EXHIBIT 4.10
EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT, dated as of April 4, 2000, between
Convergent Communications, Inc., a Colorado corporation (the "Company"), and
each of the entities named on Exhibit A hereto (each, a "Purchaser").
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In consideration of the representations, warranties, and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows.
ARTICLE I
DEFINITIONS
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1.1 Certain Definitions. As used in this Agreement, the following terms
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shall have the following meanings:
"Accredited Investor" has the meaning set forth in Regulation D promulgated
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under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
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investigations, charges, complaints, claims, demands, injunctions, Judgments,
rulings, damages, dues, penalties, fines, costs, amounts paid in settlement,
Liabilities, obligations, Taxes, Liens, losses (other than investment losses),
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
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Section 1504(a).
"Agreement" means this Securities Purchase Agreement, including all
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exhibits and schedules hereto, between the Parties, as the same may be amended
from time to time in accordance with the provisions hereof.
"Assets" means all properties and assets, real and personal, tangible and
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intangible, of every type and description, whether owned or leased or otherwise
possessed, used, held for use or usable in the Company's or any of its
Subsidiaries' businesses, including the Licenses, the Intangible Property and
the Company Contracts.
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"Balance Sheet" means the audited consolidated balance sheet of the Company
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and its Subsidiaries as of December 31, 1999 included in the Financial
Statements.
"Basis" means, with respect to any specified consequence, any past or
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present fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act or transaction that
reasonably could form the basis for such consequence.
"Business Day" has the meaning set forth in the Series B Articles of
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Amendment in Exhibit B.
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"CEO" means Xxxxxx Xxxx.
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"CEO Agreement" has the meaning set forth in Section 2.2(d) hereof, in the
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form attached hereto as Exhibit F.
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"Class I" means the class of directors of the Board of Directors with a
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term expiring at the annual meeting of stockholders of the Company in 2000 and
every third annual meeting thereafter.
"Class II" means the class of directors of the Board of Directors with a
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term expiring at the annual meeting of stockholders of the Company in 2001 and
every third annual meeting thereafter.
"Class III" means the class of directors of the Board of Directors with a
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term expiring at the annual meeting of stockholders of the Company in 2002 and
every third annual meeting thereafter.
"Closing" has the meaning set forth in Section 2.2(b).
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"Closing Date" has the meaning set forth in Section 2.2(b).
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Commission" means the Securities and Exchange Commission or any successor
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Governmental Authority.
"Common Stock" has the meaning set forth in the Series B Articles of
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Amendment in Exhibit B.
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"Company" has the meaning set forth in the preface above.
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"Company Contracts" has the meaning set forth in Section 3.20.
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"Company Transaction" means any (A) direct or indirect acquisition or
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purchase of any equity securities of the Company or any of its Subsidiaries,
that results in any Person (other than TPG) Beneficially Owning 25% or more of
any class of equity securities of the Company or equity securities of any of its
Subsidiaries, (B) business combination, sale of all or substantially all of the
Company's assets, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, or (C) other transaction by the Company the
consummation of which would prevent or materially delay the transaction
contemplated hereby.
"Company Parties" means the Company and its Subsidiaries.
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"Company's Knowledge" means the actual knowledge of the Company's officers,
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after due inquiry.
"Contract" means any agreement, contract, commitment, indenture, lease,
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license, instrument, note, bond, security, agreement in principle, letter of
intent, undertaking, promise, covenant, arrangement or understanding, whether
written or oral.
"Conversion Shares" has the meaning set forth in Section 2.2(a).
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"Disclosure Schedule" has the meaning set forth in the preface of Article
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III.
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"Employee Benefit Plan" means any (i) nonqualified deferred or incentive
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compensation, retirement, bonus, stock option or other equity based, severance,
termination, retention or change in control plan or arrangement, (ii) qualified
defined contribution retirement plan or arrangement which is an Employee Pension
Benefit Plan, (iii) qualified defined benefit retirement plan or arrangement
which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or
(iv) Employee Welfare Benefit Plan or material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
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3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
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3(1).
"Entity" means a partnership, limited liability partnership, corporation,
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limited liability company, association, joint stock company, trust, estate,
joint venture, or unincorporated organization.
"Environmental, Health, and Safety Laws" means federal, state, local, and
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foreign law (including common law), statutes, regulations, ordinances, Judgments
or binding agreements with any Governmental Authority concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of Hazardous Materials into ambient air, surface water,
ground water, or lands
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or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous Materials.
"Environmental Studies" has the meaning set forth in Section 3.14(d).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"ERISA Affiliate" means each entity which is treated as a single employer
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with the Company for purposes of Code Section 414.
"FCPA" means the Foreign Corrupt Practices Act of 1977, as amended.
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"Fiduciary" has the meaning set forth in ERISA Section 3(21).
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"Financial Statements" has the meaning set forth in Section 3.9.
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"GAAP" means United States generally accepted accounting principles as in
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effect from time to time.
"Governmental Authority" means any nation or government, any state or other
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political subdivision thereof, and any Person exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Hazardous Materials" shall mean any chemical substance, including without
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limitation any: pollutant; contaminant; chemical; raw material; intermediate,
product or by-product; industrial, solid, toxic or hazardous substance, material
or waste; petroleum or any fraction thereof; asbestos or asbestos-containing-
material; and polychlorinated biphenyls; including without limitation all
substances, materials or wastes; which are now regulated, classified or
considered to be hazardous, dangerous or toxic under any Environmental, Health
or Safety Law, now or hereafter enacted, promulgated, or amended.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
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as amended, and the regulations promulgated thereunder.
"Indemnified Party" has the meaning set forth in Section 6.4.
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"Indemnifying Party" has the meaning set forth in Section 6.4.
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"Indenture" means the Indenture dated April 2, 1998 between Convergent
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Communications, Inc. as Issuer and Norwest Bank Colorado, N.A., as Trustee.
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"Intangible Property" means all certificates of deposit, bank accounts,
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securities, partnership or other ownership interests, rights to receive money or
property by assignment, future interests, claims and rights against third
parties, accounts and notes receivables owned or held directly or beneficially
by or on behalf of the account of the Company or any of its Subsidiaries, the
Licenses, the Intellectual Property and any other intangible property of any
nature of the Company or any of its Subsidiaries.
"Intellectual Property" means (i) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, (ii) all
trademarks, service marks, trade dress, logos, trade names, and corporate names,
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (iii) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (iv) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (v) all
computer software (including data and related documentation), (vi) all other
proprietary rights, and (vii) all copies and tangible embodiments thereof (in
whatever form or medium).
"Investor Rights Agreement" means the Investor Rights Agreement, dated as
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of April [__], 2000, between the Company and the Purchasers, as it may be
amended from time to time in accordance with its terms, having the terms set
forth in the form of Investor Rights Agreement attached hereto as Exhibit G.
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"Judgment" means any judgment, writ, order or decree of or by any
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arbitrator, court, judge, justice or magistrate, including any bankruptcy court
or judge, and any order of or by any other Governmental Authority.
"Liability" means any liability (whether known or unknown, whether asserted
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or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any such liability for Taxes and any such liability with respect to any
Redeemable Equity.
"Licenses" has the meaning set forth in Section 3.16.
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"Lien" means any mortgage, pledge, lien (statutory or other), encumbrance,
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hypothecation, charge, security interest, claim, option, right to acquire,
adverse interest, assignment, deposit arrangement, restriction, or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease involving substantially the same economic effect
as any of the
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foregoing and the filing of any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction).
"Material Adverse Effect" means any event, fact, circumstance or occurrence
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which results or would result in a material adverse change in or a material
adverse effect on any of (i) the financial condition, results of operation,
business, operations or regulatory status of the Company and its Subsidiaries
taken as one enterprise, or (ii) the legality or validity as to the Company or
enforceability as against the Company of any Transaction Document or (iii) the
ability of the Company or any of its Subsidiaries to perform its material
obligations hereunder or under any other Transaction Document.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
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"Ordinary Course of Business" means the ordinary course of business of the
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Company and its Subsidiaries consistent with past custom and practice (including
with respect to quantity and frequency) taking into consideration increases in
quantity and frequency resulting from the recent growth of the Company.
"Originally Issued Shares" means, as of any time, the aggregate number of
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Conversion Shares represented by the Series B Shares issued to TPG on the
Closing Date, as such aggregate number shall have been from time to time
cumulatively adjusted as a result of the operation of Section 9 and Section 10
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of the Series B Articles of Amendment through such time.
"Parties" means the Company and the Purchasers.
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"PBGC" means the Pension Benefit Guaranty Corporation.
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"Permitted Liens" means (i) mechanic's, materialmen's, and similar Liens
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for construction in progress or evidencing indebtedness for related services
that are not more than sixty days past due, (ii) Liens for Taxes not yet due and
payable or for Taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (iii) purchase money Liens and Liens securing rental
payments under capital lease arrangements, (iv) Liens incurred pursuant to the
transactions entered into in connection with, or permitted by, the Indenture;
(v) Liens existing as of the date hereof and disclosed in the Disclosure
Schedule or disclosed to Purchasers pursuant to Section 3.26 and (vi) other
Liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money which do not materially impair the current use,
occupancy or value or the marketability of title of the Asset subject thereto.
"Person" means an individual, Entity, or Governmental Authority.
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"Prohibited Transaction" has the meaning set forth in ERISA Section 406 or
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Code Section 4975.
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"Purchasers" means each of the parties identified as such on Exhibit A and
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their Affiliates and designated assignees.
"Purchaser Indemnified Parties" means the Purchasers and their successors
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and Representatives.
"Purchaser Placement Fee" means $5,250,000.
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"Redeemable Equity" of any Person means any equity interest of such Person
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that by its terms or otherwise, absolutely, contingently or otherwise, is or may
be required to be redeemed or repurchased by such Person or is or may become
redeemable or repurchasable at the option of the holder thereof.
"Registrable Shares" has the meaning set forth in the Investor Rights
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Agreement.
"Related Persons" means, as to any Person, (i) any Affiliate of such Person
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(other than a Company Party), (ii) any Entity (other than a Company Party) of
which such Person or any of its Related Persons is a director, officer, partner,
manager or other member of management with the power to direct the management
and policies of such Entity, (iii) any Entity (other than a Company Party) that
is the issuer of any equity interests of any class or series beneficially owned
by such Person or any of its Related Persons which represent 10% or more of all
outstanding equity interests of that class or series, or (iv) any trust or
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as trustee or in a similar capacity. If such Person is a
natural person, such Person's "Related Persons" shall also include such Person's
parents, children, siblings and spouse, the parents and siblings of such
Person's spouse and the spouses of such Person's children and any Entity (other
than a Company Party), trust or estate with which any such relative of such
Person has any relationship specified in clause (i), (ii) or (iii) of the first
sentence of this definition.
"Remedies Exception" means (i) applicable bankruptcy, insolvency,
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reorganization, moratorium, and other laws of general application, heretofore or
hereafter enacted or in effect, affecting the rights and remedies of creditors
generally, and (ii) the exercise, whether in an action or proceeding at law or
in equity, of judicial or administrative discretion in accordance with general
equitable principles, particularly as to the availability of the remedy of
specific performance or other injunctive relief.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
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"Regulatory Approvals" means (i) any and all certificates, permits,
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licenses, franchises, concessions, grants, consents, approvals, orders,
registrations, authorizations, waivers, variances or
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clearances from, or filings or registrations with, Governmental Authorities, and
(ii) any and all waiting periods imposed by applicable laws.
"Representatives" means, with respect to any Person, any of such Person's
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officers, directors, employees, agents, attorneys, accountants, consultants,
equity financing partners or financial advisors or other Person associated with,
or acting on behalf of, such Person.
"Required Regulatory Approval" means a Regulatory Approval (i) necessary
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under the HSR Act, or required under the Securities Act, the Exchange Act or the
securities laws of the several states of the United States, for or in connection
with the consummation by the parties thereto of the transactions contemplated by
the Transaction Documents, or (ii) consisting of the filing by the Company of
the Series B Articles of Amendment with the Secretary of State of the State of
Colorado.
"Requirement of Law" means, as to any Person, the charter and bylaws or
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other organizational or governing documents of such Person, and all federal,
state and local laws, rules, regulations, Judgments or other determinations of
an arbitrator, court or other Governmental Authority, applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Rights" means, with respect to any Person, any subscription, option,
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warrant, convertible or exchangeable security or other right, however
denominated, to subscribe for, purchase or otherwise acquire any capital stock,
other equity interest or other security of any class or series and of any
issuer, with or without payment of additional consideration in cash or property,
either immediately or upon the occurrence of a specified date or a specified
event or the satisfaction or happening of any other condition or contingency.
"Securities" means the collective reference to the Shares and the Warrants.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Series A Warrants" has the meaning set forth in Section 2.2(a).
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"Series B Warrants" has the meaning set forth in Section 2.2(a).
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"Series B Articles of Amendment" means the Articles of Amendment to the
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Amended and Restated Articles of Incorporation of the Company setting forth a
copy of the resolution adopted by the Board of Directors of the Company creating
and authorizing the Series B Preferred Stock, as filed with the Secretary of
State of the State of Colorado on or prior to the date hereof, in the form
attached hereto as Exhibit B, or any successor provisions of the Company's
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Articles of Incorporation.
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"Series B Preferred Stock" means the Series B Senior Cumulative Convertible
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Preferred Stock, no par value, of the Company.
"Shares" has the meaning set forth in Section 2.2(a).
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"Subsidiary" means, when used with respect to any Person as of any time,
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any other Person as to which any of the following statements is true as of such
time:
(i) such second Person is an Affiliate of such first Person which
is, directly or indirectly through one or more intermediaries, controlled
by such first Person, or
(ii) such first Person owns or controls, directly or indirectly
through one or more intermediaries, 50% or more of the outstanding equity
interests in such second Person having ordinary voting power to elect a
majority of the members of the board of directors or joint venture,
partnership or other management committee, trustees, managers or other
Persons ordinarily having the power, authority or responsibility for
managing or directing the management of such second Person, or
(iii) such first Person, directly or indirectly through one or
more intermediaries, is entitled under ordinary circumstances to 50% or
more of the profits or losses of such second Person or to receive upon
dissolution and liquidation of such second Person 50% or more of the assets
available for distribution to the holders of equity interests in such
second Person,
and in the case of any of clauses (i), (ii) and (iii), disregarding any voting
power, equity interests or other rights or interests which any Person other than
the first Person or another Subsidiary of the first Person would or might have
upon the happening of any contingency, the satisfaction of any condition or the
occurrence of any event which has not happened, been satisfied or occurred as of
such time.
"Tax" means any federal, state, local, or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security (or similar), unemployment, disability,
real property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof, required to be filed
under any statute, rule or regulation.
"Termination Fee" means $5,250,000.
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"Third Party Claim" has the meaning set forth in Section 6.4 below.
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"TPG" means TPG Partners III, L.P. and its Affiliates.
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"Transaction Documents" means this Agreement, the Investor Rights
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Agreement, the Series B Articles of Amendment, the Warrant Agreement, the
Warrants and each other certificate, instrument or agreement executed and
delivered by the Company or any of its Subsidiaries pursuant to or in connection
with the transactions contemplated by any of the foregoing.
"Transactions" means any and all of the transactions contemplated by this
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Agreement or any of the other Transaction Documents, including the issuance,
sale and purchase of the Shares and the Warrants on the date hereof or at the
Closing, the issuance and sale of Warrant Securities upon the exercise of any
Warrants and the issuance and delivery of the Conversion Shares upon the
conversion of any Series B Preferred Stock.
"Underlying Shares" means the collective reference to the Shares of Common
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Stock issuable upon conversion of the Series B Preferred Stock in accordance
with the Series B Articles of Amendment or upon exercise of the Warrants in
accordance with the Warrant Agreement.
"Warrant Agreement" means the Warrant Agreement, dated the date hereof,
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between the Company and the Purchasers, as it may be amended from time to time
in accordance with its terms, having the terms set forth in the form of Warrant
Agreement attached hereto as Exhibit E.
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"Warrant Certificate" means any certificate evidencing one or more Warrants
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which may at any time or from time to time be outstanding in accordance with the
terms of the Warrant Agreement.
"Warrants" means, collectively, the Series A Warrants and the Series B
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Warrants.
"Warrant Securities" has the meaning set forth in the Warrant Agreement.
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1.2 Certain Rules of Construction. This Agreement is to be interpreted
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in accordance with the following rules of construction:
(i) Number and Gender. All definitions of terms apply equally to
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both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.
(ii) "Including," "Herein," Etc. The words "include," "includes"
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and "including" are deemed to be followed by the phrase "without
limitation". The words "herein", "hereof",
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and "hereunder" and words of similar import refer to this Agreement
(including all Exhibits and Schedules) in its entirety and are not limited
to any part hereof unless the context shall otherwise require. The word
"or" is not exclusive and means "and/or."
(iii) Subdivisions and Attachments. All references in this
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Agreement to Articles, Sections, subsections, Exhibits and Schedules are,
respectively, references to Articles, Sections and subsections of, and
Exhibits and Schedules attached to, this Agreement, unless otherwise
specified.
(iv) References to Documents and Laws. All references to any
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Transaction Document are to it as amended, modified and supplemented from
time to time in accordance with its terms. All references to (x) any other
agreement or instrument or (y) any Requirement of Law, License or similar
item are to it as amended and supplemented from time to time (and, in the
case of a statute, law or regulation, to any corresponding provisions of
successor statutes, laws or regulations), unless otherwise specified.
(v) References to Days. Any reference in this Agreement or a
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Transaction Document to a "day" or number of "days" (without the explicit
qualification "Business") is a reference to a calendar day or number of
calendar days. If any action or notice is to be taken or given on or by a
particular calendar day, and such calendar day is not a Business Day, then
such action or notice may be taken or given on the next Business Day.
(vi) Examples. If, in any provision of any Transaction Document,
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any example is given (through the use of the words "such as," "for
example," "e.g." or otherwise) of the meaning, intent or operation of any
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provision, such example is intended to be illustrative only and not
exclusive.
(vii) Participation in Drafting. The Parties and their respective
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legal counsel have participated in the drafting of this Agreement, and this
Agreement will be construed simply and according to its fair meaning and
without any presumption or prejudice for or against any Party.
(viii) Headings. The table of contents and section headings
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contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
ARTICLE II
PURCHASE AND SALE
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2.1 Authorization of Securities. Prior to the execution and delivery of
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this Agreement, the Company has duly (i) designated, created and authorized the
Series B Preferred Stock and the
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issuance and sale of shares thereof pursuant to this Agreement and (ii)
authorized the Warrants and the issuance and sale thereof pursuant to this
Agreement.
2.2 Securities Purchase.
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(a) Sale and Purchase. At the Closing, the Company shall issue and sell
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to the Purchasers, and the Purchasers shall purchase from the Company, for an
aggregate purchase price of $175,000,000 (i) a total of 175,000 shares of Series
B Preferred Stock (the "Shares"), having the rights, preferences, privileges and
restrictions set forth in the Series B Articles of Amendment, each share
convertible at the option of the holder at any time following the Closing into
shares (the "Conversion Shares") of Common Stock in accordance with the terms of
the Series B Articles of Amendment, (ii) Series A Warrants, having the terms set
forth in the form of Warrant attached hereto as Exhibit C, to purchase an
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aggregate of 700,000 shares of Common Stock (the "Series A Warrants"), and (iii)
Series B Warrants, having the terms set forth in the form of Warrant attached
hereto as Exhibit D, to purchase 1,166,667 shares of Common Stock (the Series B
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Warrants"), in the case of each of (ii) and (iii) subject to adjustment in
accordance with the Warrant Agreement. The number of Shares, Series A Warrants
and Series B Warrants to be purchased at the Closing by each Purchaser, and the
portion of the aggregate purchase price to be paid by each Purchaser, are set
forth next to such Purchaser's name on Exhibit A hereto.
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(b) Delivery of Securities; Payment of Purchase Price. The closing of the
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purchase and sale of the Securities (the "Closing") shall take place on the
third Business Day following the satisfaction or waiver of each of the
conditions set forth in Sections 2.2(c), (d) and (e) at the offices of Xxxxxx,
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Xxxx & Xxxxxxxx LLP, 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx (the
"Closing Date"), or at such other time and place as is mutually acceptable to
the Parties. Delivery of the Securities purchased by the Purchasers pursuant to
this Agreement will be made at the Closing by the Company delivering to the
Purchasers, against payment of the purchase price therefor, (i) a stock
certificate or certificates, dated the Closing Date, representing the number of
Shares purchased by the Purchasers, with each such certificate being registered
in the name of the Purchasers and (ii) Warrant Certificates, dated the Closing
Date, representing the number of Warrants purchased by the Purchasers, with each
such certificate being registered in the name of the respective Purchaser,
together with the Warrant Agreement, duly executed and delivered by the Company
and the Purchasers. Payment by the Purchasers of the agreed purchase price for
the Shares and Warrants (against which the Purchaser Placement Fee payable to
the Purchasers (which shall be allocated pro rata to the respective purchase
prices payable by them as set forth in Exhibit A) and any amounts due to the
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Purchaser for expenses pursuant to Section 8.9 hereof has been netted) shall be
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made by wire transfer (to the account of the Company previously designated by it
in writing) and the Company shall acknowledge receipt from the Purchasers of
payment in full.
(c) Conditions of Each Party. The obligation of the Company and the
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Purchasers to consummate the sale and purchase of the Securities as contemplated
by this Agreement is subject
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to the satisfaction of the following conditions, any of which may be waived in
writing by the Company and the Purchasers:
(i) Proceedings Not Restrained. No order or injunction shall
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have been issued by a court of competent jurisdiction preventing the
consummation of the transactions contemplated hereby, and no action, suit,
proceeding or investigation shall have been instituted or threatened that
seeks to restrain, restrict or prohibit or impose substantial penalties or
damages with respect to (or any other materially adverse relief or remedy
in connection with) such transactions.
(ii) Purchase Permitted By Applicable Laws. All Regulatory
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Approvals shall have been received, and the purchase and sale of the
Securities to be purchased at the Closing by the Purchasers on the terms
and conditions herein provided (including the application of the proceeds
therefrom by the Company) shall not violate any applicable Requirement of
Law.
(d) Conditions of the Purchasers. The obligation to purchase and pay for
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the Securities to be purchased by the Purchasers at the Closing Date as
contemplated by this Agreement is subject to the satisfaction, on or before the
Closing Date, of the following conditions, any of which may be waived in writing
by the Purchasers:
(i) Certain Documents. In addition to the stock certificates and
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Warrant Certificates required by Section 2.2(b), the Purchasers shall have
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received the following, each dated the Closing Date (except as otherwise
specified below):
(A) a certificate of the Secretary or an Assistant Secretary
of the Company certifying (x) the names and signatures of the officers
of the Company authorized to sign the certificates and other documents
to be delivered by the Company on the Closing Date and (y) that the
conditions contained in the other subdivisions of this Section 2.3(d)
--------------
and, to the knowledge of the Company, subdivision (i) of Section
-------
2.3(c), have been satisfied;
------
(B) a certificate of the chief executive officer of the
Company and the Secretary of the Company (x) attaching copies,
certified by such officers as true and complete, of the resolutions of
the Board of Directors of the Company in connection with the
authorization and approval of the execution, delivery and performance
of the Transaction Documents and consummation of the Transactions and
of all other documents evidencing all necessary corporate action taken
in connection therewith, (y) attaching copies, certified by such
officers as true and complete, of the Amended and Restated Articles of
Incorporation and By-laws of the Company and of the Series B Articles
of Amendment, each as amended through the Closing Date, and (z) which
includes a representation by such officers that the copies
13
of the Series B Articles of Amendment, the Articles of Incorporation
and By-Laws or other organizational documents of each Subsidiary of
the Company, as previously provided to the Purchasers, are true and
complete in all respects;
(C) favorable opinions of Xxxxxx, Xxxx & Xxxxxxxx LLP,
counsel to the Company, and Xxxxxx X. Xxxxxxx, General Counsel to the
Company, in form and substance satisfactory to the Purchasers.
(ii) Representations and Warranties; No Default. The
------------------------------------------
representations and warranties of the Company contained in this Agreement
shall have been true and correct in all material respects (except that any
representation or warranty qualified by materiality or Material Adverse
Effect shall be true and correct in all respects) on the date of this
Agreement and as of the Closing Date as if made on the Closing Date; and
the Company shall have performed and complied with all agreements,
covenants, conditions and obligations contained in this Agreement, the
Series B Articles of Amendment, the Investor Rights Agreement and the
Warrant Agreement that are required to be performed or complied with by it
on or before the Closing.
(iii) No Material Adverse Change. Since the date hereof, the
--------------------------
Company shall have operated its business only in the Ordinary Course of
Business and there shall not exist or have occurred any condition, event or
state of facts that has had or is reasonably likely to have a Material
Adverse Effect, whether or not arising in the Ordinary Course of Business.
(iv) Absence of Certain Events. No Sale of the Company (as
-------------------------
defined in Exhibit B), no Reorganization Event (as defined in Exhibit B),
--------- ---------
no Change of Control (as defined in Exhibit B) and no action or event shall
---------
have been taken or shall have occurred which has or would result in any
adjustment under Section 10 of the Series B Articles of Amendment or
Article III of the Warrant Agreement.
(v) Fairness Opinion. Warburg Dillon Read LLC shall have
----------------
delivered (and not withdrawn or modified in any adverse respect) a written
opinion to the Board of Directors to the effect that the consideration paid
to the Company for the shares of Series B Preferred Stock sold pursuant to
Section 2.2, is fair, from a financial point of view, to the Company, and a
true and correct copy of such opinion shall have been delivered to the
Purchasers.
(vi) Consents. All Regulatory Approvals (including, without
--------
limitation, the Required Regulatory Approvals) from any Governmental
Authority and all consents, waivers or approvals from any other Person
(including, without limitation, the former holders of the Series A
Preferred Convertible Stock of the Company or pursuant to the Indenture or
any of the Company's other debt or credit agreements or material contracts)
required for or
14
in connection with the execution and delivery of the Transaction Documents
and the consummation of the transactions contemplated thereby shall have
been obtained or made on terms reasonably satisfactory to the Purchasers,
and all waiting periods specified under applicable Law (including, without
limitation, the waiting period under the HSR Act), the expiration of which
is necessary for such consummation, shall have expired or been terminated.
(vii) Board Composition; By-laws. (i) The Board shall have
--------------------------
been constituted in the manner contemplated by the Investor Rights
Agreement (including that: the size of the Board shall be seven directors
(subject to increase only to the extent provided in the Series B Articles
to accommodate the Designated Directors or the Majority Directors (each as
defined in the Series B Articles of Amendment)), and the composition of the
Board shall be as specified in Schedule 2.2(d)(vii) and, if necessary,
there shall be one vacancy for the future election of an independent
director to be designated by TPG); (ii) appropriate resolutions to effect
the establishment of the Operating Committee contemplated by the Investor
Rights Agreement (the "Operating Committee") shall have been duly adopted
by the Board; (iii) the By-laws of the Company shall have been amended, in
form and substance satisfactory to the Purchasers, to effectuate the
purposes and intentions of Sections 7 and 11 of the Series B Articles of
Amendment and the Investor Rights Agreement, including by providing: (A)
that the Board shall have seven members, subject to increase only to the
extent provided in the Series B Articles to accommodate the Designated
Directors or the Majority Directors (each as defined in the Series B
Articles of Amendment); (B) for the establishment of the Operating
Committee; (C) that directors may take action in the manner described in
Section 7.4 of the Series B Articles of Amendment; (D) that for so long as
TPG is the Beneficial Owner of at least 40% of the Originally Issued
Shares, except to the extent that the listing requirements of the Nasdaq
Stock Market's National Market would be breached by the operation of this
clause (D), at least one-third of the members of each and every committee
of the Board will be Series B Directors (as defined in the Series B
Articles of Amendment); and (E) for the indemnification described in
Section 7.5 of the Series B Articles of Amendment; and (iv) directors' and
shareholders' liability insurance shall be available to the directors
designated by the Purchasers on terms satisfactory to the Purchasers and in
an amount of coverage at least equal to $40,000,000.
(viii) CEO and Related Matters. The CEO shall have been duly
-----------------------
and validly appointed Chief Executive Officer of the Company by all
necessary action of the Board of Directors, and the Company and CEO shall
have executed the employment agreement (the "CEO Agreement") substantially
-------------
in the form of Exhibit F hereto or otherwise on terms reasonably acceptable
---------
to the Purchasers and the Company.
(ix) Agreements. Each of the Series B Articles of Amendment,
----------
the Investor Rights Agreement and the Warrant Agreement shall have been
executed and delivered and shall be in full force and effect in
substantially the forms attached hereto, and
15
the Series B Articles of Amendment shall have been duly filed with and
recorded by the Secretary of State of the State of Colorado; and the
Company shall have furnished to the Purchaser evidence satisfactory to the
Purchaser of such filing.
(x) Credit Facilities; Defaults. (i) The entire outstanding
---------------------------
principal amount of and accrued interest on the $10,000,000 credit facility
between the Company and Xxxxxxx Xxxxx Credit Partners, L.P., which amount
shall be no greater than $12,000,000, shall have been paid in full and the
obligations of the Company with respect to such loan shall be satisfied in
full, in each case concurrently with the consummation of the transactions
contemplated by this Agreement, no default shall exist (or occur upon
consummation of the Transactions) under such loan or any other material
financing instrument of the Company or any other Company Contract, and no
action shall be taken to accelerate any material indebtedness of the
Company. Contemporaneously with the Closing hereunder, the Company shall
enter into a new working capital facility with Foothill Capital (or
comparable institution) on terms and conditions reasonably acceptable to
the Purchasers (the "Foothill Facility"); and (ii) the Foothill Facility
shall be in full force and effect thereafter and the Company shall have at
least $50,000,000 in firmly committed availability thereunder.
(e) Condition of the Company. The Company's obligation to issue and
------------------------
sell the Securities to be sold to and purchased by the Purchasers at the Closing
Date as contemplated by this Agreement is subject to the satisfaction of the
condition, which may be waived in writing by the Company, that the
representations and warranties contained in Article IV of this Agreement shall
be true and correct in all material respects (except that any representation or
warranty qualified by materiality or Material Adverse Effect shall be true and
correct in all respects) on and as of the Closing Date, and the Company shall
have received a certificate to that effect signed by each of the Purchasers.
2.3 Use of Proceeds. The Company shall use all proceeds of the sale of
---------------
the Securities for working capital and capital expenditures as provided in the
Company's 2000 business plan heretofore approved by the Company's Board of
Directors and furnished to the Purchasers.
ARTICLE III
COMPANY REPRESENTATIONS AND WARRANTIES
---------------------------------------
The Company represents and warrants to and covenants and agrees with the
Purchasers as follows as of the date hereof and, after giving effect to all of
the Transactions being consummated on the Closing Date, as of the Closing Date
with the same force and effect as if made at and as of such time, in each case,
except as set forth in the disclosure schedule delivered by the Company to the
Purchasers on the date hereof (the "Disclosure Schedule"). Such
representations, warranties, covenants and agreements have constituted a
material inducement to the Purchasers to enter into this
16
Agreement, to enter into the other Transaction Documents to which it has become
a party, to purchase the securities purchased by it pursuant hereto and to
consummate the other Transactions. The Disclosure Schedule is arranged in
sections corresponding to the lettered and numbered sections in this Agreement
which require the disclosure. Any matter disclosed in one section of the
Disclosure Schedule may be cross-referenced in other sections of the Disclosure
Schedule, and upon such cross-referencing shall be deemed disclosed for all
purposes of the section of the Disclosure Schedule in which such cross-reference
is contained.
3.1 Certain Representations and Warranties Regarding the Transactions.
-----------------------------------------------------------------
(a) Authorization of Transactions. The Company has full power and
-----------------------------
authority to execute and deliver this Agreement and each other Transaction
Document and to perform its obligations hereunder and thereunder. The
execution, delivery and performance by the Company of this Agreement and each
other Transaction Document have been duly authorized by the Board of Directors
of the Company and by all other necessary corporate action on the part of the
Company. Each of this Agreement and each other Transaction Document to which
the Company is a named party has been duly executed and delivered by the Company
and constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to the
Remedies Exception. The Company is not required to give any notice,
declaration, report or statement to, make any filing with, or obtain any
authorization, consent, declaration or approval of any Governmental Authority or
any other Person in connection with the execution, delivery or performance by
the Company or any of its Subsidiaries of this Agreement or any other
Transaction Document or the consummation of the Transactions or in order to
preclude any termination, suspension, modification or impairment of any of the
Company Contracts or any legal or contractual right, privilege, license or
franchise which is included in the Assets.
(b) Consents; No Conflicts. Except as set forth in the Disclosure
-----------------------
Schedule, no regulatory approval from, or registration, disclosure, declaration
or filing with, any Governmental Authority is required to be made or obtained by
the Company or any of its Subsidiaries in connection with the execution,
delivery and performance of the Transaction Documents and the consummation of
the transactions contemplated thereby. The execution and delivery of the
Transaction Documents and the consummation of the Transactions contemplated
hereby will not constitute a "Change of Control" or "Change in Control" (or
similar concept) as such term (or concept) is defined in any material contract,
agreement, indenture, mortgage, note, lease or other instrument to which the
Company or any of its Subsidiaries is a party or by which the Company or any
such Subsidiary is bound or to which the properties of the Company or any such
Subsidiary is subject.
(c) Series B Articles of Amendment. By the Closing, all actions necessary
------------------------------
in order to duly and validly authorize and designate the Series B Preferred
Stock and authorize and create the Warrants, including all necessary corporate
action on the part of the Company and its stockholders, shall have been taken
and the Series B Articles of Amendment in the form attached hereto as Exhibit
-------
17
B and the Warrant Agreement shall each be in full force and effect and shall not
-
have been amended, modified or supplemented.
(d) Financial Advisors and Brokers; Fairness Opinion. Except for Warburg
------------------------------------------------
Xxxxxx Read L.L.C., no Person has acted, directly or indirectly, as a broker,
finder or financial advisor of the Company in connection with the Transaction
Documents or the transactions contemplated thereby, and no Person is entitled to
receive any broker's, finder's or similar fee or commission in respect thereof
based in any way on any agreement, arrangement or understanding made by or on
behalf of the Company, any of its Subsidiaries or any of their respective
directors, officers or employees. Furthermore: (i) true and correct copies of
all agreements between the Company, on the one hand, and Warburg Dillon Read
L.L.C., on the other, have been delivered to the Purchasers; and (ii) the
Company has received an opinion of Warburg Dillon Read L.L.C. to the effect that
the consideration to be paid to the Company for the shares of Series B Preferred
Stock to be sold hereunder is fair, from a financial point of view, to the
Company.
(e) Offerees; Exemption from Registration. None of the Company Parties,
-------------------------------------
their respective directors and officers, their respective Affiliates or any
Person acting as agent for or on behalf of any of the Company Parties has,
directly or indirectly, sold, offered for sale, or solicited offers to buy any
of the Securities or other securities of the Company so as to bring the offer,
issuance or sale of the Securities as contemplated by this Agreement within the
registration requirements of Section 5 of the Securities Act, or within the
registration or qualification requirements of any "blue sky" or securities laws
of any state or other jurisdiction. Assuming the Purchasers are all Accredited
Investors, the offering, issuance and sale of the Securities are exempt from the
registration provisions of the Securities Act.
3.2 Organization, Qualification, and Corporate Power. The Company is a
------------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado. Each of its Subsidiaries is a limited liability
company or a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Each of the Company
Parties is duly authorized, qualified and licensed and is in good standing to
conduct business under the laws of each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or license necessary, except in such jurisdictions
where the lack of such qualification or license or the failure to be in good
standing would not have a Material Adverse Effect. Each jurisdiction in which
the Company or any of its Subsidiaries is authorized to conduct business is
identified in the Disclosure Schedule. Each of the Company Parties has full
corporate power and authority to carry on the businesses in which it is engaged
as such businesses are now being conducted and to own, lease and use the
properties currently owned, leased and used by it. The Disclosure Schedule
lists the directors and officers of the Company and the managers or directors
and officers, as the case may be, of each of its Subsidiaries. The Company has
made available to the Purchasers true, correct and complete copies of the
charter and bylaws or other operational documents of each of its Subsidiaries
(in each case as amended to date).
18
3.3 Terms, Validity, Etc. The Company has delivered to the Purchasers
---------------------
true and complete copies of its Articles of Incorporation and By-Laws as in
effect on the date hereof. The Shares and the Warrants, when issued as provided
herein, and the Underlying Shares, when issued upon conversion of Series B
Shares in accordance with the Series B Articles of Amendment or the exercise,
conversion or exchange of Warrants in accordance with the Warrant Agreement,
will be duly authorized, validly issued, fully paid and nonassessable, free and
clear of any Lien, restriction or claim, other than any restriction on transfer
under applicable Federal and State securities laws, and with no personal
liability attaching to the ownership thereof, and the holder thereof will have
the respective rights, preferences and privileges, and will be subject only to
the applicable limitations and restrictions, provided in the Company's Amended
and Restated Articles of Incorporation (including the Series B Articles of
Amendment), the Warrant Agreement and the other Transaction Documents.
3.4 Capitalization.
--------------
(a) The authorized and issued capital stock of the Company consisted solely
of (i) 100,000,000 authorized shares of Common Stock, of which 28,929,824 shares
were issued and outstanding, all Persons, to the Company's Knowledge, owning of
record greater than 5% of the outstanding shares are named in the Disclosure
Schedule and no shares were held in treasury, and (ii) 1,000,000 authorized
shares of "blank-check" Preferred Stock, none of which was designated, issued or
outstanding, except for 175,000 unissued shares designated as Series B Preferred
Stock. As of such time, except as set forth in the Disclosure Schedule, (i) no
shares of capital stock of the Company of any class or series were reserved for
issuance except for the shares of Common Stock issuable upon conversion of the
Shares or exercise of the Warrants; and (ii) other than pursuant to certain
provisions of the Transaction Documents, there were no voting trusts or other
Contracts, arrangements or understandings to which the Company was a party or by
which it was bound or of which the Company had knowledge that directly,
indirectly, absolutely or contingently, related to the issuance, ownership,
pledge, transfer, purchase, redemption or repurchase, voting or registration
under the Securities Act of, or any restrictions with respect to, any shares of
authorized, issued, or outstanding capital stock of the Company of any class or
series. No Redeemable Equity of the Company is authorized, issued or
outstanding. The Company has previously furnished to the Purchasers a true,
correct and complete copy of each registration rights agreement entered into by
the Company in favor of any Person.
(b) Immediately after the Closing and after giving effect to the
issuance of the Shares and the Warrants, the statements in Section 3.4(a) shall
--------------
be true, accurate and complete in all material respects, except that the Shares
and the Warrants will be outstanding.
(c) Except as set forth in the Disclosure Schedule, there are no
outstanding or authorized Rights or other Contracts, commitments, arrangements
or understandings that could require the Company to issue, sell, or otherwise
cause to become outstanding any shares of its capital stock, or stock
appreciation, phantom stock, profit participation, or similar rights with
respect to the
19
Company. No capital stock or other securities of the Company have been, and the
Securities are not being, and the Underlying Shares, when issued upon conversion
of the Series B Shares or exercise of the Warrants, as the case may be, will not
be, issued in violation of any preemptive rights. The Company has duly reserved
15,328,206 shares of Common Stock for issuance upon conversion, exercise or
exchange of the Shares and the Warrants. None of the issuance or sale of the
Securities, any future conversion, exercise or exchange of any Series B Share or
Warrant, nor any future adjustments in the number of shares of Common Stock or
the kinds or amounts of other securities or property deliverable upon exercise,
conversion or exchange of the Warrants or conversion of Series B Shares or in
the amount of consideration payable by holders upon such exercise or conversion
shall (i) give any Person any preemptive right or any similar or other right to
subscribe for, purchase or otherwise acquire any of the Securities, any Warrant
Securities, any convertible securities, any other shares of capital stock of the
Company of any class or series or any Rights with respect thereto or any other
securities of the Company or (ii) result in any adjustments in the number of
shares of Common Stock or the kinds or amounts of other securities or property
deliverable upon exercise of the Existing Rights or in the amount of
consideration payable by the holders thereof upon such exercise. Without
limiting the generality of the foregoing, except as set forth in the Disclosure
Schedule, no conversion price or exercise price of any Right or other security
of the Company will be reduced, and the number of shares of Common Stock
underlying any Right or other security of the Company shall not be increased, as
the result of the issuance or exercise of the Securities.
3.5 Indebtedness. The Disclosure Schedule contains a list of all
------------
outstanding loan or credit agreements, notes, bonds, mortgages, indentures and
other similar agreements and instruments pursuant to which the Company or any of
its Subsidiaries has borrowed money (other than purchase money indebtedness and
indebtedness for money borrowed by a Subsidiary from the Company, in each case
incurred in the Ordinary Course of Business) in excess of $250,000, and the
respective amounts of principal and accrued and unpaid interest outstanding
thereunder as of a recent date.
3.6 Compliance with Laws; Noncontravention.
--------------------------------------
(a) Compliance and Noncontravention. Neither the execution, delivery or
-------------------------------
performance of this Agreement or any other Transaction Document, nor the
consummation of any of the Transactions does or will (i) violate any Requirement
of Law or Judgment to which the Company, any of its Subsidiaries or any of the
Assets is subject or bound, or any provision of the charter or bylaws of the
Company or of the charter, bylaws, operating agreement or other organizational
document of any of its Subsidiaries, or (ii) conflict with, result in a breach
of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under, any Company Contract or any legal or contractual right,
privilege, License or franchise which is included in the Assets, or result in
the imposition of any Lien upon any of the Assets, except where any such
violation, conflict, breach, default, right to accelerate, terminate, modify or
cancel, or require a notice or result in the imposition of a Lien would not have
a Material Adverse Effect. Assuming that the representations and warranties of
the Purchasers contained herein are true, neither the Company nor any of its
Subsidiaries is required to give any
20
notice, declaration, report or statement to, make any filing with, or obtain any
authorization, consent, declaration or approval of any Governmental Authority or
other third party in connection with the execution and delivery by the Parties
of, or the consummation of the Transactions or in order to preclude any
termination, suspension, modification or impairment of any of the Company
Contracts or any material legal or contractual right, privilege, License or
franchise which is included in the Assets.
(b) Corporate Controls. Neither the Company nor any of its Subsidiaries:
------------------
(i) are aware of or have taken any action, directly or indirectly, that would
result in a violation by such Persons of the FCPA or the Federal Law for the
Liability of Public Servants, had such laws applied, including, without
limitation, making use of the mails or any means or instrumentality of
interstate commerce corruptly in furtherance of an offer, payment, promise to
pay or authorization of the payment of any money, or other property, gift,
promise to give, or authorization of the giving of anything of value to any
"foreign official" (as such term is defined in the FCPA) or any foreign
political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA or in violation of any Law of any Country
of Operations; or (ii) have offered, promised, authorized or made, directly or
indirectly, any unlawful payments or any payments or other inducements to any
foreign official, with the intent or purpose or result of: (A) influencing any
act or decision of such official in his official capacity, (B) inducing such
official to do or omit to do any act in violation of the lawful duty of such
official, or (C) inducing such official to use his influence with a government
or instrumentality thereof to affect or influence any act or decision of such
government or instrumentality, in each case in order to assist the Company or
any of its Subsidiaries in obtaining or retaining business for or with, or
directing business to, any Person.
3.7 Subsidiaries.
------------
(a) The Disclosure Schedule sets forth for each Subsidiary of the Company
(i) its name and jurisdiction of organization, (ii) its form of organization and
capital structure, and (iii) the capital stock or membership or other equity
interests held by the Company in such Subsidiary. The Company holds of record
and owns beneficially all of the outstanding shares of capital stock or other
equity or ownership interests in each of its Subsidiaries, free and clear of any
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws or as disclosed on the Disclosure Schedule), Taxes, Liens,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands of any nature whatsoever.
(b) Except as set forth in the Disclosure Schedule, there are no
outstanding or authorized Rights, Contracts, arrangements or understandings that
could require the Company or any of its Subsidiaries to sell, transfer, or
otherwise dispose of any equity or ownership interest in any of its Subsidiaries
or that could require any Subsidiary of the Company to issue, sell, or otherwise
cause to become outstanding any of its own shares of capital stock or membership
or other equity or ownership interests or any shares of capital stock or
membership or other equity or ownership interests in any other Subsidiary. There
are no (i) authorized or outstanding stock appreciation,
21
phantom stock, profit participation, or similar rights with respect to or
Redeemable Equity of, any Subsidiary of the Company or (ii) voting trusts,
proxies, or other agreements or understandings with respect to the voting of any
capital stock, membership interest or other equity or ownership interests of any
such Subsidiary. Except as set forth in the Disclosure Schedule, none of the
Company Parties controls directly or indirectly or has any direct or indirect
equity participation or other investment in any Person which is not a
Subsidiary.
3.8 Corporate Records. The minute books or similar records of the
-----------------
Company and each of its Subsidiaries, which have been made available to the
Purchasers, contain true and complete records in all material respects of all
meetings of, or written consents in lieu of meetings executed by, the respective
boards of directors (and all committees thereof) and shareholders or other
equity owners of the Company and each such Subsidiary. All material actions and
transactions taken or entered into by the Company or any such Subsidiary and
requiring action by its Board of Directors (or Persons performing similar
functions for any non-corporate Subsidiary) or shareholders or other equity
owners have been duly authorized or ratified as necessary and are evidenced in
such minute books; except where the failure of such authorization, ratification
or evidence in the minute book would not have a Material Adverse Effect. The
stock certificate books and stock records of the Company and each such
Subsidiary, as made available to the Purchasers, are true and complete.
22
3.9 Financial Statements.
--------------------
(a) Company Reports; Financial Statements. (a) The Company has made
-------------------------------------
available to the Purchasers a true and complete copy of (i) the Company's Annual
Report on Form 10-K for the year ended December 31, 1999, (ii) the Company's
Quarterly Report on Form 10-Q for the period ended September 30, 1999 and (iii)
each registration statement, report on Form 8-K, proxy statement, information
statement or other report or statement filed by the Company with the Commission
since September 30, 1999 and prior to the date hereof, in each case in the form
(including exhibits and any amendments thereto) filed with the Commission
(collectively, the "SEC Reports"). As of their respective dates, the SEC
-----------
Reports and any registration statement, report, proxy statement, information
statement or other statement filed by the Company with the Commission after the
date hereof and before the Closing Date ("Subsequent Reports") (i) was, or will
------------------
be, as the case may be, timely filed with the Commission; (ii) complied, or will
comply, as the case may be, in all material respects, with the applicable
requirements of the Exchange Act and the Securities Act, and (iii) did not, or
will not, as the case may be, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Each of the consolidated balance sheets (including, where applicable,
the related notes and schedules) included in or incorporated by reference into
the SEC Reports and any Subsequent Reports fairly presents, or will fairly
present, as the case may be, in all material respects, the consolidated
financial position of the Company and its Subsidiaries as of the date thereof,
and each of the consolidated statements of income (or statements of results of
operations), stockholders' equity and cash flows (including the related notes
and schedules) included in or incorporated by reference into the SEC Reports and
any Subsequent Reports fairly presents or will fairly present as the case may
be, in all material respects, the results of operations, retained earnings and
cash flows, as the case may be, of the Company and its Subsidiaries (on a
consolidated basis) for the periods or as of the dates, as the case may be, set
forth therein, in each case in accordance with GAAP applied on a consistent
basis throughout the periods covered (except as otherwise noted therein) and in
compliance with the rules and regulations of the Commission.
3.10 Events Subsequent to Most Recent Fiscal Period End. Except as
--------------------------------------------------
disclosed in the SEC Reports or the Disclosure Schedule, since December 31,
1999, there has not been any Material Adverse Effect and each Company Party has
conducted its business and affairs in the Ordinary Course of Business. Without
limiting the generality of the foregoing, since December 31, 1999:
(a) none of the Company Parties has sold, leased, transferred, or
assigned any of its Assets, other than (i) immaterial Assets or (ii) Assets
sold, leased, transferred or assigned in the Ordinary Course of Business;
23
(b) none of the Company Parties has entered into any agreement,
Contract or license (or series of related Contracts) involving more than
$250,000 and outside the Ordinary Course of Business;
(c) none of the Company Parties has accelerated, terminated (other
than upon the expiration of its term), modified, or canceled any Contract (or
series of related Contracts) and involving more than $250,000 to which the
Company or any of its Subsidiaries is or was a party or by which it is or was
bound;
(d) none of the Company Parties has imposed or suffered to exist any
Lien upon any of the Assets, other than Permitted Liens;
(e) none of the Company Parties has purchased, leased or acquired any
Assets or made any capital or operating expenditure (or series of related
capital or operating expenditures), capital addition or improvement, in either
case, not contemplated by the Company's current annual operating budget and
involving more than $250,000;
(f) none of the Company Parties has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions) not
contemplated by the Company's current annual operating budget and involving more
than $250,000;
(g) none of the Company Parties has issued any note, bond or other
debt security or Redeemable Equity or created, incurred, assumed, or guaranteed
any indebtedness for borrowed money or capitalized lease obligations involving
more than $250,000 singly or $500,000 in the aggregate (other than indebtedness
for money borrowed by a Subsidiary from the Company, in each case incurred in
the Ordinary Course of Business);
(h) there has been no change made or authorized in the charter or
bylaws of the Company or in the charter, bylaws, operating agreement or other
organizational documents of any of its Subsidiaries (except for the designation
of the Series B Preferred Stock);
(i) the Company has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash,
securities, property or otherwise) or redeemed, purchased, or otherwise acquired
any of its capital stock, or granted any Rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
(j) none of the Company Parties has experienced any damage,
destruction, or loss (whether or not covered by insurance) to any material
amount of its Assets;
(k) none of the Company Parties has made any loan to any Person,
(other than accounts receivable in the Ordinary Course of Business) or entered
into any other transaction with
24
or for the benefit of any of the Company's stockholders, directors, officers, or
employees, in each case involving more than $25,000;
(l) none of the Company Parties has discharged or satisfied any Lien,
or paid, canceled, compromised or otherwise satisfied any obligation,
indebtedness or Liability (absolute or contingent) other than the payment in the
Ordinary Course of Business of current Liabilities shown on the Balance Sheet or
incurred since the date thereof in the Ordinary Course of Business;
(m) none of the Company Parties has (A) increased the rate of
compensation payable or to become payable by it to any of its officers,
directors, employees or agents, except for increases in the Ordinary Course of
Business or required under the current terms of employment agreements, or (B)
granted, made or accrued any bonus, incentive compensation, service award or
other like benefit, contingently or otherwise, to or for the credit of any of
its officers, directors, employees or agents, other than in the Ordinary Course
of Business, or made or provided under any employee welfare, pension,
retirement, profit sharing or similar payment or benefit except pursuant to
regularly scheduled payments required pursuant to the current terms of the
Employee Benefit Plans described in the Disclosure Schedule or (C) paid or
granted any right to receive any severance or termination pay to any officer,
director, or agent;
(n) except as disclosed in the Financial Statements, none of the
Company Parties has made any material change in any method of accounting or any
accounting practice; and
(o) none of the Company Parties has entered into any Contract to do
any of the foregoing.
3.11 Undisclosed Liabilities. (i) None of the Company Parties has any
-----------------------
Liability or other obligation which, singly or in the aggregate, would be
required to be reflected or reserved against in a balance sheet of the Company
and its Subsidiaries prepared in accordance with GAAP and (ii) to the Company's
Knowledge, there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
which if asserted could result in any such Liability or other obligation which,
singly or in the aggregate, would be required to be reflected or reserved
against in a balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP, except for (x) Liabilities set forth on the face of the
Balance Sheet (rather than in any notes thereto), (y) Liabilities which have
arisen after the date of the Balance Sheet in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of Contract, tort, infringement, or violation of law)
and (z) Liabilities that do not have a Material Adverse Effect on the Company
Parties. Other than as set forth on the Disclosure Schedule, there are no
contractual or other restrictions or limitations on the ability of the Company
Parties to pay any dividends or make any other distributions on, or to purchase,
redeem or otherwise acquire any of its Securities.
25
3.12 Legal Compliance. Each of the Company Parties has complied in all
----------------
material respects with all applicable Requirements of Law and Judgments, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply except to the extent that such failure would not have a
Material Adverse Effect.
3.13 Tax Matters.
-----------
(a) Each of the Company Parties has filed on a timely basis all Tax
Returns that it was required to file on or prior to the date hereof. All such
Tax Returns were, when filed, correct and complete in all material respects.
All Taxes owed by the Company Parties (whether or not shown on any Tax Return)
have been paid or accrued. None of the Company Parties is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by a Governmental Authority in a jurisdiction where any
of the Company Parties does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Liens on any of the Assets that
arose in connection with any failure (or alleged failure) to pay any Tax.
(b) Each Company Party has withheld and paid to the proper
Governmental Authority all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax Liability of the
Company or any of its Subsidiaries either (i) claimed or raised by any
Governmental Authority in writing or (ii) to the Company's knowledge, based upon
personal contact by any officer or employee of the Company or any of its
Subsidiaries with any agent of any Governmental Authority. The Disclosure
Schedule lists all federal, state, local, and foreign income Tax Returns that
have been audited, and indicates those Tax Returns that currently are the
subject of audit.
(d) None of the Company Parties has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) None of the Company Parties has filed a consent under Code Section
341(f) concerning collapsible corporations. None of the Company Parties has
made any payments, is obligated to make any payments, nor is a party to any
agreement that under certain circumstances could obligate it to make any
payments, that will not be deductible under Code Section 280G. None of the
Company Parties is a party to any Tax allocation or sharing agreement which will
not be terminated effective as of the First Closing. Neither the Company nor
its Subsidiaries has been a member of an Affiliated Group filing a consolidated
federal income Tax Return other than a group the common parent of which was the
Company.
26
(f) None of the Company Parties has any liability for the Taxes of any
Person other than another Company Party under Reg. Section 1.1502-6 (or any
similar provisions of state, local, or foreign law, as a transferee or
successor, by contract or otherwise).
3.14 Real Property; Environmental Matters.
------------------------------------
(a) The Disclosure Schedule identifies all real property as to which
the Company or any of its Subsidiaries is the fee owner, operator or the lessee
under a lease described in Section 3.14(e).
---------------
(b) To the Company's Knowledge there are no pending actions or
proceedings (including condemnation proceedings) concerning any such current or
formerly owned, operated or leased real property that, if adversely determined
to the Company or its Subsidiaries, can reasonably be expected to have a
Material Adverse Effect and, to the Company's knowledge, no such action or
proceeding has been threatened.
(c) None of the Company Parties has received any written notice from
any city, village or Governmental Authority requiring the correction of any
condition with respect to any Property by reason of a violation or alleged
violation of any applicable law or regulation which could reasonably be expected
to have a Material Adverse Effect, other than notices with respect to violations
or alleged violations that have been cured.
(d) The Company has made available to the Purchasers complete copies
of any third party reports that are in the Company's possession or control, have
been prepared within the last five years, and relate to the physical or
environmental condition of any of the real property currently or formerly owned,
operated, leased or occupied by the Company or any of its Subsidiaries (the
"Environmental Studies").
----------------------
(e) The Disclosure Schedule contains a list of all leases or other
Contracts or arrangements pursuant to which real property is leased to or
otherwise occupied or used by any Company Party requiring payments in excess of
$500,000 per year. With respect to each such Contract:
(i) if written, the Company has provided the Purchasers with
true, correct and complete copy thereof, as in effect and as amended or
modified or agreed to be amended or modified;
(ii) such Contract is in full force and effect and is legal,
valid, binding and enforceable against the parties thereto, subject to the
Remedies Exception; and
(iii) neither the Company nor any of its Subsidiaries is in
default in its obligations to pay rent under such Contract and to the
Company's knowledge, neither the
27
Company nor any of its Subsidiaries nor any other party thereto is in
default in any of its other material obligations thereunder.
(f) No Company Party nor, to the Company's knowledge, any owner of any
real property owned, leased or occupied by the Company or any of its
Subsidiaries has received any outstanding written notice or request for
information from any Governmental Authority regarding any release or threatened
release of any Hazardous Materials or any actual or alleged material violation
of Environmental, Health, and Safety Laws relating to such property or its
occupancy, operation or use by the Company or any of its Subsidiaries and
arising under Environmental, Health, and Safety Laws, which if adversely
determined to the Company, any of its Subsidiaries or such owner, as the case
may be, could reasonably be expected to have a Material Adverse Effect.
(g) Except as described in the Environmental Studies, each of the
Company Parties has complied and is in compliance, with all Environmental,
Health, and Safety Laws and has obtained, has complied, and is currently in
compliance with, in each case in all material respects, all Licenses that are
required pursuant to Environmental, Health, and Safety Laws for the occupation
of its facilities or the operation of its businesses, in each case where
noncompliance could reasonably be expected to have a Material Adverse Effect.
(h) to the Company's Knowledge, there are no past or present events,
conditions or circumstances, including but not limited to pending changes in any
Environmental, Health and Safety Law or License, that are likely to interfere
with or otherwise affect the businesses or operations of the Company or any of
its Subsidiaries in the manner now conducted or which would interfere
substantially with compliance or continued compliance with any Environmental,
Health and Safety Law or License, in each case in a manner that could reasonably
be expected to have a Material Adverse Effect.
3.15 Intellectual Property.
---------------------
(a) The Disclosure Schedule sets forth an accurate and complete list
of the material Intellectual Property owned by the Company Parties. Except as
expressly set forth in the Disclosure Schedule, the Company is the sole and
exclusive owner of all such Intellectual Property. The Company has rights to
use all Intellectual Property material to its Business or has readily available
substitutes for such Intellectual Property.
(b) Each of the Company Parties owns or has adequate rights to use (in
the manner and to the extent presently used) all of the Intellectual Property
used in or necessary for the operation and conduct of its business as presently
or proposed to be conducted, without, to the Company's knowledge, any material
conflict or claim of conflict with the rights of others. None of such
Intellectual Property is subject to any outstanding Judgment restricting the use
thereof by the Company or any of its Subsidiaries.
28
(c) (i) None of the Company Parties has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties and (ii) to the knowledge of the Company, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of the Company Parties.
(d) No Company Party is in material default in the payment of any
royalties, license fees or other consideration to any owner or licensor of any
Intellectual Property used in or necessary for the conduct of its business as
now conducted and as proposed to be conducted or to any agent or representative
of any such owner or licensor by reason of such Company Party's use thereof nor
otherwise is in default in any material respect in the performance of any of its
obligations to any such owner or licensor, and no such owner or licensor, nor
any such agent or representative, has notified any Company Party in writing of
any claim of any such default.
3.16 Licenses; Requirements of Law. Each of the Company Parties
-----------------------------
possesses all material authorizations, approvals, consents, licenses, permits,
easements, certificates and other rights and permissions necessary to conduct
its respective business and to own, lease and operate its respective properties
as currently or proposed to be conducted, owned, leased or operated
(collectively for all Company Parties, the "Licenses"). All of the Licenses are
in full force and effect. The Company has no reason to believe that any of the
Licenses will be revoked, canceled, rescinded, or not renewed in the ordinary
course and on the same or more favorable material terms, other than any such
revocation, cancellation, rescission, or non-renewal of any License which is not
individually or in the aggregate with one or more other License(s), material to
the business or operations of the Company and the Subsidiaries taken as whole.
There is not now pending any material complaint nor, to the knowledge of the
Company, any basis for any such complaint, which might have any of the results
referred to in the immediately preceding sentence. Each of the Company Parties
is operating in all material respects in accordance with the terms of the
Licenses. Each of the Company Parties is, and has conducted its business and
affairs, in compliance with all applicable Requirements of Law, except where the
failure to comply has not had and, insofar as reasonably can be foreseen, will
not have a Material Adverse Effect.
3.17 Title to Personal Property; Liens; Intangible Property. Each
------------------------------------------------------
Company Party has good title to all of its properties which are not real
property, free and clear of all Liens, other than Permitted Liens.
3.18 Insurance. The properties and operations of each Company Party are
---------
insured under various policies of general liability and other forms of insurance
covering such risks as are usually insured against by reasonably prudent
companies engaged in the businesses and activities in which such Company Party
is engaged, in amounts which are customarily considered adequate in relation to
the business and properties of such Company Party, and all premiums to date have
been paid in full. No Company Party has been refused any insurance, nor has its
coverage been limited, by an
29
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past five years.
3.19 Absence of Certain Interests of Affiliated Parties. Except as set
--------------------------------------------------
forth in the Disclosure Schedule, no present or former stockholder, partner,
director, officer or employee of any Company Party nor any of their Related
Persons owns or has any proprietary, financial or other interest, direct or
indirect, in whole or in part, in any Intellectual Property or any other
material asset or property which any Company Party owns, possesses or uses in
its business as now or proposed to be conducted, or is involved in any business
arrangement or relationship with any Company Party which is material to the
business and operations of the Company Parties. None of the present or former
stockholders, partners, joint venturers, directors or officers of any Company
Party or any Related Person of any of the foregoing is indebted to any Company
Party, and no Company Party is indebted or has any other liability to any such
Person, except (i) pursuant to the express terms of one or more Contracts
identified in the Disclosure Schedule and (ii) liabilities to directors or
officers for compensation for services in such capacity (or as employees) or to
stockholders who are employees rendered since the end of the last calendar
month.
3.20 Contracts. The Disclosure Schedule lists the following contracts
---------
and other agreements to or by which the Company or any of its Subsidiaries is a
party or bound (the "Company Contracts"):
(i) Contract with any present or former stockholder, director,
officer, or consultant or any Related Person of such Person or for the
employment of any such Person involving payments in excess of $200,000 per
year, including any consultant or any oral contract with any such Person
which is not terminable at will by the Company Party which is a party
thereto without any payment of any kind and except for (x) employment
contracts with stockholders who are employees of the Company, (y) the
Company Plans and (z) Contracts exclusively between and for the benefit of
and enforceable by Company Parties;
(ii) Contract outside the Ordinary Course of Business for the
future purchase of, or payment for, equipment, inventory, supplies, other
goods or products or services having a total value or involving total
payments or costs of $250,000 or more in any one case or in the aggregate
for all Contracts which are related or which are with the same Person or
group of affiliated Persons;
(iii) Contract outside the Ordinary Course of Business continuing
over a period of more than six months from the date hereof having a total
value or involving total payments or costs of $250,000 or more in any one
case or in the aggregate for all Contracts which are related or which are
with the same Person or a group of affiliated Persons;
(iv) distribution, dealer, representative or agency Contract
outside the Ordinary Course of Business which, individually or together
with one or more such Contracts which
30
are related or are with the same Person or group of affiliated Persons,
involve payments in excess of $250,000.
(v) lease outside the Ordinary Course of Business under which any
Company Party is either lessor or lessee of any real property or any
material personal property having annual lease payments in excess of
$250,000;
(vi) note, debenture, bond or other security or evidence of
indebtedness, equipment trust agreement, letter of credit agreement, loan
agreement, pledge or security agreement, mortgage or other Contract
pursuant to which any material contingent obligation (or any other
Liability) in excess of $250,000 of any Company Party to any other Person
or of any other Person to any Company Party was incurred or may be incurred
in the future or otherwise relating to any such contingent obligation or
other Liability;
(vii) Except as provided in the Company's current annual operating
budget previously approved by the Company's board of directors, Contract
for any capital expenditure or leasehold improvement outside the Ordinary
Course of Business in excess of $250,000 per year in any single case or
$500,000 per year in the aggregate for all cases;
(viii) Contract, not otherwise disclosed (with sufficient
specificity regarding the following), limiting or restraining any Company
Party from engaging in any business or competing in any manner generally or
in any specific geographic area or obligating any Company Party to present
any business or other opportunity to any other Person or grant or offer to
grant any other Person any participation or other interest in any business
or other opportunity;
(ix) Contract, not otherwise disclosed (with sufficient
specificity regarding the following), pursuant to which any Person has a
right of first refusal, a "tag-along" right or any similar right with
respect to any proposed disposition by any Company Party of any equity
interest in another Company Party or of any other property of such first
Company Party;
(x) Contract with any labor union or other labor representative;
(xi) bonus, pension, profit-sharing, retirement, stock purchase,
stock option or other equity based, deferred or incentive compensation,
death benefit, disability, severance, termination, retention, change in
control, insurance, medical, fringe or other benefit plan, or similar plan,
program or Contract in effect with respect to its employees or the
employees of others, except for the Employee Benefit Plans;
(xii) Except as otherwise disclosed, any Contract which provides
for "golden parachute" or similar benefits;
31
(xiii) Except as otherwise disclosed, any Material Contract outside
the Ordinary Course of Business relating to the mortgaging, pledging or
other placing of a Lien on any properties of any Company Party;
(xiv) Except as otherwise disclosed, any Contract under which the
consequences of a default or termination would have a Material Adverse
Effect;
The Company has made available to the Purchasers a correct and complete copy of
each written Contract (as amended to date) listed in the Disclosure Schedule.
Each Contract required to be identified in the Disclosure Schedule is in full
force and effect and, to the Company's knowledge, is the legal, valid and
binding obligation of the parties thereto other than a Company Party and
enforceable against such other parties in accordance with its terms, subject to
the Remedies Exception.
3.21 Litigation. The Disclosure Schedule sets forth each Judgment
----------
entered against or specifically relating to any of the Company Parties or any of
the Assets. No Company Party is a party to or otherwise involved in or, to the
Company's knowledge, is threatened to be made a party to or threatened to be
involved in any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator which,
individually or in the aggregate, would, if determined adversely, have a
Material Adverse Effect.
3.22 Employees. Except as set forth in the Disclosure Schedule, none of
---------
the Company Parties is a party to or bound by any collective bargaining or
similar labor agreement, nor has any Company Party experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. None of the Company Parties has committed any unfair labor practice
within the meaning of any applicable Requirement of Law. Each of the Company
Parties is in compliance in all material respects with all applicable
Requirements of Law relating to the employment, the terms and conditions of
employment and the termination of employment of their respective employees.
Except as set forth in the Disclosure Schedule to the Company's Knowledge, there
is no organizational effort presently being made or threatened by or on behalf
of any labor union or other labor representative with respect to employees of
any Company Party.
3.23 Employee Benefits.
-----------------
(a) The Disclosure Schedule lists each Employee Benefit Plan established
or maintained the Company or any of its Subsidiaries or ERISA Affiliates or to
which the Company or any of its Subsidiaries or ERISA Affiliates contributes or
is obligated to contribute (and each related trust, insurance contract or fund)
complies in form and in operation in all material respects with the applicable
requirements of ERISA, the Code, and other applicable Requirements of Law.
Except as set forth on the Disclosure Schedule, none of the Company Parties
maintains any Employee
32
Benefit Plan which is an Employee Pension Benefit Plan. The Company has made
available to the Purchasers correct and complete copies of the plan documents
and summary plan descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that any of the Company
Parties or any ERISA Affiliate maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute:
(i) To the knowledge of the Company, no Such Employee Benefit Plan
which is an Employee Pension Benefit Plan has been completely or partially
terminated or been the subject to a Reportable Event as to which notice
would be required to be filed with the PBGC. No proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened.
(ii) To the knowledge of the Company, there have been no
Prohibited Transactions with respect to any such Employee Benefit Plan. No
Fiduciary has any Liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan that would have
a Material Adverse Effect.
(iii) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending
or, to the Company's knowledge, threatened, except where the action, suit,
proceeding, hearing or investigation would not have a Material Adverse
Effect.
(iv) None of the Company Parties nor any ERISA Affiliate has
incurred any Liability to the PBGC (other than PBGC premium payments) or
otherwise under Title I or IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit Plan which is
an Employee Pension Benefit Plan.
(v) None of the Company Parties nor any ERISA Affiliates has
incurred or reasonably expects to incur any material liability under or
pursuant to Title I or IV or ERISA or the penalty or excise tax provisions
of the Code relating to Employee Benefit Plans.
(c) None of the Company Parties nor any ERISA Affiliate contributes to,
ever has contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability) in
respect of any Multiemployer Plan.
(d) None of the Company Parties maintains nor ever has maintained nor
contributes, nor ever has contributed, nor ever has been required to contribute
to any Employee Welfare Benefit Plan
33
providing medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Part 6 of Title I of ERISA).
(e) The Company Parties have complied with the applicable requirements of
Parts 6 and 7 of Title I of ERISA with respect to any Employee Welfare Benefit
Plan providing health benefits, except where such noncompliance would not have a
Material Adverse Effect.
(f) No current or former employee of any Company Party is or may become
entitled, as a result of the consummation of the Transactions (either alone or
together with the occurrence of any other event), to (i) any accelerated or
increased payment or benefit, (ii) any accelerated or special vesting of any
payment, right or benefit or (iii) any payment or benefit that is not tax
deductible by the applicable Company Party.
3.24 Guaranties. Except as set forth in the Disclosure Schedule and
----------
except for guarantees of customer obligations to equipment lessors made in the
Ordinary Course of Business, none of the Company Parties is a guarantor or co-
borrower in respect of any Liability or obligation or is otherwise liable for
any Liability or obligation (including indebtedness) of any other Person other
than another Company Party.
3.25 Availability of Documents. The Company has made available to the
-------------------------
Purchasers copies of all documents, including all Contracts, insurance polices,
leases, plans, instruments, and Licenses listed in the Disclosure Schedule or
otherwise referred to herein. Such copies are true and complete and include all
amendments, supplements and modifications thereto or waivers currently in effect
thereunder. The Company will deliver to the Purchasers, at the Closing, (i) a
certificate, dated the date hereof, of the chief executive officer of the
Company and the Secretary of the Company (A) attaching copies, certified by such
officers as true and complete, of the resolutions of the Board of Directors of
the Company in connection with the authorization and approval of the execution,
delivery and performance of the Transaction Documents and consummation of the
Transactions and of all other documents evidencing all necessary corporate
action taken in connection therewith, (B) attaching copies, certified by such
officers as true and complete, of the Amended and Restated Articles of
Incorporation and By-laws of the Company and of the Series B Articles of
Amendment, (C) which includes a representation by such officers that the copies
of the Amended and Restated Articles of Incorporation and By-Laws or other
organizational documents of each Subsidiary of the Company, as previously
provided to the Purchasers, are true and complete in all respects, and (D)
setting forth the incumbency of the officer or officers of the Company who have
executed and delivered this Agreement and each other Transaction Document,
including therein a signature specimen of each such officer or officers; (ii)
copies, certified by an officer of the Company, of each Company Party's Articles
of Incorporation or other organizational documents (including, in the case of
the Company, the Series B Articles of Amendment), in each case as of the date of
this Agreement, (iii) the results of such Lien and suits and Judgment searches
previously requested by the Purchasers and performed by a company specializing
in such searches and (iv) the
34
opinion of counsel to the Company in the form previously agreed upon by the
Company and the Purchasers. The Company covenants and agrees with the Purchasers
that it shall deliver to the Purchasers a long form certificate of existence and
good standing (including tax good standing) as to each Company Party, dated as
of a recent date, of the Secretary of State of the State of Colorado or the
jurisdiction of incorporation of such Company Party.
3.26 Restrictions. Except as set forth in Section 3.26 of the
------------
Disclosure Schedule, none of the Company Parties is currently a party to or
bound by any Contract, subject to any restriction of any nature under any of its
charter or other organizational or constituent documents, subject to any
Requirements of Law or subject to any Judgment which materially adversely
affects or materially restricts or, so far as the Company can now reasonably
foresee, may in the future have a Material Adverse Effect or materially
restrict, the business, operations, properties, results of operations, prospects
or condition (financial or otherwise) of such Company Party.
3.27 Key Employees. Except as set forth on the Disclosure Schedule,
-------------
none of the officers or key employees of any Company Party, to the Company's
knowledge, presently intends to terminate his or her employment by such Company
Party.
3.28 Suppliers; Customers.
--------------------
(a) Suppliers. The Disclosure Schedule sets forth the twenty (20) largest
---------
suppliers of the Company in terms of purchases as of December 31, 1999, showing
the approximate value of such purchases from each supplier. None of such
suppliers has notified any Company Party that it intends to terminate or change
significantly its sale of products purchased by such party or any of the
material terms thereof. To the knowledge of the Company Parties none of such
suppliers is insolvent. Except as specifically set forth in the Disclosure
Schedule, neither the Company nor any of the Company Parties has granted or
agreed to grant any unusual credit, trade-in, free return, discount or other
unusual sales terms in the acquisition of its inventory. The Company Parties
have taken all necessary action to protect their rights under applicable
warranties. There are no claims pending or threatened by any Company Party
against any of their suppliers, other than those which would not result in a
Material Adverse Effect.
(b) Customers. The Disclosure Schedule sets forth the twenty (20) largest
---------
customers of the Company and the other Company Parties in terms of aggregate
sales as of December 31, 1999. None of such customers has any Company Party
that it intends to terminate or change significantly its purchase of products or
any of the material terms thereof. To the knowledge of the Company none of such
customers is insolvent. Except as specifically set forth in the Disclosure
Schedule neither the Company nor any of the Company Parties has granted or
agreed to grant any unusual credit, trade-in, free return, discount or other
unusual sales terms in its sales agreement. The Company and the Company Parties
have taken all necessary action to protect their rights under applicable
warranties. There are no claims pending or threatened by any customers against
the any Company Party, other than those which would not result in a Material
Adverse Effect.
35
3.29 Other Agreements. All representations and warranties of any
----------------
Company Party contained in any of the Transaction Documents other than this
Agreement are accurate and complete in all material respects.
3.30 Disclosure. The representations and warranties contained in this
----------
Article III hereto do not contain any untrue statement of a material fact or
-----------
omit to state any material fact necessary in order to make the statements and
information contained in this Article III not misleading.
-----------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser, severally and not jointly, agrees with, and represents and
warrants, to the Company as follows:
4.1 Purchase for Investment. The Securities being acquired on the date
-----------------------
hereof by such Purchaser pursuant to this Agreement are being acquired for its
own account and with no intention of distributing or reselling such Securities
or any part thereof in any transaction which would be in violation of the
Securities Act, without prejudice, however, to any right of such Purchaser to
sell or otherwise dispose of all or any part of such Securities pursuant to a
registration under the Securities Act or under an exemption from such
registration available under the Securities Act, and subject, nevertheless, to
the disposition of the Purchasers' property being at all times within its
control and discretion.
4.2 Organization; Status As Accredited Investor. Such Purchaser is a
-------------------------------------------
limited partnership or limited liability company duly organized under the laws
of its jurisdiction of organization and is an Accredited Investor.
4.3 Power. Such Purchaser has all requisite power and authority to
-----
execute, deliver and perform its obligations under each of the Transaction
Documents, and to consummate the respective Transactions contemplated hereby and
thereby.
4.4 Execution and Delivery; Authorization. Each of the Transaction
-------------------------------------
Documents has been duly and validly executed and delivered by such Purchaser.
The execution, delivery and performance by such Purchaser of, and the
consummation of the Transactions contemplated by, this Agreement and each of the
other Transaction Documents have been duly and validly authorized by all
necessary partnership action on the part of such Purchaser. Each of the
Transaction Documents, when executed and delivered, will constitute a legal,
valid and binding obligation of such Purchaser, enforceable in accordance with
its terms, subject to the Remedies Exception.
36
4.5 Broker's Fees. Such Purchaser does not have any liability or
-------------
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the Transactions, with respect to which the Company will have any
liability.
4.6 Restricted Securities. Such Purchaser understands that the
---------------------
Securities being acquired by it at the Closing have not been registered under
the Securities Act or the securities laws of any state, based upon an exemption
from such registration requirements for non-public offerings pursuant to
Regulation D under the Securities Act or other exemptions thereunder, and that
such Securities are "restricted securities," as said term is defined in Rule 144
of the Rules and Regulations promulgated under the Securities Act.
4.7 Information.
-----------
(i) Such Purchaser has had a reasonable opportunity to ask
questions of and receive answers and documents from the Company concerning
the Company, and such Purchaser has such knowledge and expertise in
financial and business matters that it is capable of evaluating the merits
and risk involved in an investment in the Securities;
(ii) Except as set forth in this Agreement and the other
Transaction Documents, no representations or warranties have been made to
such Purchaser by the Company or any agent, employee or affiliate of the
Company relying upon any other information; and
(iii) Such Purchaser understands that the Securities being
acquired by it at the Closing are being offered and sold to it in reliance
on specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of the representations and warranties of such Purchaser
set forth in this Agreement in order to determine the applicability of such
exemptions and the suitability of such Purchaser to acquire the Securities.
37
ARTICLE V
COVENANTS
---------
5.1 Conduct of Business. (a) From the date hereof until the Closing Date,
-------------------
except as set forth in the Disclosure Schedule hereto or as provided in Section
5.1(b) hereof, the Company shall conduct its business and shall cause its
Subsidiaries to conduct their respective businesses in, and only in, the
Ordinary Course of Business and shall use, and shall cause its Subsidiaries to
use, their best efforts to preserve intact their respective present business
organizations, operations, goodwill and relationships with third parties
(including, without limitation, clients and providers) and to keep available the
services of the present directors, officers and key employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
without the prior written consent of the Purchasers (except as expressly
permitted or required by this Agreement):
(i) the Company shall not, and shall cause each of its Subsidiaries
not to, sell any of the assets of the Company or its
Subsidiaries (or the securities of entities holding the
same) to any Person, other than the Company or a Wholly-
Owned Subsidiary of the Company, in one transaction or a
Series of related transactions, in which the fair value of
the assets being sold, or the total consideration (in the
form of cash or property and including any contingent
consideration and any Indebtedness or other obligations
assumed) to be received by the Company and its
Subsidiaries, exceeds $2,000,000;
(ii) other than in the ordinary course of business consistent with
past practice, the Company shall not, and shall cause each
of its Subsidiaries not to, acquire any assets, in one
transaction or Series of related transactions, in which the
total consideration (in the form of cash or property and
including any contingent consideration and any Indebtedness
or other obligations assumed) to be paid by the Company and
its Subsidiaries exceeds $2,000,000;
(iii) the Company shall not, and shall cause each of its Subsidiaries
not to take any of the actions or enter into any of the
agreements, commitments or transactions described in
Section 3.10 hereof;
(iv) the Company shall not, and shall cause each of its Subsidiaries
not to, take any action that it knows or has reason to
believe would cause a representation or warranty of the
Company set forth herein to be untrue in any material
respect if made at such time, or a covenant of the Company
to fail to be satisfied as of the Closing Date;
(v) the Company shall not take, consummate, approve or authorize
any action or transaction that results or (with the passage
of time or otherwise) would result
38
in any adjustment not pursuant to Section 10 of the Series
B Articles of Amendment or Article III of the Warrant
Agreement;
(vi) the Company shall not take, consummate, approve or authorize
any action or transaction which would require the consent
of the Majority Holders (as such term is defined in the
Series B Articles of Amendment) after the issuance of the
Series B Preferred Stock;
(vii) the Company shall not, and shall cause each of its Subsidiaries
not to, commit or agree to do any of the foregoing.
5.2 Reasonable Best Efforts. Each of the parties hereto agrees to use its
-----------------------
reasonable best efforts promptly to take or cause to be taken all actions and
promptly to do or cause to be done all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement in accordance with the terms of the
Agreement. Without limiting the foregoing, the Purchasers and the Company will
use their reasonable best efforts to make all filings with respect to (including
filings under the HSR Act), and to obtain, all regulatory approvals necessary
or, in the opinion of the Purchasers or the Company, advisable, in order to
permit the consummation of the Transactions contemplated hereby.
5.3 Access. Prior to the Closing, the Company Parties shall grant to the
------
Purchasers, or cause to be granted to the Purchasers and their respective
representatives, employees, counsel and accountants reasonable access, during
normal business hours and upon reasonable notice, to the personnel, properties,
books and records of the Company and each of the Company Parties.
5.4 Publicity. Except as required by Law or by obligations pursuant to any
---------
listing agreement with or requirement of any national securities exchange or
national quotation system on which the Common Stock is listed, admitted to
trading or quoted, neither the Company (nor any of its Affiliates), nor any
Purchaser (nor any of its Affiliates) shall, without the prior written consent
of each other party hereto, which consent shall not be unreasonably withheld or
delayed, make any public announcement or issue any press release with respect to
the transactions contemplated by this Agreement. Prior to making any public
disclosure required by applicable Law or pursuant to any listing agreement with
or requirement of any relevant national exchange or national quotation system,
the disclosing party shall consult with the other parties hereto, to the extent
feasible, as to the content and timing of such public announcement or press
release.
5.5 Status of Dividends. The Company agrees to treat the Series B
-------------------
Preferred Stock as equity for all Tax purposes. The Company shall take no
action (other than as required by Law) that would jeopardize the availability of
the dividends received deduction under Section 243(a)(1) of the Code for the
distributions on the Series B Preferred Stock that are paid out of current or
accumulated earnings and profits, if any.
39
5.6 Exclusivity. (a) The Company shall immediately cease and terminate
-----------
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any Persons conducted heretofore by the Company, or any of its
Subsidiaries with respect to any proposed, potential or contemplated Company
Transaction.
(b) From the date hereof until the earlier of (i) the Closing Date and (ii)
the termination of this Agreement (the "Exclusivity Period"), the Company shall
------------------
not, and shall not permit any of its Subsidiaries or Affiliates or any of its or
their directors, officers or Representatives to, directly or indirectly, (A)
solicit or initiate, or encourage the submission of, any offer, (B) participate
in any discussions or negotiations regarding, or furnish to any Person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any offer that constitutes, or may reasonably be
expected to lead to, any proposal or Company Transaction, other than a
transaction with TPG, or (C) authorize, engage in, or enter into any agreement
or understanding with respect to, any Company Transaction; provided that the
--------
Company may, in response to an unsolicited written proposal from a third party,
engage in the activities specified in clause (B) and (C) of this Section 5.6(b),
if (x) in the opinion of the Company's outside legal counsel, such action is
required for the Board of Directors to comply with its fiduciary duties under
Colorado law, (y) the Company shall have notified the Purchasers not later than
24 hours after having received the relevant proposal for a Company Transaction
(which notice shall identify the Person making the proposal and set forth the
material terms thereof) and (z) the Company shall have refrained from taking any
action specified in clause (C) of this Section 5.6(b) until the third day
following the receipt by the Purchasers of the notification referred to in
clause (y) of this Section 5.6(b). The Company will keep the Purchasers fully
informed of the status and details of any such proposal or request and any
related discussions or negotiations. The Company will promptly notify the
Purchasers of any proposal (which notice shall identify the Person making the
proposal and set forth the material terms thereof) that the Company, any of its
Subsidiaries or Affiliates or any of its or their directors, officers or
representatives may receive during the Exclusivity Period.
5.7 Notifications. At all times prior to the Closing Date, the
-------------
Purchasers shall promptly notify the Company and the Company shall promptly
notify the Purchasers in writing of any fact, change, condition, circumstance or
occurrence or nonoccurrence of any event which will or is reasonably likely to
result in the failure to satisfy the conditions to be complied with or satisfied
by it hereunder, provided, however, that the delivery of any notice pursuant to
-------- -------
this Section 5.7 shall not limit or otherwise affect the remedies available
hereunder to any party receiving such notice.
5.8. Listing; Reservation. (a) So long as there are shares of Series B
--------------------
Preferred Stock, Conversion Shares, Warrants or Warrant Shares outstanding, the
Company shall use its reasonable best efforts to ensure that the Common Stock
continues to be quoted on the Nasdaq Stock Market's National Market.
(b) From and after the Closing, the Company shall at all times reserve and
keep available, out of its authorized and unissued Common Stock, solely for the
purpose of issuing Common Stock
40
upon the exercise of Warrants, such number of shares of Common Stock free of
preemptive rights as shall be sufficient to issue Common Stock upon the exercise
of all outstanding Warrants.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 Survival of Representations and Warranties. All of the
------------------------------------------
representations and warranties contained in this Agreement shall survive the
Closing hereunder and continue in full force and effect until the second
anniversary of the Closing. To be effective, any claim for indemnification for
a breach of a representation or warranty must be made prior to such second
anniversary.
6.2 Indemnification Provisions for Benefit of the Purchasers. The
--------------------------------------------------------
Company agrees to defend, protect, indemnify and hold harmless each Purchaser
Indemnified Party against, from and for any and all Adverse Consequences of any
kind or nature (including reasonable fees and disbursements of counsel and other
costs reasonably incurred in connection with any action, suit or proceeding
initiated by such Purchaser Indemnified Party in connection with securing,
exercising, enjoying and enforcing such Purchaser Indemnified Party's rights,
benefits and privileges or enforcing any Company Party's obligations and
liabilities under any Transaction Document), whether direct, indirect or
consequential, in any manner resulting from, arising out of, based upon or
related or attributable to: (i) any breach or inaccuracy of any representation
or warranty of, or any breach or failure to perform any covenant, agreement or
obligation, of any Company Party contained in this Agreement or any other
Transaction Document; (ii) the invalidity or unenforceability, or alleged
invalidity or unenforceability, of any provision of any Transaction Document;
(iii) any liability or obligation arising as a result of any Person claiming a
commission, finder's fee or other payment for services rendered as a broker or
finder on behalf of any Company Party in connection with any of the
Transactions; or (iv) any claim by any holder or former holder of capital stock,
equity interests or other securities, or any creditor, of any Company Party or
any Affiliate of any Company Party or any other Person with whom any Company
Party has contractual relationships relating to any claim against any Company
Party or by reason of consummation of any of the Transactions; provided that
--------
unless and until a final and non-appealable judicial determination shall be made
that such Indemnified Party is not entitled to indemnification under clause (ii)
above, each such Indemnified Party shall be reimbursed for all indemnified
losses under clause (ii) above as they are incurred; provided, further, that if
-------- -------
a final and non-appealable judicial determination shall be made that such
Indemnified Party is not entitled to be indemnified for losses under clause (ii)
above, such Indemnified Party shall repay to the Company the amount of such
Losses for which the Company shall have reimbursed such Indemnified Party.
6.3 Indemnification Provisions for Benefit of the Company. In the event
-----------------------------------------------------
that any Purchaser breaches any of its representations, warranties, and
covenants contained herein, the Purchaser shall protect, defend, hold harmless
and indemnify the Company against, from and for the entirety of any Adverse
Consequences the Company may suffer through and after the date of the claim for
indemnification (but excluding any Adverse Consequences the Company may suffer
after
41
the end of any applicable survival period) resulting from or caused by the
breach, including all Adverse Consequences arising out of the enforcement of
this Section 6.3.
-----------
6.4 Matters Involving Third Parties.
-------------------------------
(a) If any third party shall notify any Party (the "Indemnified Party")
with respect to any matter (a "Third Party Claim") which may give rise to a
claim for indemnification against any other Party (the "Indemnifying Party")
under this Article V, then the Indemnified Party shall promptly notify each
---------
Indemnifying Party thereof in writing; provided, however, that no delay on the
-----------------
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced; it being understood
and agreed that the failure of the Indemnified Party to so notify the
Indemnifying Party prior to settling a Third Party Claim (whether by paying a
claim or executing a binding settlement agreement with respect thereto) or the
entry of a judgment or issuance of an award with respect to a Third Party Claim
shall constitute actual prejudice to the Indemnifying Party's ability to defend
against such Third Party Claim.
(b) Any Indemnifying Party will have the right to defend the Indemnified
Party against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (i) the Indemnifying Party
notifies the Indemnified Party in writing within 30 calendar days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party or Parties will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or caused
by the Third Party Claim (it being understood by the Parties that the
Indemnified Party may take such actions as are reasonable in connection with its
defense until it receives such notice from the Indemnifying Party), and (ii) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
(c) So long as the Indemnifying Party is conducting the defense of the
Third Party Claim in accordance with Section 6.4(b) above, (i) the Indemnified
--------------
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim (provided that the
Indemnified Party will have the right to employ separate counsel to represent
the Indemnified Party (the fees and expenses of which will be borne by the
Indemnifying Party if, in the Indemnified Party's reasonable judgment, a
conflict of interest between the Indemnified Party and the Indemnifying Party
exists with respect to such claim), (ii) the Indemnified Party will not consent
to the entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnifying Party
(not to be withheld unreasonably), and (iii) the Indemnifying Party will not,
without the prior written consent of the Indemnified Party (not to be withheld
unreasonably), consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim in which any relief other than the payment
of money damages is sought against any Indemnified Party, unless such
settlement, compromise or consent includes as an
42
unconditional term thereof the giving by the claimant, petitioner or plaintiff,
as applicable, to such Indemnified Party of a release from all liability with
respect to such Third Party Claim.
(d) In the event any of the conditions in Section 6.4(b) above is or
--------------
becomes unsatisfied, however, (i) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with respect
to, the Third Party Claim in any manner it reasonably may deem appropriate (and
the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (ii) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Parties will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim to the fullest extent provided in this Article VI.
----------
ARTICLE VII
TERMINATION
-----------
7.1 Termination of Agreement. Subject to Section 7.2 hereof, this
------------------------
Agreement may be terminated by notice in writing at any time prior to the
Closing by:
(a) the Purchasers or the Company, if the Closing shall not have occurred
on or before May 31, 2000; provided, however, that the right to terminate this
-------- -------
Agreement under this Section 7.1(a) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date;
(b) the Purchasers or the Company, if any Governmental Entity of competent
jurisdiction shall have issued any judgment, injunction, order, ruling or decree
or taken any other action restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated by the Transaction Documents and
such judgment, injunction, order, ruling, decree or other action becomes final
and nonappealable; provided that the party seeking to terminate this Agreement
--------
pursuant to this clause (b) shall have used its best efforts to have such
judgment, injunction, order, ruling or decree lifted, vacated or denied;
(c) the Purchasers, if the Company shall have taken any action described
in clause (B) or (C) of Section 5.6(b) hereof;
(d) TPG, if any Person (other than TPG) acquires, or the Company accepts
or recommends a fully financed offer made by any Person (other than TPG) to
acquire, more than twenty-five percent (25%) of the Common Stock or otherwise to
effect a Change in Control (as defined in Exhibit B); or
---------
43
(e) the Purchasers or the Company, if the Purchasers and the Company so
mutually agree in writing.
7.2 Effect of Termination. (a) If this Agreement is terminated in
---------------------
accordance with Section 7.1 hereof and the transactions contemplated hereby are
not consummated, this Agreement shall become null and void and of no further
force and effect except that (i) the terms and provisions of this Section 7.2
and Articles VI and VIII hereof shall remain in full force and effect and (ii)
any termination of this Agreement shall not relieve any party hereto from any
liability for any breach of its obligations hereunder.
(b) If (i) this Agreement is terminated in accordance with Section 7.1(a)
hereof and as of the date set forth in Section 7.1(a) hereof the conditions set
forth in Section 2.2 hereof shall not have been satisfied, and (ii) a proposal
is made to the Company or any of its Representatives with respect to a Company
Transaction (whether or not the same Company Transaction as is ultimately
consummated or as to which a written agreement, letter of intent, agreement in
principle, memorandum of understanding or similar writing is ultimately entered
into) prior to the Cut-Off Date (as defined below) or a proposal with respect to
a Company Transaction is publicly announced by the Person contemplating such
transaction or a Representative of such Person prior to the Cut-Off Date, the
Company shall pay each Purchaser the Termination Fee pro rata in accordance with
the shares of Series B Preferred Stock to be purchased by it hereunder on the
date on which a Company Transaction is consummated. The term "Cut-Off Date"
------------
shall mean the date of termination of this Agreement.
(c) If this Agreement is terminated in accordance with Section 7.1(c)
hereof, the Company shall pay each Purchaser the Termination Fee pro rata in
accordance with the shares of Series B Preferred Stock to be purchased by it
hereunder on the second Business Day following such termination.
44
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 No Third Party Beneficiaries. Except as expressly provided in
----------------------------
Article V, nothing in this Agreement, expressed or implied, is intended to
---------
confer upon any Person other than the Parties or their respective successors and
permitted assigns any rights, benefits, remedies, obligations or liabilities
under or by reason of this Agreement.
8.2 Entire Agreement. This Agreement and the Transaction Documents
----------------
collectively constitute the entire agreement among the Parties with reference to
the matters set forth herein and therein and supersede any prior understandings,
negotiations, agreements, or representations by or among the Parties, written or
oral, to the extent they related in any way to the subject matter hereof or
thereof.
8.3 Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns; provided, however, that neither this Agreement nor any of
-------- -------
the rights, interests or obligations of such Party hereunder shall be assigned
or delegated by such Party without the prior written consent of the other
Parties, which consent may be withheld in the sole discretion of such Parties;
provided further, that a Purchaser shall be permitted to assign its rights
-------- -------
hereunder to an Affiliate thereof, it being understood that no such assignment
shall relieve such Purchaser of its obligations hereunder.
8.4 Counterparts. This Agreement and each other Transaction Document
------------
may be executed in counterparts, each of which shall be deemed to be an original
and all of which together shall be deemed to constitute one and the same
agreement. In addition to any other lawful means of execution or delivery, this
Agreement and the other Transaction Documents may be executed by facsimile
signatures and may be delivered by the exchange of counterparts of signature
pages by means of telecopier transmission.
8.5 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
45
If to the Company: Convergent Communications, Inc.
000 Xxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to TPG, to TPG at TPG's address supplied from time to time in writing to the
Company, with a copy to:
Xxxx X. Xxxx, Esq.
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to Sandler Capital, to Sandler Capital at Sandler Capital's address supplied
from time to time in writing to the Company.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, facsimile transmission, ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be deemed
to have been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
8.6 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York without giving effect to any
choice or conflict of law provision or rule (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
46
8.7 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation, or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence. No waiver shall be effective
hereunder unless contained in a writing signed by the Party sough to be charged
with such waiver.
8.8 Severability. If any provision of this Agreement or any other
------------
Transaction Document or the application thereof to any person or circumstance is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions hereof, or the application of such provision to Persons
or circumstances other than those as to which it has been held invalid, void or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, provided, that if any provision
--------
hereof or thereof or the application of any such provisions shall be so held to
be invalid, void or unenforceable by a court of competent jurisdiction, then
such court may substitute therefor a suitable and equitable provision in order
to carry out, so far as may be valid and enforceable, the intent and purpose of
the invalid, void or unenforceable provision and, if such court shall fail or
decline to do so, the Parties shall negotiate in good faith a suitable and
equitable substitute provision. To the extent that any such provision shall be
judicially unenforceable in any one or more states, such provision shall not be
affected with respect to any other state, each provision with respect to each
state being construed as several and independent.
8.9 Fees and Expenses. (a) The Company shall be responsible for the
-----------------
payment of all expenses incurred by the Company in connection with the
Transaction Documents and the transactions contemplated thereby, regardless of
whether such transactions are consummated, including, without limitation, all
fees and expenses of the Company's legal counsel, all third-party consultants
engaged by the Company to assist in such transactions, all fees and expenses
incurred in connection with any filings to be made with any governmental agency.
The Company also agrees to reimburse the Purchasers for all out-of-pocket
expenses reasonably incurred by the Purchasers in connection with the
Transaction Documents and the transactions contemplated thereby, regardless of
whether or not the transactions are consummated, including, without limitation,
all fees and expenses of the Purchasers' legal counsel, financial advisors,
accountants, actuaries, and all third-party consultants engaged by the
Purchasers to assist in such transactions (including, without limitation,
McKinsey & Company) and all fees and expenses, including fees and expenses of
legal counsel, incurred in connection with enforcing the provisions of, and
collecting amounts payable pursuant to, this Agreement. Such reimbursements
shall be due to the Purchasers at the Closing, or promptly following any earlier
termination of this Agreement for any reason or, in the case of fees and
expenses incurred thereafter, promptly upon demand therefor.
(b) All amounts payable under this Agreement shall be paid in immediately
available funds to an account or accounts designated by the recipient of such
amounts.
47
8.10 Accuracy of Information. The obligations of the Purchasers hereunder
-----------------------
are subject to the accuracy, on and as of the date hereof, of the
representations and warranties of the Company, and to the accuracy and
completeness of the information provided by the Company to the Purchasers under
the Transaction Documents.
8.11 Specific Performance. The parties hereto specifically acknowledge
--------------------
that monetary damages are not an adequate remedy for violations of this
Agreement, and that any party hereto may, in its sole discretion, apply to a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent permitted by
applicable law and to the extent the party seeking such relief would be entitled
on the merits to obtain such relief, each party waives any objection to the
imposition of such relief.
8.12 Purchaser Obligations Several, Not Joint. The obligations of the
----------------------------------------
Purchasers under this Agreement are several and not joint.
8.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
---------------------------------------
identified in this Agreement are incorporated herein by reference and made a
part hereof to the extent expressly referred to herein.
8.14 Legends. Each stock certificate or other instrument evidencing the
-------
Series B Shares, the Warrants, any Conversion Stock or any Warrant Stock shall
bear a legend in substantially the form described in Section 9.01 of the
Investor Rights Agreement.
48
IN WITNESS WHEREOF, the Parties hereto have executed this Securities
Purchase Agreement as an instrument under seal on the date first above written.
CONVERGENT COMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxx
------------------------------
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
TPG CONVERGENT I, L.L.C.
By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
SANDLER CAPITAL PARTNERS V, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxxx
President
49
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
------------------------------
Xxxxxx X. Xxxxxxxxx
President
50
EXHIBIT A
Number of Number of
Number Series A Series B Aggregate
Purchasers of Shares Warrants Warrants Purchase Price
---------- --------- --------- --------- --------------
TPG Convergent I, L.L.C. 150,000 600,000 1,000,000 $150,000,000
Sandler Capital Partners IV, L.P. 10,000 40,000 66,667 $10,000,000
Sandler Capital Partners V, L.P. 15,000 60,000 100,000 $15,000,000
------- ------- --------- ------------
Totals: 175,000 700,000 1,166,667 $175,000,000
51
