the termination of his employment with the Corporation or upon the termination
of this Agreement, whichever occurs earlier, or at any time prior thereto upon
the request of the Corporation, he shall surrender all such material to the
Corporation and execute a document acknowledging that he has complied with the
provisions of this Agreement.
9. Trade Secrets. The Executive shall not at any time, whether during
or after the term of this Agreement, use for the Executive's own benefit or
purposes or for the benefit or purposes of any other person, firm, partnership,
association, corporation or business organization, entity or enterprise, or
disclose (except in the performance of his duties in the ordinary course of
business for which he is employed by the Corporation) in any manner to any
person, firm, partnership, association, corporation or business organization,
entity or enterprise any trade secret, information, data, know how or knowledge
(including, but not limited to, that relating to service techniques, purchasing
organization and methods, sales organization and methods, inventories, client
lists, market development and expansion plans, personnel training and
development programs and client and supplier relationships) or any other
Discoveries (as defined in Section 11) belonging to or relating to the affairs
of the Corporation or any of its subsidiaries or to the clients of the
Corporation or any of its subsidiaries; provided, however, that this Section 9
shall not apply to any trade secret, information, data, know how, knowledge, or
Discovery that is or becomes generally available to the public through no fault
or action of the Executive.
10. Customers. In furtherance of and not in limitation of Section 9,
the Executive acknowledges that the list of the Corporation's and its
subsidiaries' customers
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<PAGE> 8
as it may exist from time to time constitutes a valuable and unique asset of the
Corporation, and the Executive agrees that he shall not, during or after the
term of his employment, disclose such list or any part thereof to any person,
firm, partnership, association, corporation, or business organization, entity or
enterprise for any reason or purpose whatsoever, nor shall the Executive use
such customer list for his own benefit or purposes or for the benefit or
purposes of any business with whom the Executive may become associated.
11. Discoveries. The Executive agrees with the Corporation that any and
all inventions, discoveries, improvements, designs, methods, systems,
developments, know how, ideas, suggestions, devices, trade secrets and processes
(hereinafter collectively referred to as "Discoveries"), whether patentable or
not, which are discovered, disclosed to or otherwise obtained by the Executive
during his employment with the Corporation are confidential, proprietary
information and are the sole and absolute property of the Corporation. The
Executive agrees to disclose promptly to the Corporation all such Discoveries
and to assist the Corporation in making any application in the United States and
in foreign jurisdictions for patents of any kind with respect thereto.
12. Works for Hire. All works and writings of a professional nature
which are produced by the Executive during his employment with the Corporation
constitute works made for hire and are the sole and absolute property of the
Corporation. The Executive grants the Corporation the exclusive right to
copyright all such works and writings in the United States and in foreign
jurisdictions. To the extent any such works or writings are deemed to not be
works for hire, the Executive hereby assigns and agrees to assign all his
interests therein to the Corporation or its nominee. Whenever requested to do so
by the Corporation, the Executive shall execute any and all applications,
assignments, or other instruments that the Corporation may deem necessary to
protect the Corporation's interest therein.
13. Non-Competition.
(a) The Executive acknowledges that his employment as a member of
the Corporation's executive management team creates a relationship of confidence
and trust between the Executive and the Corporation with respect to confidential
and proprietary information applicable to the business of the Corporation, its
subsidiaries and its clients. The Executive further acknowledges the highly
competitive nature of the business of the Corporation. Accordingly, the
Corporation and the Executive agree that the restrictions contained in this
Section 13 are reasonable and necessary for the protection of the immediate
interests of the Corporation and that any violation of these restrictions would
cause substantial injury to the Corporation.
(b) For purposes of this Agreement, the term "Competitive
Business" means any person, firm, partnership, association, corporation, or
business organization, entity or enterprise which derives or which expects
during the following two (2) years to derive either (i) ten percent (10%) or
more of its revenues, or (ii) more than $10,000,000 in revenues from providing
technical management consulting and/or systems integration
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services for Automated Mapping/Facilities Management Systems and/or Geographic
Information Systems and/or utility transmission and distribution systems. The
term "Competitive Business" is not intended to include mere vendors or suppliers
of the Corporation.
(c) For purposes of this Agreement, the term "Existing Client"
means a client for whom the Corporation or any of its subsidiaries is performing
consulting services as of the date of the termination of the Executive's
employment with the Corporation or for whom the Corporation or any of its
subsidiaries performed consulting services within the two (2) year period
immediately preceding the termination of the Executive's employment with the
Corporation. The term "Existing Client" is not intended to include mere vendors
or suppliers of the Corporation.
(d) During the Executive's employment with the Corporation and for
a period of one (1) year following the termination of the Executive's employment
with the Corporation for any reason other than termination occasioned by the
expiration of this Agreement (provided, however, that if the termination occurs
prior to August 13, 2000, for any reason other than by the Executive for Good
Reason, such period shall continue for two (2) years), the Executive shall not
(nor shall the Executive cause, or provide assistance to anyone else to):
i. Employ or otherwise engage, or attempt to employ or
otherwise engage, in or on behalf of the Executive or any Competitive Business,
any person who is employed or engaged as an employee, consultant, agent or
representative of the Corporation or any of its subsidiaries as of the date of
the Executive's termination or at any time during the one-year period following
such termination; or
ii. Solicit directly or indirectly on behalf of the Executive
or any Competitive Business, the customer business or account of any Existing
Client of the Corporation.
(e) If any court shall determine that the duration, geographic
limitations, subject or scope of any restriction contained in this Section 13 is
unenforceable, it is the intention of the Parties that this Section 13 shall not
thereby be terminated but shall be deemed amended to the extent required to make
it valid and enforceable, such amendment to apply only with respect to the
operation of this Section 13 in the jurisdiction of the court that has made the
adjudication.
(f) Notwithstanding anything herein to the contrary, the
provisions of this Section 13 shall not be applicable to any termination which
occurs after December 31, 2002.
14. Employability. The Executive recognizes and acknowledges that he
has sufficient abilities and talents to be able to obtain, upon the termination
of this Agreement, comparable employment from another business organization or
entity while fully honoring and complying with the above covenants concerning
confidential
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information and contacts with the Corporation's or any of its subsidiaries'
existing customers or employees. The Executive recognizes and acknowledges the
importance to the Corporation and its subsidiaries of the above covenants and,
therefore, agrees that, for a period of one (1) year following the termination
of the Executive's employment with the Corporation and upon the Corporation's
reasonable request of the Executive, he will advise the Corporation of the
identity of his new employer and will provide a general description, in
reasonable detail, of his new duties and responsibilities sufficient to inform
the Corporation of its need to request a court order to enforce the above
covenants.
15. Remedies. The Executive acknowledges and agrees that the provisions
of this Agreement are essential to the Corporation and are reasonable and
necessary to protect the legitimate interests of the Corporation and its
subsidiaries and that the damages sustained by the Corporation or its
subsidiaries as a result of a breach of the agreements contained herein will
subject the Corporation or its subsidiaries to immediate, irreparable harm and
damage, the amount of which, although substantial, cannot be reasonably
ascertained, and that recovery of damages at law will not be an adequate remedy.
The Executive therefore agrees that the Corporation and its subsidiaries, in
addition to any other remedy they may have under this Agreement or at law, shall
be entitled to injunctive and other equitable relief to prevent or curtail any
breach of any provision of this Agreement. In the event suit or action is
instituted to enforce this Agreement or any of the terms and conditions hereof,
including, but not limited to, suit for preliminary injunction, the prevailing
Party shall be entitled to costs and reasonable attorneys' fees. The Executive
waives any right to the posting of a bond in the event of an issuance of a
temporary restraining order, preliminary injunction or permanent injunction upon
the issuance of said order by a court of competent jurisdiction.
16. Expenses. In the promotion and execution of the business of the
Corporation, the Executive is expected to incur certain reasonable expenses for
entertainment, travel, company automobile expenses (including insurance,
maintenance, fuel and depreciation, if applicable), and business fax and
telephone bills which shall be subject to approval by the Corporation. The
Corporation recognizes the necessity for such expenditures in order to retain
and further the professional skills, abilities and standing of the Executive and
to properly maintain, promote and develop the Corporation's consulting practice.
The Corporation shall pay all reasonably appropriate and necessary premiums on
life insurance owned by the Corporation on the life of the Executive, and shall
reimburse the Executive for insurance premiums paid by the Executive for a
policy providing a death benefit of four million dollars ($4,000,000) to the
Executive's estate or designated beneficiary. Such reimbursement shall be
"grossed-up" based upon the highest combined federal and applicable state
marginal tax rate in effect (assuming that the Executive is married and filing a
joint return) on the date of payment. The Corporation shall also pay the
Executive's dues and fees for attending professional meetings and institutes,
costs of professional books and periodicals and promotion, entertainment and
travel expenses reasonably related to the business of the Corporation. The
Corporation shall also pay the Executive's business-related legal,
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accounting and financial planning fees, up to a maximum of $20,000 per calendar
year. All payments made by the Corporation pursuant to this Section 16 shall be
made in a manner consistent with the Corporation's practices in years prior to
the execution of this Agreement. Unusual and extraordinary expenses incurred by
the Executive and not approved in advance by the Corporation may not be
reimbursed.
17. Vacation Leave Time. Vacation leave shall accrue at the rate of six
(6) weeks per year. Any unused vacation leave time accumulated during the year
shall carry over to subsequent years.
18. Disability. The Corporation may terminate this Agreement upon
written notice to the Executive if the Executive is physically or mentally
incapacitated and unable to perform his duties under this Agreement for a period
of (i) any one hundred eighty (180) days out of any three hundred sixty (360)
days, if the Common Stock of the Corporation is not then publicly traded, or
(ii) ninety (90) out of any one hundred eighty (180) days if the Common Stock of
the Corporation is then publicly traded. If at any time a question arises as to
the incapacity of the Executive, then the Corporation shall promptly employ one
physician who is a member of the American Medical Association and who is
mutually agreeable to the Corporation and the Executive to examine the Executive
and determine if his physical and/or mental condition is such as to render him
unable to perform his duties under this Agreement. The decision of the physician
shall be certified in writing to the Corporation, shall be sent by the
Corporation to the Executive or his representative and shall be conclusive for
purposes of this Agreement. Any compensation payments payable to the Executive
hereunder shall be reduced by the amount of any disability payments the
Executive receives as a result of disability policies on which the Corporation
has paid the premiums.
19. Death During Employment. This Agreement shall terminate upon the
Executive's death. In such event, the Corporation shall pay a death benefit
equal to the Executive's base monthly salary for the balance of the month of the
Executive's death and for the month following his death. Any amounts payable
under this Agreement following the Executive's death shall be paid to the
beneficiary named in writing by the Executive, or if none, to the Executive's
surviving spouse, or if none, to the executors and administrators of the
Executive's estate and shall be paid within sixty (60) days of the Executive's
death.
20. Termination for Other Than for Disability or Death. This Agreement
may terminate for reasons other than the Executive's disability or death upon
the occurrence of any of the following events; provided, however, that neither
the Executive nor the Corporation may terminate this Agreement pursuant to this
Section 20 in 1999 except for a termination by the Corporation for Cause as
provided in Section 20(a) or a termination by the Executive for Good Reason as
provided in Section 20(c).
(a) The Corporation, at its option, may terminate the Executive
for Cause (as defined below) upon thirty (30) days' advance written notice by
the Corporation to the Executive fully setting forth such Cause, which notice of
termination
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may be appealed to the Board of Directors of the Corporation. Termination shall
be effective on the thirtieth (30th) day following the Executive's receipt of
written notice from the Corporation. "Cause" shall be limited to a situation in
which the Executive has:
i. Committed a criminal offense that, if committed in the
State of Colorado, would have constituted a felony under the laws of the State
of Colorado or the United States (other than a traffic offense or other similar
violation); or
ii. Committed a fraudulent act which is materially harmful to
the Corporation (materiality, for purposes of this clause, means in excess of
$50,000); or
iii. Committed an act of willful misconduct which results in
actual damages against the Corporation of $500,000 or more; or;
iv. Committed an act of gross insubordination by refusing to
obey written directions of the Board of Directors (so long as such directions do
not involve illegal or immoral acts), which refusal continues for a period of
ten (10) days after written notice to the Executive by the Corporation which
notice references such refusal and this Section 20(a); or
v. Committed repeated acts of alcohol or illegal drug abuse,
and has failed to take reasonable steps to address such issues within ten (10)
days after written notice to the Executive by the Corporation which notice
references such acts and this Section 20(a); or
vi. Except during periods of vacation leave permitted
pursuant to Section 17, failed to devote substantially all of his professional
time and attention to the performance of his obligations under this Agreement,
as determined by the Board of Directors of the Corporation, which failure
continues for a period of fifteen (15) days after Actual Receipt (as defined in
Section 20(b) below) of written notice by the Executive from the Corporation
which notice references such failure and this Section 20(a).
(b) The Corporation shall have the right to terminate this
Agreement without Cause at any time after thirty (30) days after Actual Receipt
of written notice by the Executive from the Corporation. Failure to renew this
Agreement shall not be deemed to be a termination of employment for purposes of
this Agreement. For purposes of this Agreement, "Actual Receipt" of notice shall
mean actual physical receipt (or refusal of acceptance) of notice by the
Executive; provided, however, that in the event the Executive has been away from
the office for more than two weeks and either the Executive's whereabouts are
unknown to the Corporation or the Executive is at a location where the
Corporation cannot reasonably communicate with him, the Executive will be deemed
to have refused delivery of notice on the day such notice is delivered (or
delivery is attempted) to the Executive's last known residence. In such
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event, the Corporation shall nonetheless provide a copy of the notice to the
Executive as soon as it is reasonably possible to do so.
(c) The Executive at his option, may terminate this Agreement for
Good Reason (as defined below) upon thirty (30) days' advance written notice by
the Executive to the Corporation, which notice shall reference this Section
20(c) and shall describe in reasonable detail the cause for such Good Reason.
Such termination shall be effective on the thirtieth (30th) day following the
Corporation's receipt of written notice from the Executive; provided, however,
that such termination shall not be effective if the Corporation has cured the
cause for such Good Reason to the Executive's reasonable satisfaction within
such thirty (30) day period. For purposes of this Section 20(c), "Good Reason"
shall mean any of the following:
i. A material breach of this Agreement by the Corporation;
ii. The Corporation's requiring the Executive to be based at
any office or location other than one within the Denver, Colorado metropolitan
area, except for required travel on the Corporation's business to an extent
substantially consistent with the Executive's obligations immediately prior to
the Effective Date;
iii. Any purported termination by the Corporation of the
Executive's employment other than as permitted in this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement, and it being further understood that the nonrenewal
of this Agreement shall not be deemed to be a termination of employment for
purposes of this Agreement; or
iv. A material reduction in the character of the duties
assigned to the Executive or in the Executive's level of work responsibility,
unless mutually agreed upon by the Executive and the Corporation;
(d) The Executive shall have the right to terminate this Agreement
without cause at any time upon sixty (60) days' advance written notice to the
Corporation.
21. Rights Upon Termination.
(a) Upon termination of the Executive's employment with the
Corporation, the Corporation shall have no further obligation to the Executive
except as specifically provided under this Agreement. Termination of the
Executive's employment shall not affect the Executive's right to receive any
compensation or bonuses which have accrued but have not been paid through the
date of termination, including, but not limited to, the Incentive Bonus for that
portion of the calendar year prior to the termination.
(b) In addition to any accrued compensation or bonuses, and
depending upon the circumstances of the Executive's termination of employment,
the Corporation shall pay or provide certain severance benefits (the "Severance
Benefits"). The nature
13
<PAGE> 14
and extent of the Severance Benefits to be provided shall be determined in
accordance with the table set forth in Exhibit A attached hereto. For purposes
of Exhibit A, the following terms shall have the following meanings:
(1) "Severance Pay" shall be expressed as a monthly amount
and shall mean one-twelfth of the Executive's annual base salary
pursuant to Section 3 at the rate in effect immediately prior to the
termination of employment. Any Severance Pay due to the Executive shall
be paid in cash in a single lump sum within sixty (60) days after the
termination of employment.
(2) "Continuation Benefits" shall mean the continuation of
the Benefits, including any Benefits which cover the Executive's
family, but excluding any contribution to any qualified pension, profit
sharing or retirement plan or other deferred compensation arrangement.
(3) A "Change in Control" shall mean and shall be deemed to
have occurred if (i) any of the following events shall have occurred,
and (ii) the occurrence of such event is not within one (1) year after
a failure of the Corporation to meet the operating targets for any two
of revenues, bookings, and EBITDA, as set forth in the Annual Operating
Plan (as defined in Section 21(b)(5) below), for any three (3) out of
any five (5) consecutive quarters:
(a) A Third Person (as defined below), including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended from time to time, and any successor act (the
"Exchange Act"), becomes the "beneficial owner," as defined in the
Exchange Act, of shares of the Corporation having 50% or more of the
total number of votes that may be cast for the election of any of the
Directors of the Corporation; or
(b) At least two-thirds of the directors of the
Corporation constitute persons who were not, at the time of their first
election to the Board of Directors of the Corporation, candidates
proposed by a majority of the Board of Directors in office prior to the
time of such first election; or
(c) The Board of Directors or the stockholder(s) of the
Corporation approve: (i) any agreement for a merger or consolidation or
like business recombination or reorganization of the Corporation with
another entity, the consummation of which would result in the
occurrence of any event described in Section 21(b)(6)(a) or (b) above
or (ii) any sale, exchange or other disposition of all or substantially
all of the Corporation's assets; or
(d) Any sale, exchange or other disposition of greater
than 67% in fair market value of the Corporation's total assets, other
than in the ordinary course of business, whether in a single
transaction or a series of related transactions; provided, however,
that no sale or disposition of assets shall be
14
<PAGE> 15
taken into account to the extent that the proceeds of such sale or
disposition (whether in cash or in-kind) are reinvested or are, in the
case of proceeds received in-kind, used in the ongoing conduct of the
Corporation, provided further that such a reinvestment shall not be
deemed to have occurred unless made within six (6) months of such sale
or disposition and provided further that, the term reinvestment shall
include the use of proceeds to repay debt incurred in connection with
the operation of the business in which the assets sold or disposed of
were used; or
(e) Any other event which the Board of Directors,
including at least one Investor Director, determines, in its
discretion, would materially alter the structure of the Corporation or
its ownership.
A Change in Control shall be deemed to have occurred on the effective
date of such Change in Control; provided, however, that anything in
this Agreement to the contrary notwithstanding, if the Executive's
employment with the Corporation is terminated during the six (6) months
prior to a Change in Control and the Executive can reasonably
demonstrate that such termination (a) was at the request of a third
party who has taken steps reasonably calculated to effect the Change in
Control, or (b) otherwise arose in connection with the Change in
Control, then for all purposes of this Agreement, the Change in Control
shall be deemed to have occurred on the date immediately prior to the
date of such termination. For purposes of determining whether there has
been a Change in Control, the Third Person owning shares must be
someone other than a person or entity, or an Affiliate of a person or
entity, that, as of the Effective Date, was the beneficial owner of
shares of the Corporation having 25% or more of the total number of
votes that may be cast for the election of any of the Directors of the
Corporation. "Affiliate" shall mean, with respect to any person or
entity, a person or entity that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common
control with, such person or entity.
(4) Annual Operating Plan. On or before December 15 of the
preceding calendar year, management of the Corporation shall prepare in
good faith and submit to the Board of Directors, and the Board of
Directors shall adopt, an annual business plan for the Corporation. In
preparing the annual business plan, management shall consider, among
other factors, the past performance of the Corporation and the
Corporation's current outlook based upon the Corporation's backlog and
such other factors as management shall deem appropriate. Upon adoption
by the Board of Directors by a majority vote, provided that the CEO and
at least one Investor Director (assuming that there are then such
members on the Board of Directors) must have voted in favor of
adoption, the annual business plan shall be the "Annual Operating Plan"
for purposes of this Agreement. If the Board of Directors (including
the CEO and at least one Investor Director) fails to approve the annual
business plan as set forth herein, the plan for the prior year
multiplied by 140% shall be the "Annual Operating Plan" for purposes of
this Agreement. Notwithstanding the foregoing, the Annual Operating
Plan to be used for purposes of calendar year 1999 shall be the annual
business plan adopted
15
<PAGE> 16
by the Corporation's Board of Directors on December 14, 1998, as
amended by the Corporation's Forecast dated May 23, 1999.
(c) Upon termination of this Agreement by mutual agreement of the
parties, or by the Corporation other than for Cause pursuant to Section 20(a),
or by the Executive for any reason whatsoever, the Corporation shall, both
verbally and in writing, acknowledge that the Executive performed the services
provided under this Agreement in a good and proficient manner and shall provide
a positive reference to any person or entity that may request a reference with
regard to the Executive.
(d) Upon the termination of the Executive's employment with the
Corporation for any reason other than by the Corporation for Cause pursuant to
Section 20(a), the Executive shall be entitled to keep, free and clear of any
liens and encumbrances and any claim of title by the Corporation, (i) equipment
owned by the Corporation and used by the Executive with the approval of the
Corporation in the Executive's home, to the extent that the value of such
equipment does not exceed $10,000, and (ii) the automobile provided by the
Corporation for the Executive's use.
(e) If any portion of the Benefits (excluding any contributions to
any Retirement Plan) cannot reasonably be made available to the Executive, then
the Corporation shall pay to the Executive an amount in cash equal to 150% of
the cost which must be incurred by the Executive to acquire benefits equivalent
to any tax-exempt Benefits previously provided by the Corporation and 100% of
the cost which must be incurred by the Executive to acquire benefits equivalent
to any taxable Benefits previously provided by the Corporation. The Corporation
shall determine the cost to the Executive of such Benefits in good faith and
shall provide reasonable documentation to support its findings to the Executive.
22. Default in Payments. If any payment is due and payable to the
Executive under Section 21 and such payment is not made when due and such
non-payment continues for a period of ten (10) days after written notice thereof
from the Executive to the Corporation, which notice describes such payment
default and references this Section 22, the following shall occur:
(a) The Executive shall be immediately released from Section 13
hereof regarding non-competition; and
(b) The Executive shall retain all other rights and remedies
against the Corporation.
23. Mitigation. The Executive shall not be required to mitigate the
Corporation's obligations with respect to the provision of Continuation Benefits
or the payment of any amount described in this Agreement by seeking or accepting
any offer of employment or otherwise, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer. Continuation Benefits shall be subject to
mitigation under the limited
16
<PAGE> 17
circumstances described in Exhibit A if and only if Executive, in his sole
discretion, has accepted employment with a third party and is eligible to
receive benefits which are equivalent in all material respects to the
Continuation Benefits. In determining benefit equivalence, the parties shall
consider all factors, including the level of coverage, the cost, if any, to the
Executive, and the effect, if any, of provisions limiting coverage for
pre-existing conditions.
24. Withholding Tax. The Corporation shall be entitled to withhold from
any compensatory payments which it makes to the Executive under this Agreement
or otherwise an amount sufficient to satisfy all Federal, state and local income
and employment tax withholding requirements with respect to any and all
compensation paid to the Executive by the Corporation.
25. Registration Rights. The Executive shall be entitled to
registration rights with respect to shares of Common Stock of the Corporation
held by the Executive as set forth in that certain Registration Rights Agreement
by and among the Corporation and the parties named therein dated as of August
13, 1999.
26. Arbitration. Any controversy or claim arising out of or related to
this Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final and binding upon the Parties,
shall not be appealed from or contested in any court and may, in appropriate
circumstances, include injunctive relief. Should any Party fail to appear or be
represented at the arbitration proceedings after due notice in accordance with
the Rules, then the arbitrator may nevertheless render a decision in the absence
of said Party, and such decision shall have the same force and effect as if the
absent Party had been present, whether or not it shall be adverse to the
interests of that Party. Any award rendered hereunder may be entered for
enforcement, if necessary, in any court of competent jurisdiction, and the Party
against whom enforcement is sought shall bear the expenses, including attorneys'
fees, of enforcement. Notwithstanding the foregoing, the Corporation shall be
entitled to seek injunctive or other equitable relief to enforce any of the
provisions in Sections 7 through 13 from any court of competent jurisdiction
without the need to resort to arbitration.
27. Survival. The covenants contained in this Agreement shall survive
any termination of the Executive's employment with the Corporation and shall
survive any termination of this Agreement. The existence of any claim or cause
of action of the Executive against the Corporation, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Corporation of any of the covenants contained in this Agreement.
28. Severability. If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such
17
<PAGE> 18
restriction shall be enforced to the maximum extent permitted by law, and the
Executive and the Corporation hereby consent and agree that the scope of such
restriction may be judicially modified in any proceeding brought to enforce such
restriction. To the extent any provision of this Agreement shall be invalid or
unenforceable, it shall be considered deleted from this Agreement and the
remainder of this Agreement shall remain in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or
geographical extent of or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then such provision shall be construed to cover only that duration or
extent or those activities which may validly and enforceably be covered.
29. Subsidiaries. The "subsidiaries" of the Corporation as that term is
used in this Agreement include Utility Graphics Consultants Corporation, Graphic
Data Systems Corporation and their subsidiaries, together with any other
corporation in which the Corporation or its subsidiaries hold more than a fifty
percent (50%) interest at any time during the term of this Agreement.
30. Notice. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered by personal delivery,
air courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of the Executive as it appears in the
corporate records for notice to the Executive, or to the principal office of the
Corporation for notice to the Corporation. All notices delivered in accordance
with this Section shall be deemed to have been received and shall be deemed
effective if delivered in person or by air courier, upon actual receipt by the
intended recipient, or if mailed, upon the date of delivery or refusal to accept
delivery as shown by the return receipt therefor.
31. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the Party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, and shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
32. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Parties hereto.
33. Assignment. The rights and obligations of the Corporation under
this Agreement shall, with the prior written consent of the Executive, inure to
the benefit of and be binding upon the successors and assigns of the
Corporation. If the Corporation shall at any time be merged or consolidated with
any other corporation or shall sell or otherwise transfer a substantial portion
of its assets to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
have been sold or transferred. Upon the Executive's request, the
18
<PAGE> 19
Corporation shall obtain an agreement to expressly assume this Agreement from
any such successor. This is a personal service contract and may not be assigned
by the Executive.
34. Entire Agreement. This instrument contains the entire agreement of
the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
including, but not limited to, the Amended and Restated Employment Agreement
between the Executive and the Corporation dated December 31, 1997, and the
Parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement that are not set forth herein.
35. Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the internal laws of the State of Colorado
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
36. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ GLENN E. MONTGOMERY, JR.
----------------------------------
Glenn E. Montgomery, Jr.
Chief Executive Officer
"EXECUTIVE"
/s/ LARRY J. ENGELKEN
-------------------------------------
Larry J. Engelken
Executive
19
<PAGE> 20
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
LARRY J. ENGELKEN
AND
CONVERGENT GROUP CORPORATION
TABLE OF SEVERANCE BENEFITS
---------------------------
<TABLE>
<CAPTION>
ADDITIONAL
EVENT OF ADDITIONAL MONTHS OF MONTHS OF
CONTINUATION BENEFITS SEVERANCE PAY
- ---------------------- ------------------------ -----------------
<S> <C> <C>
1. BY 0 0
CORPORATION
FOR CAUSE
- -----------------------------------------------------------------
2. BY 6 6
CORPORATION
WITHOUT
CAUSE
- -----------------------------------------------------------------
3. BY 6 6
EXECUTIVE
WITH GOOD
REASON
- -----------------------------------------------------------------
4. BY
EXECUTIVE
WITHOUT
GOOD
REASON
A) PRIOR TO A 0 0
CHANGE IN
CONTROL
B) AFTER A 6 6
CHANGE IN
CONTROL
- -----------------------------------------------------------------
5. DISABILITY 6 6
- -----------------------------------------------------------------
6. DEATH 6 0
- -----------------------------------------------------------------
</TABLE>
A-1
<PAGE> 21
EXHIBIT B
TO
EMPLOYMENT AGREEMENT
BETWEEN
LARRY J. ENGELKEN
AND
CONVERGENT GROUP CORPORATION
EXECUTIVE'S ANNUAL OPERATING PLAN
---------------------------------
DENVER:0930222.06
D-1
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 13th day of
August, 1999 (the "Effective Date"), and entered into by and between Scott M.
Schley (subsequently called the "Executive") and Convergent Group Corporation, a
Delaware corporation, having its principal office at 6200 South Syracuse Way,
Suite 200, Englewood, Colorado 80111 (subsequently called the "Corporation"). In
consideration of the mutual promises and the terms and conditions set forth
below, the Executive and the Corporation (together, the "Parties," and each, a
"Party") agree as follows:
1. Nature and Purpose of Agreement. The Executive desires to provide
essential management to the Corporation. The Board of Directors of the
Corporation has determined the reasonable method of compensation of the
Executive and has offered him compensation of an annual base salary and bonuses
as set forth in Sections 3 and 4, and participation in a 401(k) Plan in
accordance with law, together with the other employee benefits generally set
forth in the Corporation's policies and procedures manual.
2. Employment; Term. The Corporation hereby employs the Executive as
Vice President of Finance and Chief Financial Officer and the Executive hereby
agrees to be employed by the Corporation under the terms and conditions set
forth in this Agreement. The term of this Agreement shall begin on the date
hereof and shall end on December 31, 2000, unless terminated prior to that date
as provided herein.
3. Compensation and Benefits.
(a) For all services rendered by the Executive under this
Agreement, the Corporation shall pay compensation to the Executive consisting of
an annual base salary and an incentive bonus. The annual base salary effective
as of August 15, 1999, is $168,000. The Executive's annual base salary shall not
be reduced during the term of this Agreement and shall be subject to annual
adjustments as set forth herein. Effective on January 1 of each year during the
term of this Agreement, the Executive's annual base salary shall be increased by
5% of the amount in effect immediately prior to such adjustment. The Executive's
annual base salary shall be paid in twenty-six (26) bi-weekly payments during
each annual period.
(b) The Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of the Executive's level or its
employees generally (the "Benefits").
1
<PAGE> 2
4. Bonus Arrangements.
(a) Bonus Opportunity. The Corporation and the Executive
acknowledge that the Executive is critical to the success of the Corporation as
an essential part of the management of the Corporation. The Corporation desires
to retain the Executive and ensure that the Executive receives reasonable
compensation for his critical role. The Corporation therefore agrees to pay the
balance of the Executive's reasonable compensation by way of an Incentive Bonus
(as defined below).
(b) Incentive Bonus. Commencing with calendar year 1999, the
Executive shall be eligible to earn an "Incentive Bonus" for each year in
addition to his annual base salary. The targeted amount of the Incentive Bonus
shall be 50% of the amount of the Executive's annual base salary as in effect
for such year (the "Bonus Target"). Two-thirds of the Incentive Bonus shall be
earned based upon the attainment by the Corporation of targeted EBITDA (as
defined in Section 5(e) below) during the period (the "EBITDA Bonus"), and
one-third of the Incentive Bonus shall be earned based upon the attainment by
the Corporation of targeted margins during the period (the "Margins Bonus"). The
EBITDA and margins targets used for purposes of determining the EBITDA Bonus and
the Margins Bonus shall be set forth in the Corporation's Annual Operating Plan
(as defined in Section 4(d) below). Separate calculations shall be made with
respect to each of the EBITDA Bonus and the Margins Bonus. Notwithstanding
anything herein to the contrary, the Corporation must achieve more than 90% of
the targeted EBITDA or margins, whichever is being tested, during the period for
the Executive to receive a bonus with respect to that component. To the extent
that the Corporation achieves 90% or more of the target, the Executive shall be
entitled to receive an Incentive Bonus based upon the following formula:
Percentage Attainment of Targeted EBITDA or Margins (each tested separately)
for the Period
(Determined to the Nearest Hundredth of a Percent)
Minus
-----
90
Divided By
----------
10
For example, if the Corporation achieves 95% of the targeted EBITDA and 85% of
the targeted margins as set forth in the Corporation's Annual Operating Plan for
the period, the Executive shall receive 33.33% of the Bonus Target, determined
as follows:
Bonus Target for EBITDA = 66.67% of total Bonus Target ("EBITDA Target")
% of EBITDA Target = (95-90) / 10 = 50%
% of total Bonus Target from EBITDA = 66.67% x 50% = 33.33%
2
<PAGE> 3
Bonus Target for Margins = 33.33% of total Bonus Target ("Margins Target")
% of Margin Target = 0% (performance below 90%)
% of total Bonus Target from Margins = 33.33% x 0% = 0%
% of total Bonus Target from Revenue and Margins = 33.33% + 0% = 33.33%
Notwithstanding anything herein to the contrary, for calendar year 1999, (i) the
Bonus Target shall be $35,000, which is 50% of the Executive's annual base
salary for the period August 1, 1999, through December 31, 1999 ($70,000), and
(ii) the amount of the Incentive Bonus earned by the Executive shall be
determined based on actual margins and EBITDA and targeted margins and EBITDA
for the entire calendar year 1999.
(c) Payment of Incentive Bonuses. The entire amount of the EBITDA
Bonus up to 100% of the EBITDA Target and the entire amount of the Margins Bonus
up to 100% of the Margins Target (each determined separately) shall be paid in
cash or by check. To the extent the EBITDA Bonus or the Margins Bonus exceeds
100% of the EBITDA Target or the Margins Target, as applicable, one-third of
such excess amount shall be paid in cash or by check, and the remaining
two-thirds shall be paid by the issuance to the Executive of a nonqualified
stock option (the "Option") to purchase Common Stock of the Corporation, par
value $0.001 per share ("Common Stock"). The cash amount of the Incentive Bonus
shall be paid, and the Option portion of the Incentive Bonus shall be issued,
within ten (10) days after the Calculation Date (as defined in Section 4(e)
below). In any event, the effective date of the grant of the Option shall be the
last day of the period for which the Incentive Bonus was calculated. The
exercise price per share of the Option shall be twenty-five percent (25%) of the
Fair Market Value per share of the Common Stock as of the last day of the period
for which the Incentive Bonus was calculated. For purposes of this Section 4(c),
Fair Market Value per share shall be determined in accordance with Section 4(f).
The number of shares subject to the Option shall be determined by dividing the
dollar amount of the Incentive Bonus payable in the form of the Option by an
amount equal to seventy-five percent (75%) of the Fair Market Value per share of
the Common Stock as of the last day of the period for which the Incentive Bonus
was calculated. The Option shall be fully vested and exercisable as of the date
of its grant and shall have a ten (10) year term. An example of the above
calculation is as follows: Assume the EBITDA Bonus exceeds the EBITDA Target by
$50,000. Assume further that the Fair Market Value per share is $12.00. The
exercise price per share would be $12.00 x .25, or $3.00. The number of shares
subject to the Option would be ($50,000 x .667) / ($12.00 x .75), or 3,704
shares.
(d) Annual Operating Plan. On or before December 15 of the
preceding calendar year, management of the Corporation shall prepare in good
faith and submit to the Board of Directors, and the Board of Directors shall
adopt, an annual business plan for the Corporation. In preparing the annual
business plan, management shall consider, among other factors, the past
performance of the Corporation and the Corporation's current outlook based upon
the Corporation's backlog and such other factors as management shall deem
appropriate. Upon adoption by the Board of Directors by a
3
<PAGE> 4
majority vote, provided that the Chief Executive Officer of the Corporation (the
"CEO") and at least one of the members of the Board of Directors designated by
the Investors, as such term is defined in that certain Recapitalization
Agreement (the "Recapitalization Agreement") by and among the Corporation and
the additional parties named therein dated as of August 13, 1999 (each, an
"Investor Director") in accordance with that certain Shareholders' Agreement
(the "Shareholders' Agreement") by and among the Corporation and the parties
named therein dated as of August 13, 1999 (assuming that there are then such
members of the Board of Directors) must have voted in favor of adoption, the
annual business plan shall be the "Annual Operating Plan" for purposes of this
Agreement. If the Board of Directors (including the CEO and at least one
Investor Director) fails to approve the annual business plan as set forth
herein, the plan for the prior year multiplied by 140% shall be the "Annual
Operating Plan" for purposes of this Agreement. Notwithstanding the foregoing,
the Annual Operating Plan to be used for purposes of calendar year 1999 shall be
the annual business plan adopted by the Corporation's Board of Directors on
December 14, 1998, as amended by the Corporation's Forecast dated May 23, 1999.
(e) Determination of Margins and EBITDA. For purposes of this
Agreement, "EBITDA" means earnings before interest, taxes, depreciation and
amortization; provided, however, that notwithstanding anything herein to the
contrary, EBITDA shall be adjusted as necessary to exclude the effects of (i)
the payment of transaction costs associated with the consummation of the
transactions contemplated by the Recapitalization Agreement, which shall include
but not be limited to bank fees, finance fees, legal fees, accounting fees, and
any other similar types of fees or expenses; (ii) the payment of transaction
costs associated with the consummation of a major capital event such as a sale
of all or substantially all of the Corporation's stock or assets, a merger or
consolidation, or an initial public offering; and (iii) payment of any
"Transaction Fee" or "Management Fee", as those terms are defined in the
Shareholders' Agreement. When calculated for a full calendar year, margins and
EBITDA shall be as determined in connection with the preparation of the
Corporation's audited financial statements for the year, which statements shall
be prepared in accordance with generally accepted accounting principles
consistently applied as in effect from time to time in the United States. When
calculated for any period which is less than a full calendar year, margins and
EBITDA shall initially be determined in connection with the preparation of the
Corporation's unaudited financial statements for such period, which statements
shall be prepared in accordance with generally accepted accounting principles
consistently applied as in effect from time to time in the United States and
shall be certified by the Corporation's controller. When the Incentive Bonus is
calculated for a partial year as described above, fifty percent (50%) of such
Incentive Bonus (including both cash and options, pro-rata) shall be paid or
issued immediately to the Executive and the remaining fifty percent (50%) shall
be retained by the Corporation until the regular audit of the financial
statements for such year has been completed. The amount of the Incentive Bonus
for such period shall then be re-determined based upon the Corporation's audited
financial statements, and the Corporation shall pay and issue to the Executive
any shortfall, and the Executive shall refund or return for cancellation to
4
<PAGE> 5
the Corporation any over-payment, based upon the amount of the Incentive Bonus
as re-determined and the amount previously paid and issued. Margins and EBITDA
for a full calendar year period shall be determined within fifteen (15) days
after the release of the Corporation's audited financial statements. Margins and
EBITDA for a period which is less than a full calendar year shall be determined
within fifteen (15) days after the end of the month in which such period
terminates. The date by which margins and EBITDA are to be determined or
re-determined is referred to as the "Calculation Date." The Corporation shall
use its best efforts to cause audited financial statements prepared by an
independent certified public accountant to be released no later than April 15th
of the following year. The Corporation shall notify the Executive of the amount
of the Incentive Bonus no later than five (5) days after the Calculation Date.
(f) Determination of Fair Market Value. If the Common Stock is
listed upon an established stock exchange or exchanges, then the Fair Market
Value per share shall be deemed to be the average of the quoted closing prices
of the Common Stock on such stock exchange or exchanges on each of the thirty
(30) days immediately preceding the day for which the determination is made. If
the Common Stock is not listed upon an established stock exchange but is traded
in the NASDAQ National Market System, the Fair Market Value per share shall be
deemed to be the average of the closing prices of the Common Stock in the
National Market System on each of the thirty (30) days immediately preceding the
day for which the determination is made. If the Common Stock is not listed upon
an established stock exchange and is not traded in the National Market System,
the Fair Market Value per share shall be deemed to be the average of the mean
between the dealer "bid" and "ask" closing prices of the Common Stock on the
NASDAQ System on each of the thirty (30) days immediately preceding the day for
which the determination is made. If none of these conditions apply, Fair Market
Value shall be the amount (the "Formula Price") determined as follows: (i) if
the date of determination is on or before the date which is six (6) months after
the closing of the transactions contemplated by the Recapitalization Agreement,
an amount equal to $1.085 per share, subject to equitable adjustment in the
event of any increase or decrease in the shares of Common Stock by way of stock
split, share reclassification, stock dividend or other similar transaction, or
(ii) if the date of determination is after the date which is six (6) months
after the closing of the transactions contemplated by the Recapitalization
Agreement, the fair value of each share determined by multiplying EBITDA for the
twelve month period ending on the day for which the determination is made times
an industry multiple equal to the average multiples of a list of ten comparable,
publicly-traded companies, which list has initially been determined by mutual
agreement of the CEO and InSight Capital Partners. Such list shall be revised
each year on January 1 upon the mutual agreement of the CEO and InSight Capital
Partners. A minority/liquidity discount of 20% shall be applied in determining
the Formula Price pursuant to clause (ii) above.
(g) Determination of Incentive Bonuses Following Termination of
Employment. In the event of the termination of the Executive's employment by the
Corporation for Cause (as defined in Section 20(a)) or by the Executive without
Good Reason (as defined in Section 20(c)), the Executive shall be entitled to
receive an
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Incentive Bonus for any calendar year concluded prior to such termination of
employment but shall not be entitled to receive an Incentive Bonus for the
calendar year in which such termination of employment occurs. In the event of
the termination of the Executive's employment for any reason other than by the
Corporation for Cause or by the Executive without Good Reason, including without
limitation the Executive's death or disability, the Executive shall be entitled
to receive an Incentive Bonus both with respect to any calendar year concluded
prior to such termination of employment and with respect to the calendar year in
which such termination of employment occurs. The amount of the Bonus Target for
the year in which such termination occurs shall be prorated based upon the
amount of the Executive's base salary which accrued during the portion of the
year during which the Executive was employed by the Corporation, and the amount
of the Incentive Bonus for such year shall be determined based upon actual
margins and EBITDA and targeted margins and EBITDA under the Annual Operating
Plan for that year through either the end of the calendar month in which the
termination occurs or the end of the preceding calendar month, whichever is more
favorable to the Executive.
5. Executive's Duties. The Executive is employed on a full-time basis
as Vice President of Finance and Chief Financial Officer and as an essential
member of the management of the Corporation. So long as this Agreement is in
effect, the Executive will not be employed or engaged by any other person or
firm other than the Corporation unless otherwise authorized in writing by the
Board of Directors of the Corporation. Any and all compensation received in
money or other property from any person or entity other than the Corporation for
professional services rendered by the Executive shall be deemed to be the
property of the Corporation. The Executive agrees that upon the receipt of any
such money or property, he shall promptly remit such compensation to the
Corporation together with a full accounting thereof.
6. Facilities. The Corporation shall furnish facilities, equipment,
services and assistance suitable to the Executive's position for the performance
of the Executive's duties.
7. No Copies of Documents and Materials. The Executive shall not
(except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation) at any time or in any manner make or
cause to be made any copies, pictures, duplicates, facsimiles or other
reproductions or recordings or any abstracts or summaries of any reports,
studies, memoranda, correspondence, manuals, records, plans or other written,
printed, computerized or otherwise recorded materials of any kind or nature
whatsoever belonging to or in the possession of the Corporation or any of its
subsidiaries.
8. Materials Remain on Premises. The Executive shall have no right,
title or interest in any material referenced in Section 7. The Executive agrees
that, except in the performance of his duties in the ordinary course of business
for which he is employed by the Corporation, the Executive will not, without the
prior written consent of the Corporation, remove any such material from any
premises of the Corporation. The
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Executive further agrees that, immediately upon the termination of his
employment with the Corporation or upon the termination of this Agreement,
whichever occurs earlier, or at any time prior thereto upon the request of the
Corporation, he shall surrender all such material to the Corporation and execute
a document acknowledging that he has complied with the provisions of this
Agreement.
9. Trade Secrets. The Executive shall not at any time, whether during
or after the term of this Agreement, use for the Executive's own benefit or
purposes or for the benefit or purposes of any other person, firm, partnership,
association, corporation or business organization, entity or enterprise, or
disclose (except in the performance of his duties in the ordinary course of
business for which he is employed by the Corporation) in any manner to any
person, firm, partnership, association, corporation or business organization,
entity or enterprise any trade secret, information, data, know how or knowledge
(including, but not limited to, that relating to service techniques, purchasing
organization and methods, sales organization and methods, inventories, client
lists, market development and expansion plans, personnel training and
development programs and client and supplier relationships) or any other
Discoveries (as defined in Section 11) belonging to or relating to the affairs
of the Corporation or any of its subsidiaries or to the clients of the
Corporation or any of its subsidiaries; provided, however, that this Section 9
shall not apply to any trade secret, information, data, know how, knowledge, or
Discovery that is or becomes generally available to the public through no fault
or action of the Executive.
10. Customers. In furtherance of and not in limitation of Section 9,
the Executive acknowledges that the list of the Corporation's and its
subsidiaries' customers as it may exist from time to time constitutes a valuable
and unique asset of the Corporation, and the Executive agrees that he shall not,
during or after the term of his employment, disclose such list or any part
thereof to any person, firm, partnership, association, corporation, or business
organization, entity or enterprise for any reason or purpose whatsoever, nor
shall the Executive use such customer list for his own benefit or purposes or
for the benefit or purposes of any business with whom the Executive may become
associated.
11. Discoveries. The Executive agrees with the Corporation that any and
all inventions, discoveries, improvements, designs, methods, systems,
developments, know how, ideas, suggestions, devices, trade secrets and processes
(hereinafter collectively referred to as "Discoveries"), whether patentable or
not, which are discovered, disclosed to or otherwise obtained by the Executive
during his employment with the Corporation are confidential, proprietary
information and are the sole and absolute property of the Corporation. The
Executive agrees to disclose promptly to the Corporation all such Discoveries
and to assist the Corporation in making any application in the United States and
in foreign jurisdictions for patents of any kind with respect thereto.
12. Works for Hire. All works and writings of a professional nature
which are produced by the Executive during his employment with the Corporation
constitute works made for hire and are the sole and absolute property of the
Corporation. The Executive
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grants the Corporation the exclusive right to copyright all such works and
writings in the United States and in foreign jurisdictions. To the extent any
such works or writings are deemed to not be works for hire, the Executive hereby
assigns and agrees to assign all his interests therein to the Corporation or its
nominee. Whenever requested to do so by the Corporation, the Executive shall
execute any and all applications, assignments, or other instruments that the
Corporation may deem necessary to protect the Corporation's interest therein.
13. Non-Competition.
(a) The Executive acknowledges that his employment as a member of
the Corporation's executive management team creates a relationship of confidence
and trust between the Executive and the Corporation with respect to confidential
and proprietary information applicable to the business of the Corporation, its
subsidiaries and its clients. The Executive further acknowledges the highly
competitive nature of the business of the Corporation. Accordingly, the
Corporation and the Executive agree that the restrictions contained in this
Section 13 are reasonable and necessary for the protection of the immediate
interests of the Corporation and that any violation of these restrictions would
cause substantial injury to the Corporation.
(b) For purposes of this Agreement, the term "Competitive
Business" means any person, firm, partnership, association, corporation, or
business organization, entity or enterprise which derives or which expects
during the following two (2) years to derive either (i) ten percent (10%) or
more of its revenues, or (ii) more than $10,000,000 in revenues from providing
technical management consulting and/or systems integration services for
Automated Mapping/Facilities Management Systems and/or Geographic Information
Systems and/or utility transmission and distribution systems. The term
"Competitive Business" is not intended to include mere vendors or suppliers of
the Corporation.
(c) For purposes of this Agreement, the term "Existing Client"
means a client for whom the Corporation or any of its subsidiaries is performing
consulting services as of the date of the termination of the Executive's
employment with the Corporation or for whom the Corporation or any of its
subsidiaries performed consulting services within the two (2) year period
immediately preceding the termination of the Executive's employment with the
Corporation. The term "Existing Client" is not intended to include mere vendors
or suppliers of the Corporation.
(d) During the Executive's employment with the Corporation and for
a period of one (1) year following the termination of the Executive's employment
with the Corporation for any reason other than termination occasioned by the
expiration of this Agreement, the Executive shall not (nor shall the Executive
cause, or provide assistance to anyone else to):
i. Employ or otherwise engage, or attempt to employ or
otherwise engage, in or on behalf of the Executive or any Competitive Business,
any
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person who is employed or engaged as an employee, consultant, agent or
representative of the Corporation or any of its subsidiaries as of the date of
the Executive's termination or at any time during the one-year period following
such termination; or
ii. Solicit directly or indirectly on behalf of the Executive
or any Competitive Business, the customer business or account of any Existing
Client of the Corporation.
(e) If any court shall determine that the duration, geographic
limitations, subject or scope of any restriction contained in this Section 13 is
unenforceable, it is the intention of the Parties that this Section 13 shall not
thereby be terminated but shall be deemed amended to the extent required to make
it valid and enforceable, such amendment to apply only with respect to the
operation of this Section 13 in the jurisdiction of the court that has made the
adjudication.
(f) Notwithstanding anything herein to the contrary, the
provisions of this Section 13 shall not be applicable to any termination which
occurs after December 31, 2000.
14. Employability. The Executive recognizes and acknowledges that he
has sufficient abilities and talents to be able to obtain, upon the termination
of this Agreement, comparable employment from another business organization or
entity while fully honoring and complying with the above covenants concerning
confidential information and contacts with the Corporation's or any of its
subsidiaries' existing customers or employees. The Executive recognizes and
acknowledges the importance to the Corporation and its subsidiaries of the above
covenants and, therefore, agrees that, for a period of one (1) year following
the termination of the Executive's employment with the Corporation and upon the
Corporation's reasonable request of the Executive, he will advise the
Corporation of the identity of his new employer and will provide a general
description, in reasonable detail, of his new duties and responsibilities
sufficient to inform the Corporation of its need to request a court order to
enforce the above covenants.
15. Remedies. The Executive acknowledges and agrees that the provisions
of this Agreement are essential to the Corporation and are reasonable and
necessary to protect the legitimate interests of the Corporation and its
subsidiaries and that the damages sustained by the Corporation or its
subsidiaries as a result of a breach of the agreements contained herein will
subject the Corporation or its subsidiaries to immediate, irreparable harm and
damage, the amount of which, although substantial, cannot be reasonably
ascertained, and that recovery of damages at law will not be an adequate remedy.
The Executive therefore agrees that the Corporation and its subsidiaries, in
addition to any other remedy they may have under this Agreement or at law, shall
be entitled to injunctive and other equitable relief to prevent or curtail any
breach of any provision of this Agreement. In the event suit or action is
instituted to enforce this Agreement or any of the terms and conditions hereof,
including, but not limited to, suit for preliminary injunction, the prevailing
Party shall be entitled to costs
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and reasonable attorneys' fees. The Executive waives any right to the posting of
a bond in the event of an issuance of a temporary restraining order, preliminary
injunction or permanent injunction upon the issuance of said order by a court of
competent jurisdiction.
16. Expenses. In the promotion and execution of the business of the
Corporation, the Executive is expected to incur certain reasonable expenses for
entertainment, travel, company automobile expenses (including insurance,
maintenance, fuel and depreciation, if applicable), and business fax and
telephone bills which shall be subject to approval by the Corporation. The
Corporation recognizes the necessity for such expenditures in order to retain
and further the professional skills, abilities and standing of the Executive and
to properly maintain, promote and develop the Corporation's consulting practice.
The Corporation shall also pay the Executive's dues and fees for attending
professional meetings and institutes, costs of professional books and
periodicals and promotion, entertainment and travel expenses reasonably related
to the business of the Corporation. All payments made by the Corporation
pursuant to this Section 16 shall be made in a manner consistent with the
Corporation's practices in years prior to the execution of this Agreement.
Unusual and extraordinary expenses incurred by the Executive and not approved in
advance by the Corporation may not be reimbursed.
17. Vacation Leave Time. Vacation leave shall accrue at the rate of
four (4) weeks per year. Any unused vacation leave time accumulated during the
year shall carry over to subsequent years.
18. Disability. The Corporation may terminate this Agreement upon
written notice to the Executive if the Executive is physically or mentally
incapacitated and unable to perform his duties under this Agreement for a period
of (i) any one hundred eighty (180) days out of any three hundred sixty (360)
days, if the Common Stock of the Corporation is not then publicly traded, or
(ii) ninety (90) out of any one hundred eighty (180) days if the Common Stock of
the Corporation is then publicly traded. If at any time a question arises as to
the incapacity of the Executive, then the Corporation shall promptly employ one
physician who is a member of the American Medical Association and who is
mutually agreeable to the Corporation and the Executive to examine the Executive
and determine if his physical and/or mental condition is such as to render him
unable to perform his duties under this Agreement. The decision of the physician
shall be certified in writing to the Corporation, shall be sent by the
Corporation to the Executive or his representative and shall be conclusive for
purposes of this Agreement. Any compensation payments payable to the Executive
hereunder shall be reduced by the amount of any disability payments the
Executive receives as a result of disability policies on which the Corporation
has paid the premiums.
19. Death During Employment. This Agreement shall terminate upon the
Executive's death. In such event, the Corporation shall pay a death benefit
equal to the Executive's base monthly salary for the balance of the month of the
Executive's death and for the month following his death. Any amounts payable
under this Agreement
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following the Executive's death shall be paid to the beneficiary named in
writing by the Executive, or if none, to the Executive's surviving spouse, or if
none, to the executors and administrators of the Executive's estate and shall be
paid within sixty (60) days of the Executive's death.
20. Termination for Other Than for Disability or Death. This Agreement
may terminate for reasons other than the Executive's disability or death upon
the occurrence of any of the following events; provided, however, that neither
the Executive nor the Corporation may terminate this Agreement pursuant to this
Section 20 in 1999 except for a termination by the Corporation for Cause as
provided in Section 20(a) or a termination by the Executive for Good Reason as
provided in Section 20(c).
(a) The Corporation, at its option, may terminate the Executive
for Cause (as defined below) upon thirty (30) days' advance written notice by
the Corporation to the Executive fully setting forth such Cause, which notice of
termination may be appealed to the Board of Directors of the Corporation.
Termination shall be effective on the thirtieth (30th) day following the
Executive's receipt of written notice from the Corporation. "Cause" shall be
limited to a situation in which the Executive has:
i. Committed a criminal offense that, if committed in the
State of Colorado, would have constituted a felony under the laws of the State
of Colorado or the United States (other than a traffic offense or other similar
violation); or
ii. Committed a fraudulent act which is materially harmful to
the Corporation (materiality, for purposes of this clause, means in excess of
$50,000); or
iii. Committed an act of willful misconduct which results in
actual damages against the Corporation of $500,000 or more; or
iv. Committed an act of gross insubordination by willfully
and repeatedly refusing to obey written directions of the Board of Directors (so
long as such directions do not involve illegal or immoral acts), which refusal
continues for a period of ten (10) days after written notice to the Executive by
the Corporation which notice references such refusal and this Section 20(a); or
v. Committed repeated acts of alcohol or illegal drug abuse,
and has failed to take reasonable steps to address such issues within ten (10)
days after written notice to the Executive by the Corporation which notice
references such acts and this Section 20(a); or
vi. Except during periods of vacation leave permitted
pursuant to Section 17, failed to devote substantially all of his professional
time and attention to the performance of his obligations under this Agreement,
as determined by the Board of Directors of the Corporation, which failure
continues for a period of fifteen (15) days after Actual Receipt (as defined in
Section 20(b) below) of written notice by
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the Executive from the Corporation which notice references such failure and this
Section 20(a).
(b) The Corporation shall have the right to terminate this
Agreement without Cause at any time after thirty (30) days after Actual Receipt
of written notice by the Executive from the Corporation. Non-renewal of this
Agreement shall not be deemed to be a termination of employment for purposes of
this Agreement. For purposes of this Agreement, "Actual Receipt" of notice shall
mean actual physical receipt (or refusal of acceptance) of notice by the
Executive; provided, however, that in the event the Executive has been away from
the office for more than two weeks and either the Executive's whereabouts are
unknown to the Corporation or the Executive is at a location where the
Corporation cannot reasonably communicate with him, the Executive will be deemed
to have refused delivery of notice on the day such notice is delivered (or
delivery is attempted) to the Executive's last known residence. In such event,
the Corporation shall nonetheless provide a copy of the notice to the Executive
as soon as it is reasonably possible to do so.
(c) The Executive at his option, may terminate this Agreement for
Good Reason (as defined below) upon thirty (30) days' advance written notice by
the Executive to the Corporation, which notice shall reference this Section
20(c) and shall describe in reasonable detail the cause for such Good Reason.
Such termination shall be effective on the thirtieth (30th) day following the
Corporation's receipt of written notice from the Executive; provided, however,
that such termination shall not be effective if the Corporation has cured the
cause for such Good Reason to the Executive's reasonable satisfaction within
such thirty (30) day period. For purposes of this Section 20(c), "Good Reason"
shall mean any of the following:
i. A material breach of this Agreement by the Corporation;
ii. The Corporation's requiring the Executive to be based at
any office or location other than one within the Denver, Colorado metropolitan
area, except for required travel on the Corporation's business to an extent
substantially consistent with the Executive's obligations immediately prior to
the Effective Date;
iii. Any purported termination by the Corporation of the
Executive's employment other than as permitted in this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement, and it being further understood that the nonrenewal
of this Agreement shall not be deemed to be a termination of employment for
purposes of this Agreement; or
iv. A material reduction in the character of the duties
assigned to the Executive or in the Executive's level of work responsibility,
unless mutually agreed upon by the Executive and the Corporation;
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(d) The Executive shall have the right to terminate this Agreement
without cause at any time upon sixty (60) days' advance written notice to the
Corporation.
21. Rights Upon Termination.
(a) Upon termination of the Executive's employment with the
Corporation, the Corporation shall have no further obligation to the Executive
except as specifically provided under this Agreement. Termination of the
Executive's employment shall not affect the Executive's right to receive any
compensation or bonuses which have accrued but have not been paid through the
date of termination, including, but not limited to, the Incentive Bonuses for
that portion of the calendar year prior to the termination.
(b) Upon termination of this Agreement by mutual agreement of the
parties, or by the Corporation other than for Cause pursuant to Section 20(a),
or by the Executive for any reason whatsoever, the Corporation shall, both
verbally and in writing, acknowledge that the Executive performed the services
provided under this Agreement in a good and proficient manner and shall provide
a positive reference to any person or entity that may request a reference with
regard to the Executive.
(c) Upon the termination of the Executive's employment with the
Corporation for any reason other than by the Corporation for Cause pursuant to
Section 20(a), the Executive shall be entitled to keep, free and clear of any
liens and encumbrances and any claim of title by the Corporation, (i) equipment
owned by the Corporation and used by the Executive with the approval of the
Corporation in the Executive's home, to the extent that the value of such
equipment does not exceed $10,000, and (ii) the automobile provided by the
Corporation for the Executive's use.
22. Default in Payments. If any payment is due and payable to the
Executive following a termination of this Agreement and such payment is not made
when due and such non-payment continues for a period of ten (10) days after
written notice thereof from the Executive to the Corporation, which notice
describes such payment default and references this Section 22, the following
shall occur:
(a) The Executive shall be immediately released from Section 13
hereof regarding non-competition; and
(b) The Executive shall retain all other rights and remedies
against the Corporation.
23. Withholding Tax. The Corporation shall be entitled to withhold from
any compensatory payments which it makes to the Executive under this Agreement
or otherwise an amount sufficient to satisfy all Federal, state and local income
and employment tax withholding requirements with respect to any and all
compensation paid to the Executive by the Corporation.
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24. Registration Rights. The Executive shall be entitled to
registration rights with respect to shares of Common Stock of the Corporation
held by the Executive as set forth in that certain Registration Rights Agreement
by and among the Corporation and the parties named therein dated as of August
13, 1999.
25. Arbitration. Any controversy or claim arising out of or related to
this Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final and binding upon the Parties,
shall not be appealed from or contested in any court and may, in appropriate
circumstances, include injunctive relief. Should any Party fail to appear or be
represented at the arbitration proceedings after due notice in accordance with
the Rules, then the arbitrator may nevertheless render a decision in the absence
of said Party, and such decision shall have the same force and effect as if the
absent Party had been present, whether or not it shall be adverse to the
interests of that Party. Any award rendered hereunder may be entered for
enforcement, if necessary, in any court of competent jurisdiction, and the Party
against whom enforcement is sought shall bear the expenses, including attorneys'
fees, of enforcement. Notwithstanding the foregoing, the Corporation shall be
entitled to seek injunctive or other equitable relief to enforce any of the
provisions in Sections 7 through 13 from any court of competent jurisdiction
without the need to resort to arbitration.
26. Survival. The covenants contained in this Agreement shall survive
any termination of the Executive's employment with the Corporation and shall
survive any termination of this Agreement. The existence of any claim or cause
of action of the Executive against the Corporation, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Corporation of any of the covenants contained in this Agreement.
27. Severability. If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and the Executive and the Corporation hereby consent and agree that the
scope of such restriction may be judicially modified in any proceeding brought
to enforce such restriction. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted from this Agreement
and the remainder of this Agreement shall remain in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or
geographical extent of or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law, then such provision shall be construed to cover only that duration or
extent or those activities which may validly and enforceably be covered.
28. Subsidiaries. The "subsidiaries" of the Corporation as that term is
used in this Agreement include Utility Graphics Consultants Corporation, Graphic
Data Systems
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Corporation and their subsidiaries, together with any other corporation in which
the Corporation or its subsidiaries hold more than a fifty percent (50%)
interest at any time during the term of this Agreement.
29. Notice. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered by personal delivery,
air courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of the Executive as it appears in the
corporate records for notice to the Executive, or to the principal office of the
Corporation for notice to the Corporation. All notices delivered in accordance
with this Section shall be deemed to have been received and shall be deemed
effective if delivered in person or by air courier, upon actual receipt by the
intended recipient, or if mailed, upon the date of delivery or refusal to accept
delivery as shown by the return receipt therefor.
30. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the Party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, and shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
31. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Parties hereto.
32. Assignment. The rights and obligations of the Corporation under
this Agreement shall, with the prior written consent of the Executive, inure to
the benefit of and be binding upon the successors and assigns of the
Corporation. If the Corporation shall at any time be merged or consolidated with
any other corporation or shall sell or otherwise transfer a substantial portion
of its assets to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
have been sold or transferred. Upon the Executive's request, the Corporation
shall obtain an agreement to expressly assume this Agreement from any such
successor. This is a personal service contract and may not be assigned by the
Executive.
33. Entire Agreement. This instrument contains the entire agreement of
the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
and the Parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein.
34. Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the internal laws of the State of Colorado
applicable to
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agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
35. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ Glenn E. Montgomery, Jr.
--------------------------------
Glenn E. Montgomery, Jr.
Chief Executive Officer
"EXECUTIVE"
/s/ Scott M. Schley
------------------------------------
Scott M. Schley
Executive
DENVER:0930426.06
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EXHIBIT 10.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated this 11th day of
October, 1999 and is entered into by and between Mark Shirman ("Executive") and
Convergent Group Corporation, a Delaware corporation, having its principal
office at 6399 South Fiddler's Green Circle, Suite 600, Englewood, Colorado
80111 (the "Corporation"). In consideration of the mutual promises and the terms
and conditions set forth below, Executive and the Corporation (together, the
"Parties," and each, a "Party") agree as follows:
1. Employment. The Corporation shall employ Executive as an Executive
Vice President of the Corporation, and Executive hereby accepts such employment
and agrees to perform such duties and undertake such responsibilities as are
customarily performed by others holding positions similar to that assigned to
Executive in similar businesses, subject to the general direction and
supervision of the Corporation's President and Chief Executive Officer.
2. Full-Time Best Efforts. Executive shall devote his full professional
time and attention to the performance of his obligations under this Agreement,
and will at all times faithfully, industriously and to the best of his ability,
experience and talent, perform all of his obligations hereunder. Executive shall
receive a performance review from the Corporation after six months of employment
and thereafter on or about each anniversary of the Effective Date (as defined
below).
3. Term. The term of this Agreement shall begin on October 11, 1999
(the "Effective Date") and shall end on December 31, 2002, unless terminated
prior to that date as provided herein..
4. Compensation and Benefits.
(a) The Corporation shall pay compensation to Executive consisting
of an annual base salary and bonuses. The annual base salary, effective as of
October 11, 1999, is $200,000. Executive's base salary shall be reviewed at
annually in conjunction with Executive's annual performance review and may be
increased, but not decreased, as appropriate in light of Executive's
performance. Executive's annual base salary shall be paid in twenty-four (24)
semi-monthly payments during each annual period.
(b) The annual base salary set forth in Section 4(a) shall be
adjusted annually in an amount equal to the increase in the cost of living
during the preceding annual period. At no time shall the annual base salary be
adjusted to an amount lower than the previous year's annual base salary. The
first cost of living adjustment shall be effective as of October 1, 2000 and
shall be based upon the cost of living increase for the period October 1, 1999
through September 30, 2000. The annual base salary shall be adjusted annually
each year thereafter, effective as of October 1, based upon the prior
<PAGE> 2
calendar year's cost of living change. The cost of living adjustment shall be
determined by reference to the change in the Consumer Price Index - Cities, all
items, figures for urban wage earners and clerical workers, Boston, as published
by the Bureau of Labor Statistics or a comparable index if this index is
discontinued at any time during the term of this Agreement. If the change in the
Consumer Price Index has not been released as of the time at which an adjusted
payment is to be made, the Corporation shall estimate the amount of the
adjustment, and the amount of any overpayment or underpayment shall be corrected
in the first payment in which it is reasonably practical to do so after the
Consumer Price Index is released.
(c) Executive shall receive a signing bonus of $180,000 (the
"Signing Bonus") in addition to his annual base salary. The signing bonus shall
be paid in twelve monthly payments of $15,000, payable on the last day of each
calendar month commencing October 31, 1999 and continuing through September 30,
2000, provided that Executive remains employed by the Corporation as of such
date.
(d) Commencing October 1, 2000, Executive shall be eligible to
earn an annual incentive performance bonus for each year (the "Incentive Bonus")
in addition to his annual base salary. The targeted annual bonus amount shall be
consistent with the bonus opportunity provided to other executive and senior
managers of the Corporation at Executive's level of employment (the "Target
Bonus"). The initial Target Bonus shall be pro-rated for the period October 1,
2000 through December 31, 2000. The amount of the Target Bonus which is earned
shall be dependent upon the attainment of Executive's annual performance plan
focussed upon E-Commerce and other mutually agreed upon objectives, which plan
shall be established annually by mutual agreement between Executive and the
Corporation, provided that the plan must be reasonably attainable by Executive
(the "Annual Performance Plan"). The initial Annual Performance Plan shall cover
the period from the Effective Date through December 31, 2000 and shall be
established within forty-five (45) days after the Effective Date. Subsequent
Annual Performance Plans shall cover a calendar year and shall be established
for each year on or before January 31 of such year. If the Corporation and
Executive are unable to mutually agree with respect to Executive's Annual
Performance Plan, the Annual Performance Plan shall be determined by the
Corporation in its reasonable discretion, provided that the plan must be
reasonably attainable by Executive. There shall be a 90% threshold for receipt
of the Incentive Bonus. If Executive achieves less than 90% of his Annual
Performance Plan during any year, Executive shall not be entitled to receive any
Incentive Bonus for such year. If the 90% threshold is met or exceeded,
Executive shall receive an Incentive Bonus equal to that percentage of the
Target Bonus which is the same as the percentage of the Annual Performance Plan
that has been met, up to 100%. Exceeding 100% of the Annual Performance Plan may
result in additional compensation to be determined by the Corporation in its
reasonable discretion. Any Incentive Bonus earned pursuant to this Agreement
shall be paid no later than April 15 of the year following the year for which
the Incentive Bonus was earned.
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(e) Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of Executive's level or its
employees generally (the "Benefits"). In addition, provided that Executive is
able to qualify for such insurance, the Corporation shall pay the premiums for
$2,000,000 of life insurance on the life of Executive. The Corporation shall be
the beneficiary of $500,000 of such coverage. Executive shall be entitled to
name the beneficiary for the remaining $1,500,000 of such coverage. Executive
shall be entitled to receive one week of sick/personal time and four weeks of
vacation during each full year of employment. Any unused vacation leave time
accumulated during such year of employment shall not carry over to subsequent
years.
5. Stock Options. Executive shall be granted options to purchase Common
Stock of the Corporation pursuant to the Corporation's 1999 Stock Option Plan.
Option grants shall be made in three separate tranches, as follows:
(a) The first grant ("Tranche 1") shall consist of options to
acquire 226,626 shares of Common Stock (0.3% of the outstanding capital stock of
the Corporation on a fully diluted basis as of the date of this Agreement). The
exercise price of the options in Tranche 1 shall be $.046 per share. The date of
grant shall be October 11, 1999. The options in Tranche 1 shall be fully vested
and exercisable as of the date of grant; provided, however, that if Executive
voluntarily terminates employment with the Corporation, other than for "Good
Reason" (as defined herein), prior to the first anniversary of the Effective
Date, all vested and unexercised options shall immediately terminate and any
shares acquired upon exercise of options prior to such date shall be forfeited
to the Corporation, and Executive shall be entitled to receive back the amount
paid therefor. The exercise period of the options in Tranche 1 shall be ten
years from the date of grant, subject to earlier termination as set forth in the
1999 Stock Option Plan.
(b) The second grant ("Tranche 2") shall consist of options to
acquire 377,710 shares of Common Stock (0.5% of the outstanding capital stock of
the Corporation on a fully diluted basis as of the date of this Agreement). The
exercise price of the options in Tranche 2 shall be $.046 per share. The date of
grant shall be October 11, 1999. None of the options in Tranche 2 shall be
vested or exercisable as of the date of grant. The options in Tranche 2 shall
begin to vest as of October 31, 1999, depending upon Executive's achievement of
the Annual Performance Plan for the period October 11, 1999 through September
30, 2000 (the "Initial Performance Period"). There shall be a 90% threshold for
the commencement of vesting of the Tranche 2 options. If Executive achieves less
than 90% of his Annual Performance Plan during the Initial Performance Period,
none of the Tranche 2 options shall be eligible for vesting and all of the
Tranche 2 options shall be forfeited. If the 90% threshold is met or exceeded, a
percentage of the Tranche 2 options shall begin to vest equal to that percentage
of the Tranche 2 options which is the same as the percentage of the Annual
Performance Plan that has been met, up to 100%. One-third of the Tranche 2
options which have become eligible for vesting as a result of meeting the Annual
Performance Plan during the Initial
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Performance Period shall vest and become exercisable effective as of October 11,
2000, provided that Executive remains in the employ of the Corporation. The
remaining two-thirds of such Tranche 2 options shall vest and become exercisable
in 24 monthly installments commencing on October 31, 2000 and continuing through
September 30, 2002, provided that Executive remains in the employ of the
Corporation. Any Tranche 2 options which do not commence to vest as of October
11, 2000 as a result of a failure to meet 100% of the Annual Performance Plan
during the Initial Performance Period shall be forfeited as of October 11, 2000.
The exercise period of the options in Tranche 2 shall be ten years from the date
of grant, subject to earlier termination as set forth in the 1999 Stock Option
Plan.
(c) The third grant ("Tranche 3") shall consist of options to
acquire up to 944,275 shares of Common Stock (1.25% of the outstanding capital
stock of the Corporation on a fully diluted basis as of the date of this
Agreement). Executive shall have the right, in his sole discretion, to allocate
the options in Tranche 3 among himself, Gregory H. Courniotes, David J.
Rubinstein and other employees of the Corporation who report, directly or
indirectly, to Executive; provided that the recipient of the options must be an
employee of the Corporation at the time of such allocation; and provided further
that the aggregate number of options so allocated shall not exceed 944,275. Such
allocation may be made at any time and from time to time on or after the
Effective Date and prior to the termination or expiration of this Agreement
(though once an allocation is made to an individual it may not be reallocated)
by written notice to the Corporation (an "Allocation Notice"). The date of grant
for each allocation shall be the date the Allocation Notice is received by the
Corporation. The exercise price of the options in Tranche 3 shall be Fair Market
Value, as determined in accordance with the 1999 Stock Option Plan, as of the
date of grant. The options in Tranche 3 shall vest and become exercisable only
upon the occurrence of a "Triggering Event" (as defined herein); provided that
Executive remains in the employ of the Corporation at the date of such
Triggering Event. A "Triggering Event" shall be deemed to have occurred (i) if
the Corporation's market capitalization, as determined by multiplying the
closing price per share of the Corporation's Common Stock in a nationally
recognized public trading market by the number of shares then issued and
outstanding, exceeds $1 Billion for thirty consecutive days at any time
commencing after October 1, 2000, or (ii) upon the closing of a sale of all or
substantially all of the Corporation's business, whether by sale of assets or
stock or by merger or consolidation, in a single transaction or a series of
related transactions (a "Sale"), in which the gross proceeds to the Corporation
or the Corporation's stockholders, as the case may be, equals or exceeds $750
Million. If the $750 Million threshold is met or exceeded, the percentage of the
Tranche 3 options which shall vest shall be determined by dividing the amount by
which the gross proceeds in the Sale exceeds $750 Million, up to a maximum of
gross proceed of $1 Billion or a $250 Million excess, by $250 Million. For
example if the gross proceeds in the Sale are $900 Million, 60% of the Tranche 3
options ($150 Million divided by $250 Million) shall vest. If there is a Sale in
which the $750 Million threshold is not met or exceeded, the Tranche 3 options
shall be forfeited. Due to the unique nature of the vesting conditions for the
options in Tranche 3, such options shall not automatically vest
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upon a "Change in Control" as provided in the 1999 Stock Option Plan, and the
1999 Stock Option Plan and the Stock Option Agreement issued pursuant to the
1999 Stock Option Plan to evidence the Tranche 3 options shall be modified as
necessary so that the provisions of this paragraph are permissible. The exercise
period of the options in Tranche 3 shall be ten years from the date of grant,
subject to earlier termination as set forth in the 1999 Stock Option Plan.
The option terms set forth herein shall be memorialized in Stock Option
Agreements to be executed by the Corporation and Executive pursuant to the
Corporation's 1999 Stock Option Plan. Such Option Agreements shall be in the
Corporation's standard form, subject to the modifications set forth herein,
shall be Incentive Stock Options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), to the maximum extent
permitted by the Code, and shall permit Executive to make an "early exercise" as
authorized pursuant to the 1999 Stock Option Plan. If there is any change,
increase or decrease, in the outstanding shares of the Corporation's Common
Stock which is effected without receipt of additional consideration by the
Company, by reason of a stock dividend, recapitalization, merger, consolidation,
stock split, combination or exchange of stock, or other similar circumstances,
which change occurs prior to the grant of all of the options to be granted
pursuant to this Agreement, then in each such event, the Corporation shall make
an appropriate adjustment in the aggregate number of shares of stock available
under the options not yet granted under this Agreement in order to prevent the
dilution or enlargement of Executive's rights. In making such adjustments,
fractional shares shall be rounded to the nearest whole share. If any options
are already outstanding at the time of any such change, such outstanding options
shall receive the anti-dilution protection set forth in the 1999 Stock Option
Plan. If at any time the Common Stock of the Corporation becomes
publicly-traded, the Corporation shall use reasonable efforts to register under
the Securities Act of 1933, as amended, the Common Stock to be received upon
exercise of Executive's options pursuant to a filing on Form S-8 or any
successor form, provided that the Corporation is eligible to use such Form. The
Corporation shall also use reasonable efforts to register under the Securities
Act of 1933, as amended, up to 50% of the shares of Common Stock to be received
upon exercise of Executive's options in the first secondary offering of the
Corporation's Common Stock following an initial public offering of the
Corporation's Common Stock. The Corporation and Executive recognize that the
Corporation's ability to effect a registration of shares held by Executive in
connection with a secondary offering of the Corporation's Common Stock may be
limited by the Corporation's existing obligations to register shares of Common
Stock held by existing shareholders of the Corporation pursuant to that certain
Registration Rights Agreement among the Corporation and the shareholders named
therein dated as of August 13, 1999. The Corporation and Executive further
recognize that the Corporation makes no representation and warranty regarding
the Corporation's ability to "go public" or consummate an initial public
offering or any secondary offering.
6. Facilities and Expenses. Executive's principal office shall be
located in facilities to be opened by the Corporation in the Boston,
Massachusetts metropolitan area (the "Boston Office"); provided, however, that
Executive shall make himself
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available at the Corporation's main office in Denver, Colorado, and/or at
customer premises at such times as are reasonably necessary for the satisfactory
performance of Executive's duties pursuant to this Agreement. The Corporation
shall pay per diem travel expenses, based upon the Corporation's standard
practices, for costs of commuting to the Corporation's main office and/or
customer premises. The Corporation shall further reimburse Executive, in
accordance with the Corporation's normal policies and procedures, for other
reasonable expenses incurred in the performance of Executive's duties hereunder,
including without limitation, expenses for entertainment and business fax and
telephone bills. Unusual and extraordinary expenses incurred by Executive and
not approved in advance by the Corporation may not be reimbursed.
7. No Copies of Documents and Materials. Executive shall not (except in
the performance of his duties in the ordinary course of business for which he is
employed by the Corporation) at any time or in any manner make or cause to be
made any copies, pictures, duplicates, facsimiles or other reproductions or
recordings or any abstracts or summaries of any reports, studies, memoranda,
correspondence, manuals, records, plans or other written, printed, computerized
or otherwise recorded materials of any kind or nature whatsoever belonging to or
in the possession of the Corporation or any of its subsidiaries.
8. Materials Remain on Premises. Executive shall have no right, title
or interest in any material referenced in Section 7. Executive agrees that,
except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation, Executive will not, without the prior
written consent of the Corporation, remove any such material from any premises
of the Corporation. Executive further agrees that, immediately upon the
termination of his employment with the Corporation or upon the termination of
this Agreement, whichever occurs earlier, or at any time prior thereto upon the
request of the Corporation, he shall surrender all such material to the
Corporation and execute a document acknowledging that he has complied with the
provisions of this Agreement.
9. Trade Secrets. Executive shall not at any time, whether during or
after the term of this Agreement, use for Executive's own benefit or purposes or
for the benefit or purposes of any other person, firm, partnership, association,
corporation or business organization, entity or enterprise, or disclose (except
in the performance of his duties in the ordinary course of business for which he
is employed by the Corporation) in any manner to any person, firm, partnership,
association, corporation or business organization, entity or enterprise any
trade secret, information, data, know how or knowledge (including, but not
limited to, that relating to service techniques, purchasing organization and
methods, sales organization and methods, inventories, client lists, market
development and expansion plans, personnel training and development programs and
client and supplier relationships) or any other Discoveries (as defined in
Section 11) belonging to or relating to the affairs of the Corporation or any of
its subsidiaries or to the clients of the Corporation or any of its
subsidiaries; provided, however, that this Section shall not apply to any trade
secret, information, data, know how, knowledge, or
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Discovery that is or becomes generally available to the public through no fault
or action of Executive.
10. Customers. In furtherance of and not in limitation of Section 9,
Executive acknowledges that the list of the Corporation's and its subsidiaries'
customers as it may exist from time to time constitutes a valuable and unique
asset of the Corporation, and Executive agrees that he shall not, during or
after the term of his employment, disclose such list or any part thereof to any
person, firm, partnership, association, corporation, or business organization,
entity or enterprise for any reason or purpose whatsoever, nor shall Executive
use such customer list for his own benefit or purposes or for the benefit or
purposes of any business with whom Executive may become associated.
11. Discoveries. Executive agrees with the Corporation that any and all
inventions, discoveries, improvements, designs, methods, systems, developments,
know how, ideas, suggestions, devices, trade secrets and processes (hereinafter
collectively referred to as "Discoveries"), whether patentable or not, which are
discovered, disclosed to or otherwise obtained by Executive during his
employment with the Corporation are confidential, proprietary information and
are the sole and absolute property of the Corporation. Executive agrees to
disclose promptly to the Corporation all such Discoveries and to assist the
Corporation in making any application in the United States and in foreign
jurisdictions for patents or other intellectual property protection of any kind
with respect thereto.
12. Works for Hire. All works and writings of a professional nature
which are produced by Executive during his employment with the Corporation
constitute works made for hire and are the sole and absolute property of the
Corporation. Executive grants the Corporation the exclusive right to copyright
all such works and writings in the United States and in foreign jurisdictions.
To the extent any such works or writings are deemed to not be works for hire,
Executive hereby assigns and agrees to assign all his interests therein to the
Corporation or its nominee. Whenever requested to do so by the Corporation,
Executive shall execute any and all applications, assignments, or other
instruments that the Corporation may deem necessary to protect the Corporation's
interest therein.
13. Use of Confidential Information of Other Persons. Executive
represents and warrants that he has not brought and will not bring with him to
the Corporation or use at the Corporation any materials or documents or
intellectual property belonging to Executive or to a former employer or any
other person that are not generally available to the public, unless express
written authorization for their possession and use has been obtained from such
person and the Corporation. Executive understands that he is not to breach any
obligation of confidentiality that is owed to any former employer or other
person, and Executive agrees to fulfill all such obligations during the period
of his affiliation with the Corporation.
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14. Nondisclosure Agreement. In addition to the obligations set forth
herein, Executive shall execute and deliver to the Corporation a Nondisclosure
Agreement in the Corporation's standard form.
15. Remedies. Executive acknowledges and agrees that the provisions of
this Agreement are essential to the Corporation and are reasonable and necessary
to protect the legitimate interests of the Corporation and its subsidiaries and
that the damages sustained by the Corporation or its subsidiaries as a result of
a breach of the agreements contained herein will subject the Corporation or its
subsidiaries to immediate, irreparable harm and damage, the amount of which,
although substantial, cannot be reasonably ascertained, and that recovery of
damages at law will not be an adequate remedy. Executive therefore agrees that
the Corporation and its subsidiaries, in addition to any other remedy they may
have under this Agreement or at law, shall be entitled to injunctive and other
equitable relief to prevent or curtail any breach of any provision of this
Agreement. In the event suit or action is instituted to enforce this Agreement
or any of the terms and conditions hereof, including, but not limited to, suit
for preliminary injunction, the prevailing Party shall be entitled to costs and
reasonable attorneys' fees. Executive waives any right to the posting of a bond
in the event of an issuance of a temporary restraining order, preliminary
injunction or permanent injunction upon the issuance of said order by a court of
competent jurisdiction.
16. Death During Employment. This Agreement shall terminate upon
Executive's death. In such event, the Corporation shall pay a death benefit
equal to Executive's base monthly salary for the balance of the month of
Executive's death and for the month following his death. Any amounts payable
under this Agreement following Executive's death shall be paid to the
beneficiary named in writing by Executive, or if none, to Executive's surviving
spouse, or if none, to the executors and administrators of Executive's estate
and shall be paid within sixty (60) days of Executive's death.
17. Disability. This Agreement shall terminate upon Executive's
Disability (as defined herein). "Disability" shall be deemed to exist only if
Executive is disabled according to the definition of "disability" which is
contained in the disability insurance policy paid for by the Corporation for its
executives.
18. Termination for Other Than for Disability or Death. This Agreement
may terminate for reasons other than Executive's death or disability upon the
occurrence of any of the following events:
(a) The Corporation, at its option, may terminate Executive for
Cause upon written notice by the Corporation to Executive fully setting forth
such Cause. For this purpose, the Corporation shall be deemed to have "Cause"
following the occurrence of any of the following events:
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1) Commission by Executive of an act or omission which would
constitute a felony under the laws of the State of Colorado
or the United States, had such act or omission been performed
in either such jurisdiction.
2) Executive's alcoholism or illegal drug addiction, if
established by competent evidence. The Corporation shall have
the right, but not the obligation, upon reasonable cause, to
demand that Executive submit to a medical examination by a
qualified independent physician selected by the Corporation
to ascertain whether such condition exists.
3) Breach of Executive's duty of loyalty to the Corporation
which materially adversely affects the financial well-being
of the Corporation.
4) Executive's willful refusal to obey directions of the Board
of Directors or a superior officer of the Corporation (so
long as such directions do not involve illegal or immoral
acts), which Executive fails to cure within five (5) days of
receipt of written notice from the Corporation which
describes such refusal and makes reference to this Section
18(a).
5) Gross mismanagement by Executive of the business of the
Corporation, which Executive fails to cure within fifteen
(15) days of receipt of written notice from the Corporation
which describes the mismanagement in reasonable detail and
makes reference to this Section 18(a).
6) Breach of a material term of this Agreement, which Executive
fails to cure within fifteen (15) days of receipt of written
notice from the Corporation which describes the breach in
reasonable detail and makes reference to this Section 18(a).
For purposes of the preceding sentence, the "material terms"
of this Agreement shall be limited to those set forth in
Section 2 and Sections 7 through and including 14.
(b) The Corporation shall have the right to terminate this
Agreement without Cause at any time upon thirty (30) days' advance written
notice to Executive; provided, however, that the Corporation shall not be
entitled to terminate this Agreement without Cause prior to the first
anniversary of the Effective Date.
(c) Executive, at his option, may terminate employment for Good
Reason upon written notice by Executive to the Corporation fully setting forth
such Good Reason. For this purpose, Executive shall be deemed to have "Good
Reason" following the occurrence of any of the following events:
1) A material breach of this Agreement by the Corporation, which
the Corporation fails to cure within fifteen (15) days of
receipt of written notice from Executive which describes the
breach in reasonable detail and makes reference to this
Section 18(c).
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2) The Corporation's requiring Executive to be based at any
office or location other than the Boston Office without
Executive's approval, except for required travel on the
Corporation's business, which the Corporation fails to cure
within fifteen (15) days of receipt of written notice from
Executive which describes the matter in reasonable detail and
makes reference to this Section 18(c).
3) A change in Executive's job title (other than as a result of
a promotion), a reduction in Executive's base salary, or a
change in Executive's reporting responsibilities such that
Executive no longer reports to the Corporation's President
and Chief Executive Officer (other than as a result of a
promotion), in each case which the Corporation fails to cure
within fifteen (15) days of receipt of written notice from
Executive which describes the matter in reasonable detail and
makes reference to this Section 18(c).
(d) Executive shall have the right to terminate this Agreement
without Good Reason at any time upon thirty (30) days' advance written notice to
the Corporation.
(e) This Agreement may be terminated at any time upon the mutual
agreement of the Parties.
19. Rights Upon Termination.
(a) Upon termination of Executive's employment with the
Corporation, the Corporation shall have no further obligation to Executive
except as specifically provided under this Agreement. Termination of Executive's
employment shall not affect Executive's right to receive any compensation or
bonuses which have accrued but have not been paid through the date of
termination.
(b) In addition to any accrued compensation or bonuses, and
depending upon the circumstances of Executive's termination of employment, the
Corporation shall pay or provide certain severance benefits (the "Severance
Benefits"). The nature and extent of the Severance Benefits to be provided shall
be determined in accordance with the table set forth in Exhibit A attached
hereto. For purposes of Exhibit A, the following terms shall have the following
meanings:
(1) "Severance Pay" shall be expressed as a monthly amount
and shall mean one-twelfth of Executive's annual base salary pursuant
to Section 4(a). Any Severance Pay due to Executive shall be paid in
cash or by check on the same dates on which Executive would otherwise
have received payment of his annual base salary hereunder if employment
had continued.
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(2) "Continuation Benefits" shall mean the continuation of
the Benefits, including any Benefits which cover Executive's family,
but excluding any contribution to any qualified or nonqualified
pension, profit sharing or retirement plan or other deferred
compensation arrangement (each a "Retirement Plan").
(3) A "Change in Control" shall mean and shall be deemed to
have occurred if any of the following events shall have occurred:
(a) A Third Person (as defined below), including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended from time to time, and any successor act (the
"Exchange Act"), becomes the "beneficial owner," as defined in the
Exchange Act, of shares of the Corporation having 50% or more of the
total number of votes that may be cast for the election of a majority
of the Directors of the Corporation; or
(b) The Board of Directors or the stockholder(s) of the
Corporation approve: (i) any agreement for a merger or consolidation or
like business recombination or reorganization of the Corporation with
another entity, the consummation of which would result in the
occurrence of any event described in Section 19(b)(3)(a) above or (ii)
any sale, exchange or other disposition of all or substantially all of
the Corporation's assets; or
(c) An asset sale which results in the sale, exchange or
other disposition of greater than 67% in fair market value of the
Corporation's total assets, other than in the ordinary course of
business, whether in a single transaction or a series of related
transactions; provided, however, that no sale or disposition of assets
shall be taken into account to the extent that the proceeds of such
sale or disposition (whether in cash or in-kind) are reinvested or are,
in the case of proceeds received in-kind, used in the ongoing conduct
of the Corporation, provided further that such a reinvestment shall not
be deemed to have occurred unless made within six (6) months of such
sale or disposition and provided further that, the term reinvestment
shall include the use of proceeds to repay debt incurred in connection
with the operation of the business in which the assets sold or disposed
of were used; or
(d) The dissolution of the Corporation.
Notwithstanding anything herein to the contrary, none of the events
described above shall be considered to be a "Change in Control" if (i)
such event results in the acquisition of control by the then existing
management of the Corporation, or (ii) Glenn E. Montgomery, Jr. remains
the President and Chief Executive Officer of the Corporation or its
successor for a period of at least ninety (90) days following such
event. Subject to the preceding sentence, a Change in Control shall be
deemed to have occurred on the effective date of such event. For
purposes of determining whether there has been a Change in Control, the
Third
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Person owning shares must be someone other than a person or entity, or
an Affiliate of a person or entity, that, as of the Effective Date, was
the beneficial owner of shares of the Corporation having 5% or more of
the total number of votes that may be cast for the election of any of
the Directors of the Corporation. "Affiliate" shall mean, with respect
to any person or entity, a person or entity that directly or indirectly
through one or more intermediaries, controls, or is controlled by, or
is under common control with, such person or entity.
(c) Upon the termination of Executive's employment with the
Corporation for any reason, Executive shall be return to the Corporation any and
all equipment owned by the Corporation and used by Executive.
(d) If any portion of the Benefits (excluding any contributions to
any Retirement Plan) cannot reasonably be made available to Executive as
required following a termination of employment, then the Corporation shall pay
to Executive an amount in cash equal to 150% of the cost which must be incurred
by Executive to acquire benefits equivalent to any tax-exempt Benefits
previously provided by the Corporation and 100% of the cost which must be
incurred by Executive to acquire benefits equivalent to any taxable Benefits
previously provided by the Corporation. The Corporation shall determine the cost
to Executive of such Benefits in good faith and shall provide reasonable
documentation to support its findings to Executive.
20. Mitigation. Executive shall inform the Corporation if he should
assume any position, whether as proprietor, partner, employee, principal, agent,
consultant, director, officer, or in any other capacity, in any other firm or
business. To the extent Executive shall accrue compensation from such other firm
or business (whether such compensation shall be payable immediately or on a
deferred basis), any Severance Pay payable by the Corporation shall be reduced
on a dollar for dollar basis for each dollar earned by Executive during the
period in which such Severance Pay is to be paid. Continuation Benefits shall be
subject to mitigation under the limited circumstances described in Exhibit A if
and only if Executive, in his sole discretion, has accepted employment with
another firm or business and is eligible to receive benefits which are
equivalent in all material respects to the Continuation Benefits. In determining
benefit equivalence, the parties shall consider all factors, including the level
of coverage, the cost, if any, to Executive, and the effect, if any, of
provisions limiting coverage for pre-existing conditions. Notwithstanding
anything herein to the contrary, this Section shall not apply, and there shall
be no mitigation, following a termination of Executive's employment pursuant to
Section 18(b) or 18(c) or voluntarily by Executive within one year after a
Change in Control.
21. Arbitration. Any controversy or claim arising out of or related to
this Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final
12
<PAGE> 13
and binding upon the Parties, shall not be appealed from or contested in any
court and may, in appropriate circumstances, include injunctive relief. Should
any Party fail to appear or be represented at the arbitration proceedings after
due notice in accordance with the Rules, then the arbitrator may nevertheless
render a decision in the absence of said Party, and such decision shall have the
same force and effect as if the absent Party had been present, whether or not it
shall be adverse to the interests of that Party. Any award rendered hereunder
may be entered for enforcement, if necessary, in any court of competent
jurisdiction, and the Party against whom enforcement is sought shall bear the
expenses, including attorneys' fees, of enforcement. Notwithstanding the
foregoing, the Corporation shall be entitled to seek injunctive or other
equitable relief to enforce any of the provisions in Sections 6 through 14 from
any court of competent jurisdiction without the need to resort to arbitration.
22. Survival. The covenants contained in this Agreement shall survive
any termination of Executive's employment with the Corporation and shall survive
any termination of this Agreement. The existence of any claim or cause of action
of Executive against the Corporation, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Corporation
of any of the covenants contained in this Agreement.
23. Severability. If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and Executive and the Corporation hereby consent and agree that the
scope of such restriction may be judicially modified in any proceeding brought
to enforce such restriction. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted from this Agreement
and the remainder of this Agreement shall remain in full force and effect.
24. Notice. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered by personal delivery,
air courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of Executive as it appears in the corporate
records for notice to Executive, or to the principal office of the Corporation
for notice to the Corporation. All notices delivered in accordance with this
Section shall be deemed to have been received and shall be deemed effective if
delivered in person or by air courier, upon actual receipt by the intended
recipient, or if mailed, upon the date of delivery or refusal to accept delivery
as shown by the return receipt therefor.
25. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the Party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, and shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
13
<PAGE> 14
26. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Parties hereto.
27. Assignment. The rights and obligations of the Corporation under
this Agreement shall, without the prior written consent of Executive, inure to
the benefit of and be binding upon the successors and assigns of the
Corporation. If the Corporation shall at any time be merged or consolidated with
any other corporation or shall sell or otherwise transfer a substantial portion
of its assets to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
have been sold or transferred. Upon Executive's request, the Corporation shall
obtain an agreement to expressly assume this Agreement from any such successor.
This is a personal service contract and may not be assigned by Executive.
28. Entire Agreement. This instrument contains the entire agreement of
the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
and the Parties hereto have made no agreements, representations or warranties
relating to the subject matter of this Agreement that are not set forth herein.
29. Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the internal laws of the State of Colorado
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
30. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
31. Expenses. Each of the parties shall bear his or its own expenses in
connection with the preparation, negotiation and execution of this Agreement,
except that the Corporation shall reimburse Executive for up to an aggregate of
$2,500 of legal fees and related expenses incurred in connection with the
preparation, negotiation and execution of this Agreement and the Employment
Agreements for Gregory H. Courniotes and David J. Rubinstein.
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<PAGE> 15
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ Glenn E. Montgomery
-------------------------------
Glenn E. Montgomery, Jr.
President and Chief Executive
Officer
"EXECUTIVE"
/s/ Mark Shirman
-----------------------------------
Mark Shirman
Executive
15
<PAGE> 16
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN
MARK SHIRMAN
AND
CONVERGENT GROUP CORPORATION
TABLE OF SEVERANCE BENEFITS
---------------------------
<TABLE>
<CAPTION>
ADDITIONAL MONTHS
EVENT OF TERMINATION ADDITIONAL MONTHS OF CONTINUATION BENEFITS SEVERANCE PAY
- ------------------------------ ---------------------------------------------------- -------------------------
<S> <C> <C>
1. BY CORPORATION FOR 0 0
CAUSE
- -------------------------------------------------------------------------------------------------------------
2. BY CORPORATION
WITHOUT CAUSE OR
UPON MUTUAL
AGREEMENT
A) WITHIN ONE YEAR Six months, but only until Executive's eligibility 6 months
FOLLOWING EFFECTIVE for reasonably equivalent benefits from a third-
DATE party employer.
B) AFTER ONE YEAR 0 0
FOLLOWING EFFECTIVE
DATE
- -------------------------------------------------------------------------------------------------------------
3. BY EXECUTIVE WITH Six months, but only until Executive's eligibility 6 months
GOOD REASON for reasonably equivalent benefits from a third-
party employer
- -------------------------------------------------------------------------------------------------------------
4. BY EXECUTIVE 0 0
WITHOUT GOOD
REASON
- -------------------------------------------------------------------------------------------------------------
5. DISABILITY Six months, but only until Executive's eligibility 0
for reasonably equivalent benefits from a third-
party employer
- -------------------------------------------------------------------------------------------------------------
6. DEATH Six months [See Section 16]
- -------------------------------------------------------------------------------------------------------------
</TABLE>
DENVER:0944181.07
A-1
<PAGE> 17
OCTOBER 11, 1999
Mr. Mark Shirman
- --------------------
- --------------------
RE: EXERCISE OF STOCK OPTIONS
Dear Mark:
This letter is being provided in connection with your exercise of
226,626 "Tranche 1" options granted to you pursuant to your Employment
Agreement. This will confirm that in recognition of the significance of your
contribution to the development of a digital utility strategy for Convergent's
e-business and your significant time commitment to Convergent prior to the
official date of commencing your employment, the shares of Common Stock issued
upon exercise of the "Tranche 1" options are not subject to any vesting
requirement as presently contemplated by your Employment Agreement. Any
provision in your Employment Agreement to the effect that Convergent may
repurchase such shares if you do not remain in the employ of Convergent as of
October 11, 2000 is hereby deleted.
Very truly yours,
/s/ Glenn E. Montgomery, Jr.
------------------------------------------
Glenn E. Montgomery, Jr.
President and Chief Executive Officer
Convergent Group Corporation
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is dated as of this 7th
day of January, 2000 and is entered into by and between Bryan R. Mileger
("Executive") and Convergent Group Corporation, a Delaware corporation, having
its principal office at 6399 South Fiddler's Green Circle, Suite 600, Englewood,
Colorado 80111 (the "Corporation"). In consideration of the mutual promises and
the terms and conditions set forth below, Executive and the Corporation
(together, the "Parties," and each, a "Party") agree as follows:
1. Employment; Duties. The Corporation shall employ Executive as an
Executive Vice President - Finance and Executive hereby accepts such employment
under the terms and conditions set forth in this Agreement. Executive's duties
shall include general responsibility for the Corporation's investor relations,
capital events and financial strategies, and merger and acquisition activities,
as such duties are assigned from time to time by, and subject to the general
direction and supervision of, the Corporation's President and Chief Executive
Officer and Chief Financial Officer.
2. Full-Time Best Efforts. Executive shall devote his full professional
time and attention to the performance of his obligations under this Agreement,
and will at all times faithfully, industriously and to the best of his ability,
experience and talent perform all of his obligations hereunder. So long as this
Agreement is in effect, Executive will not be employed or engaged by any other
person or firm other than the Corporation unless otherwise authorized in writing
by the Board of Directors of the Corporation. Any and all compensation received
in money or other property from any person or entity other than the Corporation
for professional services rendered by Executive shall be deemed to be the
property of the Corporation. Executive agrees that upon the receipt of any such
money or property, he shall promptly remit such compensation to the Corporation
together with a full accounting thereof.
3. Term. The term of this Agreement shall begin on February 1, 2000
(the "Effective Date") and shall end on January 31, 2003 unless terminated prior
to that date as provided herein. The term of this Agreement may be extended on
an annual basis after January 31, 2003 by mutual agreement of the Parties.
4. Compensation and Benefits.
(a) The Corporation shall pay compensation to Executive consisting
of an annual base salary and bonuses, benefits and stock options as described in
this Agreement.
(b) Executive's annual base salary effective as of February 1,
2000 is $150,000. Effective as of the date on which Executive relocates his
personal and family
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<PAGE> 2
residence to the Denver, Colorado metropolitan area, Executive's annual base
salary shall be increased by 5% to $162,500. Executive's base salary shall be
reviewed annually in conjunction with Executive's annual performance review and
may be increased, but not decreased, as appropriate in light of Executive's
performance. Executive's annual base salary shall be paid in twenty-four (24)
semi-monthly payments during each annual period.
(c) Executive shall be eligible to earn an annual incentive
performance bonus for each calendar year (the "Incentive Bonus") in addition to
his annual base salary. The targeted annual bonus amount shall be 100% of
Executive's annual base salary as of the beginning of the year under
consideration (the "Target Bonus"). The initial Target Bonus shall be pro-rated
for the period February 1, 2000 through December 31, 2000. Notwithstanding
anything herein to the contrary, there shall be no Incentive Bonus for calendar
year 2003 unless this Agreement is extended by the Parties as set forth in
Section 3. The amount of the Target Bonus which is earned shall be dependent
upon the attainment of Executive's annual performance plan, which plan shall be
established annually by mutual agreement between Executive and the Corporation
(the "Annual Performance Plan"). The initial Annual Performance Plan shall cover
the period from the Effective Date through December 31, 2000 and shall be
established within forty-five (45) days after the Effective Date. Subsequent
Annual Performance Plans shall cover a calendar year and shall be established
for each year on or before January 31 of such year. If the Corporation and
Executive are unable to mutually agree with respect to Executive's Annual
Performance Plan, the Annual Performance Plan shall be determined by the
Corporation in its reasonable discretion, provided that the plan must be
reasonably attainable by Executive. There shall be a 90% threshold for receipt
of the Incentive Bonus. If Executive achieves less than 90% of his Annual
Performance Plan during any year, Executive shall not be entitled to receive any
Incentive Bonus for such year. If the 90% threshold is met or exceeded,
Executive shall receive an Incentive Bonus equal to that percentage of the
Target Bonus which is the same as the percentage of the Annual Performance Plan
that has been met, up to 100%. Exceeding 100% of the Annual Performance Plan may
result in additional compensation to be determined by the Corporation in its
reasonable discretion. Executive must remain in the employ of the Corporation as
of the last day of the year in order to earn an Incentive Bonus for such year.
Any Incentive Bonus earned pursuant to this Agreement shall be paid no later
than April 15 of the year following the year for which the Incentive Bonus was
earned.
(d) Notwithstanding anything herein to the contrary, solely for
year 2000, Executive shall be entitled to receive a non-refundable $100,000
advance against his Incentive Bonus for such year. Such advance shall be paid in
eleven equal monthly installments payable on or before the last day of each
calendar month during year 2000, commencing February 29, 2000, provided that
Executive remains in the employ of the Corporation on each such date. Such
advance shall be offset against the amount of the Incentive Bonus, if any, which
is earned for year 2000.
2
<PAGE> 3
(e) In the event of the termination of Executive's employment by
the Corporation for Cause (as defined in Section 20(a)) or by Executive without
Good Reason (as defined in Section 20(c)), Executive shall be entitled to
receive an Incentive Bonus for any calendar year concluded prior to such
termination of employment but shall not be entitled to receive an Incentive
Bonus for the calendar year in which such termination of employment occurs. In
the event of the termination of Executive's employment for any reason other than
by the Corporation for Cause or by Executive without Good Reason, including
without limitation Executive's death or disability, Executive shall be entitled
to receive an Incentive Bonus both with respect to any calendar year concluded
prior to such termination of employment and with respect to the calendar year in
which such termination of employment occurs. The amount of the Target Bonus for
the year in which such termination occurs shall be prorated based upon the
amount of Executive's base salary which accrued during the portion of the year
during which Executive was employed by the Corporation, and the amount of the
Incentive Bonus for such year shall be determined based upon attainment of the
Annual Performance Plan through the end of the calendar month in which the
termination occurs.
(f) Executive shall be entitled to participate in such life
insurance, disability, medical, dental, pension, profit sharing and retirement
plans and other programs as may be made generally available from time to time by
the Corporation for the benefit of executives of Executive's level or its
employees generally (the "Benefits"). The Corporation shall also provide a
corporate car (including insurance, maintenance and fuel) for Executive's use.
5. Stock Options. Executive shall be granted options to purchase
377,709 shares of Common Stock of the Corporation (0.5% of the outstanding
capital stock of the Corporation on a fully diluted basis as of the date of this
Agreement). The exercise price of each option shall be $.046 per share. The date
of grant shall be February 1, 2000. None of the options shall be vested or
exercisable as of the date of grant. One-third of the options shall vest and
become exercisable on August 1, 2000, an additional one-third of the options
shall vest and become exercisable on August 1, 2001, and the final one-third of
the options shall vest and become exercisable on August 1, 2002, provided that
vesting on each such date is subject to the condition that Executive remains in
the employ of the Corporation on such date. The option terms set forth herein
shall be memorialized in Stock Option Agreements to be executed by the
Corporation and Executive in the Corporation's standard form, subject to the
modifications set forth herein. To the extent possible, the options shall be
granted pursuant to the Corporation's 1999 Stock Option Plan and shall be
Incentive Stock Options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The exercise period of the
options shall be ten years from the date of grant, subject to earlier
termination under the circumstances described in the 1999 Stock Option Plan. The
Stock Option Agreements shall permit Executive to make an "early exercise" in
the manner authorized pursuant to the 1999 Stock Option Plan.
3
<PAGE> 4
6. Facilities; Relocation Expenses. The Corporation shall furnish
fEacilities, equipment, services and assistance suitable to Executive's position
for the performance of Executive's duties. Executive shall relocate his personal
and family residence to the Denver, Colorado metropolitan area no later than
August 31, 2000. Prior to such time, Executive shall be based at the
Corporation's principal office in Englewood, Colorado, and the Corporation shall
provide a temporary residence and living expenses to Executive until Executive's
relocation to Denver, Colorado has been completed. Such expenses shall include
the cost of air travel from Dallas, Texas to Denver, Colorado on a weekly basis.
The Corporation shall also provide Executive its standard relocation package for
executive employees, including the purchase of Executive's home if Executive is
unable to sell it at a reasonable price within a reasonable time.
7. No Copies of Documents and Materials. Executive shall not (except in
the performance of his duties in the ordinary course of business for which he is
employed by the Corporation) at any time or in any manner make or cause to be
made any copies, pictures, duplicates, facsimiles or other reproductions or
recordings or any abstracts or summaries of any reports, studies, memoranda,
correspondence, manuals, records, plans or other written, printed, computerized
or otherwise recorded materials of any kind or nature whatsoever belonging to or
in the possession of the Corporation or any of its subsidiaries.
8. Materials Remain on Premises. Executive shall have no right, title
or interest in any material referenced in Section 7. Executive agrees that,
except in the performance of his duties in the ordinary course of business for
which he is employed by the Corporation, Executive will not, without the prior
written consent of the Corporation, remove any such material from any premises
of the Corporation. Executive further agrees that, immediately upon the
termination of his employment with the Corporation or upon the termination of
this Agreement, whichever occurs earlier, or at any time prior thereto upon the
request of the Corporation, he shall surrender all such material to the
Corporation and execute a document acknowledging that he has complied with the
provisions of this Agreement.
9. Trade Secrets. Executive shall not at any time, whether during or
after the term of this Agreement, use for Executive's own benefit or purposes or
for the benefit or purposes of any other person, firm, partnership, association,
corporation or business organization, entity or enterprise, or disclose (except
in the performance of his duties in the ordinary course of business for which he
is employed by the Corporation) in any manner to any person, firm, partnership,
association, corporation or business organization, entity or enterprise any
trade secret, information, data, know how or knowledge (including, but not
limited to, that relating to service techniques, purchasing organization and
methods, sales organization and methods, inventories, client lists, market
development and expansion plans, personnel training and development programs and
client and supplier relationships) or any other Discoveries (as defined in
Section 11) belonging to or relating to the affairs of the Corporation or any of
its subsidiaries or to the clients of the Corporation or any of its
subsidiaries; provided, however, that this
4
<PAGE> 5
Section 9 shall not apply to any trade secret, information, data, know how,
knowledge, or Discovery that is or becomes generally available to the public
through no fault or action of Executive.
10. Customers. In furtherance of and not in limitation of Section 9,
Executive acknowledges that the list of the Corporation's and its subsidiaries'
customers as it may exist from time to time constitutes a valuable and unique
asset of the Corporation, and Executive agrees that he shall not, during or
after the term of his employment, disclose such list or any part thereof to any
person, firm, partnership, association, corporation, or business organization,
entity or enterprise for any reason or purpose whatsoever, nor shall Executive
use such customer list for his own benefit or purposes or for the benefit or
purposes of any business with whom Executive may become associated.
11. Discoveries. Executive agrees with the Corporation that any and all
inventions, discoveries, improvements, designs, methods, systems, developments,
know how, ideas, suggestions, devices, trade secrets and processes (hereinafter
collectively referred to as "Discoveries"), whether patentable or not, which are
discovered, disclosed to or otherwise obtained by Executive during his
employment with the Corporation are confidential, proprietary information and
are the sole and absolute property of the Corporation. Executive agrees to
disclose promptly to the Corporation all such Discoveries and to assist the
Corporation in making any application in the United States and in foreign
jurisdictions for patents of any kind with respect thereto.
12. Works for Hire. All works and writings of a professional nature
which are produced by Executive during his employment with the Corporation
constitute works made for hire and are the sole and absolute property of the
Corporation. Executive grants the Corporation the exclusive right to copyright
all such works and writings in the United States and in foreign jurisdictions.
To the extent any such works or writings are deemed to not be works for hire,
Executive hereby assigns and agrees to assign all his interests therein to the
Corporation or its nominee. Whenever requested to do so by the Corporation,
Executive shall execute any and all applications, assignments, or other
instruments that the Corporation may deem necessary to protect the Corporation's
interest therein.
13. Non-Competition.
(a) Executive acknowledges that his employment as a member of the
Corporation's executive management team creates a relationship of confidence and
trust between Executive and the Corporation with respect to confidential and
proprietary information applicable to the business of the Corporation, its
subsidiaries and its clients. Executive further acknowledges the highly
competitive nature of the business of the Corporation. Accordingly, the
Corporation and Executive agree that the restrictions contained in this Section
13 are reasonable and necessary for the protection of the immediate interests of
the Corporation and that any violation of these restrictions would cause
substantial injury to the Corporation.
5
<PAGE> 6
(b) For purposes of this Agreement, the term "Competitive
Business" means any person, firm, partnership, association, corporation, or
business organization, entity or enterprise which derives or which expects
during the following two (2) years to derive either (i) ten percent (10%) or
more of its revenues, or (ii) more than $10,000,000 in revenues from providing
technical management consulting and/or systems integration services for
Automated Mapping/Facilities Management Systems and/or Geographic Information
Systems and/or utility transmission and distribution systems. The term
"Competitive Business" is not intended to include mere vendors or suppliers of
the Corporation.
(c) For purposes of this Agreement, the term "Existing Client"
means a client for whom the Corporation or any of its subsidiaries is performing
consulting services as of the date of the termination of Executive's employment
with the Corporation or for whom the Corporation or any of its subsidiaries
performed consulting services within the two (2) year period immediately
preceding the termination of Executive's employment with the Corporation. The
term "Existing Client" is not intended to include mere vendors or suppliers of
the Corporation.
(d) During Executive's employment with the Corporation and for a
period of one (1) year following the termination of Executive's employment with
the Corporation for any reason other than termination occasioned by the
expiration of this Agreement, Executive shall not (nor shall Executive cause, or
provide assistance to anyone else to):
i. Employ or otherwise engage, or attempt to employ or
otherwise engage, in or on behalf of Executive or any Competitive Business, any
person who is employed or engaged as an employee, consultant, agent or
representative of the Corporation or any of its subsidiaries as of the date of
Executive's termination or at any time during the one-year period following such
termination; or
ii. Solicit directly or indirectly on behalf of Executive or
any Competitive Business, the customer business or account of any Existing
Client of the Corporation.
(e) If any court shall determine that the duration, geographic
limitations, subject or scope of any restriction contained in this Section 13 is
unenforceable, it is the intention of the Parties that this Section 13 shall not
thereby be terminated but shall be deemed amended to the extent required to make
it valid and enforceable, such amendment to apply only with respect to the
operation of this Section 13 in the jurisdiction of the court that has made the
adjudication.
(f) Notwithstanding anything herein to the contrary, the
provisions of this Section 13 shall not be applicable to any termination which
occurs after the expiration of the term of this Agreement, including any renewal
term.
6
<PAGE> 7
14. Employability. Executive recognizes and acknowledges that he has
sufficient abilities and talents to be able to obtain, upon the termination of
this Agreement, comparable employment from another business organization or
entity while fully honoring and complying with the above covenants concerning
confidential information and contacts with the Corporation's or any of its
subsidiaries' existing customers or employees. Executive recognizes and
acknowledges the importance to the Corporation and its subsidiaries of the above
covenants and, therefore, agrees that, for a period of one (1) year following
the termination of Executive's employment with the Corporation and upon the
Corporation's reasonable request of Executive, he will advise the Corporation of
the identity of his new employer and will provide a general description, in
reasonable detail, of his new duties and responsibilities sufficient to inform
the Corporation of its need to request a court order to enforce the above
covenants.
15. Remedies. Executive acknowledges and agrees that the provisions of
this Agreement are essential to the Corporation and are reasonable and necessary
to protect the legitimate interests of the Corporation and its subsidiaries and
that the damages sustained by the Corporation or its subsidiaries as a result of
a breach of the agreements contained herein will subject the Corporation or its
subsidiaries to immediate, irreparable harm and damage, the amount of which,
although substantial, cannot be reasonably ascertained, and that recovery of
damages at law will not be an adequate remedy. Executive therefore agrees that
the Corporation and its subsidiaries, in addition to any other remedy they may
have under this Agreement or at law, shall be entitled to injunctive and other
equitable relief to prevent or curtail any breach of any provision of this
Agreement. In the event suit or action is instituted to enforce this Agreement
or any of the terms and conditions hereof, including, but not limited to, suit
for preliminary injunction, the prevailing Party shall be entitled to costs and
reasonable attorneys' fees. Executive waives any right to the posting of a bond
in the event of an issuance of a temporary restraining order, preliminary
injunction or permanent injunction upon the issuance of said order by a court of
competent jurisdiction.
16. Expenses. In the promotion and execution of the business of the
Corporation, Executive is expected to incur certain reasonable expenses for
entertainment, travel, company automobile expenses (including insurance,
maintenance, fuel and depreciation, if applicable), and business fax and
telephone bills which shall be subject to approval by the Corporation. The
Corporation recognizes the necessity for such expenditures in order to retain
and further the professional skills, abilities and standing of Executive and to
properly maintain, promote and develop the Corporation's consulting practice.
The Corporation shall also pay Executive's dues and fees for attending
professional meetings and institutes, costs of professional books and
periodicals and promotion, entertainment and travel expenses reasonably related
to the business of the Corporation. Unusual and extraordinary expenses incurred
by Executive and not approved in advance by the Corporation may not be
reimbursed.
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<PAGE> 8
17. Vacation Leave Time. Vacation leave shall accrue at the rate of
four (4) weeks per year. Any unused vacation leave time accumulated during the
year shall carry over to subsequent years.
18. Disability. The Corporation may terminate this Agreement upon
written notice to Executive if Executive is physically or mentally incapacitated
and unable to perform his duties under this Agreement for a period of (i) any
one hundred eighty (180) days out of any three hundred sixty (360) days, if the
Common Stock of the Corporation is not then publicly traded, or (ii) ninety (90)
out of any one hundred eighty (180) days if the Common Stock of the Corporation
is then publicly traded. If at any time a question arises as to the incapacity
of Executive, then the Corporation shall promptly employ one physician who is a
member of the American Medical Association and who is mutually agreeable to the
Corporation and Executive to examine Executive and determine if his physical
and/or mental condition is such as to render him unable to perform his duties
under this Agreement. The decision of the physician shall be certified in
writing to the Corporation, shall be sent by the Corporation to Executive or his
representative and shall be conclusive for purposes of this Agreement. Any
compensation payments payable to Executive hereunder shall be reduced by the
amount of any disability payments Executive receives as a result of disability
policies on which the Corporation has paid the premiums.
19. Death During Employment. This Agreement shall terminate upon
Executive's death. In such event, the Corporation shall pay a death benefit
equal to Executive's base monthly salary for the balance of the month of
Executive's death and for the month following his death. Any amounts payable
under this Agreement following Executive's death shall be paid to the
beneficiary named in writing by Executive, or if none, to Executive's surviving
spouse, or if none, to the executors and administrators of Executive's estate
and shall be paid within sixty (60) days of Executive's death.
20. Termination for Other Than for Disability or Death. This Agreement
may terminate for reasons other than Executive's disability or death upon the
occurrence of any of the following events; provided, however, that neither
Executive nor the Corporation may terminate this Agreement pursuant to this
Section 20 in 2000 except for a termination by the Corporation for Cause as
provided in Section 20(a) or a termination by Executive for Good Reason as
provided in Section 20(c).
(a) The Corporation, at its option, may terminate Executive for
Cause (as defined below) upon thirty (30) days' advance written notice by the
Corporation to Executive fully setting forth such Cause, which notice of
termination may be appealed to the Board of Directors of the Corporation.
Termination shall be effective on the thirtieth (30th) day following Executive's
receipt of written notice from the Corporation. "Cause" shall be limited to a
situation in which Executive has:
8
<PAGE> 9
i. Committed a criminal offense that, if committed in the
State of Colorado, would have constituted a felony under the laws of the State
of Colorado or the United States (other than a traffic offense or other similar
violation); or
ii. Committed a fraudulent act which is materially harmful to
the Corporation (materiality, for purposes of this clause, means in excess of
$50,000); or
iii. Committed an act of willful misconduct which results in
actual damages against the Corporation of $500,000 or more; or
iv. Committed an act of gross insubordination by willfully
and repeatedly refusing to obey written directions of the Board of Directors (so
long as such directions do not involve illegal or immoral acts), which refusal
continues for a period of ten (10) days after written notice to Executive by the
Corporation which notice references such refusal and this Section 20(a); or
v. Committed repeated acts of alcohol or illegal drug abuse,
and has failed to take reasonable steps to address such issues within ten (10)
days after written notice to Executive by the Corporation which notice
references such acts and this Section 20(a); or
vi. Except during periods of vacation leave permitted
pursuant to Section 17, failed to devote substantially all of his professional
time and attention to the performance of his obligations under this Agreement,
as determined by the Board of Directors of the Corporation, which failure
continues for a period of fifteen (15) days after receipt of written notice by
Executive from the Corporation which notice references such failure and this
Section 20(a).
(b) The Corporation shall have the right to terminate this
Agreement without Cause at any time after thirty (30) days after receipt of
written notice by Executive from the Corporation. Non-renewal of this Agreement
shall not be deemed to be a termination of employment for purposes of this
Agreement.
(c) Executive at his option, may terminate this Agreement for Good
Reason (as defined below) upon thirty (30) days' advance written notice by
Executive to the Corporation, which notice shall reference this Section 20(c)
and shall describe in reasonable detail the cause for such Good Reason. Such
termination shall be effective on the thirtieth (30th) day following the
Corporation's receipt of written notice from Executive; provided, however, that
such termination shall not be effective if the Corporation has cured the cause
for such Good Reason to Executive's reasonable satisfaction within such thirty
(30) day period. For purposes of this Section 20(c), "Good Reason" shall mean
any of the following:
i. A material breach of this Agreement by the Corporation;
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<PAGE> 10
ii. The Corporation's requiring Executive to be based at any
office or location other than one within the Denver, Colorado metropolitan area,
except for required travel on the Corporation's business;
iii. Any purported termination by the Corporation of
Executive's employment other than as permitted in this Agreement, it being
understood that any such purported termination shall not be effective for any
purpose of this Agreement, and it being further understood that the nonrenewal
of this Agreement shall not be deemed to be a termination of employment for
purposes of this Agreement; or
iv. A material reduction in the character of the duties
assigned to Executive or in Executive's level of work responsibility, unless
mutually agreed upon by Executive and the Corporation.
(d) Executive shall have the right to terminate this Agreement
without cause at any time upon sixty (60) days' advance written notice to the
Corporation.
21. Rights Upon Termination.
(a) Upon termination of Executive's employment with the
Corporation, the Corporation shall have no further obligation to Executive
except as specifically provided under this Agreement. Termination of Executive's
employment shall not affect Executive's right to receive any compensation or
bonuses which have accrued but have not been paid through the date of
termination.
(b) Upon the termination of Executive's employment with the
Corporation either (i) by the Corporation without Cause or (ii) by Executive for
Good Reason, in addition to any accrued compensation or bonuses, the Corporation
shall pay Executive a severance benefit equal to three months of Executive's
annual base salary as in effect pursuant to Section 4(b) as of the date of
termination. Any such severance payment due to Executive shall be paid in cash
or by check on the same dates on which Executive would otherwise have received
payment of his annual base salary hereunder if employment had continued.
(c) Upon the termination of Executive's employment with the
Corporation for any reason, Executive shall be return to the Corporation any and
all equipment owned by the Corporation and used by Executive.
22. Default in Payments. If any payment is due and payable to Executive
following a termination of this Agreement and such payment is not made when due
and such non-payment continues for a period of ten (10) days after written
notice thereof from Executive to the Corporation, which notice describes such
payment default and references this Section 22, the following shall occur:
(a) Executive shall be immediately released from Section 13 hereof
regarding non-competition; and
10
<PAGE> 11
(b) Executive shall retain all other rights and remedies against
the Corporation.
23. Withholding Tax. The Corporation shall be entitled to withhold from
any compensatory payments which it makes to Executive under this Agreement or
otherwise an amount sufficient to satisfy all Federal, state and local income
and employment tax withholding requirements with respect to any and all
compensation paid to Executive by the Corporation.
24. Arbitration. Any controversy or claim arising out of or related to
this Agreement shall be settled by arbitration in Englewood, Colorado, under the
Commercial Rules of the American Arbitration Association in effect at the time
such controversy or claim arises (the "Rules") by one arbitrator appointed by
the American Arbitration Association in accordance with the Rules, the
arbitrator also apportioning the costs of arbitration. The award of the
arbitrator shall be in writing, shall be final and binding upon the Parties,
shall not be appealed from or contested in any court and may, in appropriate
circumstances, include injunctive relief. Should any Party fail to appear or be
represented at the arbitration proceedings after due notice in accordance with
the Rules, then the arbitrator may nevertheless render a decision in the absence
of said Party, and such decision shall have the same force and effect as if the
absent Party had been present, whether or not it shall be adverse to the
interests of that Party. Any award rendered hereunder may be entered for
enforcement, if necessary, in any court of competent jurisdiction, and the Party
against whom enforcement is sought shall bear the expenses, including attorneys'
fees, of enforcement. Notwithstanding the foregoing, the Corporation shall be
entitled to seek injunctive or other equitable relief to enforce any of the
provisions in Sections 7 through 13 from any court of competent jurisdiction
without the need to resort to arbitration.
25. Survival. The covenants contained in this Agreement shall survive
any termination of Executive's employment with the Corporation and shall survive
any termination of this Agreement. The existence of any claim or cause of action
of Executive against the Corporation, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Corporation
of any of the covenants contained in this Agreement.
26. Severability. If the scope of any restriction contained in this
Agreement is too broad to permit enforcement of such restriction to its fullest
extent, then such restriction shall be enforced to the maximum extent permitted
by law, and Executive and the Corporation hereby consent and agree that the
scope of such restriction may be judicially modified in any proceeding brought
to enforce such restriction. To the extent any provision of this Agreement shall
be invalid or unenforceable, it shall be considered deleted from this Agreement
and the remainder of this Agreement shall remain in full force and effect. In
furtherance and not in limitation of the foregoing, should the duration or
geographical extent of or business activities covered by any provision of this
Agreement be in excess of that which is valid and enforceable under applicable
law,
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<PAGE> 12
then such provision shall be construed to cover only that duration or extent or
those activities which may validly and enforceably be covered.
27. Subsidiaries. The "subsidiaries" of the Corporation as that term is
used in this Agreement include Utility Graphics Consultants Corporation, Graphic
Data Systems Corporation and their subsidiaries, together with any other
corporation in which the Corporation or its subsidiaries hold more than a fifty
percent (50%) interest at any time during the term of this Agreement.
28. Notice. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered by personal delivery,
air courier, or if mailed by registered or certified first-class mail, return
receipt requested, to the residence of Executive as it appears in the corporate
records for notice to Executive, or to the principal office of the Corporation
for notice to the Corporation. All notices delivered in accordance with this
Section shall be deemed to have been received and shall be deemed effective if
delivered in person or by air courier, upon actual receipt by the intended
recipient, or if mailed, upon the date of delivery or refusal to accept delivery
as shown by the return receipt therefor.
29. No Waiver. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel to enforce any provision of
this Agreement, except by a statement in writing signed by the Party against
whom enforcement of the waiver or estoppel is sought. Any written waiver shall
not be deemed a continuing waiver unless specifically stated, and shall operate
only as to the specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any act other than that
specifically waived.
30. Amendments. No amendment or modification of this Agreement shall be
deemed effective unless made in writing and signed by the Parties hereto.
31. Assignment. The rights and obligations of the Corporation under
this Agreement shall, without the prior written consent of Executive, inure to
the benefit of and be binding upon the successors and assigns of the
Corporation. If the Corporation shall at any time be merged or consolidated with
any other corporation or shall sell or otherwise transfer a substantial portion
of its assets to another corporation or entity, the provisions of this Agreement
shall be binding upon and inure to the benefit of the corporation or entity
surviving or resulting from such merger or consolidation or to which such assets
have been sold or transferred. Upon Executive's request, the Corporation shall
obtain an agreement to expressly assume this Agreement from any such successor.
This is a personal service contract and may not be assigned by Executive.
32. Entire Agreement. This instrument contains the entire agreement of
the Parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, whether oral
or written, and all other communications relating to the subject matter hereof,
and the Parties hereto have made
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<PAGE> 13
no agreements, representations or warranties relating to the subject matter of
this Agreement that are not set forth herein.
33. Governing Law. This Agreement is made under and shall be governed
by and construed in accordance with the internal laws of the State of Colorado
applicable to agreements made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
34. Headings. The headings of sections in this Agreement are solely for
convenience of reference and shall not control the meaning or interpretation of
any provision of this Agreement.
Signed by the Parties on the day and year first above written.
"CORPORATION"
CONVERGENT GROUP CORPORATION
By: /s/ Glenn E. Montgomery
------------------------------
Glenn E. Montgomery, Jr.
Chief Executive Officer
"EXECUTIVE"
/s/ Bryan R. Mileger
---------------------------------
Bryan R. Mileger
Executive
13
<PAGE> 1
EXHIBIT 10.13
CONVERGENT GROUP CORPORATION
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT ("Agreement") is made as of the 29th
day of October, 1999 between CONVERGENT GROUP CORPORATION, a Delaware
corporation (the "Company"), and JOHN BLEND ("Blend"), a member of the board of
directors of the Company (the "Board").
RECITAL
WHEREAS, the Company desires to provide Blend with an added incentive
to continue his services to the Company, and through a proprietary interest, to
increase his participation in the success of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. Issuance of Restricted Stock. Subject to the terms and conditions
set forth below, the Company hereby grants and issues to Blend, as compensation
for services, and Blend accepts from the Company, a total of 755,420 shares of
Common Stock of the Company, par value $0.001 per share (the "Shares").
2. Vesting Period of Restricted Stock. The Shares shall be subject to
the restrictions set forth in Section 3 until such time as the Shares have
become vested as provided herein. The Shares shall become vested at the rate of
94,427.5 Shares per calendar quarter on the last day of each such quarter,
commencing September 30, 1999; provided, however, that with respect to any such
date, Blend has been a member of the Board in continuous service through such
date.
3. Nature of Restrictions. Shares which have not yet vested as set
forth in Section 2 (the "Restricted Shares") shall not be sold, assigned,
pledged, or otherwise transferred or encumbered, whether voluntarily,
involuntarily, or by operation of law, except with the prior written approval of
the Company and subject to the transferee's acceptance of the terms and
conditions of this Agreement. Any attempt to sell, assign, pledge, transfer or
encumber the Restricted Shares contrary to the provisions hereof, and any levy
of any attachment or similar process upon the Restricted Shares, shall be null
and void. The Company shall not recognize or give effect to any such transfers
or encumbrances on its books and records nor recognize the person or persons to
whom such purported transfer has been made as the legal or beneficial owner of
the Restricted Shares.
<PAGE> 2
4. Effect of Termination of Service as a Member of the Board. In the
event Blend's service as a member of the Board is terminated either (a) by the
Company for Cause (as defined below), or (b) by Blend voluntarily, the
Restricted Shares shall be immediately forfeited to the Company, without payment
therefor. In the event of a termination of Blend's service as a member of the
Board for any other reason, all of the Restricted Shares shall become fully
vested immediately upon such termination. In the event of Blend's death or
disability prior to the end of the vesting period set forth in Section 2, the
Company may, in its sole discretion, waive in whole or in part any or all
remaining restrictions with respect to Blend's Shares. For purposes of this
Section 4, "Cause" shall mean any one of the following: (i) the commission of a
crime involving fraud, theft or dishonesty by Blend; (ii) Blend's willful
misconduct in carrying out his position and duties; (iii) conduct of a nature
that would materially discredit the Company or any of its subsidiaries or
affiliates were the Company to continue to retain the services of Blend; (iv)
the continued use of alcohol or drugs by Blend to an extent that, in the good
faith determination of the majority of the other members of the Board, such use
materially interferes in any manner with the performance of Blend's duties and
responsibilities; or (v) the violation of any law (including the Foreign Corrupt
Practices Act of 1977, but excluding misdemeanor traffic or other similar
violations).
5. Deposit of Certificates. The stock certificate or certificates
representing the Restricted Shares shall be registered in the name of Blend but
shall remain in the custody of the Company. Blend shall deposit with the Company
stock powers or other instruments of assignment, each endorsed in blank, so as
to permit retransfer to the Company of all or a portion of the Restricted Shares
that shall be forfeited in accordance with this Agreement. As soon as
practicable after September 30 of each year or after the termination of Blend's
service as a member of the Board, and subject to the provisions of Sections 8
and 11, the Company shall issue or transfer to Blend the vested Shares and shall
deliver to Blend a certificate or certificates therefor, registered in Blend's
name.
6. Service as Member of the Board by Blend. Nothing in this Agreement
shall be construed as constituting a commitment, guaranty, agreement, or
understanding of any kind or nature that Blend shall remain a member of the
Board, and this Agreement shall not affect in any way the right of the
shareholders to terminate the service of Blend at any time.
7. Changes in Capital Structure of the Company. If there is any change,
increase or decrease, in the outstanding shares of the Company's Common Stock
which is effected without receipt of additional consideration by the Company, by
reason of a stock dividend, stock split, recapitalization, merger,
consolidation, combination or exchange of stock, or other similar circumstances,
or if there is a spin-off or other distribution of assets to the Company's
stockholders, the Company shall make an appropriate adjustment in the aggregate
number of Shares which then constitute Restricted Shares and the number of
Shares which vest per month as set forth in Section 2. Such adjustment shall be
identical to the adjustment made generally with respect to outstanding shares of
the Company's Common Stock. Any additional securities or other property issued
to Blend as a result of any of the foregoing events shall continue to be subject
to the terms of this Agreement to the same extent as the Shares giving rise to
the right to receive such additional securities or other property.
2
<PAGE> 3
8. Withholding. Blend shall reimburse the Company, in cash or by
certified or bank cashier's check, within ten days after (i) the making of an
election under Section 83(b) of the Internal Revenue Code of 1986, as amended,
or (ii) the vesting of any Restricted Shares, for federal, state or local taxes
required by law to be withheld, if any. The Company shall have the right to
deduct from any payments to be made to Blend any federal, state or local taxes
required by law to be so withheld, if any. The Company's obligation to deliver a
certificate representing the Shares following vesting shall be subject to the
payment by Blend of any applicable federal, state and local withholding tax.
9. Rights of Stockholder. Subject to the terms and provisions of this
Agreement, Blend shall have all the rights of a stockholder of the Company with
respect to the Shares, including the right to vote the Shares and to receive all
cash dividends or, subject to the last sentence of Section 8, other
distributions paid or made with respect to the Shares.
10. Legends. Certificates representing shares of Restricted Stock shall
bear the following legend:
NOTICE OF RESTRICTIONS ON TRANSFER
THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY
ARE SUBJECT TO THE PROVISIONS OF A RESTRICTED STOCK AGREEMENT,
WHEREBY THE TRANSFER IN ANY MANNER OF SUCH SHARES OF STOCK OR
ANY INTEREST THEREIN IS RESTRICTED AND THE SHARES OF STOCK ARE
SUBJECT TO FORFEITURE. A COPY OF SAID AGREEMENT IS ON FILE AT
THE REGISTERED OFFICE OF THE COMPANY WHERE IT MAY BE
INSPECTED.
To the extent that restrictions on the Restricted Shares have lapsed,
certificates bearing the legend provided for herein may be submitted to the
Company, and the Company shall reissue such certificates free of such legend.
Certificates representing Restricted Shares and Common Stock acquired upon
vesting of the Restricted Shares may contain such further legends and transfer
restrictions as the Company shall deem reasonably necessary or desirable,
including, without limitation, legends restricting transfer until there has been
compliance with federal and state securities laws.
11. Stock Restriction Agreement. Concurrent with the execution of this
Agreement, Grantee shall execute and deliver to the Company the Agreement to be
Bound by Stockholders' Agreement in substantially the form attached to this
Agreement as Exhibit A. Execution and delivery of such Agreement shall be a
condition precedent to the right to receive the Restricted Shares.
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<PAGE> 4
12. Lock-Up. In connection with the first two underwritten registered
offerings of any securities of the Company under Securities Act of 1933, as
amended (including any successor statute, the "1933 Act"), Blend will not sell
or otherwise transfer or dispose of any Shares, or any other shares of Common
Stock which are acquired by Blend, during such period following the effective
date of the registration statement of the Company filed under the 1933 Act as
may be requested by the Company or the representative of the underwriters for
the Company, not to exceed 180 days; provided, however, that such restriction
shall apply only if the executive officers and directors of the Company agree
with the representatives of the underwriters not to transfer shares of Common
Stock owned by them for the same or a greater period. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period. Blend shall cause any subsequent
transferee in a private sale of all or any portion of the Shares or any other
shares of Common Stock acquired by Blend to be bound by the restrictions of this
Section.
13. Entire Agreement; Amendments. This Agreement embodies the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification or discharge may be sought to be enforced.
14. Notices. All notices or other communications which are required to
be given or may be given to the parties pursuant to the terms of this Agreement
shall be sufficient in all respects if given in writing and delivered personally
or by registered or certified mail, postage prepaid, addressed: (i) if to the
Company, to the principal executive office of the Company to the attention of
the Secretary, and (ii) if to Blend, to the address of Blend as reflected in the
records of the Company. Notice shall be deemed given on the date of delivery in
the case of personal delivery or on the delivery or refusal date as specified on
the return receipt in the case of registered or certified mail.
15. Binding Effect. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
16. Governing Law. The parties hereby agree that this Agreement shall
be construed in accordance with the laws of the State of Colorado, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Colorado or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Colorado.
4
<PAGE> 5
17. Invalid or Unenforceable Provisions. The invalidity or
unenforceability of any particular provisions of this Agreement shall not affect
the other provisions, and this Agreement shall be construed in all respects as
if that invalid or unenforceable provision were omitted.
18. Investment Intent. Blend, by signing below, hereby acknowledges
that he is acquiring the Shares for investment and not for distribution and that
he has no present intention of selling or transferring the Shares as the
restrictions described herein lapse. Blend agrees that he will not transfer,
sell or offer for sale any of the Shares unless (i) there is an effective
registration or other qualification relating thereto under the Securities Act of
1933 or any applicable state securities laws (the "Acts") or (ii) he delivers to
the Company an opinion of counsel, satisfactory to the Company, that such
registration or other qualification under the Acts is not required in connection
with such transfer, sale or offer.
IN WITNESS WHEREOF, the Company and Blend have executed this Agreement
as of the day and year first above written.
CONVERGENT GROUP CORPORATION
By: /s/ Glenn E. Montgomery, Jr.
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
BLEND:
/s/ John Blend
----------------------------------------
John Blend
5
<PAGE> 1
EXHIBIT 10.14
CONVERGENT GROUP CORPORATION
RESTRICTED STOCK AGREEMENT
THIS RESTRICTED STOCK AGREEMENT ("Agreement") is made as of the 29th
day of October, 1999 between CONVERGENT GROUP CORPORATION, a Delaware
corporation (the "Company"), and ROBERT SHARPE ("Sharpe"), a member of the board
of directors of the Company (the "Board").
RECITAL
WHEREAS, the Company desires to provide Sharpe with an added incentive
to continue his services to the Company, and through a proprietary interest, to
increase his participation in the success of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for other good and valuable consideration, the parties hereto have
agreed, and do hereby agree, as follows:
1. Issuance of Restricted Stock. Subject to the terms and conditions
set forth below, the Company hereby grants and issues to Sharpe, as compensation
for services, and Sharpe accepts from the Company, a total of 755,420 shares of
Common Stock of the Company, par value $0.001 per share (the "Shares").
2. Vesting Period of Restricted Stock. The Shares shall be subject to
the restrictions set forth in Section 3 until such time as the Shares have
become vested as provided herein. The Shares shall become vested at the rate of
94,427.5 Shares per calendar quarter on the last day of each such quarter,
commencing September 30, 1999; provided, however, that with respect to any such
date, Sharpe has been a member of the Board in continuous service through such
date.
3. Nature of Restrictions. Shares which have not yet vested as set
forth in Section 2 (the "Restricted Shares") shall not be sold, assigned,
pledged, or otherwise transferred or encumbered, whether voluntarily,
involuntarily, or by operation of law, except with the prior written approval of
the Company and subject to the transferee's acceptance of the terms and
conditions of this Agreement. Any attempt to sell, assign, pledge, transfer or
encumber the Restricted Shares contrary to the provisions hereof, and any levy
of any attachment or similar process upon the Restricted Shares, shall be null
and void. The Company shall not recognize or give effect to any such transfers
or encumbrances on its books and records nor recognize the person or persons to
whom such purported transfer has been made as the legal or beneficial owner of
the Restricted Shares.
<PAGE> 2
4. Effect of Termination of Service as a Member of the Board. In the
event Sharpe's service as a member of the Board is terminated either (a) by the
Company for Cause (as defined below), or (b) by Sharpe voluntarily, the
Restricted Shares shall be immediately forfeited to the Company, without payment
therefor. In the event of a termination of Sharpe's service as a member of the
Board for any other reason, all of the Restricted Shares shall become fully
vested immediately upon such termination. In the event of Sharpe's death or
disability prior to the end of the vesting period set forth in Section 2, the
Company may, in its sole discretion, waive in whole or in part any or all
remaining restrictions with respect to Sharpe's Shares. For purposes of this
Section 4, "Cause" shall mean any one of the following: (i) the commission of a
crime involving fraud, theft or dishonesty by Sharpe; (ii) Sharpe's willful
misconduct in carrying out his position and duties; (iii) conduct of a nature
that would materially discredit the Company or any of its subsidiaries or
affiliates were the Company to continue to retain the services of Sharpe; (iv)
the continued use of alcohol or drugs by Sharpe to an extent that, in the good
faith determination of the majority of the other members of the Board, such use
materially interferes in any manner with the performance of Sharpe's duties and
responsibilities; or (v) the violation of any law (including the Foreign Corrupt
Practices Act of 1977, but excluding misdemeanor traffic or other similar
violations).
5. Deposit of Certificates. The stock certificate or certificates
representing the Restricted Shares shall be registered in the name of Sharpe but
shall remain in the custody of the Company. Sharpe shall deposit with the
Company stock powers or other instruments of assignment, each endorsed in blank,
so as to permit retransfer to the Company of all or a portion of the Restricted
Shares that shall be forfeited in accordance with this Agreement. As soon as
practicable after September 30 of each year or after the termination of Sharpe's
service as a member of the Board, and subject to the provisions of Sections 8
and 11, the Company shall issue or transfer to Sharpe the vested Shares and
shall deliver to Sharpe a certificate or certificates therefor, registered in
Sharpe's name.
6. Service as Member of the Board by Sharpe. Nothing in this Agreement
shall be construed as constituting a commitment, guaranty, agreement, or
understanding of any kind or nature that Sharpe shall remain a member of the
Board, and this Agreement shall not affect in any way the right of the
shareholders to terminate the service of Sharpe at any time.
7. Changes in Capital Structure of the Company. If there is any change,
increase or decrease, in the outstanding shares of the Company's Common Stock
which is effected without receipt of additional consideration by the Company, by
reason of a stock dividend, stock split, recapitalization, merger,
consolidation, combination or exchange of stock, or other similar circumstances,
or if there is a spin-off or other distribution of assets to the Company's
stockholders, the Company shall make an appropriate adjustment in the aggregate
number of Shares which then constitute Restricted Shares and the number of
Shares which vest per month as set forth in Section 2. Such adjustment shall be
identical to the adjustment made generally with respect to outstanding shares of
the Company's Common Stock. Any additional securities or other property issued
to Sharpe as a result of any of the foregoing events shall continue to be
subject to the terms of this Agreement to the same extent as the Shares giving
rise to the right to receive such additional securities or other property.
2
<PAGE> 3
8. Withholding. Sharpe shall reimburse the Company, in cash or by
certified or bank cashier's check, within ten days after (i) the making of an
election under Section 83(b) of the Internal Revenue Code of 1986, as amended,
or (ii) the vesting of any Restricted Shares, for federal, state or local taxes
required by law to be withheld, if any. The Company shall have the right to
deduct from any payments to be made to Sharpe any federal, state or local taxes
required by law to be so withheld, if any. The Company's obligation to deliver a
certificate representing the Shares following vesting shall be subject to the
payment by Sharpe of any applicable federal, state and local withholding tax.
9. Rights of Stockholder. Subject to the terms and provisions of this
Agreement, Sharpe shall have all the rights of a stockholder of the Company with
respect to the Shares, including the right to vote the Shares and to receive all
cash dividends or, subject to the last sentence of Section 8, other
distributions paid or made with respect to the Shares.
10. Legends. Certificates representing shares of Restricted Stock shall
bear the following legend:
NOTICE OF RESTRICTIONS ON TRANSFER
THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY
ARE SUBJECT TO THE PROVISIONS OF A RESTRICTED STOCK AGREEMENT,
WHEREBY THE TRANSFER IN ANY MANNER OF SUCH SHARES OF STOCK OR
ANY INTEREST THEREIN IS RESTRICTED AND THE SHARES OF STOCK ARE
SUBJECT TO FORFEITURE. A COPY OF SAID AGREEMENT IS ON FILE AT
THE REGISTERED OFFICE OF THE COMPANY WHERE IT MAY BE
INSPECTED.
To the extent that restrictions on the Restricted Shares have lapsed,
certificates bearing the legend provided for herein may be submitted to the
Company, and the Company shall reissue such certificates free of such legend.
Certificates representing Restricted Shares and Common Stock acquired upon
vesting of the Restricted Shares may contain such further legends and transfer
restrictions as the Company shall deem reasonably necessary or desirable,
including, without limitation, legends restricting transfer until there has been
compliance with federal and state securities laws.
3
<PAGE> 4
11. Stock Restriction Agreement. Concurrent with the execution of this
Agreement, Grantee shall execute and deliver to the Company the Agreement to be
Bound by Stockholders' Agreement in substantially the form attached to this
Agreement as Exhibit A. Execution and delivery of such Agreement shall be a
condition precedent to the right to receive the Restricted Shares.
12. Lock-Up. In connection with the first two underwritten registered
offerings of any securities of the Company under Securities Act of 1933, as
amended (including any successor statute, the "1933 Act"), Sharpe will not sell
or otherwise transfer or dispose of any Shares, or any other shares of Common
Stock which are acquired by Sharpe, during such period following the effective
date of the registration statement of the Company filed under the 1933 Act as
may be requested by the Company or the representative of the underwriters for
the Company, not to exceed 180 days; provided, however, that such restriction
shall apply only if the executive officers and directors of the Company agree
with the representatives of the underwriters not to transfer shares of Common
Stock owned by them for the same or a greater period. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period. Sharpe shall cause any subsequent
transferee in a private sale of all or any portion of the Shares or any other
shares of Common Stock acquired by Sharpe to be bound by the restrictions of
this Section.
13. Entire Agreement; Amendments. This Agreement embodies the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, oral or written, with
respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification or discharge may be sought to be enforced.
14. Notices. All notices or other communications which are required to
be given or may be given to the parties pursuant to the terms of this Agreement
shall be sufficient in all respects if given in writing and delivered personally
or by registered or certified mail, postage prepaid, addressed: (i) if to the
Company, to the principal executive office of the Company to the attention of
the Secretary, and (ii) if to Sharpe, to the address of Sharpe as reflected in
the records of the Company. Notice shall be deemed given on the date of delivery
in the case of personal delivery or on the delivery or refusal date as specified
on the return receipt in the case of registered or certified mail.
15. Binding Effect. This Agreement shall be binding upon the heirs,
executors, administrators and successors of the parties hereto.
16. Governing Law. The parties hereby agree that this Agreement shall
be construed in accordance with the laws of the State of Colorado, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Colorado or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Colorado.
4
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17. Invalid or Unenforceable Provisions. The invalidity or
unenforceability of any particular provisions of this Agreement shall not affect
the other provisions, and this Agreement shall be construed in all respects as
if that invalid or unenforceable provision were omitted.
18. Investment Intent. Sharpe, by signing below, hereby acknowledges
that he is acquiring the Shares for investment and not for distribution and that
he has no present intention of selling or transferring the Shares as the
restrictions described herein lapse. Sharpe agrees that he will not transfer,
sell or offer for sale any of the Shares unless (i) there is an effective
registration or other qualification relating thereto under the Securities Act of
1933 or any applicable state securities laws (the "Acts") or (ii) he delivers to
the Company an opinion of counsel, satisfactory to the Company, that such
registration or other qualification under the Acts is not required in connection
with such transfer, sale or offer.
IN WITNESS WHEREOF, the Company and Sharpe have executed this Agreement
as of the day and year first above written.
CONVERGENT GROUP CORPORATION
By: /s/ Glenn E. Montgomery
------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
SHARPE:
/s/ Robert Sharpe
---------------------------------------
Robert Sharpe
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EXHIBIT 10.15
Client Name
Convergent Group Corporation Agreement
FORM OF
AGREEMENT
BETWEEN
[Name of Client]
_______________________________
AND
CONVERGENT GROUP CORPORATION
(Reference No.______________)
This Agreement (hereinafter referred to as "Agreement") is made and entered into
by and between _________________________ (hereinafter referred to as "CLIENT")
and Convergent Group Corporation (hereinafter referred to as "CONSULTANT) for
the sale of hardware manufactured by third parties hereto (hereinafter referred
to as "Hardware"), the licensing and maintenance of Third-Party Software and
Operating System Software (hereinafter referred to as "Software"), associated
documentation (hereinafter referred to as "Documentation"), and professional
Consultant Services required to provided technical and management consulting
expertise to CLIENT for custom application software and custom application
software systems as well as provide technical services related thereto as
defined in Attachments, attached hereto and incorporated herein by this
reference.
1. STATEMENT OF SERVICES - SCOPE OF WORK: CONSULTANT will provide project
management, custom software, outage management, hardware/software selection
requirements, mapping conversion selection requirements, maintenance,
consulting and systems integration services as detailed in the Attachment
A - Scope of Work.
All Work shall be performed in accordance with sound and generally
accepted professional practices and industry standards by professional,
managerial, and administrative personnel fully qualified in the respective
professional discipline required.
CONSULTANT shall have the complete professional, managerial, or technical
responsibility for the validity, accuracy, and reliability of the Work
performed by CONSULTANT. CLIENT shall have the complete professional,
managerial, or technical responsibility for the validity, accuracy, and
reliability of the Work performed by CLIENT. Both parties will cooperate
with each other and provide timely information and timely status to the
other party regarding their development efforts in order to facilitate the
success of the project by not delaying the Work performed by the other
party.
2. PRICES: CONSULTANT charges for the purchase of Consulting Services, the
Hardware, licensing of Software, and Documentation are specified in the
Attachments. The prices set forth in such Attachments are exclusive of and
CLIENT agrees to pay:
(a) CONSULTANT charges for the purchase of Consulting Services requested
by CLIENT or (ii) services required and charges incurred due to CLIENT
failure to complete its site preparation prior to a mutually agreed
schedule for delivery of Hardware and/or Software; and,
(b) all taxes, however designated, paid or payable by CONSULTANT
hereunder, exclusive of taxes based on the net income of CONSULTANT.
If any charges under this Agreement are exempt from sales or use tax
liability, CLIENT shall provide to CONSULTANT, upon execution of this
Agreement, evidence of tax exemption acceptable to the relevant taxing
authority.
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(c) freight and shipping charges that will be invoiced to CLIENT at a rate
of one and one-half percent (1 1/2%) of the list price of each item of
Hardware ordered hereunder.
3. PAYMENT TERMS: CONSULTANT charges for the Hardware (including the freight
and shipping charges referenced above) and the licensed Software will be
invoiced upon shipment and will be payable by the CLIENT within thirty (30)
days from the date of invoice. All labor and services performed by the
CONSULTANT shall be invoiced monthly on a percent task completion basis
against a lump sum labor fee. All other charges will be invoiced when
incurred and will be payable by the CLIENT within thirty (30) days from the
date of invoice. CONSULTANT reserves the right to assess a late payment
charge of one and one-half percent (1 1/2%) per month, or at the maximum
rate permitted by law, whichever is less, on the unpaid balance of any
amount past due.
4. CONSULTANT EMPLOYEES: CONSULTANT personnel shall be and will remain at all
times, during this Agreement, employees of CONSULTANT. CLIENT shall not be
responsible for any payments due CONSULTANT employees on account of, or
in connection with, this Agreement.
CONSULTANT employees assisting CLIENT under this Agreement who are found,
in CLIENT's sole opinion to be unsatisfactory for services to be performed
hereunder, shall be removed by CONSULTANT immediately upon receipt of
written notice from CLIENT. Such employee shall be replaced with another
CONSULTANT employee satisfactory to CLIENT as soon as possible.
5. NON-SOLICITATION OF EMPLOYEES: CLIENT agrees that CLIENT will not, during
the term of this Agreement and for a period continuing for twenty-four (24)
months after the expiration or termination of this Agreement for any
reason, directly or indirectly solicit, influence, entice, or encourage any
person who is then or had been within one (1) year of such action an
employee of CONSULTANT to cease his or her relationship with CONSULTANT, or
otherwise interfere with, disrupt, or attempt to disrupt any past, present,
or prospective relationship, contractual or otherwise, between CONSULTANT
and any of its employees.
CLIENT further agrees that CLIENT will not, during the term of this
Agreement and for a period continuing for twenty-four (24) months
thereafter, hire or attempt to hire, whether as an employee, consultant, or
otherwise any person who was employed by CONSULTANT at any time during the
term of this Agreement.
CLIENT acknowledges and agrees that the provisions of this section are
essential to CONSULTANT and are reasonable and necessary to protect the
legitimate interests of CONSULTANT and that the damages sustained by
CONSULTANT as a result of a breach of the agreements contained herein will
subject CONSULTANT to immediate, irreparable harm and damage, the amount of
which, although substantial, could not be reasonably ascertainable, and
that recovery of damages at law will not be an adequate remedy. Therefore,
CLIENT agrees that CONSULTANT, in addition to any other remedy it may have
under this Agreement or at law, shall be entitled to injunctive and other
equitable relief to prevent or curtail any breach of any provision of this
section. CLIENT waives any right to the posting of a bond in the event of
an issuance of a temporary restraining order, preliminary injunction, or
permanent injunction upon the issuance of said order by a court of
competent jurisdiction.
This section shall survive termination or expiration of this Agreement for
any reason.
If the scope of any restrictions contained in this section is too broad to
permit enforcement of such restriction to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law and
CLIENT hereby consents and agrees that the scope may be judicially modified
in any proceeding brought to enforce such restriction.
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6. INSURANCE: During the term of this Agreement for CONSULTANT services
only, CONSULTANT shall provide and maintain at its own expense the
following kinds of insurance with limits of liability as set forth below:
<TABLE>
<CAPTION>
INSURANCE LIMITS OF LIABILITY
- --------- -------------------
<S> <C>
Workmen's Compensation Statutory
Commercial General Liability $2,000,000
Automobile Liability $1,000,000
</TABLE>
CONSULTANT agrees to provide CLIENT with a certificate of insurance
evidencing the coverages required above and stating the policy numbers and
inception and expiration dates of all policies. This certificate of
insurance shall also provide for thirty (30) days' prior notice to the
CLIENT in the event of cancellation of the policy.
7. INDEPENDENT CONTRACTOR STATUS: The parties to this Agreement are
independent contractors, and none of the provisions of this Agreement
shall be interpreted or deemed to create any relationship between such
parties other than that of independent contractors. Nothing contained in
this Agreement shall be construed to create a relationship of employer and
employees, master and servant, principal and agent, or coventurers between
CLIENT and CONSULTANT, between CLIENT and any employee of CONSULTANT, or
between CONSULTANT and any employee of CLIENT. CLIENT shall have no right
to control or direct the details, manner, or means by which CONSULTANT
performs the services hereunder, provided that such services shall be
performed to CLIENT's reasonable satisfaction. In performing such
services, CONSULTANT shall have no control over or management authority
with respect to the CLIENT or its operations.
8. SPECIAL CONDITIONS: The following conditions are incorporated into the
understandings associated with this Agreement:
(a) If the project scope of work is requested to be increased or changed
by CLIENT in such a manner as to require additional labor or expenses
and CONSULTANT agrees to such changes, the parties will adjust both
scope and fees through a written Change Order to this Agreement.
(b) CLIENT and CONSULTANT reserve the right to subsequently amend this
Agreement to include additional services or associated products.
Compensation for additional services or products will be as agreed by
CLIENT and CONSULTANT and may be incorporated as Attachments to this
Agreement. All work to be accomplished will be defined in written
Change Orders approved by the parties. The Change Orders will define
the objectives to be addressed, the scope of services to be provided,
the products to be delivered, the schedule to be met, special
considerations (as appropriate), and a Change Order price estimate or
fixed fee. The CONSULTANT will be reimbursed as provided in the
Change Order.
(c) CONSULTANT's project team members will have the opportunity and
authority to contact personnel at CLIENT directly in the performance
of technical consulting duties.
(d) Other terms and conditions may be added to this Agreement in the
future by mutual written consent of both parties.
9. EQUAL EMPLOYMENT: In performing the services hereunder, CONSULTANT agrees
to comply with all applicable local, state, and federal laws, regulations,
and orders relating to fair and equal employment opportunity practices and
policies.
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10. SITE PREPARATION/DELIVERY/INSTALLATION: CLIENT shall prepare and maintain
an installation site in accordance with the Hardware manufacturer's
published specifications. Risk of loss to Hardware and Software shall pass
to CLIENT upon delivery of same to the installation site.
10.1 CONSULTANT or its authorized agent will install the Hardware and/or
Software.
10.2 The Hardware and/or Software will be deemed accepted when used
by CLIENT in the ordinary course of its business, which includes
production processing.
11. CONSULTANT TRAINING: Subject to a mutually agreed to schedule, CONSULTANT
will provide training to the CLIENT in the use of the CONSULTANT Software
listed in Attachment A -- Scope of Work. The extent of such training,
number of CLIENT personnel to be trained, location of such training, and
the appropriate price are reflected in the Attachments.
12. HARDWARE MAINTENANCE: CONSULTANT will provide Hardware maintenance to
CLIENT for the applicable period provided by the Hardware manufacturer(s)
in the purchase price of the Hardware; thereafter, maintenance shall be the
responsibility of CLIENT who may contract directly with the Hardware
manufacturer(s) or CLIENT may purchase maintenance services from CONSULTANT
in accordance with the provisions of Attachment D hereto.
13. APPLICATION SOFTWARE MAINTENANCE: CONSULTANT will maintain the Custom
Software identified in Attachment A -- Scope of Work hereto in accordance
with mutually agreed upon maintenance provisions for the entire duration of
this Agreement; thereafter, CLIENT may either terminate such maintenance
coverage or may continue to purchase maintenance services from CONSULTANT
in accordance with the provisions of Attachment D hereto.
14. WARRANTY AND DISCLAIMER: CONSULTANT warrants that on the Installation Date
the Hardware will be free from defects in materials and workmanship and
that the Software will perform substantially in compliance with the
Documentation provided by CONSULTANT.
CONSULTANT MAKES NO OTHER WARRANTIES OF ANY KIND EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT BY WAY OF LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE
HARDWARE, SOFTWARE, DOCUMENTATION, TECHNICAL INFORMATION, AND TECHNICAL
ASSISTANCE PROVIDED BY CONSULTANT PURSUANT TO THIS AGREEMENT.
15. LIMIT OF LIABILITY: CONSULTANT's liability arising out of its performance
under this Agreement, with the exception of Section 17 -- Indemnity, shall
be limited to claims directly attributable only to the failure of
CONSULTANT's agents or employees to exercise the degree of skill and
performance normally exercised by duly qualified persons performing similar
functions. The amount of CONSULTANT'S liability shall not exceed the total
amount of labor fees for services rendered under this Agreement. IN NO
EVENT SHALL CONSULTANT, ITS EMPLOYEES OR AGENTS BE LIABLE FOR LOSS OF
EARNINGS, LOSS OF PROFITS, LOSS OF INTEREST, JUDGMENTS, AWARDS, OR
CONTRIBUTION THERETO, OR ANY OTHER SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGE, HOWEVER CAUSED.
16. LIMITATION OF MAINTENANCE REMEDIES: CONSULTANT'S entire liability and the
CLIENT's exclusive remedy shall be that CONSULTANT will, pursuant to
applicable maintenance provisions, restore the Hardware to working order if
it should fail due to defects in materials and workmanship and correct the
Application Software if it should fail to substantially conform to the
Documentation provided by CONSULTANT, during the period in which CONSULTANT
is providing maintenance
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services in accordance with Sections 12 and 13 herein. However, if
CONSULTANT is unable to cure such defects, as CLIENT's exclusive remedy,
CONSULTANT will grant CLIENT a refund for the Hardware and/or Application
Software involved, based upon its straight line depreciated value over the
life of the product as determined by CONSULTANT and accept its return.
16.1 CONSULTANT's entire liability for damages for any cause whatsoever,
and regardless of the form of action, shall be limited to CLIENT's
actual direct damages not to exceed the amount paid to CONSULTANT
under this Agreement for the specific item that caused the damage or
that is the subject matter of, or is directly related to, the cause of
action. This limitation is not applicable to claims for patent,
copyright, and trade secret infringement which claims are covered by
Section 17.
16.2 IN NO EVENT SHALL CONSULTANT, ITS OFFICERS, AGENTS, AND EMPLOYEES BE
LIABLE UNDER OR IN CONNECTION WITH THIS AGREEMENT UNDER ANY THEORY OF
TORT, CONTRACT, STRICT LIABILITY, OR OTHER LEGAL OR EQUITABLE THEORY
FOR LOST PROFITS, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES.
17. INDEMNITY: CONSULTANT shall defend, at its expense, any action brought
against CLIENT to the extent that it is based upon a claim that any
Hardware, Software, or Documentation infringes a patent or copyright or
violates any third-party trade secret or proprietary right and shall pay
all costs and damages finally awarded against CLIENT, provided that
CONSULTANT is given prompt written notice of such claim and is given
information, reasonable assistance, and sole authority to defend or settle
the claim.
17.1 If any such action is brought, or in CONSULTANT's opinion is likely to
be brought, then CONSULTANT may at its election (i) obtain for CLIENT
the right to continue using the Hardware, Software, or Documentation;
(ii) replace or modify such so that it becomes noninfringing; or (iii)
if such remedies are not reasonably available, accept CLIENT's return
of the Hardware, Software, or Documentation and grant CLIENT a refund
for the Hardware, Software, or Documentation involved, based upon its
straight line depreciated value over the life of the product as
determined by CONSULTANT.
17.2 CONSULTANT shall have no obligation under this section if the alleged
infringement or violation is based upon the use of the Hardware,
Software, or Documentation in combination with other hardware,
software, or documentation not furnished by CONSULTANT or if such
claim arises from CONSULTANT's compliance with CLIENT's designs,
specifications, or instructions or from CLIENT's modification of the
Hardware, Software, or Documentation.
17.3 CONSULTANT shall have no liability for infringement of patents or
copyrights, or violation of trade secrets or proprietary rights except
as expressly provided in this section.
17.4 Each party shall be responsible for willful misconduct and negligent
acts or omissions of its agents and employees. Each party shall
indemnify, hold harmless, and defend the other from and against all
liabilities for bodily injury and property damage caused by the
willful or negligent act or omission of the indemnifying party or its
agents or employees. This section shall survive termination or
expiration of this Agreement for any reason.
18. PATENTS AND INVENTIONS: The CONSULTANT has developed numerous proven
proprietary materials that provide the methodologies for the development of
the Deliverables. The use of these materials contributes to the
cost-effectiveness of CONSULTANT services. CLIENT agrees that CONSULTANT
shall own all such products, materials, and methodologies and that CLIENT
shall have or obtain no rights in such proprietary products, materials, and
methodologies except pursuant
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to a separate written agreement executed by the parties. CLIENT
understands that CONSULTANT proprietary costs analysis and strategic
planning models and facilities database models and designs or certain
software products may be used under this Agreement, and CLIENT agrees
not to exhibit, distribute, or otherwise disclose any such proprietary
methods and materials to external or third parties without the prior
approval in writing from CONSULTANT. The CONSULTANT shall continue to
market, distribute, make derivative works from, and sell similar work
to other companies without further notice to nor consent from CLIENT.
Nothing in this Agreement shall restrict or prohibit CONSULTANT's
right to use concepts, techniques, and know-how used or developed in
the course of performing these services.
CONSULTANT shall be the owner of copyright or other intellectual
property rights in such Deliverable Products. CONSULTANT grants to
CLIENT a perpetual, royalty-free license to reproduce and use, for
CLIENT's internal purposes only, any materials developed for CLIENT
related to this Agreement, not including Third-Party Software
Licenses. CLIENT agrees not to exhibit, distribute, or otherwise
disclose any proprietary software, methods, or materials to external
or third parties without the prior approval in writing from
CONSULTANT.
19. TERMINATION: If either party shall at any time commit any
material breach of any covenant or warranty under this Agreement
(other than a breach of Section 9) and (i) shall fail to cure such
breach within thirty (30) days of written notice of such breach or
(ii) if it is not curable within thirty (30) days of written notice,
shall fail to diligently commence to cure it within thirty (30) days
of notice, the defaulted party may at its option, and in addition to
any other remedies to which it is entitled, terminate this Agreement
by written notice.
19.1 Except as may be prohibited by the U.S. bankruptcy laws, in
the event of either party's insolvency or inability to pay
debts as they become due, voluntary or involuntary
bankruptcy proceedings by or against a party hereto, or
appointment of a receiver or assignee for the benefit of
creditors, the other party may terminate this Agreement by
written notice.
19.2 CONSULTANT reserves the right to terminate this Agreement
upon written notice to CLIENT if CLIENT fails to make full
payment within ninety (90) days from date of invoice.
19.3 All license rights granted, for which CLIENT has not made
payment in full, shall cease upon any termination or
cancellation of this Agreement. Within fifteen (15) days
after termination of the license rights granted herein or
termination or cancellation of this Agreement for any
reason, CLIENT agrees to certify to CONSULTANT in writing
that the original and all copies of the Software and
Documentation, in any form, have been destroyed.
19.4 If this Agreement is terminated after CONSULTANT has
commenced any work, mobilization, or other off-site
activities under this Agreement, CONSULTANT will be paid its
actual incurred costs and legally committed accrued costs,
determined in accordance with generally accepted accounting
principles consistently applied, provided that if
compensation under this Agreement is on a time and materials
basis, CONSULTANT will be compensated at the quoted rates
for time spent and materials purchased (or committed to be
purchased) as of the date of termination plus any time
reasonably required to demobilize CONSULTANT's services
hereunder.
20. CONFIDENTIALITY OF INFORMATION. The parties acknowledge that in the
course of this Agreement they will have access to, and/or will be in
possession of, Confidential Information of the other. "Confidential
Information" shall mean information regarded by that party as
confidential, including but not limited to, information relating to
its past, present, or future research, development, or business
affairs; future project purchases; any proprietary products,
materials, or methodologies; all items prepared for and submitted to
CLIENT in connection with work performed under this
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Agreement, including drafts and associated material; and any other
information marked or, in the case of information verbally disclosed,
verbally designated as confidential at the time of disclosure by that
party.
20.1 Each party shall hold in confidence, in the same manner as it holds
its own confidential information of like kind, all Confidential
Information of the other to which it may have access hereunder. Access
to Confidential Information shall be restricted to those of the
party's personnel with a need to know and engaged in a permitted use.
CONSULTANT's deliverable products marked confidential shall neither be
exhibited nor distributed in any way to parties external to CLIENT.
20.2 The foregoing shall not prohibit or limit either party's use of
information, including but not limited to, ideas, concepts, know-how,
techniques, and methodologies which (i) are or become generally
available to and known by the public (other than as a result of an
unpermitted disclosure directly or indirectly by the receiving party
hereunder or its agents, representatives, or advisors), (ii) is or
becomes available to it on a nonconfidential basis from a source other
than the furnishing party or its affiliates, advisors, agents, or
representatives, provided that such source is not and was not bound by
a confidentiality agreement or other obligation of secrecy to the
furnishing party, (iii) has already been or is hereafter independently
acquired or developed by it without violating any confidentiality
agreement or other obligation of secrecy to the furnishing party, or
(iv) is required by law or regulation to be disclosed, provided,
however, that it shall give the furnishing party reasonable advance
notice of such requirement so that the furnishing party may seek
appropriate legal relief against such disclosure.
20.3 The parties hereto agree and acknowledge that any such Confidential
Information shall be considered for all purposes confidential and
privileged information under any local, state, or federal law and such
Confidential Information shall not be released pursuant to an local,
state, or federal act, law, or statute concerning "freedom of
information."
20.4 This section shall survive termination or expiration of this Agreement
for any reason.
20.5 CLIENT acknowledges and agrees that the provisions of this section are
essential to CONSULTANT and are reasonable and necessary to protect
the legitimate interest of CONSULTANT and that the damages sustained
by CONSULTANT as a result of a breach of the agreements contained
herein will subject CONSULTANT to immediate, irreparable harm and
damage, the amount of which, although substantial, could not be
reasonably ascertainable, and that recovery of damages at law will not
be an adequate remedy. Therefore, CLIENT agrees that CONSULTANT, in
addition to any other remedy it may have under this Agreement or at
law, shall be entitled to injunctive and other equitable relief to
prevent or curtail any breach of any provision of this section. CLIENT
waives any right to the posting of a bond in the event of an issuance
of a temporary restraining order, preliminary injunction, or permanent
injunction upon the issuance of said order by a court of competent
jurisdiction.
21. RETURN OF INFORMATION: Upon termination or expiration of this Agreement for
any reason, CONSULTANT shall return to CLIENT any confidential information
or proprietary information belonging to CLIENT which is in the CONSULTANT's
possession, except that CONSULTANT shall be entitled to retain a duplicate
set of any deliverable products created in connection with this Agreement.
Upon termination or expiration of this Agreement for any reason, CLIENT
shall return to CONSULTANT any confidential information or proprietary
information belonging to CONSULTANT which is in the CLIENT's possession,
except that CLIENT shall be entitled to retain
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a duplicate set of any deliverable products created in connection with this
Agreement. This section shall survive termination or expiration of this
Agreement for any reason.
22. GOVERNING LAW: This Agreement will be governed by the laws of the State of
Colorado without regard to the conflicts of laws principles of such state.
23. ENFORCEMENT EXPENSES: In the event of a breach or threatened breach of any
term or provision of this Agreement, the nonbreaching party shall be
entitled to all of its remedies available at law or in equity and, in
addition, shall be entitled to be reimbursed for all of its costs and
expenses in enforcing this Agreement, including but not limited to,
reasonable attorney's fees. This section shall survive termination or
expiration of this Agreement for any reason.
24. CAPTIONS AND HEADINGS: The captions and headings herein are for convenience
only and in no way shall be used in the interpretation or construction of
this Agreement.
25. WAIVER OF COMPLIANCE: Any failure by any party hereto to enforce at any
time any term or condition of this Agreement shall not be considered a
waiver of that party's right to later enforce each and every term and
condition hereof.
26. NOTICES: Any notice required or permitted to be made or given to either
party hereto will be sufficiently made or given on the date of receipt or
on the refusal date as specified on the return receipt in the case of
overnight courier or certified mail, if sent to such party as its address
set forth below, or such other address as it shall designate by written
notice to the other party. Notice shall be deemed given on the date of
delivery in the case of personal delivery.
CLIENT:
Attn:
Telephone:
Facsimile:
CONSULTANT:
Convergent Group
6399 S. Fiddler's Green Cr., Suite 600
Englewood, Colorado 80111
Attn: Glenn E. Montgomery, CEO
Telephone: (303) 741-8400
Facsimile: (303) 741-8401
27. SEVERABILITY: If any provision of this Agreement or the application thereof
to any party or circumstance shall be declared invalid, illegal, or
unenforceable, the remainder of this Agreement shall be valid and
enforceable to the extent permitted by applicable law. In such event, the
parties shall use their best efforts to replace the invalid or
unenforceable provision with provision that, to the
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extent permitted by applicable law, achieves the purposes intended under
the invalid or unenforceable provision.
28. DISPUTE RESOLUTION ARBITRATION: Any and all disputes arising out of or in
connection with the execution, interpretation, performance, or
nonperformance of this Agreement or any other certificate, agreement, or
other instrument between, involving, or affecting the parties (including
the validity, scope, and enforceability of this arbitration agreement)
shall be solely and finally settled by a single arbitrator in accordance
with the Commercial Rules of the American Arbitration Association (the
"Rules"); provided, however, that in the event of conflict between the
Rules and the terms of this Agreement, the terms of this Agreement shall
govern. The place of arbitration shall be Englewood, Colorado, and the law
applicable to the arbitration procedure shall be the Federal Arbitration
Act (9 USC P2). To commence arbitration of any such dispute, the party
desiring arbitration shall notify the other party in writing in accordance
with the Rules. In the event that the parties fail to agree on the
selection of an arbitrator within fifteen (15) days after the delivery of
such notice, the arbitrator shall be selected by the American Arbitration
Association upon the request of either party.
The parties agree that the award of the arbitrator shall (1) be the sole
and exclusive remedy between them regarding any claims, counterclaims, or
issues presented to the arbitrator; (2) be final and subject to no
judicial review; and (3) be made and shall promptly be payable in U.S.
dollars free of any tax, deduction, or offset. The parties further agree
that any costs, fees, or taxes incident to enforcing the award shall, to
the maximum extent permitted by law, be charged against the party
resisting such enforcement. The parties hereto agree that judgment on the
arbitration award may be entered and enforced in any court having
jurisdiction over the parties or their assets.
Each party shall, except as otherwise provided herein, be responsible for
its own expenses, including legal fees, incurred in the course of any
arbitration proceedings. The fees of the arbitrator shall be divided
evenly between the parties.
CONSULTANT shall carry on and be paid for the services not in dispute and
maintain the schedule for services during any arbitration or litigation
proceedings, unless otherwise agreed by CONSULTANT and CLIENT in writing.
29. ATTACHMENTS:
Attachment A: Scope of Work
Attachment B: Pricing and Billing
Attachment C: Schedule
30. GENERAL: This Agreement, and any license granted therein, may not be
assigned or transferred by CLIENT, in whole or in part, either voluntarily
or by operation of law, without the prior written consent of CONSULTANT.
30.1 The failure of either party to exercise any of its rights or to
enforce any of the provisions of this Agreement on any occasion shall
not be a waiver of such right or provision, nor affect the right of
such party thereafter to enforce each and every provision of this
Agreement.
30.2 Prior to delivery, CONSULTANT reserves the right, at no additional
charge to CLIENT, to make substitutions and modifications in the
design and/or specifications of Hardware, Software, or Documentation
provided hereunder; provided that such substitutions or
modifications do not materially and adversely affect performance or
function.
30.3 Neither party shall be liable for any delay in or failure of
performance due to any cause or condition beyond its reasonable
control, whether foreseeable or not.
Proprietary and Confidential Convergent Group/___P
-9-
<PAGE> 10
Client Name
Convergent Group Corporation Agreement
30.4 Neither party shall issue any news release, public announcement, or
advertisement of any portion of the content of this Agreement
without the prior written consent of the other party.
30.5 No action, regardless of form, may be brought by either party more
than two (2) years after the cause of action has accrued or, in the
case of any action for nonpayment, more than two (2) years from the
date the last payment was due.
30.6 There shall be no export of any Hardware, Software, or Documentation
provided hereunder without (a) the express written consent of
CONSULTANT and (b) CLIENT obtaining any required prior authorizations
from the U.S. Department of Commerce or other applicable authority.
Diversion contrary to U.S. law is prohibited.
30.7 This Agreement and the Attachments hereto constitute the entire
agreement between the parties and shall supersede all proposals or
prior agreements, oral or written, and all other communications
between the parties relating to the subject matter of this
Agreement. If CLIENT issues a purchase order, memorandum, or other
instruments covering the goods or services provided under this
Agreement, it is agreed that such document is for CLIENT's internal
purposes only unless it is accepted in writing by CONSULTANT, in
which case all terms and conditions contained therein which are
additional to or inconsistent with this Agreement shall be of no
force and effect. The Agreement shall not be varied other than by an
instrument in writing of subsequent date hereto, executed by the duly
authorized representative of both parties. The Agreement shall be
construed in accordance with, and its performance governed by, the
laws of the State of Colorado excluding its laws on conflict of law.
IN WITNESS WHEREOF, the parties have executed this Agreement effective the ____
day of ____, 2000.
CLIENT:
--------------------------
Customer Name
------------------------------------------------------------------
Address
------------------------------------------------------------------------
City State Zip Code
------------------------------ ------------------- --------
By
---------------------------------- (Authorized Signature)
Name
---------------------------------------------------------------------------
Title
--------------------------------------------------------------------------
Date
---------------------------------------------------------------------------
Proprietary and Confidential Convergent Group/___P
-10-
<PAGE> 11
Client Name
Convergent Group Corporation Agreement
Received by:
CONVERGENT GROUP
By
------------------------------------------------------------------------------
Name
----------------------------------------------------------------------------
Title
---------------------------------------------------------------------------
Date
----------------------------------------------------------------------------
Proprietary and Confidential Convergent Group/____P
-11-
<PAGE> 1
EXHIBIT 10.16
OFFICE LEASE
BETWEEN
FIDDLER'S GREEN CENTER,
a Delaware limited liability company,
"LANDLORD"
AND
CONVERGENT GROUP CORPORATION,
a Delaware corporation,
"TENANT"
FOR SPACE AT
THE BUILDING KNOWN AS
FIDDLER'S GREEN CENTER - BUILDING I
Dated: August 28, 1998
<PAGE> 2
TABLE OF CONTENTS
OFFICE LEASE
<TABLE>
<S> <C> <C>
1. PREMISES; BUILDING; BUILDING COMPLEX; COMMON AREAS ................ 4
2. LEASE TERM ........................................................ 4
3. RENT; SECURITY DEPOSIT ............................................ 4
A. Base Rent ...................................................... 4
B. Security Deposit ............................................... 4
4. TENANT FINISH AND ACCEPTANCE OF THE PREMISES ...................... 4
A. Landlord's Work ................................................ 4
B. Postponement of Lease Commencement Date ........................ 5
C. Partial Months; Lease Commencement Certificate ................. 5
5. OPERATING EXPENSES ................................................ 5
A. Definitions Regarding Operating Expenses ....................... 5
B. Payment of Excess Operating Expenses ........................... 9
C. Partial Years .................................................. 9
D. Survival of Tenant's Obligation ................................ 10
E. Tenant's Right to Question Excess Operating Expenses ........... 10
F. Operating Expense Adjustments .................................. 10
6. SERVICES .......................................................... 10
A. Landlord's Services ............................................ 10
B. Excess Usage ................................................... 11
C. Additional Services to Tenant .................................. 12
D. Interruption of Services ....................................... 12
E. Notice to Landlord ............................................. 12
7. QUIET ENJOYMENT ................................................... 12
8. USE AND OCCUPANCY ................................................. 12
9. MAINTENANCE AND REPAIRS ........................................... 13
A. Landlord's Obligations ......................................... 13
B. Tenant's Obligations ........................................... 13
10. ALTERATIONS AND ADDITIONS ......................................... 13
A. Alterations by Tenant .......................................... 13
B. Ownership and Removal of Alterations ........................... 14
C. Landlord's ADA Alterations ..................................... 14
11. ENTRY BY LANDLORD ................................................. 15
12. MECHANICS LIENS .................................................. 15
13. SUBLETTING AND ASSIGNMENT.......................................... 15
A. Tenant's Right ................................................. 15
B. Other Restrictions; What Constitutes an Assignment ............. 16
C. Certain Subleases .............................................. 16
D. Related Corporation Assignment ................................. 16
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
E. Excess Rent..................................................... 17
14. DAMAGE TO PROPERTY; CLAIMS.......................................... 17
A. Landlord Not Liable ............................................ 17
B. Tenant's Indemnity ............................................. 17
15. INSURANCE........................................................... 17
A. Landlord's Insurance ........................................... 17
B. Tenant's Insurance ............................................. 17
C. Waiver of Claims and Subrogation ............................... 18
16. DAMAGE OR DESTRUCTION TO BUILDING .................................. 18
A. Repair of Damage ............................................... 18
17. CONDEMNATION ....................................................... 19
18. ESTOPPEL CERTIFICATE ............................................... 19
A. Duty to Provide ................................................ 19
B. Tenant's Failure to Deliver .................................... 19
19. DEFAULT BY TENANT .................................................. 19
A. Event of Default ............................................... 19
B. Remedies of Landlord ........................................... 20
C. Late Charges and Interest ...................................... 21
D. No Waiver ...................................................... 22
E. Landlord's Lien ................................................ 22
20. SUBORDINATION AND ATTORNMENT ....................................... 22
A. General ........................................................ 22
21. SURRENDER AND HOLDING OVER ......................................... 23
A. Surrender ...................................................... 23
B. Property Not Removed ........................................... 23
C. Holding Over ................................................... 23
22. LANDLORD DEFAULT ................................................... 23
23. NOTICE ............................................................. 24
24. RULES AND REGULATIONS .............................................. 24
25. PARKING ............................................................ 24
26. RIGHT TO RELOCATE TENANT ........................................... 24
27. MISCELLANEOUS ...................................................... 24
A. Limitation of Landlord's Liability ............................. 24
B. No Merger ...................................................... 25
C. Landlord's Use of Common Areas ................................. 25
D. Covenants are Independent ...................................... 25
E. Severability ................................................... 25
F. Captions and Terms ............................................. 25
G. Binding Effect; Governing Law .................................. 25
H. Tenant's Authority ............................................. 25
I. Joint and Several .............................................. 25
J. Acts Binding Landlord .......................................... 25
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
K. Changes in the Building; Use of Names ........................... 26
L. Change in Light or View ......................................... 26
M. No Other Agreements; Amendments ................................. 26
N. Brokers ......................................................... 26
O. Recordation ..................................................... 26
P. Execution Required .............................................. 26
Q. Attorney's Fees ................................................. 26
R. Time of Essence.................................................. 26
28. COUNTERPARTS ....................................................... 27
29. SIGNAGE ............................................................ 27
30. MOVING ALLOWANCE ................................................... 27
31. EXCLUSIVITY ........................................................ 27
32. LEASE OF STORAGE SPACES ............................................ 27
A. Lease of Spaces ................................................. 27
B. Use ............................................................. 28
C. Base Rent and Other Matters ..................................... 28
33. OPTIONS TO INCREASE OR DECREASE PREMISES ........................... 28
A. Options ......................................................... 28
B. Exercise Notice ................................................. 28
C. Amendment ....................................................... 28
D. Not Transferable ................................................ 29
E. No Default ...................................................... 29
34. EXPANSION OPTION ................................................... 29
A. Expansion Space ................................................. 29
B. Exercise Notion ................................................. 29
C. Expansion Amendment ............................................. 29
D. Amendment ....................................................... 30
E. Not Transferable ................................................ 30
F. No Default ...................................................... 31
35. TENANT'S ABILITY TO REQUEST ADDITIONAL EXPANSION SPACE ............. 31
A. Additional Expansion Space ...................................... 31
B. Lease Terms ..................................................... 31
C. Amendment ....................................................... 32
D. Available Space ................................................. 32
E. Termination ..................................................... 32
36. RIGHT OF FIRST REFUSAL ............................................. 32
A. Exercise ........................................................ 33
B. No Default ...................................................... 33
37. OPTIONS TO EXTEND .................................................. 33
A. Exercise of Option .............................................. 33
B. Rent Determination .............................................. 33
C. Appraiser Defined ............................................... 35
D. Market Rate Defined ............................................. 35
E. Expiration of Options ........................................... 35
38. TERMINATION OPTION ................................................. 35
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
A. Termination Notice .............................................. 36
B. Excused Delays .................................................. 36
C. Termination Fee ................................................. 36
D. No Default ...................................................... 36
E. Not Transferrable................................................ 36
</TABLE>
Exhibits:
EXHIBIT A Depiction of Primary Premises
EXHIBIT B Legal Description of Building Complex
EXHIBIT C Tenant Improvement Agreement (Work Letter)
EXHIBIT C-1 Base Building/Tenant Improvement Guideline and List of Plans and
Specifications
EXHIBIT C-2 Preliminary Space Plans
EXHIBIT D Subordination, Non-Disturbance and Attornment Agreement
EXHIBIT E Rules and Regulations
EXHIBIT F Lease Commencement Certificate
EXHIBIT G HVAC Specifications
EXHIBIT H Building Area
EXHIBIT I Commission Agreement
iv
<PAGE> 6
OFFICE LEASE
PART I
BASIC LEASE TERM SHEET
BUILDING: Fiddler's Green Center - Building I
LEASE DATE: August 28, 1998
LANDLORD: Fiddler's Green Center, LLC, a Delaware corporation
Address: 165 South Union Boulevard, Suite 380
Lakewood, Colorado 80228
TENANT: Convergent Group Corporation, a Delaware corporation
Address: Fiddler's Green Center Building I
6399 South Fiddler's Green Circle, Suite 600
Englewood, Colorado 80111
BUILDING
MANAGER: John Madden Company, LLC, a Colorado limited liability company
Address: 6400 S. Fiddler's Green Circle, Suite 1280
Englewood, Colorado 80111
LANDLORD'S
BROKER: Cushman & Wakefield, Inc.
TENANT'S
BROKER: CoRE Partners Inc.
(if any)
LEASED
PREMISES: Suite Number: 600 Floor: 5th and 6th - primary Premises;
1st - Distribution Space & Storage Space
Address: Fiddler's Green Center Building I
6399 South Fiddler's Green Circle, Suite 600
Englewood, Colorado 80111
Tenant's Rentable Area: approximately 74,094 rentable square feet*
*Includes STORAGE SPACE and DISTRIBUTION
SPACE
*See also Section 33 below
*Subject to Tenant's and Landlords
mutual agreement on a field measurement
based on BOMA standard ANS 1-265.1 -
1996, with common area factors of
3.05% for full floor space and 10.38%
for multi-tenant floors
LEASE
TERM: Lease Commencement Date: The date the Premises are Ready for
Tenant, as defined in the Lease.
Estimated Lease
Commencement Date: September 24, 1999
<PAGE> 7
Lease Expiration Date: 10th anniversary of the Commencement
Date; provided that if the Commencement
Date is other than the 1st day of a
month, the Expiration Date shall be the
last day of the month in which the 10th
anniversary of the Commencement Date
occurs.
Lease Term: 10 Years
BASE RENT: Payable in monthly
installments as follows:
<TABLE>
<CAPTION>
Space Period Monthly Annual Per Sq. Ft.
- ----- ------ ------- ------ -----------
<S> <C> <C> <C> <C>
Primary* Years 1-5 $143,108.58 $1,717,303.00 $24.50
Premises Years 6-10 $157,711.50 $1,892,538.00 $27.00
Distribution Space** Years 1-10 $ 1,833.33 $ 22,000.00 $22.00
Storage Space Years 1-10 $ 5,000.00 $ 60,000.00 $20.00
</TABLE>
*See Section 33 below
**See also Section 33 below
BASE OPERATING Base Year: 2000
EXPENSES: Tenant's Pro-Rata Share: 35.84%
SECURITY DEPOSIT: N/A
PARKING SPACES: Number of Parking Spaces: 280 total (i.e 4 per 1,000
rentable square feet) of which (i) 140 spaces (i.e., 2 per
1,000 rentable square feet) shall be provided as covered
spaces within the first phase of the parking garage to be
constructed on or before January 1, 2000 and the balance
shall be uncovered spaces; (ii) 50% of the covered parking
spaces shall be designated for Tenant's use and selected by
Tenant on a first-choice basis in the south half of the
ground level of the Phase I parking structure and the
balance will be first-come, first-served; and (iii) up to
70 of the 140 uncovered parking spaces, (1 per 1,000
rentable square feet) may, at the Landlord's option, be
located on the roof of the parking structure; provided
however, to the extent the first phase of the parking
structure is not completed on or before January 1,2000 (said
date to be extended as a result of Excused Delays, as
defined in the Work Letter) and as a result, the 140 covered
spaces are not available for Tenant's use in the parking
structure on or before such date (as the same may be
extended), then Tenant shall be entitled to a one day's Base
Rent abatement for each day that such covered parking spaces
are not completed. Further, Landlord agrees that Landlord
shall use best efforts to arrange with the owner of the
Plaza Tower One building to lease, at Landlord's sole cost
and expense, 7 covered parking spaces (on a month-to-month,
non-designated/first-come, first-served basis) for Tenant's
use, starting on the Commencement Date through the date
Phase I of the parking garage is complete ("PTO Parking
Spaces"). If Landlord is unable to arrange for such PTO
Parking Spaces, Tenant may elect to make such arrangements
itself and, if so, Landlord agrees to credit the costs
thereof (not to exceed comparable market monthly covered
parking charges) to the Base Rent hereunder.
Visitor Parking Spaces: A minimum of ten (10) parking spaces
designated as general visitor parking spaces shall be
situated near Building's entrance.
OPTIONS: See Paragraphs 33 through 38 below
2
<PAGE> 8
GUARANTOR: Name N/A
THIS BASIC LEASE TERM SHEET, together with the General Provisions in Part II and
any Exhibits as Part III, all constitute the entire lease between Tenant and
Landlord for the Leased Premises, made and entered into as of the Lease Date.
3
<PAGE> 9
PART II
GENERAL PROVISIONS
1. PREMISES; BUILDING; BUILDING COMPLEX; COMMON AREAS. In consideration of
the payment of the Rent and the performance of Landlord and Tenant's obligations
under the Lease, Landlord hereby leases to Tenant and Tenant leases from
Landlord the premises as described on the Basic Lease Term Sheet and as depicted
on Exhibit A (the "Premises") located in Building A on the land described on
Exhibit B (the "Building"), the parking as described on the Basic Lease Term
Sheet (the covered portion thereof is generally planned as a two-story covered
structure with a minimum of 158 covered spaces constructed approximately 80 feet
from Building A), together with a non-exclusive right to use all common areas
designated by Landlord for non-exclusive use of the tenants of the Building that
Landlord will construct the Building substantially in accordance with the plans
and specifications described on Exhibit C-1 ("Building Plans and
Specifications") to the Work Letter (defined in Paragraph 4). The Building,
additional buildings and structures owned by Landlord and located on the real
property from time to time, the real property, plazas, landscaped and parking
areas, drives and related easements, common areas, and appurtenances are
hereinafter collectively sometimes called the "Building Complex" whether all or
a part of it. The "Common Areas" include the exterior plazas, building
entrances, walkways, driveways, elevators, stairways, common lobbies and
corridors, and other areas designated from time-to-time by Landlord for the use
of all tenants of the Building and/or Building Complex; but specifically
excluding (without limitation) covered, handicapped and other parking reserved
for visitors and for use by those other than Tenant.
All inspections of the Premises or Building Complex during construction under
the Work Letter (defined in Paragraph 4) by Tenant its employees, architects,
agents or representatives shall be at Tenant's sole risk, and Tenant shall
indemnify and hold Landlord and its employees, partners, contractors, and
Building Manager harmless from and against any and all injuries, death, damages,
loss, claims, suits and liability arising out of any such inspection, except to
the extent caused by the gross negligence or willful misconduct of Landlord, its
agents or employees. Tenant shall not prior to the Lease Commencement Date enter
on the Premises or permit others to do so, except during normal work hours at
the Premises and after prior notice to and approval by Landlord and Landlord's
general contractor and subject to compliance with all safety requirements and
other rules of Landlord and the general contractor and the requirements of their
insurers and applicable laws and regulations.
2. LEASE TERM. The term of the Lease shall commence at 12:01 a.m. on the
Lease Commencement Date and shall terminate at 12:00 midnight on the Lease
Expiration Date, as specified on the Basic Lease Term Sheet (the "Primary Lease
Term"). The Primary Lease Term, as it may be extended, is referred to as the
"Lease Term."
3. RENT; SECURITY DEPOSIT.
A. Base Rent. Tenant shall pay to Landlord base rent for the Premises
("Base Rent") as specified on the Basic Lease Term Sheet during the Primary
Lease Term. All installments of Base Rent shall be payable in advance, on the
first day of each calendar month during the Lease Term. All Base Rent and
Additional Rent (as hereinafter defined), (collectively, "Rent") shall be paid
without notice, demand, deduction, offset, or abatement (except as otherwise
expressly provided in this Lease), at Landlord's address or at such other place
as Landlord from time-to-time designates in writing. In no event will the total
Rent to be paid by Tenant during any Lease Year ever be less than the Base Rent
plus Tenant's Pro Rata Share of increases in Operating Expenses under Paragraph
5.
B. Security Deposit. [Intentionally omitted.]
4. TENANT FINISH AND ACCEPTANCE OF THE PREMISES.
A. Landlord's Work. Landlord has agreed to make improvements or to
perform remodeling work to the Premises and provisions with respect to such work
are set forth in the work
4
<PAGE> 10
letter attached to this Lease as Exhibit C (the "Work Letter"). Other than as
set forth in the Work Letter, Landlord shall have no obligations for any
remodeling or other work in the Premises, and Tenant shall accept the Premises
in their "as-is" condition on the date the Premises is Ready for Tenant.
B. Postponement of Lease Commencement Date. If Landlord is to complete
the work as set forth in the Work Letter and the Premises are not Ready for
Tenant on the Estimated Lease Commencement Date (except as set forth in the Work
Letter with respect to Excused Delay) the Lease Commencement Date shall be
postponed until the earlier of: (i) the date the Premises are Ready for Tenant;
or (ii) the date Tenant takes occupancy of any of the Premises, on which date
all of the provisions of this Lease shall take effect, including the payment of
Rent. If the Premises are not Ready for Tenant, the postponement of Tenant's
obligation to pay Rent shall be in full settlement of all claims which Tenant
might otherwise have by reason of the Premises not being Ready for Tenant on the
Lease Commencement Date. "Ready for Tenant" shall mean the date that (i)
Landlord has completed any Tenant Finish Work in the Premises to be performed by
Landlord under the Work Letter and a certificate of occupancy for the Premises
has been issued, and (ii) the Building's Common Areas and landscape areas are
substantially complete in accordance with the Building Plans and Specifications.
Notwithstanding the foregoing to the contrary, if the Premises are not Ready for
Tenant on or before September 24, 1999 (such date shall be deemed extended by
the number of days that the completion of the Premises are delayed due to any
Excused Delay, as that term is defined in the Work Letter), Landlord shall
reimburse Tenant any holdover rent it shall actually pay to its existing
landlord, as evidenced by paid invoices, as a result of such delay; provided,
that such reimbursement shall not exceed 200% of Tenant's then current monthly
rent under the current year of its existing lease and such reimbursement
obligation shall only be applicable until the date the Premises are Ready for
Tenant; provided, further, that if the Premises are not Ready for Tenant on or
before April 1, 2000, then Tenant shall have the option, by written notice
delivered to Landlord on or before April 6, 2000, to elect to terminate this
Lease.
C. Partial Months; Lease Commencement Certificate. If the Lease
Commencement Date does not begin on the first day of a month, Tenant shall pay
proportionate Rent in advance for the partial month and the partial month shall
be considered part of the first Lease Year (as defined in subparagraph 5.A). In
the event the Lease Commencement Date is delayed, the Lease Expiration Date
shall be extended so that the Primary Lease Term will continue for the full
period set forth in the Basic Lease Term Sheet. At the request of either party,
Landlord and Tenant shall execute a Lease Commencement Certificate, the form of
which is attached hereto as Exhibit F, setting forth among other things the
Lease Commencement Date and the Lease Expiration Date.
5. OPERATING EXPENSES.
A. Definitions Regarding Operating Expenses. The following terms have
the following meanings with respect to their use in this Lease:
(1) "Base Operating Expenses" is the per square foot amount of actual
Operating Expenses for the Base Year specified on the Basic Lease Term Sheet
multiplied by the Building Rentable Area. It is understood and acknowledged by
Tenant that Landlord has not made any representation or given Tenant any
assurances regarding current or Base Operating Expenses or Additional Rent
resulting from the calculation of Base Operating Expenses (any estimates
provided by Landlord are non-binding estimates only). In the event that the
actual Operating Expenses during any year are less than the Base Operating
Expenses, Tenant shall not be entitled to any refund, credit or other form of
reimbursement.
(2) "Building Rentable Area" means 206,734, which is the total
rentable square footage of the Building. If there is a significant change in the
Building Rentable Area as a result of an addition to the Building, partial
destruction, modification to building design, or similar cause which causes a
reduction or increase thereto on a permanent basis, Landlord shall make such
adjustments in the computations as shall be necessary to provide for any such
change.
5
<PAGE> 11
(3) "Tenant's Pro Rata Share" means the percentage specified on the
Basic Lease Term Sheet. In the event Tenant, at any time during the Lease Term,
leases additional space in the Building or the Premises are reduced, Tenant's
Pro Rata Share shall be recomputed by dividing the total rentable square footage
of space then being leased by Tenant (including any additional space) by the
Building Rentable Area, and the resulting percentage figure shall become
Tenant's Pro Rata Share.
(4) "Lease Year" means each calendar year during the Lease Term,
except that the first Lease Year shall begin on the Lease Commencement Date and
end on December 31 of that year, and the last Lease Year shall begin on January
1 of the calendar year in which this Lease expires or is terminated and end on
the date it expires or terminates. If the first or last Lease Year is less than
12 months, Operating Expenses for these years shall be prorated.
(5) "Operating Expenses" means all operating expenses of any kind or
nature as reasonably determined by Landlord and which are incurred in connection
with the ownership, operation and maintenance of the Building Complex. Operating
Expenses shall include, but not be limited to:
(a) All real property taxes and assessments levied against the
Building Complex by any governmental or quasi-governmental authority, including
any taxes, assessments, reassessments, surcharges, imposition, or under any
covenants, declarations, easements or restrictions, or other service, tax or
other fees of a nature now in effect or which shall hereafter be levied on the
Building Complex as a result of the use, ownership or operation of the Building
Complex or for any other reason, whether in lieu of or in addition to, any
current real estate taxes and assessments; provided, however, in no event shall
the terms "taxes" or "assessments" include any federal or state income taxes
levied or assessed on Landlord, unless those taxes are a substitute for real
property taxes or any special assessments incurred to construct the Building
Complex or acquire the Real Estate to do so (collectively referred to as
"Taxes"). Expenses incurred by Landlord for tax consultants and in contesting
the amount or validity of any Taxes shall be included in such computations.
"Assessments" shall include general and special assessments, license tax,
business license fee, business license tax, commercial rental tax, levy, charge
penalty or tax, imposed by any authority having the direct power to tax,
including any city, county, state or federal government, or any school,
agricultural, lighting, water, drainage or other improvement or special
district, against the Premises, the Building or Building Complex or any legal or
equitable interest of Landlord therein. For the purposes of this Lease, any
special assessments shall be deemed payable in such number of installments as is
permitted by law, whether or not actually so paid and the taxes for the Base
Year Building shall be set as though the Building is fully assessed during the
Base Year. Provided that Tenant requests in a timely fashion, Tenant may request
that Landlord protest the assessed valuation of the Building's tax parcel (real
estate and improvements) whenever Tenant reasonably believes the assessed
valuation is too high.
(b) Costs of cleaning and other supplies, tools, materials and
equipment;
(c) Costs incurred in connection with obtaining and providing
energy for the Building Complex, including costs of propane, butane, natural
gas, steam, electricity, solar energy and fuel oils, coal or any other energy
sources as well as costs for heating, ventilation, and air conditioning services
("HVAC");
(d) Costs of water and sanitary and storm drainage services;
(e) Costs of security services, janitorial services and parking
garage attendants;
(f) Costs of maintenance, repairs, alterations, improvements and
replacements, including materials, labor, equipment and maintenance contracts;
and
6
<PAGE> 12
(g) Costs of maintenance and replacement of landscaping; and
costs of maintenance, repair, resurfacing, striping and repairing parking areas
and Common Areas, including trash, ice and snow removal;
(h) Insurance premiums in connection with the insurance carried
by Landlord in accordance with Paragraph 15, including fire and all-risk
coverage, together with loss of rent endorsement; the part of any claim required
to be paid under the deductible portion of any insurance policy carried by
Landlord in connection with the Building Complex; public liability insurance and
any other insurance carried by Landlord on the Building Complex;
(i) Labor costs, including wages and other payments, costs to
Landlord of workmen's compensation and disability insurance, payroll taxes,
fringe benefits, pension, profit sharing for all individuals engaged in
operating, maintaining or providing security, traffic control or other services
and all legal fees and other costs or expenses incurred in resolving any labor
dispute;
(j) Professional building management fees and costs of Building
management space occupied by the Building Manager or its agents;
(k) Legal, accounting, inspection, and consultation fees
(including fees charged by consultants retained by Landlord for services that
are designed to produce a reduction in Operating Expenses or to reasonably
improve the operation, maintenance or state of repair of the Building Complex)
incurred in the ordinary course of operating the Building Complex; and a general
overhead and administrative charge equal to 2% percent of all Operating Costs.
(l) The costs of capital improvements and structural repairs and
replacements made in or to the Building Complex or the cost of any machinery or
equipment installed in the Building Complex in order to conform to any
applicable laws, ordinances, rules, regulations or orders of any governmental or
quasi-governmental authority having jurisdiction over the Building Complex
("Required Capital Improvement"); the costs of any capital improvements and
structural repairs and replacements designed primarily to reduce Operating
Expenses ("Cost Savings Improvements"); and a reasonable annual reserve for all
other capital improvements and structural repairs and replacements reasonably
necessary to permit Landlord to maintain the Building Complex. The expenditures
for Cost Savings Improvements shall be limited in any year to the amount of the
resulting reduction of Operating Expenses; and
(m) The cost of space allocated to the portion of the Building
utilized for the restaurant/delicatessen operation, unless such space is paid
for by the operator of such operation, and limited to office space market rent,
in effect from time to time, for no more than 750 rentable square feet.
(n) In addition to those Operating Expenses related solely to the
Building, Operating Expenses shall also include an equitable allocation of those
operating expenses which relate to both the Building and other buildings,
improvements, landscaping, parking improvements and real property comprising the
Building Complex.
(o) Any other expense which under generally accepted real estate
standards for the metropolitan area where the Building is located would be
considered Operating Expenses.
(6) "Operating Expenses" shall not include (a) costs of work,
including painting and decorating and tenant improvement work, which Landlord
performs for any tenant in the Building which is not for the benefit of all or
most tenants of the Building; (b) costs of repairs or other work occasioned by
fire, windstorm or other insured casualty to the extent of insurance proceeds
received by Landlord; (c) leasing commissions, advertising expenses, and other
costs incurred in leasing space in the Building; (d) costs of repairs or
rebuilding necessitated by condemnation; (e) any interest on borrowed money or
debt amortization on Landlord's mortgages on the Building, except as
specifically set forth above; or (f) depreciation on the Building; (g) wages,
salaries, fees, and fringe
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benefits paid to individuals who are executive personnel or officers or partners
of Landlord (Tenant acknowledges that Building Manager is a Member of Landlord
and will be paid a property management fee by Landlord); (h) other than as
provided in Paragraph 5.A(5), any charge for depreciation of the Building or
equipment and any interest or other financing charge; (i) any charge for
Landlord's income taxes, excess profit taxes, franchise taxes, or similar taxes
on Landlord's business; (j) all costs for which Tenant or any other tenant in
the Building is being charged other than pursuant to the operating expense
clauses; (k) the costs of correcting defects in the construction of the
Building, or in the building equipment, due to defective or illegal
construction, except that conditions (not occasioned by construction defects)
resulting from ordinary wear and tear will not be deemed defects for the purpose
of this category; (l) the cost of any repair made by Landlord because of the
total or partial destruction of the Building, or the condemnation of a portion
of the Building; (m) the cost of any items for which Landlord is reimbursed by
insurance or otherwise compensated by parties other than tenants of the Building
pursuant to clauses similar to this paragraph or the cost of any increase in
insurance premiums to the extent that such increase is solely and directly
attributable to the use, occupancy or activity of another Tenant in the
Building; (n) other than Required Capital Improvements or Cost Savings
Improvements, the cost of any additions or capital improvements to the Building
subsequent to the date of original construction; (o) the cost of any removal,
treatment or abatement of asbestos or any other hazardous substance or gas in
the Building or on Tenant's Premises (however, to the extent such asbestos or
hazardous substance results from Tenant's or its agents' actions or inactions,
such costs shall be reimbursed to Landlord by Tenant as Tenant's direct
expense); (p) any operating expense representing an amount paid to a related
corporation, entity, or person which is in excess of the amount which would be
paid in the absence of such relationship; (q) the cost of tools and equipment
used initially in the construction of the Building; (r) the cost of alterations
of space in the Building leased to other tenants; (s) the cost of overtime or
other expense to Landlord in curing its defaults or performing work expressly
provided in this Lease to be borne at Landlord's expense; (t) ground rent or
similar payments to a ground lessor; and (u) late payments charges and
penalties.
Further, Landlord may elect to cause the Building Complex to be annexed
into the City of Greenwood Village ("City"). If so, the parties acknowledge that
the City will impose on Tenant an Occupational Privilege Tax for each of
Tenant's employees ("Head Tax") and a sale/use Tax on any tangible property
purchased outside the City and utilized within the City for Tenant's business
operations in the Premises ("Sales Tax"). Only during the initial term of the
Premises, Landlord agrees to credit against Tenant Base Rent that amount paid by
Tenant for its employers' share of the Head Tax. Further, only during the
initial term of the Premises, Landlord agrees to likewise credit against
Tenant's Base Rent, the Sales Tax paid by Tenant to the City during any calendar
year limited, however, to only the amount of the Sales Tax imposed by the City
on the first Two Million Dollars of such tangible property purchased by Tenant
in any such calendar year. All amounts to be credited by Landlord hereunder
shall be net of any rebate or abatement of Head Taxes and/or Sales Taxes
provided to Tenant by the City pursuant to the terms of the Annexation Agreement
annexing the Building Complex into the City. Tenant shall submit to Landlord in
January of each calendar year during the Term, copies of all applicable reports
pertaining to Tenant's payment of the Head Tax and Sales Tax, with supporting
backup and cancelled checks filed with an paid to the City for the prior
calendar year, and Landlord shall credit such amount paid by Tenant, and not
subsequently rebated or abated by the City, to the Base Rent due and payable by
Tenant in March of the then current calendar year.
(7) For purposes of determining Tenant's Pro Rata Share of Excess
Operating Expenses, as hereinafter defined in Paragraph 5.B, for each calendar
year during the Term following the Base Year, increases in the Operating
Expenses, excluding increases in those Operating Expenses identified in
Paragraph 5.A(5)(a), (c), (d) and (h) and Required Capital Improvements as
defined in Paragraph 5.A(5)(a)(l) above), (the "Capped Operating Expenses")
shall be limited to the lesser of (a) the actual increase in said Capped
Operating Expenses or (b) 125% of the percentage increase, if any, in the
Consumer Price Index, as hereinafter defined, between the Base Consumer Price
Index, as hereinafter defined, and each Adjustment Consumer Price Index, as
hereinafter defined, throughout the initial Lease Term (i.e., if the Consumer
Price Index increases by 3%, any increases in the total of the Capped Operating
Expenses shall, for determining Tenant's Pro Rata Share, be deemed capped at
3.75%). "Consumer Price Index" shall mean the Revised Consumer Price Index, All
Urban
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Consumers index years 1982-84, for Denver-Boulder-Greeley, Colorado, as
published by the United States Department of Labor, Bureau of Labor Statistics.
If the manner in which the Consumer Price Index is determined by the Bureau of
Labor Statistics shall be substantially revised, including a change in the base
index year, an adjustment shall be made by Landlord in such revised index
which would produce results equivalent, as nearly as possible, to those which
would have been obtained if such Consumer Price Index had not been so revised.
If the Consumer Price Index shall become unavailable to the public because
publication is discontinued, or otherwise, or if equivalent data is not readily
available to enable Landlord to make the adjustment referred to herein, then
Landlord will substitute therefor a comparable index based upon changes in the
cost of living or purchasing power of the consumer dollar published by any other
governmental authority or, if no such index shall be available, then a
comparable index published by a major bank or other financial institution or by
a university or a recognized financial publication; provided, however, that
Landlord may make adjustments to such substitute index necessary to produce
substantially the same results as would have been obtained under the unavailable
index. "Base Consumer Price Index" shall mean the Consumer Price Index for the
calendar month immediately preceding the calendar month in which the Term
commences. "Adjustment Consumer Price Index" shall mean the Consumer Price Index
for the same calendar month as the Base Consumer Price Index during each year of
the initial Lease Term following the year 2000.
B. Payment of Excess Operating Expenses. It is hereby agreed that
following the Base Year and continuing each month thereafter through the Lease
Term, Tenant shall pay to Landlord as Additional Rent at the same time as Base
Rent is paid an amount equal to 1/12 of Landlord's estimate of Tenant's Pro Rata
Share of the increase in Operating Expenses for the particular Lease Year in
excess of the Base Operating Expenses (the "Excess Operating Expense"). Landlord
shall deliver to Tenant, as soon as practicable following the end of any Lease
Year, an estimate of the Excess Operating Expenses for the new Lease Year (the
"Budget Sheet"). Until receipt of the Budget Sheet, Tenant shall continue to pay
its current monthly Tenant's Pro Rata Share of Excess Operating Expenses based
upon the estimate for the preceding Lease Year. If the Budget Sheet reflects an
estimate of Tenant's Pro Rata Share of Excess Operating Expenses for the new
Lease Year greater than the amount actually paid to the date of receipt of the
Budget Sheet for the new Lease Year, Tenant shall pay such amount to Landlord
within 30 days of receipt of the Budget Sheet. Upon receipt of the Budget Sheet,
Tenant shall thereafter pay the amount of its monthly Tenant's Pro Rata Share of
the Excess Operating Expenses as set forth in the Budget Sheet. As soon as
practicable following the end of any Lease Year, but not later than May 1,
Landlord shall submit to Tenant a statement in reasonable detail describing the
computations of the Excess Operating Expenses setting forth the exact amount of
Tenant's Pro Rata Share of the increase, if any, in Operating Expenses for the
Lease Year just completed, and the difference, if any, between the actual
Tenant's Pro Rata Share of the increase in Operating Expenses for the Lease Year
just completed and the estimated amount of Tenant's Pro Rata Share of the Excess
Operating Expenses for such Lease Year (the "Statement"). Notwithstanding the
foregoing, Landlord's failure to deliver the Statement to Tenant on or before
May 1 shall not be a waiver of Landlord's rights under this Paragraph. If the
actual Tenant's Pro Rata Share of the Excess Operating Expenses for the period
covered by the Statement is higher than the estimated Tenant's Pro Rata Share of
the Excess Operating Expenses which Tenant previously paid during the Lease Year
just completed, Tenant shall pay to Landlord the difference within 30 days
following receipt of the Statement from Landlord. If the actual Tenant's Pro
Rata Share of the Excess Operating Expenses for the period covered by the
Statement is less than the estimated Tenant's Pro Rata Share of the Excess
Operating Expenses which Tenant previously paid during the Lease Year just
completed, Landlord shall credit the excess against any sums then owing or next
becoming due from Tenant under this Lease. In no event will Rent be less than
Base Rent. In the event the Building is not fully occupied during any particular
Lease Year, Landlord shall adjust those Operating Expenses which are affected by
the occupancy rates for the particular Lease Year (including the Base Year), or
part of it, as the case may be, to reflect an occupancy of 95% percent of the
Building Rentable Area.
C. Partial Years. If the Lease Term covers a period of less than a full
calendar year during the first or last Lease Years, Tenant's Pro Rata Share of
the increase in Operating Expenses for the partial year shall be calculated by
proportionately reducing Operating Expenses to reflect the number of months in
that year.
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D. Survival of Tenant's Obligation. Landlord's and Tenant's
responsibilities with respect to the Excess Operating Expense survive the
expiration or termination of this Lease and Landlord shall have the right to
retain the Security Deposit, or so much thereof as it deems necessary, to secure
Tenant's obligations attributable to the Lease Year in which this Lease
terminates.
E. Tenant's Right to Question Excess Operating Expenses. If Tenant
questions the amount of Excess Operating Expenses as shown by the Statement,
Tenant shall notify Landlord within 30 days after receipt of the Statement. If
Tenant does not give Landlord notice within that time period, Tenant shall have
waived its right to dispute the Statement. If Tenant timely gives notice, it
shall have 90 days after giving notice to hire, at Tenant's sole expense, an
accredited member of the Colorado Society of CPA's ("Tenant's Accountants"), to
examine Landlord's books and records for the purpose of verifying the accuracy
of the Statement. If Tenant's Accountants determine that an error has been made,
notice describing the error in reasonable detail must be given to Landlord
during that 90-day period, or the right to question the Statement shall be
waived; and if such a notice is given, Landlord and Tenant shall endeavor to
agree upon the matter within the following 30 days. All information disclosed to
Tenant or Tenant's Accountants in connection with any such review shall be kept
confidential by Tenant and Tenant's Accountants and shall not be disclosed or
used by Tenant or Tenant's Accountants for any reason other than to verify
information set forth in the Statement. Notwithstanding the pendency of any
dispute over any particular Statement, Tenant shall continue to pay Landlord the
amount of the adjusted monthly installments of Additional Rent based upon the
Statement until the dispute is resolved. Delay by Landlord in submitting any
Statement for any Lease Year shall not affect the provisions of this Paragraph
or constitute a waiver of Landlord's rights as set forth herein for that or any
subsequent Lease Year.
F. Operating Expense Adjustments. Notwithstanding anything in this Lease
to the contrary, if any lease entered into by Landlord with any tenant in the
Building is on a "net" basis, or provides for a different basis of computation
for any Operating Expenses with respect to its leased premises, then, to the
extent that Landlord determines that an adjustment should be made in making the
computations of Operating Expenses under this Lease, Landlord may modify the
computation of Base Operating Expenses, Building Rentable Area, and Operating
Expenses for any Lease Year in order to eliminate or otherwise modify any such
expenses which are paid for in whole or in part by that tenant. Furthermore,
Landlord shall also be permitted to make such adjustments and modifications to
the provisions of this Paragraph as shall be reasonably necessary to achieve the
intent of this Lease or the intention of the parties hereto.
6. SERVICES.
A. Landlord's Services. Subject to the provisions of subparagraph 6D,
Landlord in accordance with standards established by Landlord from time to time
for the Building, agrees: (1) to furnish running water for use in lavatories and
drinking fountains (and to the Premises if the Space Plans for the Premises so
provide); (2) to furnish, during Ordinary Business Hours, as hereinafter
defined, heated or cooled air to the Premises as may, in the judgment of
Landlord, be reasonably required for the comfortable use and occupancy of the
Premises, provided that during Ordinary Business Hours Landlord shall use
reasonable efforts to cause the temperature within the Premises to be within the
range of 68 degrees to 74 degrees Fahrenheit ("Premises Temperature Range").
Further, if (i) the requirements of this Lease for occupancy and use of the
Premises are complied with by Tenant, and (ii) the Premises are used only for
standard office use and in accordance with Building HVAC design specification
and assumptions, as set forth in Exhibit G attached, then, if a substantial
portion of the Premises' (10% or more of the square footage of the Premises)
temperature is outside the Premises' Temperature Range for one (1) entire
consecutive business day (during that day's entire Ordinary Business Hours, as
hereinafter defined), following Landlord receipt of written notice (delivered
pursuant to the notice requirements hereof, along with reasonable third-party
evidence establishing the same), the Base Rent hereunder (pro rata as to the
affected square footage area within the Premise) shall be abated, per diem, for
each business day after receipt of said notice that the temperature of the
Premises falls outside of the Premises Temperature Range, which abatement shall
be Tenant's sole and exclusive remedy. Notwithstanding the foregoing to the
contrary, if the reason the Premises' temperature falls
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<PAGE> 16
outside of the Premises Temperature Range is due to a power failure to the
Building or other force majeure event, the foregoing abatement shall not be
available to the Tenant. Finally, Tenant acknowledges that Tenant shall use
commercially reasonable judgment in determining the need to notify the Landlord
under the above provisions, recognizing the rapid changes in outside climate and
temperature may result in short-lived temperature drops or increases in the
Premises, which the Building's HVAC system will compensate for within typical
system recovery times; (3) to provide, during Ordinary Business Hours, the
general use of passenger elevators for ingress and egress to and from the
Premises and such elevators to be equipped (i) so that at least one elevator
returns to the sixth floor when elevators are not in use and (ii) to provide
restricted access to the fifth and sixth floors of the Premises; provided,
however, that if Tenant elects to reduce the Premises, as hereinafter provided
in Paragraph 33, then such restricted access shall only be applicable to the
sixth floor of the Premises; (4) to provide to the Premises the standard
janitorial services provided for other tenants of the Building (including such
window washing of the outside of exterior windows as may, in the judgment of
Landlord, be reasonably required), after Ordinary Business Hours five days each
week, excluding Holidays; (5) to cause electric current to be supplied to the
Premises for all of Tenant's Standard Electrical Usage; (6) to provide
controlled access services for the Building Complex; and (7) to use best efforts
to cause the operation of an automatic teller machine and restaurant/
delicatessen operation for tenants and invitees; provided, however,
that Tenant acknowledges that such services may be periodically unavailable due
the operators thereof, from time to time, electing to quit or being terminated
by Landlord. "Tenant's Standard Electrical Usage" means electrical consumption
for the standard tenant lighting used in the Building and ordinary office
equipment that operates on standard 110 voltage (and/or Tenant's Standard
Equipment, as hereinafter defined, even if the same does not operate on standard
110 voltage) and does not require special or additional ventilation or air
conditioning and shall be equal to at least an average of 8 kilowatts per
rentable square foot within the Premises. "Ordinary Business Hours" as used
herein means 7:00 a.m. to 7:00 p.m. Monday through Friday and 8:00 a.m. to 1:00
p.m. on Saturdays, Holidays excepted. "Holidays," as used herein, means New
Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
Christmas Day, and such other national holidays as may be observed by national
banks in Denver, Colorado. Notwithstanding the foregoing, Tenant and its
employees shall be provided means of access to the Building and associated
parking structure at all times outside of Ordinary Business Hours, upon
compliance with Landlord's after-hours access regulation. The definitions of
Tenant's Standard Electrical Usage, Ordinary Business Hours, Holidays and Excess
Usage, as hereinafter defined, shall be uniform as to all tenants in the
Building.
B. Excess Usage. "Excess Usage" means any usage of electricity (1)
during other than Ordinary Business Hours; or (2) in an amount in excess of
Tenant's Standard Electrical Usage; or (3) for "Special Equipment"; or (4) for
any requirement for standard HVAC services during other than Ordinary Business
Hours. "Special Equipment" means (a) any equipment requiring a voltage other
than 110 volts, single phase, or (b) equipment that requires the use of
self-contained HVAC units; provided, however, that notwithstanding the foregoing
to the contrary, the term Special Equipment shall not include laser jet
printers, copy machines, computer servers or APC UPS Units ("Tenant's Standard
Equipment"). If Tenant desires Excess Usage, it shall give Landlord at least 24
hours prior notice, and Landlord shall use reasonable efforts to supply it, at
the expense of Tenant, at Landlord's actual out-of-pocket expense, without
mark-up. Tenant shall reimburse Landlord for reasonable costs incurred by
Landlord in providing services for Excess Usage. Reasonable costs shall include
Landlord's costs for materials, additional wear and tear on equipment,
utilities, and labor (including fringe benefits and overhead costs). Computation
of Landlord's cost for providing Excess Usage will be made by Landlord's
engineer, based on his engineering survey of Tenant's Excess Usage. Tenant shall
also reimburse Landlord for all costs of supplementing the Building HVAC System
and/or extending or supplementing any electrical service, as Landlord may
determine is necessary, as a result of Tenant's Excess Usage. Prior to
installation or use by Tenant of any equipment which will result in Excess Usage
or operation of the Premises for extended hours on an ongoing basis, Tenant
shall notify Landlord of such intended installation or use and obtain Landlord's
consent. In addition, Landlord shall have the right, if it determines based on
its reasonable judgment that Tenant is using electric current in excess of
Tenant's Standard Electrical Usage, to require Tenant at Tenant's sole cost and
expense, to install a check meter and/or flow meter to determine the amount of
such Excess Usage, and the cost of the
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check meter and/or flow meter, including monitoring, installation and repair,
shall be paid by Tenant. Landlord shall use reasonable efforts to cause the
Building to be equipped with uninterrupted power supply system.
C. Additional Services to Tenant. If Tenant requires janitorial or other
services in addition to those required to be provided to all other tenants of
the Building, Tenant shall pay for those services monthly as Additional Rent. In
addition, Tenant shall pay as Additional Rent monthly with Base Rent any and all
charges for utility services supplied and materials furnished directly to the
Premises. It is also understood and agreed that Tenant shall pay the cost of
replacing light bulbs and/or tubes and ballast used in all lighting in the
Premises other than the standard tenant lighting used in the Building.
D. Interruption of Services. Landlord may discontinue, reduce, or
curtail heating, air conditioning, elevator, electrical, janitorial, lighting,
or other services, or any of them, at such times as it may be necessary by
reason of accident, repairs, alterations, improvements, strikes, lockouts,
riots, acts of God, application of Laws (as hereinafter defined) or due to any
other happening beyond the control of Landlord. In the event of any
interruption, reduction, or discontinuance of Landlord's services Landlord
shall, if possible, give advance notice to Tenant, but Landlord shall not be
liable for damages to Tenant or any other party as a result thereof nor shall
the occurrence of any such event in any way be construed as an eviction of
Tenant, cause or permit an abatement, reduction or set off of Rent, or operate
to release Tenant from any of Tenant's obligations under this Lease.
E. Notice to Landlord. Tenant shall promptly notify Landlord or the
Building Manager of any interruption in the Building services or of any defects
in the Building or Building systems of which Tenant becomes aware and of which
Landlord is not aware, including defects in pipes, electric wiring, and HVAC
equipment. In addition, Tenant shall provide Landlord with prompt notification
of any matter or condition of which it becomes aware which may cause injury or
damage to the Building, the Building Complex, or to any person or property.
7. QUIET ENJOYMENT. Subject to the provisions of this Lease, all Laws and
any mortgage, easement, covenants, reservations or other encumbrances on the
Building Complex, Landlord agrees to warrant and defend Tenant in the quiet
enjoyment and possession of the Premises during the Lease Term against any
person claiming under Landlord, so long as Tenant complies with its obligations
to pay Rent and performs all of its other obligations under this Lease. Landlord
shall use reasonable efforts to cause any party whose construction activities in
the Building result in extraordinary construction noise to conduct those such
extraordinary construction noise activities at times other than Ordinary
Business Hours. Further, Landlord represents that the roof-top HVAC units
background sound levels will not exceed ASHRAE guidelines for Office Buildings
as published in the 1995 HVAC Applications Handbook, Chapter 43, Table 2.
8. USE AND OCCUPANCY. The Premises shall be used and occupied as business
offices for the operation of Tenant's consulting and computer system integration
services as related to the GIS industry (the "Permitted Use") and for no other
purpose, and Tenant shall use it in a careful, safe, and proper manner, and pay
on demand for any damage, including repair of damage, to the Building Complex
caused by the use, act or neglect by Tenant, Tenant's agents or employees, or
any other person entering upon the Premises under express or implied invitation
of Tenant. Tenant shall at its sole cost, comply with all applicable federal,
state, city, quasi-governmental and utility provider laws, statutes, ordinances,
orders, codes, rules, regulations, covenants and restrictions now or hereafter
in effect, including the Americans With Disabilities Act ("ADA") and all
environmental laws (collectively referred to as "Laws") applicable to Tenant's
use, occupancy or alteration of the Premises, and Tenant shall obtain all
permits or licenses required for its business conducted at the Premises;
provided, however, that Landlord, at its sole cost and expense, shall use its
best efforts to cause the architect to design the Tenant Finish Work and the
Building to be in compliance with the ADA as interpreted on the date hereof.
Tenant shall not commit waste or permit waste to be committed or cause or permit
any unpleasant odor or noise or other nuisance in or from the Premises or on the
Building Complex. Tenant shall not use the Premises for any use that causes an
increase in rates or cancellation of any insurance policy covering the Building
Complex. Tenant shall not store, keep, use, sell, dispose of or
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offer for sale in, upon or from the Premises or the Building Complex any article
or substance prohibited by any insurance policy covering the Building Complex or
the Premises nor shall Tenant keep, store, produce, dispose of or release on, in
or from the Premises or the Building Complex (or allow others to do so) any
substance which may be deemed an infectious waste, hazardous waste, hazardous or
toxic material, or hazardous substance under any Laws (collectively called
"Hazardous Materials") except customary office and cleaning supplies stored and
used in accordance with Laws. Tenant represents and warrants to Landlord that it
shall not bring onto or allow other to bring any Hazardous Materials onto the
Building Complex, and that it has received no notice or complaint from any
governmental authority or third party that the business it intends to operate in
the Premises or that any property or materials it intends to keep or allow on
the Building Complex or in the Premises is a Hazardous Material or violates any
Laws. Tenant shall give prompt notice to Landlord of any such notice or
complaint it has received or does receive in the future. Tenant shall pay when
due any taxes assessed with respect to Tenant's use or occupancy of the Premises
and Tenant's Property (as defined in Paragraph 10) and any Alterations made by
Tenant.
9. MAINTENANCE AND REPAIRS.
A. Landlord's Obligations. Landlord shall, subject to reimbursement as
part of Operating Expenses, to the extent deemed reasonably necessary by
Landlord for operations of the Building Complex, repair and maintain: the
structural portions of the Building, elevators and escalators (if any),
plumbing, air conditioning, heating and electrical systems installed or
furnished by Landlord, the Building roof, the curtain wall, including all glass
connections at the perimeter of the Building, all exterior doors, including any
exterior plate glass within the Building, Building telephone and electrical
closets owned or operated by Landlord, the Common Areas of the Building Complex,
landscaping, and interior portions of the Building above and below grade which
are not within space leased to Tenant or other tenants in the Building. Landlord
shall have no obligation to make improvements to or to repair or maintain the
Premises during the Lease Term except as expressly required in this Lease or in
the Work Letter.
B. Tenant's Obligations. Tenant, at Tenant's sole cost and expense,
except for services furnished by Landlord pursuant to Paragraph 6 and Landlord's
obligations under Paragraph 9A, shall maintain, in good order, condition,
repair, and appearance the Premises, including the interior surfaces of the
ceilings (if damaged or discolored due in whole or in part to the act, neglect,
omission or fault of Tenant), walls and floors, all doors, interior glass
partitions or glass surfaces (not exterior windows) and pipes, electrical
wiring, switches, fixtures and other special items exclusively serving the
Premises, subject to the provisions of Paragraph 14. In the event Tenant fails
to maintain the Premises as required by this Paragraph, Landlord shall give
Tenant notice to do such acts as are required by this Paragraph. If within a
reasonable time not to exceed 30 days following Landlord's notice, Tenant fails
to perform its obligations under this Paragraph, or if those obligations cannot
reasonably be completed within 30 days, fails to promptly commence such work and
diligently pursue it to completion within a reasonable time not to exceed 90
days, then Landlord shall have the right, but shall not be required, to do such
acts and expend such funds at the expense of Tenant as are reasonably required
to perform those obligations, without curing Tenant's default. The funds so
expended plus 20% of such amounts as an overhead/administrative charge shall be
due and payable by Tenant within 10 days after receipt of Landlord's invoice. In
addition to the foregoing, Landlord shall install, at its sole cost and expense,
surveillance cameras (with video components and with a monitor screen(s)
installed in the Premises) adjacent to the Building elevators on the floors of
the Building which include the office space portions of the Premises
("Surveillance System"). Tenant, at its sole cost and expense, shall be
responsible for the monitoring, operation and maintenance of such Surveillance
System.
10. ALTERATIONS AND ADDITIONS.
A. Alterations by Tenant. Except as expressly provided in the Work
Letter, Tenant shall make no alterations, additions or improvements to the
Premises or the Building Complex (the "Alterations"), including the installation
of equipment or machinery which requires modifications to existing electrical
outlets or increases Tenant's usage of electricity beyond Tenant's Standard
Electrical
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Usage without obtaining the prior written consent of Landlord. Tenant shall
submit any such reasonable request to Landlord at least 30 days prior to the
commencement of the Alterations. Landlord may impose, as a condition to its
consent, and at Tenant's sole cost, such requirements as Landlord may deem
necessary in its judgment, including the manner in which the Alterations are
done, the times during which the work is to be accomplished, approval of all
plans and specifications, and the procurement of all licenses and permits.
Landlord shall be entitled to or to require Tenant to post notices on and about
the Premises with respect to Landlord's non-liability for the Alterations and
Tenant shall not permit those notices to be defaced or removed. Tenant further
agrees not to connect any apparatus, machinery or device to the Building
systems, including electric wires, water pipes, fire, safety, heating and
mechanical systems, without the prior written consent of Landlord. Alterations
which Tenant is permitted to make shall be performed in a good and workmanlike
manner and in compliance with this Lease.
If Landlord permits any Alterations, then prior to the commencement of
those Alterations, Tenant shall deliver to Landlord certificates (and copies of
the policies if requested by Landlord) issued by insurance companies qualified
to do business in the state where the Premises are located evidencing that
workmen's compensation, public liability insurance and property damage
insurance, builder's risk coverage (if applicable) all in amounts, with
companies and on forms satisfactory to Landlord, are in force and maintained by
all such contractors and subcontractors engaged by Tenant to perform the work.
All such policies shall name Landlord as an additional insured and shall provide
that they may not be canceled or modified without 30 days' prior notice to
Landlord.
Tenant, at its sole cost and expense, shall cause any permitted Alterations
to be performed in compliance with all applicable requirements of insurance
policies, Laws, and governmental bodies having jurisdiction, in such manner as
not to interfere with other tenants or interfere with, delay, or impose any
additional expense upon Landlord in the construction, maintenance or operation
of the Building Complex, and so as to maintain harmonious labor relations in the
Building and to not disturb other tenants' use of their premises or interfere
with Landlord's operation of the Building Complex. In addition, Tenant, at its
sole cost and expense, shall be responsible for the acquisition of auxiliary
aids, required under the ADA, including all Alterations required: (i) as a
result of Tenant, or any subtenant, assignee or concessionaire, being a Public
Accommodation (as defined in the ADA); (ii) as a result of the Premises being a
Commercial Facility (as defined in the ADA); (iii) as a result of any leasehold
improvements made to the Premises by or on behalf of Tenant, or any subtenant,
assignee or concessionaire (whether or not Landlord's consent to such leasehold
improvements was obtained); or (iv) as a result of the employment by Tenant, or
any subtenant, assignee or concessionaire, of any individual with a disability.
B. Ownership and Removal of Alterations. All Alterations, whether made
by Landlord or Tenant, including all counters, screens, grilles, cabinetry work,
partitions, paneling, carpeting, drapes or other window coverings and light
fixtures (but not including Tenant's Property, as defined below), shall be
deemed a part of the real estate and the property of Landlord and shall remain
upon and be surrendered with the Premises without disturbance or injury, at the
end of the Lease Term. All movable partitions, machines, furniture/cabinets/
screens (even if attached to the Premises) and equipment which are installed in
the Premises by or for Tenant, without expense to Landlord, which can be removed
without damage to or defacement of the Building or the Premises, and all
unattached furniture, furnishings and other articles of personal property owned
by Tenant and located in the Premises (all of which are herein called "Tenant's
Property") shall be and remain the property of Tenant and may be removed by it
at any time during the Lease Term, subject to the provisions of this Lease.
However, if any of Tenant's Property is removed, Tenant shall repair or pay the
cost of repairing any damage to the Building Complex or the Premises resulting
from the removal.
C. Landlord's ADA Alterations. Landlord shall, subject to reimbursement
as part of Operating Expenses, be responsible for any alterations, modifications
or improvements to any Common Areas of the Building Complex which are required
by the ADA. Landlord warrants that the design of the Building will comply with
the ADA as currently enacted and interpreted on the date hereof.
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11. ENTRY BY LANDLORD. Landlord, the Building Manager and their employees,
contractors and agents shall have the right to enter the Premises at all
reasonable times after advance notice to Tenant (except in the case of an
emergency or to provide janitorial services, which shall require no notice) for
the purpose of inspecting it, to supply any services to be provided by Landlord,
to show it to prospective purchasers, investors or Mortgagees, to make such
alterations, repairs, maintenance, improvements or additions to the Premises or
to the Building as Landlord may deem necessary or desirable, and during the last
270 days of the Lease Term or after an Event of Default to show it to
prospective tenants. However, exclusive of emergency situations, Landlord shall
not enter the Premises when Tenant or Tenant's representative is not present
without the prior consent of Tenant. Any such entry shall not entitle Tenant to
an abatement of Rent or any other claim against Landlord, except for Landlord's
gross negligence or willful misconduct.
12. MECHANICS LIENS. Tenant has no right or authority to impose or permit
any lien or claim against the Premises, the Building, the Building Complex or
its interest in or under this Lease. Tenant shall pay all costs for work done by
or for Tenant in the Premises (including work performed by Landlord or its
contractor at Tenant's request following the commencement of the Primary Lease
Term) and Tenant will keep the Premises and the Building Complex free and clear
of all mechanics' and other liens on account of work done by or for Tenant or
persons claiming under it, excluding any Tenant Finish Work performed by
Landlord pursuant to the Work Letter. Tenant agrees to indemnify, defend, and
save Landlord harmless of and from all liability, loss, damage, costs, or
expenses, including attorneys' fees, on account of any claims of any nature
whatsoever for work performed or for materials or supplies furnished to Tenant
or persons claiming under Tenant. Should any such claims be made or liens be
recorded against the Premises, the Building or the Building Complex or should
any action affecting the title thereto be commenced as a result of any such
work, Tenant shall cause the claim to be satisfied before being recorded, or if
the claim or lien is recorded to be removed of record within five days after
recording. If Tenant desires to contest any claim or lien, Tenant shall give
notice to Landlord of Tenant's intent to contest it and, within five days after
the recording of any such liens, Tenant shall either furnish to Landlord
adequate security satisfactory to Landlord of at least 150% of the amount of the
claim, plus estimated costs and interest or bond over any lien under CRS
38-22-131 and as soon as possible thereby have the lien against the Premises,
Building and Building Complex discharged and released in full. If a final
judgment establishing the validity or existence of any lien for any amount is
entered, Tenant shall immediately pay and satisfy it. If Tenant fails to pay any
amount in the time periods provided herein, Landlord may (but without being
required to do so) pay such lien or claim and any costs, and the amount so paid,
plus 20% of such amounts as an overhead/administration charge, together with
reasonable attorneys' fees incurred in connection therewith, shall be
immediately due from Tenant to Landlord.
13. SUBLETTING AND ASSIGNMENT.
A. Tenant's Right. Tenant cannot assign this Lease or sublet all or any
part of the Premises without the prior written consent of Landlord, not to be
unreasonably withheld. If Tenant wants to assign this Lease or sublet all or a
portion of the Premises, Tenant shall first notify Landlord in writing of the
name of the proposed assignee or sub-tenant and the proposed use of the
Premises, and provide such financial and other information as Landlord may
reasonably require about the proposed assignee or subtenant. It shall not be
unreasonable for Landlord to withhold its consent to a proposed assignment or
sublease if (i) the reputation, financial responsibility, or business of the
proposed assignee or subtenant is unacceptable to Landlord; (ii) the intended
use of the Premises by the proposed assignee or subtenant either (a) violates
any exclusivity rights granted by Landlord to other tenants in the Building
Complex, or (b) violates any Laws or requires modifications to the Premises or
the Building Complex to comply with Laws; or (iii) if the proposed assignee or
subtenant is a present tenant of the Building currently negotiating with
Landlord for renewal or expansion. Tenant shall have no right to assign this
Lease or sublet any part of the Premises if a notice of default has been
delivered by Landlord to Tenant, which default has not been cured, or if an
Event of Default exists under this Lease, either at the time of Tenant's request
for Landlord's consent to an assignment or sublease or at the time the
assignment or sublease is scheduled to commence.
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B. Other Restrictions; What Constitutes an Assignment. Any assignment or
subletting consented to by Landlord shall be in writing in a form acceptable to
Landlord. This Lease cannot be assigned or sublet by operation of law. Any
transfer of this Lease by a sale of all or substantially all of Tenant's assets,
merger, consolidation, liquidation, or change in ownership of or power to vote
the majority of outstanding stock of Tenant or, if Tenant is a partnership, any
withdrawal, replacement, or substitution of any partner or partners, either
general or limited, whether as the result of a single or series of transactions,
shall constitute an assignment for purposes of this Paragraph. Any assignment or
subletting shall not affect the liability of the Tenant under this Lease or
release Tenant from its obligations. Consent by Landlord to any assignment or
sublease shall not relieve the Tenant from the requirement of obtaining the
prior written consent of Landlord to any subsequent assignment or subletting and
Landlord's consent to one assignment or subletting shall not waive Landlord's
right to refuse to consent to a subsequent request. If Landlord consents to
Tenant's request to assign this Lease or sublet all or a portion of the
Premises, Tenant shall pay Landlord, at the time consent is given, in
consideration for Landlord's written consent to the assignment or sublease, an
amount equal to $500 as a subletting/assignment fee. In addition, Tenant or
Tenant's assignee or sublessee shall be solely responsible for all costs
incurred in altering the Premises to conform to Laws due to any change in the
intended use of the Premises.
C. Certain Subleases. Notwithstanding the above, if Tenant requests
Landlord's consent to sublet 25% or more of the Premises, Landlord may refuse to
grant consent in its sole discretion and may terminate this Lease as to that
portion of the Premises; provided, however, if Landlord does not consent and
elects to terminate the Lease as to that portion, Tenant may within 15 days
after notice from Landlord to this effect withdraw Tenant's request for consent.
If Landlord elects to terminate under this Paragraph, it shall be effective on
the date designated in a notice from Landlord.
D. Related Corporation Assignment. Notwithstanding anything to the
contrary set forth in this Section, and subject to all of the provisions of this
Lease, Tenant may assign this Lease to or permit any corporation or other
business entities which control, are controlled by, or are under common control
with Tenant (each, a "Related Corporation") to sublet the Premises for any of
the purposes permitted to Tenant under this Lease (subject, however, to
compliance with Tenant's obligations under this Lease) provided that (a) Tenant
shall not then be in default (after any applicable grace and/or cure periods in
the performance of any of its obligations under this Lease), (b) prior to such
assignment or subletting, Tenant furnishes Landlord with the name of any such
Related Corporation, together with the written certification of Tenant that such
entity is a Related Corporation of Tenant, and (c) in the reasonable judgment of
Landlord, the proposed assignee or subtenant is in keeping with the reasonable
standards of Landlord for the Building. Any such subletting shall not be deemed
to vest in any such Related Corporation any right or interest in this Lease or
the Premises nor shall any such subletting or assignment relieve, release,
impair or discharge any of Tenant's obligations hereunder. For the purposes
hereof, "control" shall be deemed to mean ownership of not less than 51% of all
of the legal and equitable interest in any other business entities. Further,
notwithstanding anything contained herein to the contrary, the provisions of
this Paragraph 13 shall not apply to transactions with a corporation into or
with which Tenant is merged or consolidated or to which substantially all of
Tenant's assets are transferred, provided that in any of such events the
successor to Tenant has a net worth computed in accordance with generally
accepted accounting principles at least equal to the Tenant's net worth on the
date hereof, and proof satisfactory to Landlord of such net worth shall have
been delivered to Landlord at least ten (10) days prior to the effective date of
any such transaction. Further, notwithstanding anything contained herein to the
contrary, the provisions of Paragraph 13.A. shall not apply to transactions with
a corporation into or with which Tenant is merged or consolidated or to which
substantially all of Tenant's assets are transferred, provided that in any of
such events, the successor to Tenant has a net worth computed in accordance with
generally accepted accounting principles at least equal to the greater of (i)
Tenant's net worth on the date hereof or (ii) Tenant's net worth on the date of
such merger or consolidation, and proof satisfactory to Landlord shall have been
delivered to Landlord at least ten (10) days prior to the effective date of any
such transaction.
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E. Excess Rent. If the Rent and other sums payable to Tenant by an
assignee or sublessee for or in connection with an assignment of this Lease or
the sublease of all or any part of the Premises shall be in excess (the
"Excess") of the Base Rent and Tenant's Pro Rata Share payments provided for -
in this Lease (allocated on a per square foot basis in the event of a
sublease of less than all of the Premises), Tenant shall so notify Landlord and,
after deducting its reasonable leasing costs, shall pay Landlord 50% of the
Excess as and when received by Tenant. After a default by Tenant under this
Lease, Landlord shall have the right to collect any Base Rent directly from any
subtenant (or from any assignee from which is it not already collecting
directly).
14. DAMAGE TO PROPERTY; CLAIMS.
A. Landlord Not Liable. Neither Landlord nor the Building Manager or
their employees or agents shall have any liability for, and Tenant shall neither
hold nor attempt to hold Landlord the Building Manager and their employees and
agents liable for any injury or damage, either proximate or remote, occurring
through or caused by fire, water, steam, or any repairs, alterations, injury,
accident, or any other cause to or within the Premises, to Tenant's Property or
other personal property of Tenant or others kept in the Premises or stored in
other parts of the Building and/or Common Areas, or for property of Tenant or
others entrusted to employees of the Building, or for loss of property by theft
or otherwise (including loss or damage in the parking areas) whether by reason
of the negligence or default of Landlord, other occupants or any other person or
otherwise, and the keeping or storing of all property of Tenant in the Building,
Common Areas and/or Premises shall be at the sole risk of Tenant, unless caused
by the gross negligence or willful misconduct of Landlord.
B. Tenant's Indemnity. Subject to provisions of Paragraph 15C, Tenant
hereby agrees to indemnify, defend, and save Landlord and Building Manager
harmless of and from all actions, suits, fines, penalties, liability, loss,
damages, costs, or expenses, including reasonable attorneys' fees, resulting
from Tenant's use or occupancy of the Premises, or on account of injuries to the
person or property of Tenant or any third party, including any other tenant in
the Building Complex or to any other person rightfully in the Building Complex
for any purpose whatsoever, where the injuries are caused by the negligence or
willful misconduct of the Tenant, Tenant's agents, subcontractors or employees
(excluding business invitees), or resulting from any breach of this Lease by
Tenant.
15. INSURANCE.
A. Landlord's Insurance. Landlord agrees to carry and maintain
commercial general liability insurance against personal injury, including death
and property damage, in or about the Building Complex (excluding Tenant's
Property), in such amounts as Landlord deems appropriate. Landlord shall
maintain casualty insurance for the Building Complex, the shell and core of the
Building and the Premises (other than the insurance Tenant is required to carry
on the Premises) in such amounts, from such companies, and on such terms and
conditions, including insurance for loss of Rent, as Landlord deems appropriate
from time to time.
B. Tenant's Insurance. Tenant shall, at its own cost, at all times
during the Lease Term, procure and maintain workmen's compensation insurance in
the maximum statutory amount covering all persons employed by Tenant, insurance
coverage at least as broad as ISO Special Form Coverage against risks of direct
physical loss or damage (commonly known as "all risk") for the full replacement
cost of Tenant's Property and the contents of the Premises including damage due
to water leakage, in an amount equal to their full replacement cost, and
commercial general liability insurance, including coverage for bodily injury,
property damage, personal injury (employee and contractual liability exclusions
deleted), products and completed operations, contractual liability, owner's
protective liability, and broad form property damage with the following limits
of liability: $2,000,000.00 each occurrence combined single limit for bodily
injury, property damage and personal injury; $2,000,000.00 aggregate for bodily
injury and property damage for products and completed operations. All such
insurance shall be procured from a responsible insurance company or companies
authorized to do business in the State where the Premises are located, with
general policyholder's ratings of not less than AA+ and a financial rating of
not less than "XI' in the most current available Best's Insurance Reports, and
shall
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be otherwise satisfactory to Landlord. All such policies (except workmen's
compensation) shall name Landlord and Building Manager as additional insureds,
and shall provide they cannot be canceled or altered except upon 30 days prior
written notice to Landlord. All insurance maintained by Tenant shall be primary
to any insurance carried by Landlord. If Tenant obtains any general liability
insurance policy on a claims-made basis, Tenant shall provide continuous
liability coverage for claims arising during the entire Lease Term, regardless
of when the claims are made, either by obtaining an endorsement providing for an
unlimited extended reporting period in the event any such policy is canceled or
not renewed for any reason whatsoever or by obtaining new coverage with a
retroactive date the same as or earlier than the expiration date of the canceled
or expired policy. Tenant shall provide certificate(s), and if requested copies
of the policies, of such insurance to Landlord upon commencement of the Lease
Term and at least 30 days prior to their renewal date and such certificate(s)
and policies shall name Landlord and Building Manager as additional insureds, in
addition to the other requirements herein. The limits of Tenant's insurance
shall not, under any circumstances, limit the liability of Tenant under this
Lease.
C. Waiver of Claims and Subrogation. Each party hereby waives and
releases the other party and its respective officers, directors, partners,
members, agents, representatives and employees, from any claim (including a
claim for negligence) which it might otherwise have against the other party for
loss, damage or destruction to its real and personal property (including the
Building, Building Complex, Premises and Tenant's Property) or for loss of
business arising out of or related to the use and occupancy of the Premises
occurring during the Lease Term which is insured or capable of being insured
against under insurance required under this Paragraph. Tenant also waives all
such rights of recovery against the Building Manager. Each party shall notify
its insurance carrier of this waiver provision and obtain an appropriate waiver
of subrogation provision in its policies.
16. DAMAGE OR DESTRUCTION TO BUILDING.
A. Repair of Damage. In the event that the Premises or the Building is
damaged by fire or other insured casualty, the damage shall be repaired by and
at the expense of Landlord, provided that the Premises can be made fit for
occupancy, within 180 days after the occurrence of the damage without the
payment of overtime or other premiums. Until the repairs and restoration are
completed, Rent shall be abated in proportion to the part of the Premises which
is unusable by Tenant in the conduct of its business as the result of the
casualty (but there shall be no abatement of Rent by reason of any portion of
the Premises being unusable for a period of five days or less or as set forth
below). Landlord agrees to notify ("Landlord's Notice") Tenant within 60 days
after the casualty of the approximate length of time Landlord estimates will be
required to complete the repairs and restoration, and if Landlord therein
estimates that it will be unable to repair and restore the Premises within 180
days, Landlord, in its Landlord's Notice or Tenant in a notice given to Landlord
within 15 days thereafter (or within 75 days after the casualty if Landlord
fails to provide Landlord's Notice, unless the repairs are in fact complete
within said 75-day period), may terminate this Lease effective 30 days from the
date of such notice (the "Termination Date"). However, Tenant may not terminate
this Lease or receive an abatement of Rent, as above stated, if the damage to
the Premises or the Building is in whole or in part the result of the act,
omission, fault or negligence of Tenant, its agents, contractors or employees.
In the event this Lease is terminated, Tenant shall pay Rent until the
Termination Date and shall forthwith surrender the Premises in accordance with
Paragraph 21A. If Tenant fails so to surrender the Premises, Landlord may
reenter and take possession of the Premises and remove Tenant and the property
and Alterations Tenant is required to remove under Paragraph 10, at Tenant's
expense. Except as provided in this Paragraph, there shall be no abatement of
rent and no liability of Landlord by reason of any damage to or interference
with Tenant's business or property arising from the casualty or the making of
any such repairs, alterations or improvements in or to the Building Complex or
Premises. Tenant understands that Landlord will not carry insurance of any kind
on Tenant's Property, or any Alterations installed in the Premises by or on
behalf of Tenant, and that Landlord shall not be obligated to repair any damage
or replace any of Tenant's Property or any such Alterations, which shall be
Tenant's responsibility.
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17. CONDEMNATION. If the entire Premises or substantially all of the
Premises or any portion of the Building Complex which shall render the Premises
untenantable shall be taken by eminent domain or by condemnation or shall be
conveyed in lieu of any such taking, then this Lease, at the option of either
Landlord or Tenant exercised by either party giving notice to the other of such
termination within 30 days after such taking or conveyance, shall as of the date
Tenant is dispossessed of the Premises terminate and the Rent shall be
apportioned as of that date; and Tenant shall surrender the Premises as required
in this Lease to Landlord and Landlord may reenter and take possession of the
Premises on that date. In the event less than all of the Premises shall be taken
by that proceeding, Landlord shall promptly repair the Premises as nearly as
possible to its condition immediately prior to the taking. In the event of any
such taking or conveyance, Landlord shall receive the entire award or
consideration for the portion of the Building or Building Complex so taken, and
Tenant may claim separately for loss of personal property and moving expenses.
18. ESTOPPEL CERTIFICATE.
A. Duty to Provide. Tenant agrees at any time and from time to time on
or before five days after written request by Landlord, to execute, acknowledge
and deliver to Landlord an estoppel certificate certifying (i) that this Lease
is unmodified and in full force and effect (or if there have been modifications,
that it is in full force and effect as modified, and stating the modifications),
(ii) that there have been no defaults by Landlord (to the best of Tenant's
knowledge) or by Tenant (or, if there have been defaults, describing the
default), (iii) the date to which Rent and other charges have been paid in
advance, if any, (iv) that Tenant claims no present charge, lien, claim or
offset against Rent, (v) that Rent is not prepaid for more than one month in
advance, and (vi) such other matters as may be reasonably required by Landlord,
any Mortgagee or prospective Mortgagee, or any potential purchaser of the
Building. It is intended that any such statement delivered pursuant to this
Paragraph may be relied upon by any prospective purchaser of all or any portion
of Landlord's interest, or by any Mortgagee or prospective Mortgagee.
B. Tenant's Failure to Deliver. Tenant acknowledges that it may be
difficult, if not impossible, for Landlord to sell or finance the Building
without such an estoppel certificate from Tenant, and that Landlord would not
enter into this Lease without Tenant's agreement to provide such an estoppel
certificate. If Tenant shall fail to execute, acknowledge and deliver to
Landlord any estoppel on or before the expiration of the 5-day period provided
under Paragraph 18A above, Landlord shall again provide written request to
Tenant delivered in accordance with the provisions of Paragraph 23 below and if
Tenant fails to execute, acknowledge and deliver to Landlord such estoppel on or
before 5 days after said second request therefor, it shall be deemed both (1) as
Tenant's affirmation of the provisions of the estoppel, including that (a) this
Lease is in full force and effect, (b) there are no breaches or defaults on the
part of Landlord, and (c) no more than one month's rent has been paid in
advance; and (2) that Tenant has appointed Landlord as Tenant's attorney-in-fact
to execute said estoppel certificate in Tenant's stead and place.
19. DEFAULT BY TENANT.
A. Event of Default. Each one of the following events is referred to as
an "Event of Default":
(1) Any failure by Tenant to pay Rent on the due date unless the
failure is cured within 5 business days after notice by Landlord; however,
Tenant is not entitled to more than three notices of delinquent payments of Rent
during any calendar year and, if thereafter during that calendar year any Rent
is not paid when due, an Event of Default shall automatically occur;
(2) If Tenant's interest in this Lease or in the Premises, or if all
or a substantial part of Tenant's Property, is seized or taken by process of law
or otherwise and is not released within 15 days;
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(3) Commencement by or against Tenant of a proceeding under any
provision of federal or state law relating to insolvency, bankruptcy, or
reorganization ("Bankruptcy Proceeding"), unless dismissed within 60 days after
commencement; the insolvency of Tenant or execution by Tenant of an assignment
for the general benefit of creditors; the convening by Tenant of a meeting of
its creditors or any significant class thereof for purposes of effecting a
moratorium upon or extension or composition of its debts; or the failure of
Tenant generally to pay its debts as they mature;
(4) [Intentionally omitted];
(5) [Intentionally omitted];
(6) If Tenant fails to take possession of the Premises within 30
days after it is Ready for Tenant;
(7) [Intentionally omitted];
(8) If Tenant fails to perform or breaches any of the other
agreements, terms, covenants or conditions hereof on Tenant's part to be
performed (other than the obligation to pay Rent or any other charges payable
hereunder), and that default continues for a period of 30 days after notice by
Landlord to Tenant; provided, however, that if Tenant cannot reasonably cure the
default within 30 days, Tenant shall not be in default if it commences to cure
the default within that 30 days and diligently pursues it to completion within a
reasonable period of time, not to exceed 60 days.
B. Remedies of Landlord. If any one or more Event of Default occurs,
Landlord shall have the right at Landlord's election, then or at any time
thereafter, in addition to its other rights and remedies under this Lease or any
Laws, to do any one or more of the following:
(1) (a) Without demand or notice except as required by Laws, to
enter and retake possession of the Premises or any part of it and expel Tenant
and those claiming through or under Tenant and remove the effects of both or
either, without being guilty of trespass and without prejudice to any remedies
for unpaid of Rent or other breach of this Lease. If Landlord elects to enter
and retake possession pursuant to legal proceedings or pursuant to any notice
provided for by Laws, Landlord may, from time to time, without terminating this
Lease, relet the Premises or any part of it, in Landlord's or Tenant's name but
for the account of Tenant, for such periods (which may be greater or less than
the period which would otherwise have constituted the balance of the Lease Term)
and on such conditions and upon such other terms (which may include, among other
terms, leasing and brokerage fees, concessions of free rent and alteration and
repair of the Premises) as Landlord, in its sole discretion, may determine, and
Landlord shall be entitled to collect all the rents from the reletting. Landlord
shall in no way be responsible or liable for any failure to relet the Premises
or any part of it, or for any failure to collect any rent due upon reletting. No
such entry or repossession or notice by Landlord shall be construed as an
election on Landlord's part to terminate this Lease, unless written notice of
termination is given to Tenant. Landlord reserves the right following any such
entry and/or reletting to exercise its right to terminate this Lease by giving
Tenant notice, in which event the Lease will terminate as specified in that
notice.
(b) If Landlord takes possession of the Premises without
terminating this Lease, Tenant shall pay to Landlord (i) the Rent and other sums
payable under this Lease, less (ii) the net proceeds, if any, of any reletting
of the Premises after deducting all of Landlord's expenses incurred in
connection with the reletting, including all repossession costs, leasing and
brokerage fees, concessions, attorneys' fees, expenses of employees, alteration
and repair costs ("Reletting Expenses"). If, in connection with any reletting,
the new lease term extends beyond the Lease Term or the premises covered thereby
include other premises not part of the Premises, a fair apportionment of the
Rent received from the reletting and the Reletting Expenses will be made in
determining the net proceeds received from the reletting. In determining the net
proceeds, any rent concessions will be apportioned
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over the term of the new lease. Tenant shall pay the amount due under this
Paragraph to Landlord monthly on the days on which Rent is due under this Lease.
(2) To give Tenant notice of termination of this Lease on the date
specified in that notice, and on that date Tenant's right to possession of the
Premises shall cease and this Lease shall terminate except as to Tenant's
liability as provided below. In the event this Lease is terminated pursuant to
the provisions of this subparagraph), Tenant shall remain liable to Landlord for
damages in an amount equal to the Rent and other amounts which would have been
owing by Tenant for the balance of the Lease Term had this Lease not terminated,
less the net proceeds, if any, from reletting of the Premises by Landlord
subsequent to termination, after deducting the Reletting Expenses. Landlord
shall be entitled to collect such damages from Tenant monthly on the days on
which Rent would have been payable if this Lease had not been terminated.
Alternatively, if this Lease is terminated, Landlord at its option may recover
immediately from Tenant as damages for loss of the bargain and not as a penalty
an amount equal to the worth at the time of termination of the excess, if any,
of the Rent payable under this Lease for the balance of the Lease Term over the
then Reasonable Rental Value of the Premises for the same period reduced to
present value at a discount rate of 5%. "Reasonable Rental Value" shall be the
amount of rent Landlord can obtain for the remaining balance of the Lease Term,
taking into account a reasonable period for reletting, after deducting all
estimated Reletting Expenses.
(3) Advance such monies, and take such other action, for Tenant's
account as reasonably may be required to perform Tenant's obligation or to
mitigate any default or Event of Default, but no such advance or action shall
cure the default or Event of Default. Tenant agrees to reimburse Landlord for
any such advances, as Additional Rent, upon demand from Landlord. Any such
advance, and any cost or expense so incurred, shall bear interest at the rate of
1-1/2% per month, compounded monthly, until paid by Tenant.
(4) Suits for the recovery of Rent and damages may be brought by
Landlord, from time to time, at Landlord's election, and nothing herein shall be
deemed to require Landlord to wait until each installment is due or until the
expiration of the Lease Term. Each right and remedy provided for in this Lease
shall be cumulative and in addition to every other right or remedy provided for
in this Lease or now or hereafter existing at law or equity or otherwise,
including, but not limited to, suits for injunctive relief and specific
performance. The exercise or beginning of the exercise by Landlord of any one or
more rights or remedies shall not preclude the simultaneous or later exercise by
Landlord of other rights or remedies. All costs incurred by Landlord in
connection with collecting Rent or other amounts and damages owing by Tenant or
to enforce any provision of this Lease, shall also be recoverable by Landlord
from Tenant.
(5) No failure by Landlord to insist upon the strict performance of
any agreement, term, covenant or condition hereof or to exercise any right or
remedy, and no acceptance of full or partial Rent during the continuance of any
such breach shall constitute a waiver of any such breach or agreement, term,
covenant, or condition, except by written instrument executed by Landlord or
relieve Tenant from the obligation to make the full payment as and when due. No
waiver shall affect or alter this Lease, and each and every agreement, term,
covenant, and condition hereof shall continue in full force and effect with
respect to any other then existing or subsequent breach.
(6) Nothing contained in this Lease shall limit or prejudice the
right of Landlord to obtain as liquidated damages in any bankruptcy or similar
proceeding the maximum amount allowed by Law at the time such damages are
proven, whether or not the amount is greater, equal to, or less than the amounts
recoverable, either as damages or Rent, referred to in any of the preceding
provisions of this Paragraph.
C. Late Charges and Interest. Rent or other amounts owed by Tenant
which are not received by Landlord by the 5th business day after the date they
are due shall be subject to a late charge of 3% of the amount due. Additionally,
if Rent is not received by Landlord within 15 days after it is due (or after
notice of default, if notice is required), the amount due shall be subject to an
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additional 5% late charge. Rent and all other monetary obligations under this
Lease not received by Landlord when due shall also bear interest at the rate of
1 1/2% per month, compounded monthly, from the date due until fully received by
Landlord. Tenant acknowledges that late payments will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which would be
impossible or extremely difficult to ascertain. Those costs include processing
and accounting charges, interest and late charges imposed by Mortgagees, and
other general and administrative expenses. Tenant agrees that the late charges
and interest contemplated by this Paragraph represent a fair and reasonable
estimate of the costs which Landlord will incur as a result of any such late
payments by Tenant. Acceptance of late charges and interest by Landlord shall
not constitute a waiver of Tenant's default with respect to any overdue amount,
or prevent Landlord from exercising any other rights or remedies under this
Lease.
D. No Waiver. No payments of Rent or money by Tenant to Landlord after
notice of termination or after termination of this Lease, in any manner, shall
reinstate, continue, or extend the term of this Lease or affect any notice given
to Tenant prior to the payment, it being agreed that after the service of notice
of termination or the commencement of a suit or other final judgment granting
Landlord possession of the Premises, Landlord may receive and collect any sums
of Rent due or any other sums of money, whether as Rent or otherwise, and
exercise Landlord's rights and remedies hereunder, and shall not waive any
default or notice or in any manner affect any pending suit or judgment.
E. Landlord's Lien. [Intentionally omitted.]
20. SUBORDINATION AND ATTORNMENT.
A. General. This Lease, and all rights of Tenant under it, at
Landlord's option shall be subordinate to any ground leases, deeds of trust,
mortgages and security agreements, including leasehold mortgages and building
loan agreements, now or hereafter placed upon the Building or the Building
Complex (including all advances made thereunder), and to all amendments,
renewals, replacements and extensions thereof (collectively, "Mortgage"), but
only if and when any Lessor or Mortgagee (as defined below) executes and
delivers to Tenant a non-disturbance and attornment agreement in the standard
form of such Lessor or Mortgagee or the form attached hereto as Exhibit D, under
which, among other provisions which may be included (1) Tenant agrees to
recognize and attorn to the Lessor or Mortgagee if it becomes the Landlord under
this Lease, and (2) the Lessor or Mortgagee (on behalf of itself and its
successors and assigns in interest) agrees to recognize Tenant's rights under
this Lease as long as Tenant is not in default under this Lease, notwithstanding
defaults under any such ground lease or Mortgage or foreclosure, receivership or
sale thereunder ("Nondisturbance Agreement"). If any holder of a Mortgage
("Mortgagee") or the lessor of any ground lease ("Lessor") elects to have this
Lease made superior to the lien of its Mortgage and gives notice to Tenant, this
Lease will be deemed prior to that Mortgage, whether this Lease is dated prior
or subsequent to the date of that Mortgage. In confirmation of this
non-disturbance and attornment, subordination or superior position, as the case
may be, Tenant shall promptly execute and deliver to Landlord (or such other
party so designated by Landlord) at Tenant's own cost and expense, within 10
days after request from Landlord any instruments as may be reasonably required
for this purpose by Mortgagee or Lessor, in recordable form if requested. If
Tenant fails to do so within that 10-day period, Tenant shall be in default
under this Lease, and Tenant hereby irrevocably grants to Landlord a power of
attorney coupled with an interest to act as Tenant's attorney-in-fact for the
purposes of executing whatever documents are necessary to evidence such
subordination or superior position. Tenant agrees to attorn to all successor
owners of the Building, whether such ownership is acquired by sale, foreclosure
of a Mortgage, or otherwise. Landlord covenants and agrees that concurrently
with the full execution of this Lease by Landlord and Tenant that Landlord shall
cause to be delivered to Tenant a Nondisturbance Agreement and signed by all of
Lessor's current Mortgagees or Lessors, if either, as the case may be.
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21. SURRENDER AND HOLDING OVER.
A. Surrender. Upon the expiration or termination of this Lease or
termination of Tenant's right of possession, Tenant shall promptly surrender the
Premises to Landlord broom clean, in good order and condition, ordinary wear and
tear and loss by fire or other insured casualty excepted (except as otherwise
provided in Paragraphs 15 and 16), and Tenant shall remove Tenant's Property and
the Alterations and other property as required under Paragraph 10. If Tenant
fails to vacate the Premises on a timely basis as required, Tenant shall be
liable to Landlord for all costs incurred by Landlord as a result of that
failure, including, but not limited to, any amounts required to be paid to third
parties who were to have occupied the Premises.
B. Property Not Removed. All Tenant's Property not removed from the
Premises upon the termination of this Lease or of Tenant's right of possession
for any cause whatsoever shall conclusively be deemed to have been abandoned and
may be appropriated, sold, stored, destroyed, or otherwise disposed of by
Landlord without notice to Tenant or any other person and without obligation to
account therefor, Tenant shall pay Landlord all expenses incurred in so doing.
C. Holding Over. If, after the termination of this Lease or of Tenant's
right of possession, Tenant remains in possession of the Premises and continues
to pay Rent, and Landlord consents to the possession and accepts the Rent,
without any written agreement, the holding over shall be deemed a tenancy from
month-to-month, under all the provisions of this Lease, but at a monthly Rent
equivalent to 150% of the monthly installments of Rent paid by Tenant
immediately prior to the termination or the current market rental rate for the
Premises, whichever is greater. If, after the termination of this Lease or of
Tenant's right of possession, Tenant remains in possession without Landlord's
consent, Landlord will suffer damages, the amount of which will be difficult to
determine; therefore, Tenant shall pay to Landlord as liquidated damages an
amount equal to 200% of the Rent calculated on a per diem basis, applicable
under the Lease in the month immediately prior to the termination. All such Rent
shall be payable in advance on the same day of each month. The month-to-month
tenancy may be terminated by either party upon 10 days' notice prior to the end
of any such monthly period. Nothing contained herein shall be construed as
obligating Landlord to accept any Rent tendered by Tenant after any such
termination or as obligating Landlord to consent to any holding over, or as
relieving Tenant of its liability under this Lease.
22. LANDLORD DEFAULT. In the event of any noncompliance with the terms and
conditions of this Lease by Landlord, Tenant shall, before exercising any right
or remedy available to it at law, in equity or hereunder, give Landlord written
notice of such noncompliance. If prior to its giving such notice, Tenant has
been notified in writing (by way of Notice of Assignment of Rents and Leases by
execution of a subordination agreement, or by notice delivered in accordance
with the provisions of Section 22 hereof) of the address of a Mortgagee which
has furnished any of the financing referred to in Section 20 hereof,
concurrently with giving the aforesaid notice to Landlord, Tenant shall, by
registered mail, transmit a copy thereof to such Mortgagee. For the 30 days
following the giving of the notice(s) required by the foregoing portion of this
Section 22 (or such longer period of time as may be reasonably required to cure
a matter which, due to its nature, cannot be reasonably rectified within 30
days), Landlord shall have the right to cure the noncompliance involved. If
Landlord has failed to effect such cure within such 30 day period, any such
Mortgagee shall have 30 days within which to cure the same, or, if such default
cannot be cured within that period, such additional time as may be reasonably
necessary to cure such default, if within such 30-day period, said Mortgagee has
commenced and diligently pursues the actions or remedies to completion;
provided, however, that any such cure must be completed within 90 days following
Landlord's cure period. Notwithstanding the foregoing, in case of a bona fide
emergency not arising as a result of force majeure and which results in a
substantial portion of the Premises being untenantable and as a result, Tenant
has not occupied such portion of the Premises for at least 2 consecutive
business days, (i) Tenant shall not be required to give written notice, but may,
instead, give oral telephone notice to Landlord (so long as such oral notice is
promptly followed by written notice, which may be by means of facsimile
transmission), and (ii) neither Landlord nor such Mortgagee shall be entitled to
such 30-day period to cure any such noncompliance and, instead, Landlord and
such Mortgagee shall have such shorter time as is reasonably
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necessary to cure such noncompliance in light of the nature of the emergency and
all surrounding circumstances. Upon Landlord's (and Mortgagee's, if applicable)
failure to cure any failure of its performance of any of its covenants or
obligations as set forth in this Lease beyond the cure period set forth herein,
Tenant, at its option, but without obligation, may perform such acts and pay
such amounts as are reasonably necessary to cure such default by Landlord, and
Landlord shall reimburse Tenant for the out-of-pocket costs reasonably incurred
in connection therewith within 30 days following receipt of Tenant's written
request with accompanying paid invoices evidencing such costs. If such amounts
are not paid by Landlord within said 30 days, Tenant shall have the right to
offset such sums against Base Rent due under this Lease. Further, provided the
Tenant has complied with the notice to Landlord and Mortgagee (and afforded the
cure opportunities) pursuant to the terms of the first four sentences of this
Paragraph, and has not elected to avail itself of the offset provisions of this
Section as Tenant's remedy, the Tenant shall have any other rights against
Landlord that are available at law or in equity for Landlord's breach of
Landlord's obligations hereunder. If Tenant prevails in any such proceedings and
obtains a monetary judgment against Landlord, Tenant may, subject to Section 27A
below, execute and collect on such judgement.
23. NOTICE. All notices, demands or statements required or permitted to be
given to Landlord shall be in writing and shall be deemed duly served when
deposited in the United States mail, postage prepaid, certified or registered,
return receipt requested, addressed to Landlord at Landlord's address shown on
the Basic Lease Term Sheet or at the most recent address of which Landlord has
notified Tenant in writing. All notices, demands or statements required or
permitted to be given to Tenant shall be in writing and shall be deemed duly
served when delivered to any officer or agent of Tenant (or a partner or member
of Tenant if Tenant is a partnership or other entity or to Tenant individually
if Tenant is a sole proprietor) or manager of Tenant whose office is in the
Building, or when deposited in the United States mail, postage prepaid,
certified or registered, return receipt requested, addressed to Tenant at the
Premises, or, prior to Tenant's taking possession of the Premises, to the
address known to Landlord as Tenant's principal office address. Either party
shall have the right to designate in writing, served as above provided, a
different address to which notice is to be delivered. This Section shall not
prohibit notice from being given as provided in Rule 4 of Colorado Rules of
Civil Procedure, as amended from time to time.
24. RULES AND REGULATIONS. The rules and regulations attached as Exhibit E
are deemed a part of this Lease, and Tenant agrees that Tenant and its
employees, agents or any others permitted by Tenant to occupy or enter the
Premises shall at all times abide by those rules and regulations. Tenant agrees
that Landlord may change the rules and regulations for the Premises and the
Building Complex from time to time (including the addition of rules and
regulations regarding parking), and Tenant agrees to abide by them upon receipt
of notice of the change.
25. PARKING. Tenant shall have the right to use the number of uncovered and
covered (if applicable) parking spaces indicated on the Basic Lease Term Sheet
at no charge. All vehicles parked in the parking spaces are at the sole risk of
Tenant, Tenant's agents and invitees and Landlord shall have no liability for
loss or damage. The parking garage servicing the Building shall be a controlled
access garage and will have an on-site attendant during Ordinary Building Hours
and during concerts held at the Fiddler's Green Amphitheater, if the parking
garage is utilized for concert parking.
26. RIGHT TO RELOCATE TENANT. [Intentionally omitted.]
27. MISCELLANEOUS.
A. Limitation of Landlord's Liability. The term "Landlord" as used in
this Lease, so far as covenants or obligations on the part of Landlord are
concerned, shall mean and include only the owner or owners of the Building at
the time in question and, in the event of any transfer or transfers of the title
thereto, Landlord herein named (and in the case of any subsequent transfers or
conveyances, the then grantor) shall be automatically released, from and after
the date of the transfer or conveyance, of all liability as respects the
performance of any covenants or obligations on the part of Landlord thereafter
to be performed, provided that the Security Deposit then held by Landlord or the
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then grantor at the time of the transfer shall be delivered to or credited to
the purchase price paid by the grantee. Notwithstanding anything to the contrary
contained herein, Landlord's liability under this Lease shall be limited to
Landlord's interest in the Building Complex, and Tenant shall not and cannot
seek any recovery or deficiency against any other assets or against any
partners, lenders, officers, directors, or employees of Landlord or against the
Building Manager.
B. No Merger. The termination of this Lease shall not be a merger, and
such termination shall, at the option of Landlord, either terminate all
subleases and subtenancies or operate as an assignment to Landlord of any or all
such subleases or subtenancies.
C. Landlord's Use of Common Areas. Tenant agrees that Landlord has the
right to use the Common Areas for the general benefit of the Building Complex,
including for the purposes of completing or making repairs or alterations in any
portion of the Building. Landlord may use the Building Complex, the Common Areas
and one or more of the street entrances to the Building Complex as may be
necessary in Landlord's judgment to complete any such work or for other purposes
in connection with Landlord's management or operation of the Building Complex.
D. Covenants are Independent. This Lease shall be construed as though
the covenants between Landlord and Tenant are independent and not dependent, and
subject to the provisions of the Parking Spaces paragraph of the Basic Term
Sheet, Section 6A(2), Section 16 and Section 22, Tenant shall not be entitled to
any set off of the Rent or other amounts owing hereunder against Landlord if
Landlord fails to perform its obligations.
E. Severability. If any provision of this Lease is held by a court of
competent jurisdiction to be illegal, invalid, or unenforceable under any Laws,
it is the intention of the parties that the remainder of this Lease shall not be
affected and that the illegal, invalid, or unenforceable provision be replaced
by a provision (or construed to be) as similar in terms as possible and be
legal, valid, and enforceable.
F. Captions and Terms. The caption of each Paragraph is added as a
matter of convenience only and shall have no effect on the construction of any
provision or provisions of this Lease. The words "include" and "including" when
used in this Lease are intended in their illustrative sense, not as a
limitation, and the terms that follow such words are illustrative and not
exclusive. References to "provisions" of this Lease refers to all of the
provisions, terms, conditions, covenants and agreements in this Lease. The
words "shall" and "will" have the same meaning.
G. Binding Effect; Governing Law. Subject to Paragraphs 13 and 28A,
this Lease shall inure to the benefit of, and be binding upon, Landlord and
Tenant and their respective heirs, administrators, successors and assigns. This
Lease is subject to and shall be construed in accordance with Colorado law.
H. Tenant's Authority. Tenant and the party executing this Lease on
behalf of Tenant represent to Landlord that they are authorized to do so by
requisite action of Tenant and that this Lease is binding on Tenant, and agree,
upon request, to deliver to Landlord a resolution or similar document or opinion
of counsel to that effect.
I. Joint and Several. If there are more than one entity or person which
are the Tenant under this Lease, the obligations imposed upon Tenant under this
Lease shall be joint and several.
J. Acts Binding Landlord. No act or thing done by Landlord or
Landlord's agents during the term, including any agreement to accept the
surrender of the Premises or to amend or modify this Lease, shall be binding on
Landlord, unless in writing and signed by a person authorized to bind Landlord.
The delivery of keys to Landlord, or Landlord's agents, employees, or officers
shall not operate as a termination of this Lease or a surrender of the Premises.
No payment by Tenant or receipt by Landlord of a lesser amount than the full
monthly Rent and all other amounts owing, as herein
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stipulated, shall be deemed to be other than on account of the earliest due Rent
or other amounts, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as Rent be deemed an accord and
satisfaction. Landlord may accept any such check or payment without prejudice to
Landlord's right to recover the balance owed or to pursue any other remedy
available to Landlord.
K. Changes in the Building; Use of Names. Landlord shall have the right
at any time to increase the size of the Building Complex by adding additional
land, to construct other buildings or improvements on any portion of the
Building Complex or to change the location and/or character of or to make
alterations of or additions to the Building Complex so long as the alterations
and changes do not unreasonably interfere with Tenant's occupancy of the
Premises. Tenant shall not use the Building's name for any purpose other than as
a part of its business address, and Tenant shall not use the name "Fiddler's
Green", or any variation, without Landlord's prior written approval. Any use of
any of those names by Tenant shall constitute a default under this Lease.
L. Change in Light or View. Tenant agrees that no diminution of light,
air, or view by any structure that may hereafter be erected (whether or not by
Landlord) shall entitle Tenant to any reduction of Rent or other charges under
this Lease, result in any liability of Landlord to Tenant, or in any way affect
this Lease or Tenant's obligations under it; provided, however, that Landlord
agrees that no other structure shall be erected within the footprint of the
Building, as depicted on the attached Exhibit H.
M. No Other Agreements; Amendments. Tenant acknowledges and agrees that
it has not relied upon any statements, representations, agreements, or
warranties by Landlord, its agents or employees, except those expressed in this
Lease and that no amendment or modification of this Lease shall be valid or
binding unless in writing and executed by the parties hereto in the same manner
as the execution of this Lease, and that this Lease incorporates all prior
discussions and agreements.
N. Brokers. Landlord and Tenant represent and warrant to each other
that no broker or agent negotiated or was instrumental in the negotiation or
consummation of this Lease, except Landlord's Broker and any Tenant's Broker
specified in the Basic Lease Term Sheet. Landlord shall, at its sole cost and
expense, pay to Landlord's Broker and Tenant's Broker a commission pursuant to a
separate written agreements between Landlord and Landlord's Broker and Landlord
and Tenant's Broker, copy(ies) of which are attached hereto as Exhibit I.
Landlord and Tenant agree to indemnify and hold each other harmless from and
against any and all commissions, fees and expenses and all claims therefore, by
any broker, salesman or other party in connection with or arising out of the
parties' entering into this Lease, claiming by, through or under the
indemnifying party, except for the commissions of Landlord's Broker and Tenant's
Broker, which commissions Landlord shall be obligated to pay. Tenant
acknowledges Landlord is not liable for any representations by Landlord's Broker
regarding the Premises, the Building, the Building Complex or this Lease.
O. Recordation. Tenant shall not record or permit to be recorded this
Lease or any memorandum of it; and any such recording shall be an Event of
Default.
P. Execution Required. Submission of this Lease or any letter regarding
it for examination or signature by Tenant shall not grant to Tenant an option or
right to lease the Premises; and this Lease shall not be effective as a lease or
otherwise binding on either party until execution and delivery by both Landlord
and Tenant.
Q. Attorney's Fees. If either party brings an action to enforce any
provision of this Lease, the prevailing party shall be entitled to recover its
reasonable attorney's fees, as determined by the court.
R. Time of Essence. Time is of the essence herein.
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28. COUNTERPARTS. This Lease may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Any one or more counterpart signature
pages may be removed from one counterpart of the Lease and annexed to another
counterpart of the Lease to form a completely executed original instrument
without impairing the legal effect of the signature thereon.
29. SIGNAGE. Tenant shall be entitled to its pro rata share of the total
square footage of monument lettering available to the Building. All Building
tenants' monument signage lettering shall be consistent in size. Additionally,
Tenant shall have exterior Building signage rights which shall be limited to
placement on a single side of the Building, to be selected, as hereinafter
provided, by Tenant from the North, South or East face of the Building, and
Tenant's signage rights on the selected side of the Building to be exclusive.
Tenant shall make such selection by written notice to Landlord on the earlier of
(i) December 31, 1998, or (ii) ten (10) days following Landlord's written
request in conjunction with Landlord's leasing of the Building. If Tenant fails
to so timely elect, Tenant shall be deemed to have waived such exterior signage
rights. Said monument signage is to be shared (on the aforementioned pro rata
basis) with other Building tenants. The number, location, design and size of
signs shall be by mutual agreement of the parties and shall be subject to
applicable laws, as well as protective covenants and architectural codes
applicable to the Real Property and the approval of local governing authorities.
Tenant will bear the costs of removal of any signage at the termination or
expiration of the Lease, including restoring or repairing damages to the
monuments, or the Building caused by such removal to the condition at the time
of installation. Landlord will be responsible, as a direct expense chargeable to
tenants with exterior Building and monument signage, to maintain such signage in
good condition and in accordance with the requirements of the declaration of
protective covenants applicable to the Real Property. Tenant shall not affix or
modify signage to monuments, the outside of the Building or to the inside of the
Building without the approval of Landlord, in Landlord's reasonable discretion.
Finally, Landlord shall, at its expense, provide at least 3 spaces in the
Building's tenant directory for identifying Tenant.
30. MOVING ALLOWANCE. Subject to the provisions hereinafter set forth,
Landlord shall pay Tenant for the cost of relocation from its present location
to the Premises, including, without limitation, costs incurred for the move and
transportation of Tenant's personal property, the purchase of new letterhead,
telephone and data service relocation fees and client notification costs
("Moving Allowance"). The amount of such Moving Allowance shall be the $1.50 per
rentable square foot contained in the primary Premises or $105,141.00 (subject
to reduction or increase pursuant to Paragraph 33 below). The amount of
$105,141.00 (subject to reduction or increase pursuant to Paragraph 33 below)
payable to Tenant by Landlord pursuant to this Paragraph shall be paid in one
lump sum by Landlord within 30 days after the Commencement Date.
31. EXCLUSIVITY. Landlord and Tenant have mutually agreed that so long as
no uncured Event of Default exists hereunder, Landlord shall not lease space in
the Building to Tenant's Direct Competitors, as hereinafter defined, without
Tenant's prior written consent; provided, however, that in the event of an
assignment of the Lease or a subletting or vacation of more than 25% of the
Premises (other than an assignment to a Related Corporation or Related
Corporation sublessee of the entire Premises), the provisions of this Section
are null and void. Further, the right granted in this Paragraph is personal to
Tenant, is not assignable (other than to a Related Corporation assignee or
Related Corporation sublessee of the entire Premises) and may not be enforced by
any sublessee or assignee of Tenant (other than by a Related Corporation
assignee or Related Corporation sublessee of the entire Premises), regardless of
whether the sublessee or assignee has been approved by Landlord. Direct
Competitors" shall mean any company selling products or providing services for
Geographic Information Systems, Energy Management Systems and/or Infrastructure
Management Services.
32. LEASE OF STORAGE SPACES.
A. Lease of Spaces. Landlord hereby leases to Tenant, and Tenant leases
from Landlord, an additional (a) approximately 1,000 rentable square feet of
space located near the Building's rear loading dock area and as depicted on
Exhibit A-1 ("Distribution Space") and (b) approximately
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3,000 rentable square feet located on the first floor of the Building and as
depicted on Exhibit A-2 ("Storage Space"). Subject to the following provisions,
for all purposes hereunder, the Distribution Space and the Storage Space shall
both be deemed parts of the Premises and subject to all terms and conditions of
this Lease, including, without limitation, Tenant's insurance requirements,
Tenant's indemnification of Landlord, surrender, obligations and the exemption
of Landlord from liability. Tenant shall not receive any additional Parking
Spaces or additional Moving Allowance for lease of the Distribution Space and
the Storage Space.
B. Use. Notwithstanding anything to the contrary contained in this
Lease, Tenant shall use the Distribution Space and the Storage Space only for
storage of personal property of Tenant. In no event shall Tenant place or store
any property in the Distribution Space and the Storage Space which is hazardous
to persons or property.
C. Base Rent and Other Matters. As set forth in Part 1 of the Lease, in
addition to Base Rent, Tenant shall pay to Landlord as additional Base Rent (a)
for the Distribution Space, an amount equal to $22.00 per rentable square foot
within the Distribution Space and (b) for the Storage Space, an amount equal to
$20.00 per rentable square foot within the Storage Space. The Distribution Space
and the Storage Space shall be completed with tenant finish improvements
pursuant to the Work Letter attached hereto; provided, however, that Landlord
Allowance for the Distribution Space shall be equal to $16,270.00 (or $16.27 per
rentable square foot) and Landlord's only improvement obligations as to the
Storage Space shall be expressly limited to providing Building standard
sprinklers, lights and ventilation.
33. OPTIONS TO INCREASE OR DECREASE PREMISES.
A. Options. Subject to the provisions hereinafter set forth, Landlord
grants to Tenant options (each, an "Option") to elect to (i) increase or
decrease the 70,094 total rentable square footage contained within the primary
Premises by 10,000 rentable square feet ("Modification Space"), subject to the
provisions of this Paragraph hereinafter set forth (the location of the
Modification Space (in the event of any increase) shall be determined by
Landlord and the location of the Modification Space (in the event of any
decrease) shall be on the fifth floor, and/or (ii) to decrease either or both
the Distribution Space and Storage Space to zero rentable square feet of space
(either or both "Eliminated Space").
B. Exercise Notice. Tenant may exercise either Option by giving
Landlord written notice ("Exercise Notice") of its elections on or before March
31, 1999, and Tenant's failure to so timely provide such written notice shall
mean that Tenant's Options (or other Option, as the case may be) granted
hereunder shall be deemed expired and of no further force and effect.
C. Amendment. After timely receipt of the Exercise Notice, Landlord and
Tenant shall enter into an amendment ("Amendment") of this Lease acceptable to
Landlord. Such Amendment shall provide that this Lease shall be deemed modified
as follows:
(1) The term "Premises" shall be deemed to (i) include or exclude
the Modification Space, as applicable and/or (ii) exclude the Eliminated Space,
as applicable;
(2) The Base Rent shall be increased or decreased, as applicable, by
an amount determined by multiplying the number of rentable square feet in the
Modification Space times Base Rent rate for the primary Premises square footage
rate as provided in Part 1 above and/or by multiplying the number of rentable
square feet in the Eliminated Space times the Base Rent payable for the
Eliminated Space as provided in Part 1 above;
(3) Tenant's Pro Rata Share shall be increased by a percentage equal
to the actual number of rentable square feet in the Modification Space divided
by the number of rentable square feet in the Building and/or decreased by a
percentage equal to the number of square feet in the Eliminated space divided by
the number of rentable square feet in the Building;
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(4) Landlord's Allowance and the Moving Allowance shall both be
modified to reflect the lesser or greater, as applicable, number of square feet
within the primary Premises and to reflect the reduction or elimination of that
portion of the Landlord's Allowance applicable to the Eliminated Space, if any;
and
(5) The number of Parking Spaces shall be increased or decreased
pursuant to the parking ratios set forth in Part 1 above.
If Tenant elects to increase the primary Premises, then, other than the
modifications set forth herein, the terms and conditions hereof shall govern
Tenant's lease of the Modification Space. If Tenant elects to decrease the
primary Premises or to exclude the Eliminated Space then effective on the date
of the Amendment, the Tenant shall be released from all obligations pertaining
to the Modification Space and the Eliminated Space.
D. Not Transferable. Tenant acknowledges and agrees that the Options
granted herein shall be deemed personal to Tenant and if Tenant subleases,
assigns or otherwise transfers any interests hereunder prior to the exercise of
Options, such option shall lapse and be of no further force and effect.
E. No Default. Tenant may exercise the Options, and an exercise thereof
shall only be effective, provided that at the time of Tenant's exercise of the
Options and on the Amendment date (i) this Lease is in full force and effect,
(ii) Tenant is not in Default following any applicable cure period hereunder,
and (iii) no event has occurred which, with the giving of any applicable notice
or passage of time, would constitute a Default.
34. EXPANSION OPTION.
A. Expansion Space. Subject to the provisions hereinafter set forth,
Landlord grants to Tenant an option ("Expansion Option") to lease up to an
additional approximately 20,000 rentable square feet of space within the
Building (individually and collectively, "Expansion Space"), on the same terms
and conditions as set forth in this Lease, except as otherwise provided in this
Paragraph. It is understood and agreed that the Expansion Space shall be on a
floor or floors and in a configuration as determined by Landlord, that the
Expansion Spaces may be available in phases, that the Expansion Space may be
comprised of multiple suites which are not contiguous to one another, and that
the suites comprising the Expansion Space will be provided to Tenant only in
their then existing demised rentable square foot increments.
B. Exercise Notice. Tenant may exercise the Expansion Option by giving
Landlord written notice ("Exercise Notice") of its desire to lease the Expansion
Space. Such Exercise Notice must be received by Landlord on or before the last
day of the 48th month of the initial Term. If the Exercise Notice is not
received in the required time period, then the Expansion Option shall be deemed
null, void and of no further force or effect. Tenant's Exercise Notice shall
identify the approximate number of rentable square feet Tenant desires up to the
maximum 20,000 rentable square feet. Within 30 days following Tenant's Exercise
Notice to Landlord, Landlord shall notify Tenant of the Expansion Space suites,
the total rentable square footage and estimated commencement date (or dates) of
the Expansion Space suites based on such suites' differing existing lease
expiration dates; provided, that, the Landlord agrees that all expiration dates
for the lease terms of suites within the Expansion Space shall not exceed the
last day of the 72nd month of the initial Term hereunder.
C. Expansion Amendment. After receipt of an Exercise Notice, Landlord
and Tenant shall enter into an amendment ("Expansion Amendment") of this Lease
acceptable to Landlord. Such Expansion Amendment shall provide that from and
after the applicable date on which the Expansion Space is demised to Tenant on
the date which is the earlier of (i) the date the Expansion Space, or any
portion thereof, is Ready for Tenant (each on "Expansion Space Commencement
Date"), this Lease shall be deemed modified as follows:
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(1) The term "Premises" shall be deemed to include the Expansion
Space;
(2) The term of the Expansion Space shall commence upon the
Expansion Space Commencement Date, as hereinafter defined, and shall expire on
the Lease Expiration Date, as the same may be extended;
(3) The Base Rent shall be increased by an amount determined by
multiplying the number of rentable square feet in the Expansion Space (not to
exceed 20,000 rentable square feet) times 95% of the Market Rate determined as
provided in Paragraphs 37.B, C and D below, in effect during the Term, but in
no event less than the Rent payable for the primary Premises, and said Market
Rate determination shall be adjusted to reflect the number of months remaining
in the initial Term following the Expansion Space Commencement Date.
(4) Tenant's Pro Rata Share shall be increased by a percentage equal
to the actual number of rentable square feet in the Expansion Space (or
applicable portion thereof) divided by the number of rentable square feet in the
Building;
(5) The Base Year for the Expansion Space shall be the calendar year
in which the Commencement Date term for the Expansion Space begins and adjusted
pursuant to the provisions of the last sentence of Paragraph 5.B above;
(6) Tenant Finish Work in the Expansion Space shall be installed
pursuant to a Work Letter for the Expansion Space attached to the Expansion
Amendment and the term of the Expansion Space shall commence on the date the
Expansion Space is Ready for Tenant ("Expansion Space Commencement Date"). Said
Work Letter is to provide that Landlord shall contribute to the planning and
construction of the installation of alterations and improvements to such
Expansion Space in an amount equal to the lesser of (i) the Landlord
contribution allowance utilized in determining Market Rate for the Expansion
Space, or (ii) the actual cost and expense of such initial alterations and
improvements ("Expansion Space Allowance"). All such Expansion Space Allowance
to be used for tenant improvements within the Expansion Space, and for no other
purpose whatsoever; provided, however, Landlord shall, at its sole cost and
expense, pay for all demolition expenses, mechanical systems, ceiling grid, tile
and lights associated with the Expansion Space; and
(7) The number of Parking Spaces shall be increased pursuant to the
parking ratios set forth in Part 1 above.
Other than the modifications set forth herein, the terms and conditions hereof
shall govern Tenant's lease of the Expansion Space.
D. Amendment. Landlord shall cause such Expansion Amendment to be
prepared and delivered to Tenant as soon as reasonably possible following its
receipt of Tenant's Exercise Notice and the determination of Base Rent. In the
event that Amendment is not executed by Tenant within 10 days after receipt by
Tenant, then Tenant's rights under this Paragraph shall be null and void, Tenant
shall be deemed to have waived its right under this Paragraph with respect to
the then applicable Expansion Space and Landlord shall have the absolute right
to lease such Expansion Space to any other person or entity. Notwithstanding
Tenant's exercise of its ability to request to lease the Expansion Space
pursuant to the terms of this Paragraph, Landlord shall not be obligated to
deliver possessions of the then Expansion Space to Tenant if, prior to delivery
of possession of the Expansion Space, Tenant shall be in default hereunder
beyond any applicable notice and grace period, in which event the provisions of
this Paragraph shall terminate and be of no further force or effect.
E. Not Transferable. In the event of an assignment of the Lease or
subletting (other than an assignment to or subletting of the entire Premises by
a Related Corporation) or vacation of more than 25% of the Premises (other than
an assignment to or subletting of the entire Premises by a Related Corporation),
Tenant's rights hereunder are null and void. Further, the right granted in this
Paragraph is personal to Tenant, is not assignable (other than Related
Corporation assignee) and may
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not be exercised by any sublessee or assignee of Tenant (other than to a Related
Corporation), regardless of whether the sublessee or assignee has been approved
by Landlord.
F. No Default. Tenant may exercise the Expansion Option, and an
exercise thereof shall only be effective, provided that at the time of Tenant's
exercise of the Expansion Option and on the Expansion Space Commencement Date
(i) this Lease is in full force and effect, (ii) Tenant is not in Default
following any applicable cure period hereunder, and (iii) no event has occurred
which, with the giving of any applicable notice or passage of time, would
constitute a Default.
35. TENANT'S ABILITY TO REQUEST ADDITIONAL EXPANSION SPACE.
A. Additional Expansion Space. Provided that this Lease shall be in
full force and effect and Tenant shall not be in default hereunder beyond any
applicable notice and grace period, Tenant shall have the ability, exercisable
by written notice to Landlord ("Tenant's Notice") given at any time during the
initial Term (but provided to Landlord at least 120 days prior to the date
Tenant desires to occupy additional space in the Building, the time of the
giving of such notice to be of the essence of this Paragraph) to request the
lease of additional space in the Building. Tenant agrees that Tenant's Notice
shall set forth the number of additional rentable square feet of space Tenant
desires to lease, which shall be at least a minimum of 5,000 rentable square
feet and shall not exceed a maximum of 5,000 rentable square feet. Landlord
shall have 30 days from the date it receives Tenant's Notice to evaluate and
determine, in its sole discretion, what Available Space, as defined below in
subparagraph D, if any, then exists in the Building and to provide written
notification thereof to Tenant ("Landlord's Notice"). If Landlord's Notice so
identifies Available Space in the Building, Tenant shall have 5 calendar days
from the date of Landlord's Notice to notify Landlord, in writing, of its
election to either accept or reject the Available Space ("Tenant's Response
Notice").
B. Lease Terms. In the event that Tenant elects in its Tenant's
Response Notice not to accept such Available Space, Tenant shall be deemed to
have waived its rights under this Paragraph with respect to such Available Space
and Landlord shall have the absolute right to lease such Available Space to any
other person or entity. If Tenant elects in its Tenant's Response Notice to
accept the lease of the Available Space, Landlord and Tenant shall enter into an
amendment ("Amendment") of this Lease acceptable to Landlord to include such
Available Space (hereinafter the "Additional Expansion Space") under the terms
of this Lease and to provide that from and after the applicable Additional
Expansion Space Commencement Date (as hereinafter defined), the Lease shall be
deemed modified as follows:
(1) The term "Premises" shall be deemed to include the Additional
Expansion Space;
(2) The term of the Additional Expansion Space shall commence upon
the date the Additional Expansion Space is Ready for Tenant ("Additional
Expansion Space Commencement Date") and shall expire on the Expiration Date, as
the same may be extended;
(3) Such Additional Expansion Space shall be added to the Premises
upon the terms and conditions and at a rental rate comparable to those on which
Landlord would lease the Additional Expansion Space, if it became available for
leasing in the Building as of the time Tenant's occupancy thereof would commence
and recognizing that the term of such Additional Expansion Space shall be the
number of months remaining on the initial Term hereunder and including any costs
incurred by Landlord in relocating existing tenants located in the Additional
Expansion Space, but in no event shall the rental rate be less than the Rent
which Tenant is then paying for the primary Premises. Such terms and conditions
may include, among other things, escalations and pass-throughs and parking
allocations.
(4) Tenant's Pro Rata Share shall be increased by a percentage equal
to the actual number of square feet in the applicable Additional Expansion Space
divided by the number of rentable square feet in the Building; and
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(5) Tenant shall accept the Additional Expansion Space in its "as
is" condition as of the Additional Expansion Space Commencement Date.
C. Amendment. Landlord shall cause such Amendment of this Lease to be
prepared and delivered to Tenant as soon as reasonably possible following its
receipt of Tenant's Notice wherein Tenant elects to lease such Additional
Expansion Space. In the event that the Expansion Amendment is not executed
within 10 days after receipt by Tenant, then Tenant's rights under this
Paragraph shall be null and void, Tenant shall be deemed to have waived its
right under this Paragraph with respect to the then applicable Additional
Expansion Space and Landlord shall have the absolute right to lease such
Additional Expansion Space to any other person or entity. Notwithstanding
Tenant's exercise of its ability to request to lease the Additional Expansion
Space pursuant to the terms of this Paragraph, Landlord shall not be obligated
to deliver possession of the then Additional Expansion Space to Tenant if, prior
to delivery of possession of the Additional Expansion Space, Tenant shall be in
default hereunder beyond any applicable notice and grace period, in which event
the provisions of this Paragraph shall terminate and be of no further force or
effect.
D. Available Space. The term "Available Space" shall mean any space in
the Building which, in Landlord's determination in its sole discretion, as of
the date of Tenant's Notice, (i) is not the subject of lease negotiations per a
written lease proposal, (ii) is not in a shell condition, (iii) is not the
subject of rights or interests conferred to other tenants' space, as contained
in any lease, or otherwise, then in effect, including, without limitation,
options or rights regarding renewal, extension or expansion, subleases or
assignments, and (iv) has in its lease a relocation clause. Notwithstanding the
foregoing to the contrary, Landlord agrees to use reasonable efforts to include
a Landlord's relocation provision in all leases within the Building containing
5,000 or less rentable square feet; provided, however, that any such relocation
clause shall be expressly contingent upon Landlord's ability to relocate such
tenant in the Building and if no space exists at the time of Tenant's Notice,
then, notwithstanding anything contained in this Paragraph 35, Landlord shall
have no obligation to relocate any such tenants to create Available Space for
Tenant under this Paragraph 35. It is also understood and agreed that the
Available Space identified in Landlord's Notice shall be in a configuration and
location as determined by Landlord, may not be contiguous to the Premises, may
consist of multiple suites in the Building which are not contiguous to one
another, and that the suites comprising the Available Space will be provided to
Tenant only in their then existing demised rentable square foot increments,
which may or may not equal precisely 5,000 rentable square feet. Further, Tenant
hereby acknowledges that nothing contained herein shall be deemed to limit or
preclude Landlord's right to actively market or lease the Building and to enter
into any and all lease commitments with any party pertaining to the same.
E. Termination. The option herein granted shall continue only so long
as there have been no uncured Event of Default hereunder by Tenant and only so
long as there are at least 36 months remaining on the initial Term following the
Additional Expansion Space Commencement Date. In the event of an assignment of
the Lease or a subletting (other than an assignment to or subletting of the
entire Premises by a Related Corporation) or vacation of more than 25% of the
Premises (other than an assignment to or subletting of the entire Premises by a
Related Corporation), Tenant's rights under this Paragraph are null and void.
Further, this right granted in this Paragraph is personal to Tenant, is not
assignable (other than to a Related Corporation assignee) and may not be
exercised by any sublessee or assignee of Tenant (other than to a Related
Corporation assignee or sublessee of the entire Premises), regardless of whether
the sublessee or assignee has been approved by Landlord.
36. RIGHT OF FIRST REFUSAL. Subject to the renewal options and expansion
options granted in written leases entered into with the initial tenants first
occupying space in the Building, whether entered into before or after the date
of this Lease, if during the initial Term, Landlord shall receive a written bona
fide offer ("Offer"), satisfactory to Landlord in its sole discretion, to lease
any space in the Building (the "Refusal Space"), Landlord agrees to offer to
Tenant, by notice ("Offer Notice"), the one-time right to lease the Refusal
Space upon the same terms and conditions set forth in the Offer and, at Tenant's
election, Tenant may elect to lease such same on the same terms and
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conditions set forth in the Offer, as adjusted to reflect the number of months
remaining in the initial Term.
A. Exercise. Provided this Lease shall then be in full force and effect
and Tenant shall not be in default hereunder beyond any applicable notice and
grace period, Tenant may exercise its right to lease the Refusal Space by
written notice to Landlord within 10 days after the date of the Offer Notice,
the time of the giving of such notice to be of the essence of this Paragraph, in
which event Landlord and Tenant shall enter into a amendment of this Lease,
reasonably acceptable to Landlord, to incorporate the terms and conditions set
forth in the Offer. In the event that Tenant fails to accept the offer contained
in Landlord's Notice within such 10-day period or fails to execute an Amendment
modifying this Lease to incorporate the terms and conditions contained in the
Offer within 10 days after such Amendment has been delivered to Tenant, Tenant
shall be deemed to have waived its rights under this Paragraph to lease the
Refusal Space, Landlord shall have the absolute right to lease the Refusal Space
to any other person or entity on any same terms and conditions, and Tenant shall
have no further rights with respect to the Refusal Space. Notwithstanding
Tenant's acceptance of the Offer pursuant to the terms of this Paragraph,
Landlord shall not be obligated to deliver possession of the Refusal Space to
Tenant if, prior to delivery of possession of the Refusal Space, Tenant shall
be in Default hereunder beyond any applicable notice and grace period, in which
event the rights of Tenant hereunder shall terminate and be of no further force
or effect.
B. No Default. The option herein granted shall continue only so long as
there have been no uncured Defaults hereunder by Tenant and only so long as
there are at least 36 months remaining on the initial Term as of the Refusal
Space Commencement Date. In the event of an assignment of the Lease or a
subletting (other than an assignment to or subletting of the entire Premises by
a Related Corporation) or vacation of more than 25% of the Premises (other than
an assignment to or subletting of the entire Premises by a Related Corporation),
Tenant's rights under this Section are null and void. Further, this right
granted in this Section is personal to Tenant, is not assignable (other than to
a Related Corporation assignee) and may not be exercised by any sublessee or
assignee of Tenant (other than to a Related Corporation assignee or sublessee of
the entire Premises), regardless of whether the sublessee or assignee has been
approved by Landlord.
37. OPTIONS TO EXTEND. As additional consideration for the covenants of
Tenant hereunder, Landlord hereby grants Tenant two options (the "Options") to
extend the term of the Lease for consecutive terms of 5 years each (singularly,
the "First Option" or "Second Option," as applicable, and collectively, the
"Option Term"). The Options shall apply to all space contained in the Premises
at the time each Option arises hereunder and shall be on the following terms and
conditions:
A. Exercise of Option. Written notice of Tenant's exercising an Option
("Notice") shall be given to Landlord no earlier than 420 days and no less than
365 days prior to the expiration of the then current Term and, upon the giving
of such Notice, this Lease and the Term shall be extended with the same force
and effect as if the applicable Option Term had originally been included in the
Term and the Expiration Date shall thereupon be deemed to be the last day of the
then applicable Option Term. Tenant's right to exercise an Option shall be
conditioned on there being no uncured Event of Default under the Lease at the
time of exercise of the Option or at the time of the commencement of the
respective Option Term.
B. Rent Determination. The Options granted hereunder shall be upon the
terms and conditions contained in the Lease except (i) options to extend,
following the Options granted in this Section, and rights of first offer or
abilities to request expansion space shall not be applicable, (ii) no Landlord's
contributions, tenant allowances or similar concessions shall be applicable,
(iii) no leasing commissions shall be payable by Landlord, (iv) the Base Year
for the First Option shall be the last year of the initial Lease Term and the
Base Year for the Second Option shall be the last year of the First Option Term,
(v) the restriction on increases in the Capped Operating Expenses shall not
apply during either Option Term, and (vi) the Rent to be paid by Tenant to
Landlord during the Option shall be equal to 95% of the then Market Rate, as
hereinafter defined; provided, however, that in no event shall the
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Rent be less than the Rent payable in the last year of the initial Term or, if
applicable, the last year of the First Option. Subject to said caveat, Rent for
each Option shall be determined as follows:
(1) Within 14 days of Landlord's receipt of an Option Notice,
Landlord shall notify Tenant in writing ("Landlord's Notice") of the proposed
Market Rate, and the resulting Rent, applicable to the Option ("Landlord's Rent
Rate"). Tenant shall, within 14 days following receipt of Landlord's Notice,
notify Landlord in writing of the acceptance or rejection of the Landlord's Rent
Rate set forth therein. If Tenant fails to respond to Landlord's Notice within
such 14-day period, Tenant shall be deemed to have accepted Landlord's Rent
Rate. If Tenant rejects Landlord's Rent Rate, Tenant's rejection notice shall
state Tenant's estimate of the Market Rate, and the resulting Rent, applicable
to the Option ("Tenant's Rent Rate"). Landlord shall, within 14 days following
receipt of notice of Tenant's Rent Rate, notify Tenant of its acceptance of the
Tenant's Rent Rate. If Landlord fails to respond within such 14-day period,
Landlord shall be deemed to have rejected Tenant's Rent Rate. Landlord and
Tenant shall act in good faith in estimating and proposing their respective
determinations of the Market Rate.
(2) If Landlord rejects Tenant's Rent Rate, the parties shall
thereafter attempt to negotiate the Rent in good faith. If, however, the parties
have not agreed on the Rent within 40 days after the date of the then applicable
Option Notice, the Rent for the renewal term in question shall be determined as
set forth below:
(a) Within 60 days after delivery by Tenant of the Option Notice
in question, Landlord and Tenant shall each appoint an Appraiser, as hereinafter
defined. The two Appraisers shall meet promptly and attempt to determine the
Market Rate for the renewal term in question. The determination made by the two
Appraisers, if they agree, shall be the Market Rate. If the amounts determined
by the two Appraisers vary by less than 5%, then the average of the two values
shall be the Market Rate.
(b) If the Market Rate is not established pursuant to
sub-paragraph (a) within 10 days following their appointment, the two Appraisers
shall immediately select a third Appraiser. If they are unable to agree on a
third Appraiser within 5 days, then they shall each select the names of two
willing persons qualified to be Appraisers hereunder and from the four persons
so named, one name shall be drawn by lot by a representative of Tenant in the
presence of a representative of Landlord, and the person whose name is so drawn
shall be the third Appraiser. If either of the first two Appraisers fails to
select the names of two willing, qualified Appraisers so that a third Appraiser
can be selected by lot, as aforesaid, the third Appraiser shall be selected by
lot from the two Appraisers which were selected by the other Appraiser for the
drawing. The three Appraisers so selected shall confer and immediately proceed
to determine the Market Rate for the renewal term in question. If the three
Appraisers fail to agree on such Market Rate within 10 days after the selection
of the third Appraiser, the average of the two determinations of Market Rate
which are closest to each other shall be the Market Rate for the renewal term in
question.
(c) The Appraisers selected hereunder shall deliver a signed
written report of their appraisal, or the average of the two closer appraisals,
as the case may be, to Tenant and Landlord. The fee of the Appraiser initially
selected by Tenant shall be paid by Tenant, the fee of the Appraiser initially
selected by Landlord shall be paid by Landlord, and the fee of any third
Appraiser and any expenses reasonably incident to the appraisal (except
attorneys' fees, which shall be borne by the party incurring the same) shall be
shared equally by Tenant and Landlord. Any vacancy in the office of the
Appraiser appointed by Tenant shall be filled by Tenant, any vacancy in the
office of the Appraiser appointed by Landlord shall be filled by Landlord, and
any vacancy in the office of the third Appraiser shall be filled by the first
two Appraisers in the manner specified above for the selection of a third
Appraiser.
(d) If appraisal proceedings are initiated as provided above in
order to determine the Market Rate which is applicable to the term of an Option,
the decision and award of the Appraisers as to such Market Rate shall be final,
conclusive, and binding on the parties, absent
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settlement by agreement of the parties prior to the rendering by the Appraisers
of any such decision and award and, further, as provided above, the Rent will be
equal to 95% of the Market Rate for the applicable renewal term; provided,
however, that notwithstanding the determination of Market Rent, in no event
shall the Rent be less than the Rent payable in the last year of the Term or, if
applicable, the last year of the First Option.
(e) If Rent is not finally determined prior to the commencement
of the term of an Option, Tenant shall pay Rent in the amount of the Rent
theretofore in effect under this Lease until the final determination of the Rent
for the renewal term in question occurs as provided above. If the final
determination of such Rent is different from the amount paid by Tenant, Tenant
shall promptly pay to Landlord any deficiency in Rent or Landlord shall promptly
pay to Tenant any overpayment of Rent from the commencement of the term of the
Option until such final determination. If appraisal proceedings are initiated,
as provided above, neither Landlord nor Tenant shall disclose its initial
proposal for Market Rate to any of the Appraisers.
C. Appraiser Defined. "Appraiser," used herein, shall mean a person (A)
who is impartial, (B) who has at least ten years' experience as a real estate
broker in the office building leasing market for the Southeast Denver, Colorado
area, (C) who is a senior employee of a nationally or regionally recognized
brokerage firm who has not acted as the primary representative on such broker's
firm's account for either Landlord or Tenant in the previous three years, and
(D) who is a Colorado licensed real estate broker in good standing and is a
member of the Society of Industrial and Office Realtors, or a successor or
similar organization of recognized national standing.
D. Market Rate Defined. "Market Rate" shall mean the annual rental
rates then being charged in the Building and in the Suburban Denver, Colorado
area for space comparable to the space for which the Market Rate is being
determined, taking into consideration (i) use, location and floor level within
the applicable building, (ii) the location, quality and age of the building,
(iii) the definition of rentable area or net rentable area, as the case may be,
with respect to which such rental rates are computed, (iv) leasehold
improvements allowances provided, but assume the space has been previously built
out and the leasing of the space is on an "as is" basis, (v) rental concessions
offered with respect to such other space (such as abatements, lease assumptions
or takeovers and moving expenses), (vi) the date the particular rate under
consideration became effective, (vii) the term of the lease under consideration,
(viii) the fact that no brokers' commissions will be payable by Landlord in
connection with the applicable Option, (ix) the extent of services provided
thereunder, (x) applicable distinctions between "gross" leases and "net" leases,
(xi) as provided above, base year figures for escalation purposes, (xii) the
credit rating or worthiness of the Tenant under this Lease, (xiii) any other
adjustments (including by way of indexes) to rental, (xiv) availability, nature
and quality of parking and separate parking charges, if any, for covered parking
rights, and (xv) any other relevant term or condition in making such evaluation.
E. Expiration of Options. After failure to exercise the First Option
above described or after the exercise of the Second Option, there shall be no
further rights on the part of Tenant to extend the term of the Lease.
38. TERMINATION OPTION. Landlord hereby agrees to use reasonable efforts to
accomplish the following Building construction events on or before each of the
below-listed dates (each, a "Milestone Event"):
(a) Commencement of site grading by August 16, 1998;
(b) Receipt of building construction permit by September 17, 1998;
(c) Commencement of building foundation by September 28, 1998.
If Landlord fails to commence such Milestone Events by each of the
above-referenced deadlines, then such deadline shall automatically be deemed
extended for 60 additional days (each, an "Extended Deadline"). If Landlord
thereafter fails to commence such Milestone Event by the Extended Deadline,
Tenant shall have an option ("Termination Option") to terminate this Lease.
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A. Termination Notice. The Termination Option shall be exercisable by
Tenant by written notice ("Termination Notice") from Tenant to Landlord of
Tenant's election to exercise the Termination Option, such notice to be received
by Landlord no later than (a) on or before the date Landlord completes the
applicable Milestone Event or (b) the date which is 5 business days following
the Extended Deadline. If Tenant fails to so deliver to Landlord the
Termination Notice, the Termination Option shall lapse as to the applicable
Milestone Event and Tenant shall have no further right to terminate the Lease
based upon the failure to meet the then applicable Milestone Event deadline and,
further, following the expiration of the final Extended Deadline exercise
period, Tenant's right to terminate this Lease under this Paragraph shall expire
and be of no further force or effect.
B. Excused Delays. Further, notwithstanding the foregoing to the
contrary, any Milestone Event deadline or Extended Deadline shall be deemed
automatically extended as a result of any Excused Delay, as said term is defined
in the Work Letter.
C. Termination Fee. If Tenant validly exercises the Termination Option,
Landlord acknowledges and agrees that Landlord shall pay to Tenant $100,000.00
plus Tenant's then actual out-of-pocket architectural and engineering fees,
within 30 days after receipt of written invoice evidencing such actual fees. As
of the termination effective date, all obligations of the parties shall cease
and terminate in the same manner as upon expiration of the Term.
D. No Default. Tenant may exercise the Termination Option, and an
exercise thereof shall only be effective, provided that at the time of Tenant's
exercise of the Termination Option,(i) this Lease as hereby amended is in full
force and effect; (ii) Tenant is not in default following any applicable notice
and the expiration of any applicable cure period hereunder the Lease, and (iii)
no event has occurred which, with the giving of any applicable notice or passage
of time would constitute a default.
E. Not Transferrable. Tenant acknowledges and agrees that the
Termination Option shall be deemed to be personal to Tenant and if Tenant
subleases, assigns or otherwise transfers any interests under the Lease to any
person or entity prior to the exercise of the Termination Option, the
Termination Option shall lapse and be forever waived.
[INTENTIONALLY LEFT BLANK]
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Dated: August 28, 1998.
"LANDLORD"
FIDDLER'S GREEN CENTER,
a Delaware limited liability company,
By: /s/ LARRY A. LANCE
------------------------------------
As its: Manager
--------------------------------
"TENANT"
CONVERGENT GROUP CORPORATION,
a Delaware corporation
By: /s/ GLENN E. MONTGOMERY
------------------------------------
As its: CEO
--------------------------------
Attest:
By: /s/ [ILLEGIBLE]
---------------------------
Title: V/P Finance
-----------------------
37
<PAGE> 43
EXHIBIT A
DEPICTION OF PRIMARY PREMISES
(See attached)
A-1
<PAGE> 44
[FIFTH FLOOR PLAN]
<PAGE> 45
[SIXTH FLOOR PLAN]
<PAGE> 46
EXHIBIT B
LEGAL DESCRIPTION OF BUILDING COMPLEX
Lot 1,
Greenwood Plaza Filing No. 6
Arapahoe County, Colorado
To be replatted to reduce to Building area only.
B-1
<PAGE> 47
EXHIBIT C
TENANT IMPROVEMENT AGREEMENT
This Agreement is a part of the Office Lease entered into by FIDDLER'S
GREEN CENTER, a Delaware limited liability company, as Landlord, and
CONVERGENT GROUP CORPORATION, a Delaware corporation, as Tenant, pertaining
to the Fiddler's Green Center - Building A (the "Lease"). Except as
expressly provided to the contrary herein, all capitalized terms used in
this Agreement shall have the same meaning as set forth in the Lease to
which this Exhibit C is attached.
1 . Base Building Improvements. Landlord, at its expense, shall
construct in or for the Premises the following improvements with Building
standard materials and installation (the "Base Building Improvements"):
See attached Exhibit C-1.
2. Preliminary Space Plans. Pursuant to the terms of this Agreement,
Landlord shall cause the leasehold improvements to be constructed within
the Premises in addition to the Base Building Improvements (the "Tenant
Finish Work"), substantially in accordance with the preliminary space plans
that are finally approved by Landlord and Tenant and attached hereto as
Exhibit C-2 (the "Preliminary Space Plans"). As hereinafter provided,
Tenant shall cause Tenant's architect, Acquilano Leslie Incorporated
("Tenant's Architect") to prepare and submit the Final Space Plans and
Construction Drawings pursuant to the Improvement Schedule, as each term is
hereinafter defined. The Final Space Plans and Construction Drawings may be
modified at Tenant's request prior to commencement of construction pursuant
to revised Final Space Plans and Construction Drawings resubmitted to
Landlord for approval, provided such modifications do not cause
construction and completion delays, or, if so, such delays will be deemed a
Tenant Delay, as hereinafter defined. The parties have agreed upon the
following schedule (the "Improvements Schedule") for completion of the
preparation, review and approval of the final Space Plans ("Final Space
Plans"), the Construction Drawings and the obtaining of pricing information
and the satisfaction of permitting requirements with respect to the
construction of the Tenant Finish Work within the Premises as follows:
October 1, 1998: Delivery of Final Space Plans, substantially in
accordance with the Preliminary Space Plans, by
Tenant to Landlord.
October 6, 1998: Landlord's approval or disapproval of (including
any Landlord requested changes to) the Final Space
Plans.
October 12, 1998: Tenant submission to Landlord the names of and
supporting information for 2 (other than Pinkard
Construction, Landlord's Building general
contractor) Qualified General Contractors, as
hereinafter defined.
October 30, 1998: Landlord's approval of 2 Qualified General
Contractors.
December 15, 1998: Delivery of Construction Drawings, substantially in
accordance with the approved Preliminary Space
Plans, by Tenant to Landlord.
December 24, 1998: Landlord's approval or disapproval of (including any
changes to) the Construction Drawings.
December 30, 1998: Delivery of revised Construction Drawings
(including any Landlord requested changes) by
Tenant to Landlord.
January 15, 1999: Landlord's pricing of the Construction Drawings and
submission to Tenant, as hereinafter provided.
C-1
<PAGE> 48
February 1, 1999: Tenant's approval or disapproval of the pricing
information for the Construction Drawings.
February 10, 1999: If Tenant has disapproved pricing information,
Tenant's resubmission of revised Construction
Drawings to eliminate or modify aspects thereof to
reduce the pricing of the Construction Drawings to
an amount acceptable (and identified) by Tenant.
February 17, 1999: Tenant's approval of revised Construction Drawings
and revised pricing. Tenant's affirmation of the
selected contractor, as hereinafter provided.
March 1, 1999: Contractor contracts for construction of Tenant
Finish Work.
Provided, that Landlord meets its deadlines hereunder (subject to
Tenant Delays, as hereinafter defined), to the extent that Tenant fails to
make any response (including providing required information) or deliver any
approval or disapproval within the applicable time-frame required above or
in the event the response, approval or disapproval of Tenant requires
modifications or revision to the Space Plans, the Construction Drawings or
pricing for the Tenant Finish Work, which modification or revision results
in a delay of the schedule noted above, all such delays shall be deemed an
event of Tenant Delays, as further defined below, and shall also be deemed
Excused Delays (as hereinafter defined). In the event any Tenant Delay
results in a delay in any of the milestones noted in the schedule above,
each of the succeeding milestones in such schedule shall be extended by one
day for each such day of Tenant Delay. To the extent Landlord fails to meet
the milestones established by the schedule noted above, Tenant time for
response or delivery of approval or disapproval shall be similarly
increased on a day-for-day basis as to subsequent milestones.
If Landlord disapproves of the final proposed Construction Drawings,
Tenant shall make such changes to the final proposed Construction Drawings
as reasonably requested by Landlord, and shall resubmit such amended final
Construction Drawings for Tenant approval or disapproval. Landlord and
Tenant agree that they shall act reasonably and in good faith in connection
with the preparation and approval of the final Construction Drawings. The
cost of the final Construction Drawings shall be paid out of the Landlord's
Allowance (hereinafter defined).
3. Landlord's Allowance. Landlord shall provide Tenant with a
leasehold improvement allowance in the amount of (i) $24.50 per rentable
square foot of the primary Premises, inclusive of $2.00 per rentable square
foot for architectural and engineering fees and $0.25 per rentable square
foot for tenant's construction consultant, and (ii) $16.27 per square foot
of the Distribution Space (subject to the provisions of Paragraph 33 of the
Lease), also inclusive of architectural, engineering and construction
management fees (the "Landlord's Allowance"). Additionally, at Tenant's
written request (provided to Landlord as part of Tenant's acceptance of the
final pricing information), Landlord will provide an additional leasehold
improvement allowance for the primary Premises of up to the lesser of (i)
the actual costs of the Tenant Finish Work in excess of Landlord's Allowance
or (ii) $10.00 per rentable square foot ("Excess Allowance"). Said Excess
Allowance shall be repaid by Tenant to Landlord in the form of an increase
in Base Rent equal to the amortization of the Excess Allowance over the
initial Lease term with an annual interest rate of 10%. Landlord's only
obligation for the Storage Space shall be to provide Building standard
sprinklers, lights and ventilation, for such unoccupied storage area, at
Landlord's sole cost and expense. Hereinafter, the term "Allowance" shall
mean the Landlord's Allowance and, to the extent applicable, the Excess
Allowance. Said Allowance shall be applied toward the cost of the Space
Plans, the Construction Drawings and the cost of the Tenant Finish Work,
including any required permits. The Allowance shall be used solely for
Tenant Finish Work which will include, but not be limited to, (i) all
third-party fees and expenses incurred by Landlord in connection with the
design and construction of the Tenant Finish Work, exclusive of Landlord's
Architect's, as hereinafter defined, fees and expenses, which shall be at
Landlord's sole cost and expense, (ii) third-party testing and inspection
costs, and (iii) costs of pre-stock material used in the construction of the
Tenant Finish Work. Tenant shall be entitled to a Rent reduction for any
part of the Landlord's Allowance not so used. Tenant shall not be entitled
to receive any of the Excess Allowance
C-2
<PAGE> 49
not utilized for the Tenant Finish Work, as provided hereinabove. Tenant's
Architect and construction consultant shall be paid from the Landlord's
Allowance upon Tenant's submission of an invoice(s) and such reasonable
support documentation as Landlord may request (with payment being in
accordance with Landlord's construction draw/funding cycles on a monthly
basis.
4. Qualified General Contractor. Tenant has requested that, in
addition to Pinkard Construction ("Building General Contractor"),
Landlord's obtaining pricing information from two other general
contractors. Pursuant to the Improvement Schedule milestones, Tenant shall
submit to Landlord the names and appropriate supporting information
(including, but not limited to, resume, references, previous job
descriptions and said contractor's guaranteed maximum price form of
contract) regarding at least 3 general contractors who meet or exceed the
following criteria: (i) demonstrated quality reputation, (ii) duly licensed
as a general contractor in the State of Colorado, (iii) bondable and
insurable, (iv) at least 5 years of office tenant finish construction
experience in the greater Denver Metropolitan area for tenant finish
projects similar in size, scope and pricing to the Tenant Finish Work, and
(v) demonstrated ability (and availability in said General Contractor's
current commitment schedules) to complete the Tenant Finish Work within the
identified construction schedule and on or before September 1, 1999 (each a
"Qualified General Contractor").
5. Construction of Tenant Finish Work. In accordance with the
Improvements Schedule above, Landlord shall obtain and provide Tenant with
a guaranteed bid estimate for the price of the design and construction of
the Tenant Finish Work (the "Price Estimate Bid") from the Building
General Contractor and each of the two approved Building General
Contractors. Tenant shall approve or disapprove the Price Estimate Bid in
accordance with the Improvements Schedule above and designate the General
Contractor to construct the Tenant Finish Work in accordance with the
Improvement Schedule above. Once approved, the Price Estimate Bid shall be
the amount the General Contractor may charge for completing the Tenant
Finish Work. Tenant shall have the right to request that each General
Contractor, as part of its Price Estimate Bid, obtain competitive bids for
all major trades comprising the Tenant Finish Work (including plumbing,
electrical and mechanical work), in which case the following provisions
shall be applicable: (i) any delay in completing the Tenant Finish Work
(beyond the date it would have been completed without such process) shall
be deemed Tenant Delay; (ii) Tenant shall be entitled to participate in the
bidding process (including the process of qualifying the bidders); and
(iii) unless otherwise agreed to in writing by Landlord and Tenant, the
selected General Contractor shall engage the trade subcontractor submitting
the lowest, qualified bid meeting the identified construction schedule to
construct the Tenant Finish Work. Landlord agrees that all information
obtained by Landlord to arrive at the Price Estimate Bid and the price
payable with respect to the Tenant Finish Work, including, but not limited
to, all bids related thereto, as well as all documentation and other
information related to the price of the Tenant Finish Work, shall be made
available to Tenant on an "open-book" basis, and Tenant shall have the
right to review all such records and information.
In accordance with the Improvements Schedule above, Tenant shall cause
its Architect and engineer to prepare construction drawings and
specifications (the "Construction Drawings") for the Tenant Finish Work,
based strictly on the Final Space Plans, and Landlord shall cause the
Tenant Finish Work to be constructed in the Premises in accordance with the
Construction Drawings; provided, however, that Landlord's total cost of
reimbursement for the Space Plans and Construction Drawings and for
constructing the Tenant Finish Work shall not exceed the Allowance. As
hereinabove provided, the Excess Allowance shall be reimbursed to Landlord
in the form of additional Base Rent. Further, any Tenant Finish Work Costs
in excess of the Allowance (the "Excess Costs") will be at Tenant's sole
cost and expense and will be paid promptly by Tenant upon receipt of
billing therefor. Upon substantial completion of the construction of the
Tenant Finish Work and prior to Tenant's occupancy of the Premises, Tenant
shall pay to Landlord the amount, if any, by which the actual cost of
preparing the Construction Drawings and of constructing the Tenant Finish
Work exceeds the Allowance.
If after commencement of the construction of the Tenant Finish Work,
Tenant wants to change the Construction Drawings or scope of the Tenant
Finish Work, it shall notify Landlord. Landlord shall then obtain an
estimate of the additional cost of the Tenant Finish Work, if any,
resulting from any such changes and within 10 days notify Tenant of the
additional cost and any resulting delay in completing
C-3
<PAGE> 50
the Tenant Finish Work; and within three business days thereafter, Tenant
shall advise Landlord whether or not it wants to proceed with the changes.
If Tenant elects to proceed with the changes, Landlord shall proceed with
the changes. Any delay in completing the Tenant Finish Work as a result of
such changes shall also be deemed a Tenant Delay for purposes of Paragraph 5
below.
6. Tenant's Delay. The Lease Commencement Date shall not commence until
Landlord has substantially completed the Base Building Improvements and
Tenant Finish Work; provided, however, that if Landlord is delayed in
substantially completing the Base Building Improvements and Tenant Finish
Work as a result of:
A. A Tenant Delay arising under Paragraph 2 or Paragraph 4, as
described in each such Paragraph;
B. Subject to the selected General Contractor's obligation to use
reasonable efforts to timely procure, the unavailability of materials or
installations as a part of the Tenant Finish Work that are other than
Landlord's Building standard materials or installations;
C. Tenant's changes in any previously approved drawings, plans or
specifications, including the Construction Drawings;
D. Any other act or omission of Tenant or Tenant's consultants or
invitees;
E. If other than the Building General Contractor is selected by
Tenant, any delays in the Building construction resulting from said selected
General Contractor's interference with or failure to coordinate with the
identified Building construction schedule.
(each of which shall be a "Tenant Delay"); then the Lease Commencement Date
shall only be extended pursuant to Paragraph 4B of the Lease until the date
on which Landlord would have substantially completed the performance of the
Tenant Finish Work but for the Tenant Delay.
7. Excused Delays. As used herein, the term "Excused Delay" shall mean
any Tenant Delay or any other delay in the construction or completion of the
Base Building Improvements or the Tenant Finish Work resulting from
casualties, acts of God, government embargo, shortages of fuel, labor or
building materials or other causes beyond Landlord's reasonable control.
8. General. Landlord shall notify tenant of the anticipated Lease
Commencement Date in a notice given at least fifteen (15) days prior to the
anticipated Lease Commencement Date. Landlord and Tenant shall thereupon set
a mutually convenient time for Landlord, Tenant and the General Contractor
to inspect the Premises, at which time the parties shall prepare a punchlist
of items to be completed ("Punchlist Items"). Upon completion of the
inspection, Tenant shall acknowledge in writing that substantial completion
of the Tenant Finish Work has occurred, subject to completion of Punchlist
Items to be completed. Landlord shall use reasonable efforts to complete the
Punchlist Items as soon as possible following the Lease Commencement Date.
Tenant shall have the right to inspect the progress of the construction of
the Base Building Improvements and the Tenant Finish Work from time to time,
so long as such inspections do not hinder, delay or otherwise interfere with
construction or installation of the Base Building Improvements or the Tenant
Finish Work. Failure by Tenant to pay any amount when due under this
Agreement shall be an Event of Default under Paragraph 19A of the Lease,
entitling Landlord to all of its remedies under the Lease, as well as all
remedies otherwise available to Landlord.
9. Construction Scheduling. If a General Contractor, other than the
Building General Contractor, is selected by Tenant for the Tenant Finish
Work, Tenant acknowledges that any additional Building construction costs
arising as a result of (i) said General Contractor's failure to adhere to
the Building General Contractor's job site rules and regulations, including
scheduling and coordination to minimize job interference thereof (a) damage,
destruction or injury to the Building General Contractor's employees or
agents, or the property of the foregoing of either, or (b) repairs, "re-dos"
or modifications
C-4
<PAGE> 51
of the Building Improvements required as a result of the selected General
Contractor's, or its employees or agents', negligence or wilful misconduct,
shall be incurred by Tenant under the Landlord Allowance or as Excess
Costs, if the Landlord Allowance has (or will be) fully utilized for the
costs of the Tenant Finish Work.
10. Substantial Completion; Ready for Tenant. The Tenant Finish Work
shall be deemed to have been substantially completed and to be Ready for
Tenant when the Landlord has substantially completed the Tenant Finish
Work, exclusive of any punch list work, substantially in accordance with
the final approved Construction Drawings. If the Tenant and Landlord
disagree as to whether the Tenant Finish Work has been substantially
completed, the mutual decision of Fentress Bradburn Architects, Ltd.
("Landlord's Architect") and Tenant's Architect, Acquilano Leslie
Incorporated, shall be final and conclusive on that issue.
11. General. All drawings, space plans, plans and specifications for
any improvements or installations in the Premises are expressly subject to
Landlord's prior written approval. Any approval by Landlord or Landlord's
architects or engineers of any of Tenant's drawings, plans or
specifications which are prepared in connection with construction of
improvements in the Premises shall not in any way constitute a
representation or warranty of Landlord as to the adequacy or sufficiency of
the drawings, plans or specifications, or the improvement to which they
relate, for any use, purpose or condition, but this approval shall merely
be the consent of Landlord to Tenant's construction of improvements in the
Premises in accordance with those drawings, plans or specifications.
C-5
<PAGE> 52
EXHIBIT C-1
BASE BUILDING/TENANT IMPROVEMENT GUIDELINE
AND
LIST OF PLANS AND SPECIFICATIONS
1) Construction Drawings for the Building entitled "Fiddler's Green Center
- Building I, The John Madden Company, Fiddler's Green Circle, Arapahoe
County, Colorado - Building Permit August 17, 1998", prepared by
Fentress Bradburn Architects, Ltd.
2) Fiddler's Green Center - Building I - Project Manual
Specifications - Permit Package, dated August 17, 1998, prepared by
Fentress Bradburn Architects, Ltd.
3) See attached also.
C-1-6
<PAGE> 53
EXHIBIT C
BASE BUILDING/TENANT IMPROVEMENT GUIDELINE
SCOPE OF WORK DEFINITION BASE BUILDING VS. TENANT IMPROVEMENT WORK
<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
CEILINGS a. No requirement. a. Furnish and install 2' x 4'
acoustical ceiling grid
throughout leasable area.
Furnish and install 2' x 4'
acoustical ceiling tile (not
yet selected) equal to
Armstrong's Second Look
II on each floor.
b. Furnish and install 2 x 2 acoustical
ceiling grid and ceiling tiles in b. No requirement.
required corridors. Ceiling tile equal
to Armstrong Cirrus with regular
edge. Toilet room ceilings to be
painted gypsum board.
c. No requirement. c. Provide upgraded ceiling
systems as required by
tenant's space plan.
CORE SERVICE AREAS a. Toilet rooms, telephone, electrical a. No requirements.
rooms, stairwells, janitor closets,
service entry and mechanical rooms
are to be provided complete.
DOORS, FRAMES AND a. Furnish and install natural finished a. No requirement.
HARDWARE flush cherry doors in hollow metal
frames at core building areas.
b. Furnish and install natural finished b. Furnish, install and finish
flush cherry tenant entry doors, per doors, frames and hardware
code, in hollow metal frames with as required by tenant's
sidelights extending the full door space plan.
height and 16" in width. Polished
wire glass in sidelight.
c. Furnish brushed aluminum finish on c. No requirement.
all door hardware. Provide and
install lever handle mortise locks and
closers on all tenant entry and core
building doors.
d. Furnish and install card access, d. No requirement.
electric locks for after hour security at
each of the three entrances.
</TABLE>
1
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<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
Electrical a. Furnish and install a complete a. No requirement.
277/480 volt, 3-phase, 6,000 amp
building power distribution system.
12 watts per SF allocated for HVAC
loads.
3.5 watts per SF allocated for overall
lighting (2.2 watts for tenant lighting).
6.4 watts per SF allocated for office
equipment loads (one circuit per 140
SF).
b. Furnish and install on 277 volt b. Lighting circuits distributed
lighting panel in the central from central panel to tenant
electrical room on each floor. fixtures.
c. No requirement. c. Furnish and install stock
piled fixtures as required by
tenant's space plan.
Fluorescent fixtures are to
be 2' x 4' deep cell
parabolic and equipped
with three (3) T8 lamps and
electronic ballasts. Fixture
density at 1:80 RSF.
Furnish and install
connection to J-Box,
switching and accent
lighting.
d. Furnish and install lighting in base d. No requirement.
building rooms.
e. Furnish and install step down e. Furnish and install branch
transformers and three (3) 120/208 circuits for 120 V power to
volt panels at one (1) electrical room tenant spaces from
on each floor, sized to provide 6.4 Electrical Rooms. Furnish
watts per square foot for office and install power poles and
equipment loads and convenience convenience outlets as
power. desired along with any
additional distribution
panels or step down
transformers.
f. Furnish and install code required exit f. Furnish and install code
and emergency lighting for all public required exit and
areas. emergency lighting for all
tenant areas.
</TABLE>
2
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<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
ELECTRICAL g. Furnish and install telephone riser g. Furnish and install phone board,
CONTINUED chases to the telephone rooms on each vertical and horizontal distribution
floor. Service available from provider from first floor service entry to
panel on first floor. tenant space.
h. Furnish and install fire management h. Fire management provisions, if any, in
system as required by code, including addition to code requirements.
horn and strobe devices on each floor.
i. Furnish and install exterior site i. No requirement.
lighting.
ELEVATORS a. Furnish and install three 3,500 pound a. No requirement.
and one 4,000 pound capacity electric
traction elevators with 350 feet per
minute travel speed. (9'-7" cab height
available above ceiling in 4,000 pound
car).
b. Furnish and install interior cab wall b. No requirement.
finishes. Brushed stainless steel front
wall. Side & back wall to have stone
wainscot with fabric panels above. Floor
to be stone. Brushed stainless steel
ceiling with recessed can lights.
FIRE EXTINGUISHERS a. Furnish and install one (1) fire a. Furnish and install fire extinguishers
extinguisher in each landing of each and cabinets as required by space layout.
stair.
FIRE PROTECTION a. Furnish and install complete fire a. Relocate or add sprinkler for proper
SPRINKLER SYSTEM protection system per NFPA coverage as dictated by the tenant's
requirements for office occupancy. space plan.
FLOOR COVERING a. Furnish and install quality commercial a. No requirement.
grade carpeting adhered directly to
floor slab in all required corridors.
b. Provide smooth troweled concrete slabs, b. Furnish and install floor coverings for
ready for finish. all areas except toilet rooms and
required common area corridors.
</TABLE>
3
<PAGE> 56
<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
HVAC a. Furnish and install base building a. Furnish and install separate
heating and cooling system. air conditioning or air
o Cooling Ratio: 378 SF/ton handling units for non-standard
o Heating Capacity: 3.59 watts/SF loads (i.e. computer room).
o Cooling Load Allowance:
Lighting: 2.5 watt/SF
Office Equipment: 2 watt/SF
People: 1 occ/100 SF
b. Furnish and install primary trunk b. No requirement.
ducts from air handlers to vicinity of
each zone serviced. Primary air duct
looped on floor.
c. Furnish and install secondary c. Furnish and install runouts,
ductwork and VAV boxes for all zones diffusers and RA grilles.
at a ratio of 1:610 RSF. Perimeter Provide modifications as
zones are fan-powered with required by tenant's space
pinchdown backup. Interior zones are plan.
pinchdown units. Furnish and install
code required fire dampers.
d. Furnish and install base building d. Provide modifications as
energy management system with required by tenant's space
DDC temperature control system plan.
connections to terminal devices.
e. Provide exhaust systems for base e. Install exhaust systems for
building spaces as required. conference rooms, etc.
desired by Tenant.
INTERIOR COLUMNS a. No requirement. a. Furnish and install gypsum
board to columns. Tape and
sand smooth. Apply paint/wall
covering and base.
INTERIOR PARTITIONS a. Construct required building corridor a. Construct gypsum board
walls to underside of structure with partitions as required by
gypsum wall board both sides (rated - tenant's space plan. Finish
1 hour). Furnish and install vinyl as desired. Apply paint/wall
wall covering on corridor walls. covering and base.
</TABLE>
4
<PAGE> 57
<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
LOBBY IMPROVEMENTS a. Furnish and install honed limestone a. No requirement.
with granite accent throughout lobby
and elevator areas. Carpeted areas
inset into stone in seating areas.
b. Furnish and install limestone b. No requirement.
surrounds elevator door on elevator
lobby walls.
c. Furnish and install 2'-0" high stone c. No requirement.
wainscot with fabric wrapped panels
above in balance of lobby.
d. Furnish and install coffered ceiling d. No requirement.
with decorative lighting and accent
recess can fixtures at seating and wall
washers at art work.
e. Furnish and install brushed stainless e. No requirement.
steel elevator frames and doors.
f. Furnish and install pedestal-mounted f. No requirement.
tenant directory with stone base.
g. Furnish and install lobby furnishings: g. No requirement.
Carpeting, seating, plants and art.
h. Furnish and install entrance door h. No requirement.
(full lite aluminum pair of doors
3'-0" x 9'-0" each).
PERIMETER WALLS a. Construct gypsum board walls below a. Apply paint/wall covering
sills and at perimeter columns, taped and base.
and sanded smooth. (Work completed
during tenant buildout.)
b. Furnish and install windowsills. b. No requirement.
(Installed during tenant buildout.)
PLUMBING a. Furnish and install complete a. No requirement.
plumbing in core service areas.
b. Furnish and install electric water b. No requirement.
cooler(s) adjacent to public toilet
rooms.
c. Furnish two (2) tenant rough-in wet c. Furnish and install
columns per floor with opportunity to convenience sinks, water
tie into stack at building core. supply to coffee/vending
areas, etc.
</TABLE>
5
<PAGE> 58
<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
SIGNAGE a. Furnish and install general a. Furnish and install
identification/directional signage at identification signage at
toilet rooms and exit stairwells. tenant entrances.
b. Furnish and install a building directory b. No requirement.
in the main lobby.
c. Furnish and install exterior monument c. No requirement.
signage for building identification.
STAIRS a. Furnish and install painted metal pan a. No requirement.
and riser with poured concrete tread
(sealed). Painted metal stringer and
railings.
b. Paint concrete stair walls. Furnish and b. No requirement.
install surface-mounted lighting at stair
landings.
STRUCTURE a. Structural steel frame and composite a. No requirement.
steel and concrete floor structure (fire
proof).
b. Supported floor live load capacity of b. No requirement.
50 pounds per square foot and a
partition load of 20 pounds per square
foot. Center bay and tenant corridor
areas designed for 100 pounds per
square foot live load.
c. Clear ceiling height of 9'-0". c. No requirement.
d. Building shell shall meet ADA code d. No requirement.
requirements.
TOILET FLOORS a. Furnish and install ceramic tile on a. No requirement.
floor and wet walls. Paint on
remaining wall.
b. Furnish and install polished granite b. No requirement.
vanity with porcelain lavatories and
decorative mirrors.
c. Furnish and install baked enamel, c. No requirement.
ceiling hung toilet partitions.
</TABLE>
6
<PAGE> 59
<TABLE>
<CAPTION>
ITEM BASE BUILDING TENANT IMPROVEMENTS
- ---- ------------- -------------------
<S> <C> <C>
TOILET FLOORS d. Furnish and install wall-mount, flush d. No requirement.
CONTINUED valve water closets and wall-hung
urinals.
e. Fully ADA compliant restrooms. e. No requirement.
WINDOW BLINDS a. Furnish and install horizontal mini- a. No requirement.
blinds on all exterior windows.
</TABLE>
7
<PAGE> 60
EXHIBIT C-2
PRELIMINARY SPACE PLANS
(See attached)
C-2-1
<PAGE> 61
[FIDDER'S GREEN CENTER 6TH FLOOR PLAN]
FIDDLER'S GREEN CENTER
FLOOR 6
SEPTEMBER 1999 PROGRAM - 285 PEOPLE
preliminary pricing: JULY 16, 1998
revised: JULY 1, 1998
space plan: JUNE 4, 1998
[legend] [Acquilano Leslie, Inc. Logo]
REFER TO ATTACHED 8 1/2" x 11" PRELIMINARY PRICING SPECIFICATION
<PAGE> 62
[FIDDER'S GREEN CENTER 5TH FLOOR PLAN]
FIDDLER'S GREEN CENTER
FLOOR 5
SEPTEMBER 1999 PROGRAM - 285 PEOPLE
preliminary pricing: JULY 16, 1998
revised: JULY 1, 1998
space plan: JUNE 4, 1998
[Acquilano Leslie, Inc. Logo]
REFER TO ATTACHED 8 1/2" x 11" PRELIMINARY PRICING SPECIFICATION
<PAGE> 63
EXHIBIT D
FORM OF SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") made and entered into as of the ___ day of _____________ , 19 __ by
and among ______________________, a ____________________ [corporation],
[(general) (limited) partnership], having an office at _______________________
("Owner"), ___________________, a ____________________, having an office at
________________, ("Mortgagee"), and ___________________, a ___________________,
having an office at _____________ ("Tenant").
W I T N E S S E T H :
WHEREAS, Owner owns the improved real property described in Schedule A
annexed hereto (the "Premises");
WHEREAS, Mortgagee is the owner and holder of the mortgage(s) and/or
deed(s) of trust listed in Schedule B annexed hereto (which mortgage(s) and/or
deed(s) of trust, together with all amendments, increases, renewals,
modifications, consolidations, spreaders, replacements, combinations,
supplements, substitutions and extensions thereof, now or hereafter made, are
hereinafter collectively referred to as the "Mortgage" and which Mortgage,
together with the promissory note or notes and the loan agreement(s), and other
documents executed in connection therewith and any amendments, increases,
renewals, modifications, consolidations, spreaders, replacements, combinations,
supplements, substitutions and extensions thereof, are hereinafter collectively
referred to as the "Loan Documents");
WHEREAS, pursuant to a lease dated_________, 19__ [as amended on _________]
([collectively] the "Lease"), Tenant has leased from Owner, as landlord, a
portion of the Premises (the "Leased Premises") more particularly described
therein; and
WHEREAS, Mortgagee has agreed to recognize the status of Tenant in the
event Mortgagee shall acquire title to Premises by foreclosure, by the
acceptance of a deed in lieu thereof, or any other means and Tenant has agreed
to attorn to Mortgagee in any such event.
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
hereinafter mentioned and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Mortgagee hereby consents to the Lease.
2. Tenant hereby agrees that the Lease is and shall be under, subject and
subordinate at all times to the lien, right, title and terms of the Loan
Documents and all advances and/or payments made, or to be made, under any Loan
Document. In confirmation of such subordination, Tenant shall promptly execute,
acknowledge and deliver any instrument that Mortgagee may request to evidence
such subordination, and Tenant hereby irrevocably constitutes and appoints
Mortgagee as Tenant's attorney-in-fact, coupled with an interest, to execute and
deliver any such instruments for and on behalf of Tenant if Tenant fails to
execute, acknowledge or deliver any such instruments within ten (10) days after
request therefor.
3. So long as Tenant (a) is not in default under the Lease beyond the
expiration of any applicable grace or cure periods, (b) has not canceled or
terminated the Lease (without regard to whether Owner or Tenant is then in
default under the Lease), nor surrendered the Leased Premises, and (c) except as
specifically required pursuant to the terms of the Lease, has not made any
advance payment of rent or additional rent, in the event that Mortgagee shall
commence an action to foreclose the Mortgage or to otherwise acquire title to,
and possession of, the Premises, Tenant shall not be
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joined as a party defendant in any such action or proceeding and Tenant
shall not be disturbed in its possession of the Leased Premises nor shall the
Lease be terminated unless, as a condition precedent to commencing or proceeding
with any such action to foreclosure the Mortgage [or any of them] or to
otherwise acquire title to, and possession of, the Premises, Mortgagee is
required by statute, judicial decision or the court in which such action or
proceeding has been commenced or is pending so to name Tenant as a party
defendant. For the purposes of this Agreement, any rent abatements or free rent
periods expressly provided for in the Lease shall not be deemed to be an advance
payment of rent or additional rent.
4. If (a) Mortgagee shall acquire title to, and possession of, the Premises
upon foreclosure in an action in which Mortgagee shall have been required to
name Tenant as a party defendant, and (b) Tenant is not in default under the
Lease beyond any applicable cure or grace periods, has not canceled or
terminated the Lease (without regard to whether Owner or Tenant is then in
default under the lease) nor surrendered, vacated or abandoned the Leased
Premises and remains in actual possession of the Leased Premises at the time
Mortgagee shall so acquire title to, and possession of, the Premises, then, in
such event, Mortgagee shall enter into a new lease with Tenant upon the same
terms and conditions as were contained in the Lease, except that (x) the
obligations and liabilities of Mortgagee under any such new lease shall be
subject to the terms and conditions of this Agreement (including, without
limitation, the provisions of Paragraphs 5, 6, and 7 hereof), (y) without
limiting the generality of clause (x) above, Mortgagee shall, in no event, have
any obligations or liabilities to Tenant under any such new lease beyond those
of Owner (or its predecessors-in-interest) as were contained in the Lease (to
the extent assumed by Mortgagee under this Agreement), and (z) the expiration
date of such new lease shall coincide with the original expiration date of the
Lease. Tenant shall execute any such new lease and shall attorn to Mortgagee or
its nominee, successors or assigns or any purchaser (as the case may be) as to
establish direct privity between Mortgagee and Tenant.
5. If (a) Mortgagee shall acquire title to, and possession of, the
Premises upon foreclosure in an action in which Tenant has not been named as a
party defendant, or by deed in lieu of foreclosure, or by any other means and
(b) Tenant is not in default under the Lease beyond any applicable cure or grace
periods and Tenant has not surrendered the Leased Premises at the time Mortgagee
shall so acquire title to and possession of the Premises:
(i) Tenant shall be deemed to have made a full and complete attornment
to Mortgagee so as to establish direct privity between Mortgagee and
Tenant;
(ii) all obligations of Tenant under the Lease shall continue in full
force and effect and be enforceable against Tenant by Mortgagee, with the
same force and effect as if the Lease had originally been made and entered
into directly by and between Mortgagee, as landlord thereunder, and Tenant;
and
(iii) Mortgagee shall recognize and accept the rights of Tenant under
the Lease and, subject to the provisions of Paragraphs 6 and 7 hereof,
shall thereafter assume the obligations of Owner under the Lease in respect
of Owner's obligations under the Lease thereafter falling due subject, in
all events, to (A) the provisions of Paragraph 6 and 7 below and (B)
Tenant's waiver, as against Mortgagee, of any defaults of Owner (whether or
not curable) which occurred prior to Mortgagee acquiring title to, and
possession of, the Premises.
6. (a) Nothing herein contained shall impose any obligation upon Mortgagee
to perform any of the obligations of Owner under the Lease, unless and until
Mortgagee shall take possession of the Premises, and, in any event, Mortgagee
shall have no liability with respect to any acts or omissions of Owner occurring
prior to the date on which Mortgagee shall take possession of the Premises;
(b) Notwithstanding anything to the contrary contained herein, officers,
directors, shareholders, agents, servants and employees of Mortgagee shall have
not personal liability to Tenant and the liability of Mortgagee, in any event,
shall not exceed and shall be limited to Mortgagee's interest in the Premises;
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(c) Mortgagee shall not be liable for any act or omission of Owner (or,
its predecessor-in-interest);
(d) Mortgagee shall not be subject to any offsets or defenses which
Tenant might have against Owner;
(e) Mortgagee shall not be bound by any covenant to undertake or
complete any construction of the Premises, the Leased Premises or any portion
thereof;
(f) Mortgagee shall not be bound by any obligation of Owner to make any
payment to Tenant, except that (i) Mortgagee shall be liable for the timely
return of any security or other deposit actually received by Mortgagee and (ii)
Mortgagee shall be liable on account of any prepayments of rent or other charges
owing to Tenant if the funds are actually received by Mortgagee;
(g) Mortgagee shall not be bound by any obligation to repair, replace,
rebuild or restore the Premises, the Leased Premises, or any part thereof in the
event of damage by fire or other casualty, or in the event of partial
condemnation, beyond such repair, replacement, rebuilding or restoration as can
reasonably be accomplished with the use of the net insurance proceeds or the net
condemnation award actually received by or made available to Mortgagee; and
(h) Mortgagee shall not be required to remove any person occupying the
Leased Premises or any part thereof.
8. Tenant hereby agrees to provide Mortgagee with prompt notice of any
asserted default by Owner of its obligations under the Lease. In the event any
such asserted default constitutes a legal basis for the cancellation of the
Lease by Tenant, Tenant hereby agrees that the Lease shall not be canceled or
terminated until Mortgagee shall have a reasonable period of time within which
to (a) obtain possession of the Leased Premises, and (b) cure such default.
9. Tenant and Owner hereby agree that, in the event that Mortgagee delivers
to Tenant a notice (i) stating that an Event of Default (as defined in the
Mortgage [or any of them]) has occurred under the Mortgage [or any of them] or
any other Loan Document and (ii) requesting that all rent and additional rent
due under the Lease be thereafter paid to Mortgagee, Tenant shall pay, and is
hereby authorized and directed by Owner to pay, such rent and additional rent
directly to Mortgagee. Delivery to Tenant of the aforedescribed notice from
Mortgagee shall be conclusive evidence of the right of Mortgagee to receive such
rents and payment of the rents by Tenant to Mortgagee pursuant to such notice
shall constitute performance in full of Tenant's obligation under the Lease to
pay such rents to Owner. If and to the extent that the Lease or any provisions
of law shall entitle Tenant to notice of any mortgage, Tenant acknowledges and
agrees that this Agreement shall constitute such notice to Tenant of the
existence of the Mortgages. Tenant acknowledges that it has notice that the
Lease and the rent and all other sums due thereunder have been assigned to
Mortgagee as part of the security for the Loan Documents.
10. Each of Owner and Tenant represents and warrants to Mortgagee that, as
of the date hereof, there are no agreements other than the Lease in existence or
contemplated between Owner and Tenant, relating to the Premises or the Leased
Premises or with respect to any other matter related to Tenant's occupancy of
the Leased Premises.
11. Owner, by its execution of this Agreement, agrees to be bound by and to
act in accordance with the terms and conditions hereinabove contained.
12. This Agreement (i) shall be governed by and construed in accordance
with the laws of the state in which the Premises are located, (ii) contains the
entire agreement among the parties with respect to the subject matter hereof and
(iii) may not be modified, nor any provision hereof be waived, orally or in any
manner other than by an agreement in writing signed by the parties hereto or
their respective successors, administrators and assigns.
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13. All notices to be given hereunder shall be in writing and shall be
deemed sufficiently given if (a) hand delivered, (b) delivered by reputable
overnight courier or (c) mailed by certified mail, return receipt requested, in
each case to the address of each party as set forth above. Each such notice
shall be deemed to be effective, in the case of mail deliveries, on the second
business day after mailing, and otherwise, upon receipted delivery. Any party
may change its address for notice by notifying the other parties hereunder in
accordance with the provisions of this Paragraph 13.
14. All rights of Mortgagee hereunder shall accrue to, and all obligations
of Mortgagee shall be binding upon, Mortgagee, its successors, assigns and
nominees, including, without limitation, the grantee under a deed in lieu of
foreclosure and/or the purchaser of the Premises at a foreclosure sale or at any
sale of the Premises following the granting of a deed in lieu of foreclosure or
following foreclosure; provided, however, that following any sale or other
transfer of its interest in the Premises, Mortgagee, any such grantee or
purchaser (as the case may be) shall be fully released and discharged of and
from any and all obligations and liabilities of any kind hereunder or under the
Lease and/or under any such new lease. Without limiting the generality of the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
successors, administrators and permitted assigns of Owner and Tenant hereto.
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above set forth.
OWNER: _______________________________________
By: __________________________________________
MORTGAGEE: ___________________________________
By: __________________________________________
TENANT: ______________________________________
By: __________________________________________
STATE OF ____________________ )
) ss.
COUNTY OF ___________________ )
On this ___ day of _________, 19 __, before me personally came ________, to
be known, who, being duly sworn, did depose and say that he resides
at ______________________________, that he is a ____________________________ of
___________________, a ______________________, the ________________ described
in, and which executed, the foregoing instrument; and that he signed his name
thereto by order of the _________ [board of directors] of said
__________________________.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of ____, 19__.
My Commission Expires: __________________________________
___________________________________
Notary Public
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STATE OF _____________________ )
)ss.
COUNTY OF ____________________ )
On this ___ day of __________ , 19__ , before me personally came
___________, to be known, who, being duly sworn, did depose and say that he
resides at _______________ , that he is a __________________ of
__________________ , a ___________________ , the __________________
described in, and which executed, the foregoing instrument; and that he
signed his name thereto by order of the ___________________ [board of
directors] of said _________________________ .
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_________, 19__.
My Commission Expires: ________________________________________
________________________________________
Notary Public
STATE OF _____________________ )
)ss.
COUNTY OF ____________________ )
On this ___ day of ________ , 19__, before me personally came
_________________, to be known, who, being duly sworn, did depose and say
that he resides at _______________, that he is a _______________ of
_____________ , a _________________ , the ___________ described in, and
which executed, the foregoing instrument; and that he signed his name
thereto by order of the _____________________ [board of directors] of said
_____________________.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of ____,
19__.
My Commission Expires: _______________________________
___________________________________
Notary Public
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EXHIBIT E
RULES AND REGULATIONS
It is further agreed that the following rules and regulations shall be and
are hereby made a part of this Lease and Tenant agrees that Tenant's employees
and agents or any others permitted by Tenant to occupy or enter the Premises
will at all times abide by these rules and regulations as they may be amended or
supplemented from time to time. Capitalized terms have the same meaning as used
in the Lease, unless otherwise indicated.
(1) The sidewalks, entries, passages, corridors, stairways, and elevators of
the Building Complex shall not be obstructed or locked or used for smoking,
storage or loitering by Tenant or Tenant's agents or employees or used for
any purpose other than ingress and egress to and from the Premises, it
being understood and agreed that such access may be obtained only via the
elevators (if any) in the lobby of the Building. The fire doors, including
those in the elevator lobbies, shall not be locked or obstructed by Tenant.
(2) Furniture, equipment, or supplies will be moved in or out of the Building
only upon the elevator (if any) and access ways designated by Landlord and
then only during such hours and in such manner as may be prescribed by
Landlord. The Landlord shall have the right to approve or disapprove the
movers or moving company employed by Tenant and Tenant shall cause the
movers to use only the loading facilities and elevator designated by
Landlord. In the event Tenant's movers damage the elevator or any part of
the Building, Tenant shall forthwith pay to Landlord the amount required to
repair that damage.
(3) No safe or article, the weight of which may, in the opinion of Landlord,
constitute a hazard or damage to the Building or the Building's equipment,
shall be moved into the Premises. Safes and other equipment, the weight of
which is not excessive, shall be moved into, from, or about the Building
only during such hours and in such manner as shall be prescribed by
Landlord and landlord shall have the right to designate the location of
such articles in the Premises.
(4) During the entire term of this Lease, Tenant shall, at Tenant's expense,
install and maintain under each and every caster chair a chair pad to
protect the carpeting.
(5) No sign, advertisement or notice shall be inscribed, painted, or affixed on
any part of the inside or outside of the Building (including windows)
unless of such color, size, and style and in such place upon or in the
Building as shall be first designated by Landlord in writing but there
shall be no obligation or duty on Landlord to allow any sign, advertisement
or notice to be inscribed, painted, or affixed on any part of the inside or
outside of the building. A directory in a conspicuous place, for listing
the names of tenants in the Building will be provided by Landlord. Any
necessary revision in the directory will be made by Landlord at Tenant's
expense within a reasonable time after notice from Tenant of the change
making the revision necessary. No furniture shall be placed in front of the
Building or in any lobby or corridor of the building (whether included
wholly within the Premises, or otherwise), without the prior written
consent of Landlord. Landlord shall have the right to remove all
non-permitted signs and furniture, without notice to Tenant, at the expense
of Tenant.
(6) Tenant shall not do or permit anything to be done in the Premises or bring
or keep anything therein which would in any way increase the rate of fire
insurance on the Building or on property kept therein which would in any
way increase the rate of fire insurance on the Building or on property kept
herein, constitute a nuisance or waste, obstruct or interfere with the
rights of other tenants or in any way injure or annoy them, or conflict
with the laws relating to fire or with any regulations of the fire
department, fire insurance underwriters, or with any insurance policy upon
the Building or any part thereof, or conflict with any of the rules or
ordinances of the Department of Health of the City and County where the
Building is located.
(7) The janitor of the building may at all times keep a passkey and other
agents of Landlord shall at all times be allowed admittance to the
Premises.
(8) Water closets and other water fixtures shall not be used for any purpose
other than that for which they were intended and any damage resulting to
them from misuse on the part of Tenant or Tenant's agents or employees
shall be paid for by Tenant. No person shall waste water by tying back or
wedging the faucets or in any other manner.
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(9) Except for handicapped assistance dogs, no animals shall be allowed in the
offices, halls, corridors, and elevators in the Building. No person shall
disturb the occupants of the Building or adjoining buildings or premises by
the use of any radio, sound equipment, or musical instrument or by the
making of loud or improper noises.
(10) Bicycles or other vehicles shall not be permitted in the offices, halls,
corridors, and elevators in the Building nor shall any obstruction of
sidewalks or entrances of the Building be permitted.
(11) Tenant shall not allow anything to be placed on the outside of the
building, nor shall anything be thrown by Tenant or Tenant's agents or
employees out of the windows or doors or down the corridors, elevator
shafts, or ventilating ducts or shafts of the Building. Tenant, except in
case of fire or other emergency, shall not open any outside window. Tenant
must at its own expense dispose of crates, boxes, or similar large items of
refuse which will not fit into office waste paper baskets. In no event
shall Tenant set any such items in the corridors or other areas of the
Building or garage facility.
(12) No additional lock or locks shall be placed by Tenant on any door in the
Building, unless written consent of Landlord shall first have been
obtained. Two keys to the Premises and the toilet rooms, if locked by
Landlord, will be furnished by Landlord and neither Tenant nor Tenant's
agents or employees shall have any duplicate keys made. Landlord shall
supply Tenant with such additional keys as Tenant may require at Tenant's
sole cost and expense. At the termination of this tenancy, Tenant shall
promptly return to Landlord all keys to offices, toilet rooms, or vaults.
(13) No window shades, blinds, screens, draperies, or other window coverings
will be attached or detached by Tenant without Landlord's prior written
consent. Tenant agrees to abide by Landlord's rules with respect to
maintaining uniform curtains, draperies and linings, or blinds at all
windows and hallways.
(14) If any Tenant desires telegraphic, telephonic, or other electric
connections, Landlord or Landlord's agents will direct the electricians as
to where and how the wires may be introduced. Without such directions, no
boring or cutting for wires will be permitted. Any such installation and
connection shall be made at Tenant's expense.
(15) Tenant shall not install or operate any steam or gas engine or boiler or
carry on any mechanical business in the Premises. The use of oil, gas, or
inflammable liquids for heating, lighting, or any other purpose is
expressly prohibited. Explosives or other articles deemed extra hazardous
shall not be brought into the Building.
(16) Any painting or decorating, as may be agreed to be done by and at the
expense of Landlord, shall be done during regular weekday working hours.
Should Tenant desire such work on Saturdays, Sundays, Legal Holidays, or
outside of regular working hours, Tenant shall pay for the extra cost
thereof.
(17) Except as permitted by Landlord, Tenant shall not mark upon, paint signs
upon, cut drill into, drive nails or screws into, or in any way deface the
walls, ceilings, partitions, or floors of the Premises or of the Building
and any defacement, damage, or injury caused by Tenant or Tenant's agents
or employees shall be paid for by Tenant.
(18) Smoking is prohibited in the Building, including all tenants' premises,
inside lobbies, stairwells, bathrooms, and other Common Areas and public
areas of the Building Complex and is restricted in all outside plaza areas
of the Building Complex to specific locations designated by Landlord as
smoking areas, if any.
(19) Tenant shall be entitled to two sets of keys to the Premises. In the event
Tenant needs any additional keys, such keys must be requested from
Landlord. Tenant shall pay to Landlord the actual cost of making such
additional keys. Landlord reserves the right to refuse admittance to the
Building at any time other than during Ordinary Business Hours, to any
person not producing a key to the Premises and/or a pass issued by
Landlord. In case of fire, invasion, riot, public excitement or other
commotion, Landlord also reserves the right to prevent access to the
Building while it continues. Landlord shall in no case be liable for
damages for the admission or exclusion of any person to or from the
Building.
(20) No canvassing, soliciting, distribution of hand bills or other written
material, or peddling shall be permitted in the Building on the Building
Complex, and Tenant shall cooperate with Landlord in prevention and
elimination of same.
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EXHIBIT F
LEASE COMMENCEMENT CERTIFICATE
LANDLORD: Fiddler's Green Center, LLC, a Delaware corporation
TENANT: Convergent Group Corporation, a Delaware corporation
This Lease Commencement Certificate is made by Landlord and Tenant pursuant
to that certain Office Lease (the "Lease") entered into as of _______________ ,
__________ , for the Leased Premises known as Suite 600, in the Building known
as Fiddler's Green Center building I, 6399 South Fiddler's Green Circle,
Englewood, Colorado 80111 (the "Premises"). This constitutes a supplementary
addendum to the Lease as contemplated by Article 4 of the Lease.
1. Lease Commencement Date. Landlord and Tenant acknowledge and agree that
the Lease Commencement Date, as contemplated by Article 4 of the Lease, is
_______________ , and the Lease Expiration Date is ________________,
___________________. Rent as contemplated by the Lease begins accruing to
Landlord's benefit as of __________________ , _________. All covenants in the
Lease contemplated to begin on the Lease Commencement Date shall commence as of
the Lease Commencement Date.
2. Acceptance of Premises. Tenant has inspected and examined the Premises,
and Tenant finds the Premises acceptable and satisfactory in all respects in
their current, "as is" condition, except for the "Punchlist Items" attached
hereto (if any). All of the work to be completed by Landlord, as contemplated by
the Lease and the Work Letter (attached as Exhibit C to the Lease), has been
fully completed and fulfilled. The attached list of Punchlist Items constitutes
all matters which Tenant does not find fully and completely acceptable, and as
to which Tenant desires Landlord to perform corrective work.
3. Incorporation in Lease. This Certificate is incorporated into the Lease,
and forms a supplementary and integral part thereof. This Certificate shall be
construed and interpreted in accordance with all other terms and provisions of
the Lease for all purposes.
"LANDLORD"
FIDDLER'S GREEN CENTER,
a Delaware limited liability company,
By: __________________________________________
As its: ______________________________________
"TENANT"
CONVERGENT GROUP CORPORATION,
a Delaware corporation
By: __________________________________________
As its: ______________________________________
Attest:
By: _______________________________
Title: ____________________________
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EXHIBIT G
HVAC SPECIFICATIONS
(See attached)
G-1
<PAGE> 72
[M-E ENGINEERS, INC. LETTERHEAD]
FIDDLERS GREEN CENTER
MEMORANDUM
DATE: August 28, 1998
TO: Ned Kirschbaum, Kelly Dunn - C.W. Fentress, J.H. Bradburn
FROM: Michael Hart - ME Engineers
RE: System Cooling Capacity
- -------------
Ned and Kelly,
This list may serve as bullet items regarding cooling capacity for the subject
building:
The building shall be capable of cooling to 74 degrees within the space when
the outdoor conditions as high as 93 degrees dry bulb, 59 degrees wet bulb
(28 BTU/lb dry air) given the following conditions are met:
No individual tenant cooling to less than 74 degrees.
Maximum tenant space occupancy of 150 square feet per person.
Maximum 2.5 Watts/sqft light heat dissipated throughout the building.
Maximum 2 Watts/sqft electrical equipment heat dissipated throughout the
building.
Tenant space air flows must be properly selected and distributed.
Appropriate space zoning and thermostat location provided.
System balancing complete and correct.
Heating shall be provide to maintain 70 degrees within the space with an
outdoor temperature as low as 5 degrees below zero given the following
conditions:
No individual tenant heating to greater than 70 degrees.
Tenant space air flows must be properly selected and distributed.
Appropriate space zoning and thermostat location provided.
System balancing complete and correct.
Given these parameters, the rooftop equipment will have adequate capacity to
cool and heat the building.
Please call if you have any questions or need further clarification.
<PAGE> 73
EXHIBIT H
BUILDING AREA
(See attached)
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[FIRST FLOOR PLAN]
<PAGE> 75
EXHIBIT I
COMMISSION AGREEMENT
(See attached)
I-1
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[CONVERGENT GROUP LETTERHEAD]
August 17, 1998
Mr. David McCagg
John Madden Company
6400 South Fiddlers Green Circle, Suite 1280
Englewood, CO 80111
Dear David:
Attached please find a revised commission agreement with CoRE Partners, Inc.
The revisions include (1) changing the rate to $1.50 per foot, all of which
will go to CoRE Partners; (2) deferring the first half payment until all
contingencies in Article 38 of the least have been met or waived; and (3)
removing any requirement to be paid on square footage beyond that taken with
the initial premises.
Please let me know if this will be acceptable.
Sincerely,
Convergent Group
/s/ SCOTT M. SCHLEY
Scott M. Schley
Vice President, Finance
Enclosure
<PAGE> 77
[CONVERGENT GROUP LETTERHEAD]
August 17, 1998
Mr. David McCagg
John Madden Company
6400 South Fiddlers Green Circle, Suite 1280
Englewood, CO 80111
Dear David:
Attached please find a revised commission agreement with CoRE Partners, Inc.
The revisions include (1) changing the rate to $1.50 per foot, all of which
will go to CoRE Partners; (2) deferring the first half payment until all
contingencies in Article 38 of the least have been met or waived; and (3)
removing any requirement to be paid on square footage beyond that taken with
the initial premises.
Please let me know if this will be acceptable.
Sincerely,
Convergent Group
/s/ SCOTT M. SCHLEY
Scott M. Schley
Vice President, Finance
Enclosure
<PAGE> 78
[iTRA/CoRE PARTNERS LETTERHEAD]
- --------------------------------------------------------------------------------
Date: 3/14/98
Pages: 3
To: Scott Schley C.P.A.
Fax Phone: 303-741-8474
From: John Reynolds
Subject: Revised Commission Agreement
Scott,
I received your voice mail message. Thanks for the update.
Here is our commission agreement revised in the 3 areas you requested.
Best regards,
/s/ JOHN REYNOLDS
<PAGE> 79
COMMISSION AGREEMENT - LEASE
August 14, 1998
CoRE Partners, Inc.
7979 East Tufta Avenue, Suite 605
Denver, Colorado 80237
RE: Proposed Lease Fiddlers Green Center, L.L.C., as Landlord, and
Convergent Group Corporation, as Tenant, of Fiddler's Green Center,
Englewood, Colorado.
Gentlemen:
This letter confirms our agreement that in the event of the consummation of the
above Lease, we shall pay to CoRE Partners, Inc. ("CPI") in consideration for
your brokerage services rendered, a brokerage commission calculated in
accordance with the applicable annexed Schedule.
It is expressly acknowledged and agreed that with respect to the above leasing
transaction: a) CPI is representing the Tenant: b) CPI is not acting as an agent
or sub-agent of the Landlord; and c) the Tenant has acknowledged that CPI will
be receiving its compensation from the Landlord.
If the foregoing accurately sets forth our agreement, kindly sign and return
the enclosed copy hereof.
Very truly yours,
Fiddler's Green Center, L.L.C.
By: /s/ LARRY LANCE
----------------------------
Title: Manager
-------------------------
AGREED TO
CoRE PARTNERS, INC.
By: /s/ JOHN F. REYNOLDS
----------------------------
John F. Reynolds
Title: Managing Partner
<PAGE> 80
CoRE PARTNERS, INC. (CPI)
SCHEDULE OF COMMISSIONS AND CONDITIONS
FOR OFFICE LEASE TRANSACTIONS - DENVER
1. RATES
$2.50 per rentable square foot for the primary room.
2. TIME OF PAYMENT
Fifty percent (50%) of the commission shall be paid within thirty (30) days
of the time of the execution and delivery of the lease by and between the
Landlord and Tenant and after all contingencies in Article 30 have been met
or waived. The balance of the commission shall be paid at the earlier of
the commencement of the lease term or occupancy.
3. MISCELLANEOUS
The Terms "Landlord" and "Tenant" shall be deemed to include any
subsidiaries, affiliates, successor, nominees or assigns of same.
In the event of a sale conveyance or other disposition of any portion of
the Landlord's interest in the property at which the lease is made, the
Landlord shall remain responsible to pay CPI the commissions due and which
may become due hereunder, unless Landlord shall obtain from the grantee of
its interest and deliver to CPI an agreement, in form and substance and
from a party reasonably acceptable to CPI, whereby the grantee assumes
Landlord's obligations hereunder.
AGREED TO:
Fiddler's Green Center, L.L.C. CoRE Partners, Inc.
By: /s/ LARRY LANCE /s/ JOHN F. REYNOLDS
--------------------------- -----------------------------
Title: Manager John F. Reynolds, Managing Broker
<PAGE> 81
FIRST AMENDMENT TO OFFICE LEASE
(FIDDLER'S GREEN CENTER I - CONVERGENT GROUP)
THIS FIRST AMENDMENT TO OFFICE LEASE ("Amendment") is made as of the 31
day of August, 1999, by and between FIDDLER'S GREEN CENTER, LLC, a Delaware
limited liability company ("Landlord"), and CONVERGENT GROUP CORPORATION, a
Delaware corporation ("Tenant").
RECITALS
WHEREAS, Landlord and Tenant entered into that certain Office Lease, dated
August 28, 1998 ("Lease"), pertaining to the lease of those certain premises
described as containing approximately 74,094 rentable square feet ("Premises")
in the building located at 6399 South Fiddler's Green Circle, Suite 1280,
Englewood, Colorado 80111 ("Building").
WHEREAS, Landlord and Tenant desire to amend the provisions of the Lease
as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. All capitalized terms shall have the same meaning set
forth in the Lease unless otherwise provided herein.
2. REMEASUREMENT OF BUILDING. The parties acknowledge and agree that the
Building was remeasured and the "Building Rentable Area" defined in Paragraph
5.A(2) of the Lease is hereby revised to be 206,914 rentable square feet of
space. Accordingly, the primary Premises (the 5th and 6th floor portions of the
Premises) consist of a total of approximately 71,480 rentable square feet of
space. Further, the Distribution Space, as defined in Paragraph 32.A of the
Lease, consists of approximately 1,168 rentable square feet of space. Tenant
will not lease the Storage Space referenced in Paragraph 32.A of the Lease and
such Storage Space is deleted from the description of the Premises. Therefore,
the Premises now demised under the Lease consists of a total of approximately
72,648 rentable square feet of space (the "Premises"). Accordingly, the Lease is
modified as follows:
A. Certain provisions of the Basic Lease Term Sheet of the Lease
are hereby replaced in their entirety as follows:
BASE RENT: Payable in monthly installments as follows:
<TABLE>
<CAPTION>
Space Period Monthly Annual Per Sq. Ft.
- ----- ------ ------- ------ ----------
<S> <C> <C> <C> <C>
Primary* Years 1-5 $145,938.33 $1,751,260.00 $24.50
Premises Years 6-10 $160,830.00 $1,929,960.00 $27.00
Distribution Space** Years 1-10 $2,141.33 $25,696.00 $22.00
</TABLE>
* See Section 33 below
**See also Section 33 below
1
<PAGE> 82
BASE OPERATING
EXPENSES: Base Year: 2000
Tenant's Pro-Rata Share: 35.11%
PARKING SPACES: Number of Parking Spaces: 286 total (i.e., 4 per 1000
rentable square feet) of which (i) 143 spaced (i.e., 2 per
10000 rentable square feet) shall be provided as covered
spaces within the first phase of the parking garage to be
constructed on or before January 1, 2000 and the balance
shall be uncovered spaces; (ii) 50% of the covered parking
spaces shall be designated for Tenant's use and selected by
Tenant on a first-choice basis in the south half of the
ground level of the Phase I parking structure and the
balance will be first-come, first-served; and (iii) up to 71
of the 143 uncovered parking spaces may, at the Landlord's
option, be located on the roof of the parking structure;
provided, however, to the extent the first phase of the
parking structure is not completed on or before January 1,
2000 (said date to be extended as a result of Excused
Delays, as defined in the Work Letter) and as a result, the
143 covered spaces are not available for Tenant's use in the
parking structure on or before such date (as the same may be
extended), then Tenant shall be entitled to a one day's Base
Rent abatement for each day that such covered parking spaces
are not completed. Further, Landlord agrees that Landlord
shall use the best efforts to arrange with the owner of the
Plaza Tower One building to lease, at Landlord's sole cost
and expense, 7 covered parking spaces (on a month-to-month,
non-designated/first-come, first-served basis) for Tenant's
use, starting on the Commencement Date through the date
Phase I of the parking garage is complete ("PTO Parking
Spaces"). If Landlord is unable to arrange for such PTO
Parking Spaces, Tenant may elect to make such arrangements
itself and, if so, Landlord agrees to credit the costs
thereof (not to exceed comparable market monthly covered
parking charges) to the Base Rent hereunder. Tenant shall
pay to Landlord monthly parking charges in the amount of
$66.05 per month for the first 143 covered parking spaces
for the initial Term, subject to adjustment thereafter.
Tenant shall be solely responsible for strictly monitoring
its employees use of the parking garage and insuring that
its employees or other designated parkers do not park in
spaces reserved for other tenants or exceed the total number
of covered parking spaces allocated to Tenant hereunder,
from time to time. Any failure by Tenant to adequately
monitor said parking usage shall, upon notice and expiration
of applicable cure period, for a non-monetary default, be
deemed a default hereunder, allowing Landlord to exercise
its rights and remedies hereunder, including, in this case,
limiting the daily access of Tenant's employees to no more
than the total number of covered parking spaces then
allocated to Tenant and/or terminating card access
capability to all but a total number of Tenant's employees
equal to the total number of covered parking spaces then
allocated to Tenant.
2
<PAGE> 83
Visitor Parking Spaces: A minimum of ten (10) parking spaces
designated as general visitor spaces shall be situated near
the Building's entrance.
B. References to $105,141.00 in Paragraph 30 of the Lease as the
Moving Allowance is amended to $107,220.00.
C. References in the Lease to $16,270.00 as the Landlord's Allowance
for the Distribution Space is amended to $19,003.36.
3. PREMISES EXPANSION.
A. PHASE TWO EXPANSION. The parties hereby acknowledge and agree
that the Premises shall be expanded by the addition, on the same terms and
conditions as set forth in the Lease except as otherwise provided in this
Paragraph, of a minimum of 12,000 rentable square feet and a maximum of 20,000
rentable square feet in the Building, in a location, total square footage and
configuration as determined by Landlord, in its sole discretion ("Phase Two
Expansion"); provided, however, that said Phase Two Expansion must be
contiguous space.
B. NOTICE. On or before July 1, 2000 Landlord shall notify Tenant
of the precise location and configuration of the Phase Two Expansion. The term
for the Phase Two Expansion shall commence on October 1, 2000 unless Tenant
elects, at its discretion, to give Landlord written notice of its desire to
occupy the Phase Two Expansion prior to October 1, 2000. If Tenant so
notifies Landlord prior to July 1, 2000, then within 10 days following Tenant's
notice to Landlord, Landlord shall notify Tenant of the then available Phase
Two Expansion location, the total rentable square footage and estimated early
commencement date of the Phase Two Expansion. In such case, upon completion of
tenant improvements, Tenant may occupy said Phase Two Expansion prior to
October 1, 2000; provided, however, that in the case of such early occupancy
Tenant's obligation to pay Base Rent shall be forgiven and Tenant shall only be
required to pay its additional Tenant's Pro Rata Share of Operating Expenses
for the Phase Two Expansion until October 1, 2000, whereupon Base Rent shall
commence.
C. EXPANSION AMENDMENT. After determination of the Phase Two
Expansion, Landlord and Tenant shall enter into an amendment ("Expansion
Amendment") of this Lease acceptable to Landlord. Such Expansion Amendment
shall provide that from and after the applicable date on which the Expansion
Space is demised to Tenant on the date which shall mean the earlier of (i) in
the event of an early occupancy by Tenant, as herein above provided, the date
the Phase Two Expansion is Ready for Tenant or (ii) October 1, 2000 ("Expansion
Space Commencement Date"), this Lease shall be deemed modified as follows:
(1) The term "Premises" shall be deemed to include the Phase
Two Expansion;
(2) The term of the Phase Two Expansion shall commence upon the
Expansion Space Commencement Date, as herein above defined, and shall expire on
the Lease Expiration Date, as the same may be extended;
(3) The Base Rent shall be increased by an amount determined
by multiplying the number of rentable square feet in the Phase Two Expansion
times the Base Rent rate for the primary Premises on the per square footage
rate, as provided in Part 1 of the Lease.
3
<PAGE> 84
(4) Tenant's Pro Rata Share shall be increased by a percentage equal to
the actual number of rentable square feet in the Phase Two Expansion divided by
the number of rentable square feet in the Building;
(5) The Base Year for the Phase Two Expansion shall be the Base Year
for the primary Premises.
(6) Tenant Finish Work in the Phase Two Expansion shall be installed
pursuant to a Work Letter for the Phase Two Expansion Space attached to the
Expansion Amendment and substantially similar to the Work Letter attached to
the Lease and the term of the Phase Two Expansion shall commence on the
Expansion Space Commencement Date. Said Work Letter is to provide that Landlord
shall contribute to the planning and construction of the installation of
alterations and improvements to such Phase Two Expansion in an amount equal to
the lesser of (i) $26.50 per rentable square foot of the Phase Two
Expansion, or (ii) the actual cost and expense of such initial alterations and
improvements ("Expansion Space Allowance"). All such Phase Two Expansion
Allowance to be used for the design and construction of the tenant
improvements within the Expansion Space, and for no other purpose whatsoever;
and
(7) The number of Parking Spaces shall be increased by 4 per 1000
rentable square feet within the Phase Two Expansion; provided, that the monthly
charge for additional covered parking spaces (based on the 2 per 1000 rentable
square foot ratio also set forth above) shall equal $75.00 per covered space
throughout the initial Term, subject to adjustment thereafter.
Other than the modifications set forth herein, the terms and conditions hereof
shall govern Tenant's lease of the Phase Two Expansion.
D. AMENDMENT. Landlord shall cause such Expansion Amendment to be
prepared and delivered to Tenant as soon as reasonably possible following
determination of the Phase Two Expansion. In the event that Amendment is not
executed by Tenant within 10 days after receipt by Tenant, then Tenant's rights
under this Paragraph shall be null and void, Tenant shall be deemed to have
waived its right under this Paragraph and Landlord shall have the absolute right
to lease such Phase Two Expansion. Notwithstanding the terms of this Paragraph,
Landlord shall not be obligated to deliver possession of the Phase Two Expansion
Space to Tenant if, prior to delivery of possession of the Phase Two Expansion,
Tenant shall be in default hereunder beyond any applicable notice and grace
period, in which event the provisions of this Paragraph shall terminate and be
of no further force or effect.
E. NOT TRANSFERABLE. In the event of an assignment of the Lease or
subletting (other than an assignment to or subletting of the entire Premises by
a Related Corporation) or vacation of more than 25% of the Premises (other than
an assignment to or subletting of the entire Premises by a Related Corporation),
Tenant's rights hereunder are null and void. Further, the right granted in this
Paragraph is personal to Tenant, is not assignable (other than Related
Corporation assignee) and may not be exercised by any sublessee or assignee of
Tenant (other than to a Related Corporation), regardless of whether the
sublessee or assignee has been approved by Landlord.
5. EXPANSION OPTION AND ADDITIONAL EXPANSION SPACE. The parties hereby
acknowledge and agree that Paragraph 34 of the Lease entitled "Expansion
Option" is hereby replaced in its entirety with the following:
4
<PAGE> 85
34. EXPANSION OPTION.
A. Expansion Space. Subject to the provisions hereinafter set forth,
Landlord grants to Tenant an option ("Expansion Option") to lease an additional
approximately 15,483 rentable square feet of space ("Expansion Space"), on the
same terms and conditions as set forth in this Lease, except as otherwise
provided in this Paragraph. It is understood and agreed that the Expansion Space
shall consist of Suites 101, 102 and 103 of the Building; provided, however,
upon commencement of construction of a second office building in the Building
Complex, which commencement shall be at Landlord's sole election ("Building
Two"), if Landlord so determines, again at Landlord's sole election, the
Expansion Space shall thereafter be space located on a floor or floors and in a
configuration in Building Two as determined by Landlord. It is further
understood and agreed that if the Expansion Space is so located in Building Two
it may be comprised of multiple suites which are not contiguous to one another,
and that the suites so comprising the Expansion Space in Building Two will be
provided to Tenant only in their then existing demised rentable square foot
increments.
B. Exercise Notice. Tenant may exercise the Expansion Option by giving
Landlord written notice ("Exercise Notice") of its desire to lease the
Expansion Space. Such Exercise Notice must be received by Landlord on or before
the last day of the 48th month of the initial Term. If the Exercise Notice is
not received in the required time period, then the Expansion Option shall be
deemed null, void and of no further force or effect. Within 30 days following
Tenant's Exercise Notice to Landlord, Landlord shall notify Tenant of (i) the
location and precise suite numbers of the Expansion Space, if located in
Building Two; and (ii) the estimated commencement date of the Expansion Space
suites based such Expansion Space's suite's existing expiration date(s) for the
lease terms of suites within the Expansion Space (either in the Building or in
Building Two); provided, that, Landlord agrees that all expiration dates for
the lease terms of suites within the Expansion Space shall not exceed the last
day of the 72nd month of the initial Term hereunders.
C. Expansion Amendment. After receipt of an Exercise Notice, Landlord
and Tenant shall enter into an amendment ("Expansion Amendment") of this Lease
acceptable to Landlord. Such Expansion Amendment shall provide that from and
after the applicable date on which the Expansion Space is demised to Tenant on
the date which is the earlier of (i) the date the Expansion Space, or any
portion thereof, is Ready for Tenant (each an "Expansion Space Commencement
Date"), this Lease shall be deemed modified as follows:
(1) The term "Premises" shall be deemed to include the Expansion Space;
(2) The term of the Expansion Space shall commence upon the Expansion
Space Commencement Date, as herein defined, and shall expire on the Lease
Expiration Date, as the same may be extended;
(3) The Base Rent shall be increased by an amount determined by
multiplying 15,483 rentable square feet of Expansion Space times 95% of the
Market Rate determined as provided in Paragraphs 37.B, C and D below, in effect
during the Term, but in no event less than the Rent payable for the primary
Premises, and said Market Rate determination shall be adjusted to reflect the
number of months remaining in the initial Term following the Expansion Space
Commencement Date.
5
<PAGE> 86
(4) Tenant's Pro Rata Share shall be increased by a percentage equal to
15,483 rentable square feet of Expansion Space divided by the number of rentable
square feet in the Building or Building Two, as applicable;
(5) The Base Year for the Expansion Space shall be the calendar year
in which the Commencement Date term for the Expansion Space begins and adjusted
pursuant to the provisions of the last sentence of Paragraph 5.B in the Lease;
(6) Tenant Finish Work in the Expansion Space shall be installed
pursuant to a Work Letter for the Expansion Space attached to the Expansion
Amendment and the term of the Expansion Space shall commence on the date the
Expansion Space is Ready for Tenant ("Expansion Space Commencement Date"). Said
Work Letter is to provide that Landlord shall contribute to the planning and
construction of the installation of alterations and improvements to such
Expansion Space in an amount equal to the lesser of (i) the Landlord
contribution allowance utilized in determining Market Rate for the Expansion
Space, or (ii) the actual cost and expense of such initial alterations and
improvements ("Expansion Space Allowance"). All such Expansion Space Allowance
to be used for tenant improvements within the Expansion Space, and for no other
purpose whatsoever; provided, however, Landlord shall, at its sole cost and
expense, pay for all demolition expenses, mechanical systems, ceiling grid, tile
and lights associated with the Expansion Space; and
(7) The number of Parking Spaces shall be increased pursuant to the
parking ratios set forth in Part 1 above; provided that additional covered
spaces (based on the 2 per 1000 rentable square feet ratio also set forth
above) shall be available at the then current monthly parking rate.
Other than the modifications set forth herein, the terms and conditions hereof
shall govern Tenant's lease of the Expansion Space.
D. Amendment. Landlord shall cause such Expansion Amendment to be
prepared and delivered to Tenant as soon as reasonably possible following its
receipt of Tenant's Exercise Notice and the determination of Base Rent. In the
event that Amendment is not executed by Tenant within 10 days after receipt by
Tenant, then Tenant's rights under this Paragraph shall be null and void,
Tenant shall be deemed to have waived its right under this Paragraph with
respect to the then applicable Expansion Space and Landlord shall have the
absolute right to lease such Expansion Space to any other person or entity.
Notwithstanding Tenant's exercise of its ability to request to lease the
Expansion Space pursuant to the terms of this Paragraph, Landlord shall not
be obligated to deliver possession of the then Expansion Space to Tenant if,
prior to delivery of possession of the Expansion Space, Tenant shall be in
default hereunder beyond any applicable notice and grace period, in which
event the provisions of this Paragraph shall terminate and be of no further
force or effect.
E. Not Transferable. In the event of an assignment of the Lease or
subletting (other than an assignment to or subletting of the entire Premises by
a Related Corporation) or vacation of more than 25% of the Premises (other than
an assignment to or subletting of the entire Premises by a Related Corporation),
Tenant's rights hereunder are null and void. Further, the right granted in this
Paragraph is personal to Tenant, is not assignable (other than Related
Corporation
6
<PAGE> 87
assignee) and may not be exercised by any sublessee or assignee of Tenant (other
than to a Related Corporation), regardless of whether the sublessee or assignee
has been approved by Landlord.
F. No Default. Tenant may exercise the Expansion Option, and an exercise
thereof shall only be effective, provided that at the time of Tenant's
exercise of the Expansion Option and on the Expansion Space Commencement Date
(i) this Lease is in full force and effect, (ii) Tenant is not in Default
following any applicable cure period hereunder, and (iii) no event has occurred
which, with the giving of any applicable notice or passage of time, would
constitute a Default.
6. ADDITIONAL EXPANSION SPACE. The parties herby acknowledge and agree
that Paragraph 35 of the Lease entitled "Tenant's Ability to Request Additional
Expansion Space" shall hereby be deemed modified such that, notwithstanding
anything to the contrary contained in said Paragraphs 35 or elsewhere in the
Lease, at Landlord's option the Additional Expansion Space(s), as defined in
Paragraph 35, may be located in additional buildings constructed by Landlord,
at its sole election, as part of the Building Complex.
7. TENANT IMPROVEMENT AGREEMENT. The parties hereby agree that Paragraph 3
of the Tenant Improvement Agreement attached to the Lease as Exhibit C, shall
be deemed modified by the deletion of the third sentence of said paragraph,
such that the Tenant shall not be obligated to repay the Excess Allowance to
Landlord.
8. RATIFICATION. Except as expressly modified by this Amendment, all other
terms and conditions of the Lease are hereby ratified and affirmed.
9. VALIDITY OF LEASE. The parties acknowledge that the Lease is a valid
and enforceable agreement and, as of the date hereof, neither party has any
actual knowledge of any claim against the other party or its agents which might
serve as the basis of any other set-off against accruing rent and other charges
or any other remedy at law or in equity.
7
<PAGE> 88
IN WITNESS WHEREOF, Landlord and Tenant have respectively executed
this Amendment as of the date and first year above written.
LANDLORD
FIDDLER'S GREEN CENTER, LLC, a Delaware
limited liability company
By: /s/ LARRY A. LANCE
------------------------------------
Name: Larry A. Lance
----------------------------------
Title: Managing Member
---------------------------------
TENANT
CONVERGENT GROUP CORPORATION, a
Delaware corporation
By: /s/ GLENN E. MONTGOMERY
------------------------------------
Name: Glenn E. Montgomery
----------------------------------
Title: CEO
---------------------------------
8
<PAGE> 1
EXHIBIT 21
<TABLE>
<S> <C> <C> <C> <C>
Convergent Group Corporation
(Delaware)
|
------------------------------------------------------------------------------------
| | | |
UGC Partnership UGC Corp. Convergent Global Corporation GDS Corp.
(Colorado) (Colorado) (Delaware) (Delaware)
(51%) (100%) (100%) (100%)
| |
---------------------------- ---------------------------
| | | |
GIS Research Corp. Convergent Group Ltd. GDS Ltd. Informatix
(Delaware) (Canada) (UK) (Japan)
(100%) (100%) (100%) (15%)
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 8, 2000 (except for Note J, as to
which the date is February 16, 2000), accompanying the financial statements of
Convergent Group Corporation contained in the Registration Statement and
Prospectus, and we consent to the use of our name as it appears under the
caption "Experts."
GRANT THORNTON LLP
February 17, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AT DECEMBER 31, 1999 AND THE RELATED STATEMENTS OF OPERATIONS,
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND CASH FLOWS FOR THE YEAR THEN
ENDED.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,596
<SECURITIES> 0
<RECEIVABLES> 15,575
<ALLOWANCES> (43)
<INVENTORY> 0
<CURRENT-ASSETS> 21,523
<PP&E> 7,688
<DEPRECIATION> 4,963
<TOTAL-ASSETS> 26,707
<CURRENT-LIABILITIES> 15,591
<BONDS> 0
0
42
<COMMON> 28
<OTHER-SE> (11,105)
<TOTAL-LIABILITY-AND-EQUITY> 26,707
<SALES> 0
<TOTAL-REVENUES> 66,610
<CGS> 0
<TOTAL-COSTS> 42,501
<OTHER-EXPENSES> 30,104
<LOSS-PROVISION> (113)
<INTEREST-EXPENSE> 778
<INCOME-PRETAX> (6,597)
<INCOME-TAX> (1,347)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,250)
<EPS-BASIC> .54
<EPS-DILUTED> .25
</TABLE>
