Exhibit 4
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
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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
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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.
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IN WITNESS WHEREOF, each party has executed this Agreement as of the
date set forth above.
CONVERGENCE COMMUNICATIONS, INC.
By:_________________________________
Its:________________________________
TELEMATICA EDC, C.A.
By:_________________________________
Its:________________________________
TCW/CCI HOLDING LLC
By:_________________________________
Its:________________________________
INTERNATIONAL FINANCE CORPORATION
By:_________________________________
Its:________________________________
GLACIER LATIN-AMERICA LTD.
By:_________________________________
Its:________________________________
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By:_________________________________
Its:________________________________
INTERNEXUS S.A.
By:_________________________________
Its:________________________________
