OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into as of the 18th day
of October, 1999, between Convergence Communications, Inc., a Nevada corporation
("Grantor") in favor of Telematica EDC, C.A. ("Telematica"), TCW/CCI Holding LLC
("TCW"), International Finance Corporation ("IFC"), Glacier Latin-America Ltd.
("Glacier"), FondElec Essential Services Growth Fund, L.P. ("FondElec") and
Internexus S.A. ("Internexus"). Each of Telematica, TCW, IFC, Glacier, FondElec
and Internexus is sometimes referred to as a "Grantee" and collectively as the
"Grantees". The Grantor and the Grantees are referred to collectively herein as
the "Parties" and singularly as a "Party". Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed thereto in that
certain Participation Agreement dated as of October 15, 1999, to which the
Grantor and Grantees are parties (the "Participation Agreement").
WHEREAS, pursuant to the terms of the Participation Agreement,
Telematica, TCW, IFC and Glacier have each agreed to purchase Series C Shares,
and FondElec and Internexus have each agreed to convert certain debt of the
Grantor into Series C Shares;
WHEREAS, the Grantees wish to reserve for themselves the right to
acquire further Series C Shares and the Grantor is prepared to grant such right
under this Agreement; and
WHEREAS, the execution of this Agreement is one of a series of
transactions set out in the Participation Agreement which are to occur
simultaneously at the Closing.
NOW, THEREFORE, the Parties agree as follows:
1. Grant of Option. Grantor hereby grants to each Grantee, and each
Grantee hereby accepts from Grantor, an option (the "Option") to
acquire, during the period set forth in paragraph 3, up to the number
of shares of the Grantor's Series C Preferred Stock, par value $.001
per share (collectively, the "Option Shares"), as is set forth below:
(a) to Telematica, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 1,333,333 Option Shares, if
Telematica purchases all of the Series C Shares allocated to
it under the Participation Agreement;
(b) to TCW, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 1,333,333 Option Shares, if TCW
purchases all of the Series C Shares allocated to it under the
Participation Agreement;
(c) to IFC, 40% of the number of Series C Shares actually acquired
by it under the terms of the Participation Agreement, which
shall be 266,667 Option Shares, if IFC purchases all of the
Series C Shares allocated to it under the Participation
Agreement;
(d) to Glacier, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 160,000 Option Shares, if Glacier
purchases all of the Series C Shares allocated to it under the
Participation Agreement;
(e) to FondElec, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 266,666 Option Shares if FondElec
purchases all of the Series C Shares allocated to it under the
Participation Agreement; and
(f) to Internexus, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 531,564 Option Shares, if Internexus
purchases all of the Series C Shares allocated to it under the
Participation Agreement.
2. Exercise of Option. Subject to the satisfaction of the condition
precedent set forth in Section 6(c)(iii) of the Participation Agreement
in the case of any exercise by Telematica or TWC of its Option, a
Grantee may, at any time and from time to time during the term of its
Option, as set forth in paragraph 3 below, exercise its Option in whole
or in part by delivering written notice to Grantor designating the
number of Option Shares that it elects to purchase, together with the
full purchase price therefor in immediately available funds. The
purchase price for each Option Share shall be, subject to adjustments
as provided in paragraph 7 below, Seven and 00/000 Xxxxxx Xxxxxx
Dollars (U.S. $7.50). Any Option Shares acquired by a Grantee hereunder
shall be entitled to the benefit of the Registration Rights Agreement
among Grantor and Grantees of even date herewith, and shall be subject
to the rights and duties imposed thereunder. Upon the delivery to
Grantor of the consideration for the Option Shares so exercised,
Grantor shall deliver to the exercising Grantee a certificate or
certificates representing the Option Shares containing restrictive
legends substantially in the form of those legends set forth in Section
3 of the Participation Agreement. Upon their issuance, the Option
Shares shall be deemed validly issued and fully paid and non-assessable
shares of Grantor's Series C Convertible Preferred Stock, subject to no
liens, charges or encumbrances other than those arising under the terms
of the Participation Agreement and the CCI Shareholders' Agreement
entered into pursuant to the Participation Agreement.
3. Term of Option. Each Grantee's Option shall terminate at 5:00 PM U.S.
Eastern Time on July 18, 2000.
4. Representations and Warranties. Each exercising Grantee shall be
deemed, by its exercise, to affirm the representations and warranties
set forth in Sections 3(e), 3(f) and 3(g) of the Participation
Agreement as to the Option Shares as to which its Option is exercised
and, upon issuance of the Series C Preferred Stock pursuant to any such
exercise, the Grantor shall be deemed to affirm the representations and
warranties set forth in Sections 4(a), 4(b), 4(c), 4(d), 4(f) (except
that an expenditure in accordance with the Business Plan, or Budget or
as approved by the Grantor's board of directors, shall not be
considered a material adverse change), 4(j), 4(k), 4(t) and, to the
extent the exercise relates to the IFC, 4(z).
5. Reservation of Stock. Grantor shall, at all times while the Options are
effective, reserve and keep available out of the designated Series C
Convertible Preferred Stock of Grantor, for the purpose of issuance on
the exercise of the Options provided for herein, such number of shares
of such Series C Convertible Preferred Stock as shall, from time to
time, be sufficient to permit the exercise of each Option in whole.
6. Restrictions on Exercise. No Option may be exercised unless such
exercise is in compliance with U.S. Securities Law.
7. Adjustment. If an Option is exercised subsequent to any stock dividend,
split-up, recapitalization, merger, consolidation, combination or
exchange of shares, separation, reorganization or liquidation of the
Grantor occurring after the date hereof, as a result of which shares of
any class shall be issued in respect of outstanding shares of capital
stock of the Grantor (or shall be issuable in respect of securities
convertible into shares of capital stock) or upon exercise of rights
(other than the Options) to purchase shares of capital stock, or shares
of such capital stock shall be changed into the same or a different
number of shares of Series C Convertible Preferred Stock or another
class or classes, the Grantee exercising the Option shall receive, for
the aggregate price paid upon such exercise, the aggregate number and
class of shares which such Grantee would have received if this Option
had been exercised immediately prior to such stock dividend, split-up,
recapitalization, merger, consolidation, combination or exchange of
shares, separation, reorganization or liquidation.
8. Non-Transferability of the Option and Rights of Grantee. A Grantee's
Option may be exercised only by that Grantee, and no Grantee may
transfer its Option in any manner except it may make such a transfer to
a Person who would be permitted to receive a Transfer of Company Equity
from such Grantee under the Shareholders Agreement. No Grantee shall
have any rights as a shareholder with respect to any Option Shares to
be acquired hereunder unless and until that Grantee exercises its
Option with respect to such Option Shares.
9. Rights and Obligations Part of Series of Transactions. The Parties
acknowledge and agree that the rights and obligations provided for in
this Agreement are part of a series of transactions which, pursuant to
the Participation Agreement, are subject to certain conditions
precedent as provided therein, and are being entered into in reliance
on certain representations and warranties and covenants of
indemnification set out in the Participation Agreement (which
indemnification obligations shall be deemed incorporated herein).
Unless and until such conditions are satisfied or waived, and these
representations and warranties are made, all in the manner provided for
in the Participation Agreement, no Party shall have any rights or
obligations hereunder.
10. Further Assurances. At the request of any Party hereto, each Party to
this Agreement hereby agrees, without the payment of additional
consideration, to execute, deliver, file and verify any and all
documents, instruments or agreements necessary or appropriate to
effectuate the intent of the parties in entering into this Agreement.
11. Notices. Any notice required or permitted hereunder shall be effected
(and deemed effected) in the manner set forth for giving notice in the
Participation Agreement.
12. Governing Law; Dispute Resolution. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York,
United States of America, without giving effect to any choice or
conflict of law provision or rule that would cause the application of
laws of any jurisdiction other than the State of New York except to the
extent this Agreement would require the mandatory application of the
corporate law of the State of Nevada. All disputes arising under or
relation to this Agreement shall first be subject to conciliation in
accordance with the Rules of Conciliation of the International Chamber
of Commerce and, failing conciliation, be finally settled under the
Rules of Arbitration of the International Chamber of Commerce by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York. The language of the
arbitration shall be English. In the event any dispute under the
Participation Agreement relates in any way to the validity, performance
or interpretation of this Agreement and an arbitral tribunal is
constituted pursuant to Section 11(n) of the Participation Agreement,
all parties to any dispute hereunder agree (i) to be joined to the
procedures initiated pursuant to Section 11(n) of the Participation
Agreement; (ii) to have any proceedings initiated hereunder
consolidated with proceedings initiated pursuant to Section 11(n) of
the Participation Agreement and (iii) to be bound by any ruling of the
arbitral tribunal constituted pursuant to Section 11(n) of the
Participation Agreement or any interim or final award thereof.
Submission of disputes to arbitration pursuant to the Rules of
Arbitration of the International Chamber of Commerce, in consolidation
with any disputes submitted to arbitration pursuant to Section 11(n) of
the Participation Agreement as provided above, shall be the sole method
of resolving disputes between the Parties hereto. Judgment upon an
arbitration award may be entered in any court having jurisdiction.
IN WITNESS WHEREOF, each party has executed this Agreement as of the
date set forth above.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Xxxxx X'Xxxxxxxx
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Its:
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TELEMATICA EDC, C.A.
By: /s/ Xxxxxxxx Xxxxxxxx
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Its:
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TCW/CCI HOLDING LLC
By: /s/ Xxxxx X. Xxxxx
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Its:
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INTERNATIONAL FINANCE CORPORATION
By:
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Its:
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GLACIER LATIN-AMERICA LTD.
By: /s/ Xxxxx Xxxxxxx
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Its:
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FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Xxxxxx Xxxxxx-Xxx
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Its:
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INTERNEXUS S.A.
By: /s/ Xxxxx Xxxxxxxx
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Its: Duly Authorized
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