PROGRAM AGREEMENT
This Program Agreement ("Agreement"), dated as of the 19th day of November,
1997 ("Effective Date"), is by and between Comdisco, Inc. ("Comdisco") a
Delaware corporation, having its executive office at 0000 Xxxxx Xxxxx Xxxx,
Xxxxxxxx, Xxxxxxxx 00000 and Convergent Communications, Inc. ("Convergent
Communications"), a Colorado corporation, Convergent Capital Corporation, a
Colorado corporation ("Lessee") and Convergent Communications Services, Inc., a
Colorado corporation, each having their executive offices at 00 Xxxxxxxxx Xxxxx
Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000.
RECITAL
WHEREAS, Comdisco is engaged in the business, among other things, of
financing, leasing, remarketing, and arranging leasing programs for various
types of computer telephony, network switching and other communications hardware
and software products.
WHEREAS, Convergent Communications or its subsidiaries (hereinafter
collectively referred to as "Convergent") is in the business of providing
various communications and network services including but not limited to design,
assemble and operate integrated communications systems for local and long
distance service to end-user customers.
WHEREAS, as a part of its services, Convergent will require the use of
various types of computer, communications, network and other equipment for its
own internal purposes as well as providing the same to end-user customers in
fulfilling its service obligations to Convergent end-user customers.
WHEREAS, Comdisco and Convergent desire to enter into a financing program,
whereby Comdisco will, in accordance with the terms of this Agreement, lease
Equipment (as hereinafter defined) to Convergent. The leased Equipment shall be
used for the benefit of Convergent at its business location(s) or shall be made
available for the benefit of Convergent end-user customers (each a "Customer")
at such Customer premises.
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. RELATIONSHIP. At no time will this Agreement be deemed to create a
partnership, joint venture, agency employment or any other relationship other
than that expressly provided for herein. Convergent is not Comdisco's
representative or agent for any purpose except as expressly stated herein.
2. PURCHASE OF EQUIPMENT. Convergent will from time to time enter into
purchase agreements (the "Purchase Agreement") with various third party vendors
for Equipment and may lease such Equipment from Comdisco. In accordance with
the terms set forth below Comdisco may lease such Equipment to Convergent
pursuant to an assignment agreement (the "Assignment Agreement") substantially
in the form attached hereto as Exhibit A whereby Comdisco will acquire title to
such Equipment from the third party vendor.
3. LEASE OF EQUIPMENT. Comdisco as lessor ("Lessor") and Lessee have
entered into a master lease agreement (the "Master Lease") dated the 11th day of
November 1997 attached hereto as Exhibit B. In addition, Lessor and Lessee
shall enter into various equipment schedules (the "Equipment Schedules")
substantially in the form attached hereto as Exhibit C. Pursuant to the terms
of the Master Lease and Equipment Schedule, Lessor shall lease the Equipment to
Lessee.
In addition, Lessee will from time to time enter into Master Equipment
Lease Agreements and Equipment Schedules, substantially in the forms attached as
Exhibit D and E, (hereinafter referred to as "Lease(s)") with other subsidiaries
of Convergent Communications for the purpose of making such equipment available
to Convergent customers pursuant to various services agreements with such
customers. In such event, subject to the terms contained in this Agreement,
Lessee may assign such Lease(s) to Comdisco as
Lessor and at the time such equipment is accepted for lease, Comdisco shall pay
the vendor the purchase price for such equipment. Any changes to the standard
terms and conditions contained in Exhibits D and E to be incorporated in the
Lease(s) must be approved by Comdisco prior to such lease assignment.
The minimum amount of Equipment to be purchased and leased pursuant to any
Lease(s) at time of acceptance shall, on each calendar month, in the aggregate
equal $250,000.
4. LEASE AMOUNT AND AVAILABILITY. In addition to the terms,
conditions and contingencies contained in the Lease(s) and any other document
entered into in connection with the Lease(s), Comdisco's obligation to lease
Equipment to Convergent shall be contingent upon Convergent's continued
performance of the terms and conditions of this Agreement. In accordance with
the foregoing, the maximum amount of Equipment Convergent may lease shall be as
set forth subject to the contingency identified below for the respective years
December 1, 1997 through June 30, 2000 and subject to the availability
requirements for each year shall not exceed Fifty Million Dollars
($50,000,000.00) from the date hereof through June 30, 2000.
The continued availability of amounts committed for lease is subject to
there being no material adverse change in Convergent's consolidated financial
condition or business prospects.
Amount Committed Contingency to be
Year for Lease Satisfied for Availability
---- --------- --------------------------
December 1, 1997 $10,000,000 1) Achieving a Recurring Revenue Run Rate
to June 30, 1998 of $3 million per year and an
Aggregate Run Rate of $10 million per
year;
2) 10% Letter of Credit (as Equipment is
leased) calculated as a percentage of
Equipment costs if new or Comdisco's
value if from Comdisco's inventory
July 1, 1998 Additional 1) Funding of at least $20 million of
to June 30, 1999 $20,000,000 common equity, convertible preferred
or similar equity security
2) Achieving a Recurring Revenue Run Rate
of $10 million per year and an
Aggregate Run Rate of $30 million per
year
July 1, 1999 Additional 1) Achieving positive EBITDA on a monthly
to June 30, 2000 $20,000,000 basis
----------- 2) Achieving a Recurring Revenue Run Rate
of $25 million per year and an
Aggregate Run Rate of $70 million per
year
Total $50,000,000
For purposes of the above, the term "Recurring Revenue Run Rate" means the
annualized monthly revenue of Convergent's reported recurring revenue which
consists of: (a) Enterprise Network Services; (b) Voice Services and (c) Data
Services and the term "Aggregate Run Rate" shall mean the sum of the Recurring
Revenue Run Rate and all other revenue from other transactions or binding
agreements. The term "EBITDA" means earnings before interest, tax, depreciation
and amortization in accordance with generally accepted accounting principles.
Convergent's Vice President - Finance and Administration will, upon request,
certify to Comdisco in writing as to compliance with each respective Contingency
set forth above.
5. EQUIPMENT. Comdisco shall be obligated to lease to Convergent only
the Equipment and configurations identified on the attached Exhibit F (the
"Equipment"), except as Comdisco may agree to from time to time in writing.
Comdisco shall have no obligation to purchase or lease Equipment if Convergent
is not in compliance with the Contingency requirement as set forth above or is
in default under this Agreement, the Lease(s) or any other agreement entered
into in connection with this Program.
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6. LEASE QUOTATION. The format of the pricing for the lease of
Equipment shall be in the form of lease rate factors which shall be defined as
the percentage of the purchase price of the Equipment plus interest for each
payment and shall be provided in the context of a table which provides, in
addition to the lease rate factor, Equipment description and various lease
periods. Comdisco will, no later than five (5) business days prior to the first
day of each month, provide Convergent with lease rate factors for Equipment.
The lease rate factor, special terms or lease periods applicable to any
Equipment not listed on such table or which differ from those set forth on the
table, shall be subject to an individual quotation by Comdisco and shall specify
the period for which such quote is valid. The lease rate factors contained in
the monthly table shall be valid for transactions which Comdisco has received
notice of installation and acceptance no later than sixty (60) days from the
first day of the month in which such lease rate factor applies. Any lease
acceptance for Equipment occurring after such sixty (60) day period shall be
subject to adjustment in accordance with the terms of the Equipment Schedule.
Equipment placed on lease from Comdisco's inventory shall be subject to
individual quotation and shall be quoted as a monthly rental rate.
7. SERVICE CONTRACT ASSIGNMENT. At the time Comdisco accepts an
assignment of the Lease(s), Convergent shall identify the Equipment location and
name of its Customer if the Equipment is to be placed in service by or on behalf
of such Convergent Customer. Provided Convergent is not in default under an
existing Lease, Comdisco shall not contact such Customer unless Comdisco has a
pre-existing relationship with such Customer or is engaged or proposes to engage
such Customer in an unrelated business transaction. In addition, at the time of
acceptance, Convergent shall assign to Comdisco, as security for the payment of
rent or other amounts due pursuant to the terms of the Leases(s), all right,
title and interest in and to payment under its service agreement or agreements
("Service Agreement Receivables") in which the use of the Equipment is part of
the services provided by Convergent provided the assignment of payments shall be
limited to such amounts as are sufficient to ensure complete payment of all
amounts due under the Lease(s) applicable to the Equipment made available for
use by Customers pursuant to the assigned service agreements. Convergent agrees
that at the time of the assignment of such Service Agreement Receivables,
Comdisco shall have a first perfected security interest in the Service Agreement
Receivables to the extent necessary to pay all amounts due under the Lease(s)
free of any other liens, claims or encumbrances and any prior or subsequent
financing or assignment of such Service Agreement Receivables shall be subject
and subordinate to Comdisco's perfected security interests.
8. OWNERSHIP. Convergent in its capacity as Lessee shall acquire no
rights of ownership in any of the leased Equipment and shall not at any time
represent to any third party that it has ownership to such property or act as
agent for Comdisco unless it has acquired title from Comdisco to such Equipment
or is requested in writing to act on behalf of Comdisco with respect to such
Equipment.
9. CONVERGENT COMMUNICATIONS GUARANTY. In connection with entering
into this Agreement, Convergent Communications shall execute a Guaranty
Agreement substantially in the form attached hereto as Exhibit G. Such Guaranty
Agreement shall obligate Convergent Communications to perform all obligations
(including but not limited to the payment of rent) of Convergent as Lessee under
the Lease(s).
10. WARRANTS. In conjunction with entering into this Agreement and as
additional consideration for entering into the Lease(s), Comdisco and Convergent
Communications will have entered into a Warrant Agreement (the "Warrant")
substantially in the form attached as Exhibit H, whereby Comdisco shall acquire
rights to acquire Convergent common stock in accordance with the terms and
conditions contained therein. In order to maintain consistency with the
availability of lease commitments set forth in Paragraph 4 above, the parties
shall either amend the Warrant or execute a new warrant agreement at the time of
additional lease availability to reflect the additional warrants applicable to
such committed monies available for Lease(s) in each of the years 1998 and 1999.
The number of shares subject to the new or amended Warrants to be executed
in the respective years 1998 and 1999 shall be an amount equal to ten (10%)
percent of the monies committed for such year
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divided by the exercise price per share. The exercise price per share shall be
equal to the price paid by investors in the most recent equity offering, but in
no event shall be less than three ($3.00) dollars per share.
11. GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES OF BOTH PARTIES.
(a) Corporate Capacity; State Licensing. Each party represents and
warrants that it is a corporation validly existing and in good standing under
the laws of the state of its incorporation, with adequate power and capacity to
enter into this Agreement, and is duly qualified in all states required to
conduct all activity contemplated by this Agreement.
(b). Due Authorization. This Agreement, the Lease(s), the Warrant and
other documents executed in connection herewith have been or will be duly
authorized, executed and delivered by it, and will constitute a valid, legal and
binding agreements, enforceable against it in accordance with the terms hereof
and thereof, except to the extent that the enforcement of remedies may be
limited under generally applicable laws relating to specific performance,
bankruptcy and creditors' rights.
(c) Governmental Approvals. No approval, consent or withholding of
objections is or will be required from any federal, state or local governmental
authority or instrumentality with respect to the entry into or performance of
this Agreement, the Lease(s), the Warrant and other documents executed in
connection herewith, except such as have already been obtained.
(d) No Violation. The entry into and performance of this Agreement,
the Lease(s), the Warrant and other documents executed in connection herewith,
will not: (i) violate any judgment, order, law or regulation applicable to it or
any provision of its Articles of Incorporation or By-Laws; or (ii) result in any
breach of, or constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Lease(s) or any
Equipment pursuant to any indenture, mortgage, deed of trust, bank loan or
credit agreement or other instrument (other than the related Lease(s)) to which
it is a party.
(e) No Legal Proceedings. There are no suits or proceedings pending
or threatened in any court or before any regulatory commission, board or other
administrative or governmental agency, which if adversely decided would have a
material adverse effect on its ability to fulfill its obligations under this
Agreement, the Lease(s), the Warrant and other documents executed in connection
herewith.
(f) Information. All information provided by one party to the other
under this Agreement, the Lease(s), the Warrant and other documents executed in
connection herewith is or will be true and correct in all material respects to
the best of its knowledge and belief.
(g) Books and Records. To fulfill the intent and purposes of this
Agreement, each party will afford the other with reasonable access to its files
and records pertaining to this Agreement.
12. FINANCIAL STATEMENTS. Convergent will promptly furnish Comdisco
with copies of its quarterly and annual financial statements and reports and
other filings with the Securities and Exchange Commission ("SEC"), if any. Such
financial statements shall include balance sheets, income statements and annual
statements of source and application of funds.
13. LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE LIABLE FOR
ANY INDIRECT, PUNITIVE, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE IN
CONNECTION WITH OR RELATED TO THIS AGREEMENT (INCLUDING LOSS OF PROFITS, USE,
DATA, OR OTHER ECONOMIC ADVANTAGE), HOWSOEVER ARISING, WHETHER FOR BREACH OF
THIS AGREEMENT, INCLUDING BREACH OF WARRANTY OR IN TORT, EVEN IF THAT PARTY HAS
BEEN PREVIOUSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
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14. TERM AND TERMINATION. This Agreement shall be effective as of the
date first indicated above. The term of this Agreement shall continue from such
date to June 30, 2000 unless otherwise extended or terminated.
15. ADDITIONAL DOCUMENTS AND MUTUAL COOPERATION. Comdisco and Convergent
shall cooperate by furnishing such records and supporting material relating to
the Lease(s) as may be reasonably requested, in the preparation of forms and in
the execution of such other documents as may be necessary to fulfill the intent
and effectuate the purpose of this Agreement.
16. ASSIGNMENT OF AGREEMENT. Convergent shall not assign any of its
rights or interests or obligations under this agreement without Comdisco's prior
written consent. Comdisco shall provide notification to Convergent in the event
it assigns its rights, interests or obligations to any third party.
17. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to Comdisco, Inc. at 0000
Xxxxx Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000, attention: Chief Financial Officer,
cc: Legal Department, attn: General Counsel, (and/or, if by facsimile,
(000)000-0000 and (000)000-0000) and (ii) to Convergent at 00 Xxxxxxxxx Xxxxx
Xxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxx 00000, attention: Legal Department (and/or
if by facsimile, (000)000-0000), or at such other address as any such party may
subsequently designate by written notice to the other party.
18. MISCELLANEOUS: Paragraph and Section headings appearing in this
Agreement are for convenience of reference only and shall not modify, define,
expand or limit any of the terms or provisions of this Agreement. References to
the singular include references to the plural and vice versa. THE PARTIES AGREE
THAT THIS AGREEMENT HAS BEEN EXECUTED AND DELIVERED IN, AND SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO. If at any time any
provision of this Agreement shall be held by any court of competent jurisdiction
to be illegal, void or unenforceable, such provision shall be of no force and
effect, but the illegality or unenforceability of any other provision shall have
no effect upon and shall not impair the enforceability of any other provision of
this Agreement.
19. ENTIRE AGREEMENT. This Agreement in conjunction with the other
agreements referenced herein and attached as Exhibits hereto constitute the
entire agreement between the parties concerning the subject matter hereof. The
terms of this Agreement may not be amended or modified orally, but only by an
instrument duly authorized by each of the parties. This Agreement and any
amendments shall be binding on and inure to the benefit of the parties and their
respective permitted successors and assigns. Two or more duplicate originals of
this Agreement may be signed by the parties, each of which shall be original,
but all of which together shall constitute one and the same agreement.
20. SURVIVAL OF OBLIGATIONS. All agreements, representations and
warranties contained in this Agreement or in any related document shall survive
the execution, delivery expiration or other termination of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
COMDISCO, INC. CONVERGENT COMMUNICATIONS, INC.
/s/ Xxxx Xxxxxxxx /s/ Xxxx X. Xxxxx
----------------------------- -----------------------------
By: Xxxx Xxxxxxxx By: Xxxx X. Xxxxx
-------------------------- --------------------------
Title: COO Title: CEO
----------------------- -----------------------
CONVERGENT COMMUNICATIONS CONVERGENT CAPITAL CORPORATION
SERVICES, INC.
/s/ Xxxx X. Xxxxx /s/ Xxxx X. Xxxxx
----------------------------- -----------------------------
By: Xxxx X. Xxxxx By: Xxxx X. Xxxxx
-------------------------- --------------------------
Title: CEO Title: CEO
----------------------- -----------------------
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