<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 9, 1996
REGISTRATION NO. 333-12977
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------
IMPSAT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 4899
(STATE OR OTHER JURISDICTION (PRIMARY INDUSTRIAL 52-1910372
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) (IRS EMPLOYER IDENTIFICATION
NUMBER)
</TABLE>
IMPSAT S.A.
(REGISTRANT WITH RESPECT TO THE GUARANTEE)
<TABLE>
<S> <C>
ARGENTINA 4899
(STATE OR OTHER JURISDICTION (PRIMARY INDUSTRIAL
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
RICHARD HORNER
ALFEREZ PAREJA 256 (1107) IMPSAT USA, INC.
BUENOS AIRES, ARGENTINA ONE FINANCIAL PLAZA
(541) 362-4240 FT. LAUDERDALE, FLORIDA 33394
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (954) 779-7171
INCLUDING (NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE
AREA CODE, OF EACH REGISTRANT'S PRINCIPAL EXECUTIVE NUMBER, INCLUDING AREA CODE, OF AGENT FOR
OFFICES) SERVICE FOR EACH REGISTRANT)
</TABLE>
------------------
Please send copies of communications to:
NEIL M. GOODMAN, ESQ.
ARNOLD & PORTER
555 TWELFTH STREET, N.W.
WASHINGTON, D.C. 20004-1202
(202) 942-5191
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as possible after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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- -----------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED NOTE(1) PRICE(1) FEE(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12 1/8% Senior Guaranteed Notes due 2003... $125,000,000 $102.63 $128,281,250 $44,235
- -----------------------------------------------------------------------------------------------------------
Guarantee of the Notes..................... -- -- -- (3)
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Total...................................... $125,000,000 $102.63 $128,281,250 $44,235
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</TABLE>
(1) Pursuant to Rule 457(f) under the Securities Act of 1933, the registration
fee has been calculated based on the average of the bid and asked prices in
the PORTAL market on September 24, 1996 of the 12 1/8% Senior Guaranteed
Notes due 2003 of the Company, for which the securities registered hereby
will be exchanged.
(2) The filing fee was paid on September 25, 1996.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Guarantee (as defined herein).
------------------
THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY STATE.
PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 9, 1996
OFFER TO EXCHANGE
ALL OUTSTANDING
12 1/8% SENIOR GUARANTEED NOTES DUE 2003
FOR
12 1/8% SENIOR GUARANTEED NOTES DUE 2003
OF
IMPSAT CORPORATION
GUARANTEED BY
IMPSAT S.A.
---------------------
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY , 1997 UNLESS EXTENDED
---------------------
IMPSAT Corporation, a Delaware corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange its outstanding 12 1/8% Senior Guaranteed Notes due
2003 (the "Old Notes"), of which an aggregate of $125,000,000 in principal
amount is outstanding as of the date hereof, for an equal principal amount of
newly issued 12 1/8% Senior Guaranteed Notes due 2003 (the "New Notes"). The
form and terms of the New Notes will be the same as the form and terms of the
Old Notes except that (i) the New Notes will be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and hence will not bear legends
restricting the transfer thereof and (ii) the holders of the New Notes will not
be entitled to certain rights of holders of the Old Notes under the Registration
Rights Agreement (as defined herein), which rights will terminate upon the
consummation of the Exchange Offer. The New Notes will evidence the same debt as
the Old Notes and will be entitled to the benefits of an indenture dated as of
July 30, 1996, governing the Old Notes and the New Notes (the "Indenture"). The
Indenture provides for the issuance of both the New Notes and the Old Notes. The
New Notes and the Old Notes are sometimes referred herein collectively as the
"Notes" or the "Senior Notes."
(Continued on next page)
---------------------
FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY ELIGIBLE
HOLDERS IN EVALUATING THE EXCHANGE OFFER. SEE "RISK
FACTORS" BEGINNING ON PAGE 20.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE> 3
The Notes will bear interest at the rate of 12 1/8% per annum and interest
will be payable semi-annually in cash on January 15 and July 15 of each year,
commencing January 15, 1997, to holders of record on the immediately preceding
January 1 and July 1. See "Description of the New Notes."
The Notes have the benefit of a guarantee (the "Guarantee") issued on a
senior unsecured basis by IMPSAT S.A., the Company's Argentine operating
subsidiary ("IMPSAT Argentina" or the "Guarantor"). The Notes and the Guarantee
will be unsecured, unsubordinated obligations of the Company and the Guarantor,
respectively, will rank pari passu in right of payment with all existing and
future unsecured, unsubordinated obligations and will be senior in right of
payment to all subordinated indebtedness of the Company and the Guarantor,
respectively. The Company is a holding company. As an equity holder of its
subsidiaries, the right of the Company to receive assets from a subsidiary upon
the bankruptcy, liquidation or reorganization of such subsidiary (and therefore
the right of the holders of the Notes to participate in those assets) will be
effectively subordinated to all liabilities, including trade payables, of the
Company's subsidiaries (other than the Guarantor) except to the extent that the
Company is recognized as a creditor of the subsidiary. Although the proceeds of
the Old Notes have been or will be distributed to the Company's subsidiaries in
the form of intercompany loans (thereby creating a creditor-debtor relationship
between the Company and its subsidiaries), there are no restrictions upon the
Company's ability to capitalize such amounts at a later date. On September 30,
1996, on an as adjusted basis and excluding inter-company payables to the
Company or the Guarantor, the Company's subsidiaries (other than the Guarantor)
had approximately $47.3 million of liabilities, including approximately $32.4
million of indebtedness. At such date and on such an as adjusted basis, the
Company's operating subsidiaries (including the Guarantor) had a total of
approximately $22.3 million of secured indebtedness. The Notes would also be
subordinated to certain statutorily created preferences in the countries in
which the Company's subsidiaries operate with respect to certain liabilities of
the Company's subsidiaries, such as accrued tax liabilities and accrued salary,
severance, social security and pension liabilities.
At any time on or prior to July 15, 1999, the Company may, at its option
from time to time, redeem Notes having an aggregate principal amount of up to
$25 million at a redemption price equal to 112.125% of the principal amount
thereof on the redemption date, together with accrued and unpaid interest
thereon, with the net cash proceeds of one or more public or private issuances
of common stock of the Company ("Equity Offerings"); provided that (i) Notes
having an aggregate principal amount of at least $100 million remain outstanding
after each such redemption and (ii) each such redemption occurs within 180 days
after consummation of such Equity Offering.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Company does not intend to list the New Notes on any securities exchange or
to seek approval for quotation through any automated quotation system. There can
be no assurance that an active market for the New Notes will develop. To the
extent that a market for the New Notes does develop, the market value of the New
Notes will depend on market conditions (such as yields on alternative
investments), general economic conditions, the Company's financial condition and
other conditions. Such conditions might cause the New Notes, to the extent that
they are actively traded, to trade at a significant discount from face value.
See "Risk Factors -- Lack of Public Market."
The New Notes will be available initially only in book-entry form. The
Company expects that the New Notes issued pursuant to the Exchange Offer will be
issued in the form of one or more fully registered global notes that will be
deposited with, or on behalf of, the Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., as its nominee. Beneficial
interests in the global note representing the New Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the DTC
and its participants. After the initial issuance of such global note, New Notes
in certificated form will be issued in exchange for the global note only in
accordance with the terms and conditions set forth in the Indenture. See
"Description of the Notes -- Book Entry; Delivery and Form" and "Description of
the Notes -- Certificated Notes."
The Company will accept for exchange any and all Old Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time,
on January , 1997 (if and as extended, the
2
<PAGE> 4
"Expiration Date"). Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Notes being tendered for
exchange. Old Notes may be tendered only in integral multiples of $1,000. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Old Notes, the Company will promptly return all previously tendered Old
Notes to the holders thereof.
Based on a previous interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in no-action letters to third
parties, the Company believes that the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold, and otherwise
transferred by a holder thereof (other than (i) a broker-dealer who purchases
such New Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company (within the meaning of Rule 405 under the Securities
Act)) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the holder is acquiring the New
Notes in its ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in the distribution
of the New Notes. Holders of Old Notes wishing to accept the Exchange Offer must
represent to the Company that such conditions have been met.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter," within the meaning of the Securities Act, in connection with
resale of New Notes received in exchange for Old Notes where such Old Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of 180 days after
the Expiration Date, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Company believes that none of the registered holders of the Old Notes
is an affiliate (as such term is defined in Rule 405 under the Securities Act)
of the Company. The Company has not entered into any arrangement or
understanding with any person to distribute the New Notes to be received in the
Exchange Offer, and to the best of the Company's information and belief, each
person participating in the Exchange Offer is acquiring the New Notes in the
ordinary course of business and has no arrangement or understanding with any
person to participate in the distribution of the New Notes to be received in the
Exchange Offer.
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to bear the expenses of the Exchange Offer. No underwriter is
being used in connection with the Exchange Offer.
3
<PAGE> 5
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act with respect to the New Notes offered hereby. As
permitted by the rules and regulations of the Commission, this Prospectus omits
certain information, exhibits and undertakings contained in the Registration
Statement. For further information with respect to the Company and the New Notes
offered hereby, reference is made to the Registration Statement, including the
exhibits thereto and the financial statements, notes and schedules filed as a
part thereof. The Registration Statement (and the exhibits and schedules
thereto), as well as the periodic reports and other information filed by the
Company and the Guarantor with the Commission, may be inspected and copied at
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of
the Commission located at 7 World Trade Center, New York, New York 10007 and
Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661-2511. Copies of such materials may be obtained from the Public
Reference Section of the Commission, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York and Chicago, Illinois at the prescribed rates. The Commission
maintains a site on the World Wide Web ("WWW") which contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The Commission's WWW site is
http://www.sec.gov. Statements contained in this Prospectus as to the contents
of any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
During such times as the Company is not subject to the reporting and
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company has agreed that for so long as any of the
Notes remain outstanding to furnish to the holders of the Notes all quarterly
and annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Company were required
to file such Forms. In addition, the Company has agreed to make available to any
prospective purchaser of the Notes or beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Company has either exchanged
the Old Notes for New Notes or until such time as the holders thereof have
disposed of such Old Notes pursuant to an effective registration statement filed
by the Company. From and after the time the Company files a registration
statement with the Commission with respect to the New Notes, the Company will
file such quarterly and annual information with the Commission.
No person is authorized in connection with any offering made hereby to give
any information or to make any representation other than as contained in this
Prospectus or the accompanying Letter of Transmittal, and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company. Neither this Prospectus nor the accompanying Letter
of Transmittal or both together constitute an offer to sell or a solicitation of
an offer to buy any security other than the New Notes offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any
securities offered hereby to any person in any jurisdiction in which it is
unlawful to make such offer or solicitation to such person. Neither the delivery
of this Prospectus or the accompanying Letter of Transmittal or both together,
nor any sale made hereunder shall under any circumstances imply that the
information contained herein is correct as of any date subsequent to the date
hereof.
------------------------
All but one of the directors and executive officers of the Company and the
Guarantor (as well as certain experts named in this Memorandum) reside outside
of the United States. Virtually all of the assets of such persons, the Company
and the Guarantor are located outside the United States. As a result, it may not
be possible for investors to effect service of process within the United States
upon such persons or to enforce against them judgments of U.S. courts predicated
upon civil liability provisions of the U.S. federal or state securities laws.
The following discussion with respect to the enforceability of certain U.S.
court judgments in Argentina is based upon advice provided to the Company and
the Guarantor by Nicholson & Cano, Argentine counsel to the Company and the
Guarantor. The United States and Argentina currently do not have a treaty
providing for
4
<PAGE> 6
the reciprocal recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Consequently, a final judgment for
payment rendered by any federal or state court in the United States based on
civil liability, whether or not predicated solely upon U.S. federal securities
laws, would not automatically be enforceable in Argentina. In order to enforce
any U.S. judgment in Argentina, proceedings must be initiated by way of a common
law action before a court of competent jurisdiction in Argentina. In such a
common law action, an Argentine court generally will not (subject to the
following sentence) reinvestigate the merits of the original matter decided by a
U.S. court and will order summary judgment on the basis that there is no defense
to the claim for payment. The entry of an enforcement order by an Argentine
court is conditioned upon the following: (a) the U.S. court had jurisdiction
over the original proceeding; (b) the judgment is final and conclusive on the
merits and is for a definite sum of money; (c) the judgment does not contravene
Argentine public policy; (d) the judgment is not for a tax, penalty or judgment
arrived at by doubling, trebling or otherwise multiplying a sum assessed as
compensation for the loss or damage sustained; (e) the judgment has not been
obtained by fraud; (f) the defendant against whom the enforcement of the
judgment is sought was duly served with a summons in the original proceeding;
and (g) the judgment is not contrary to a prior or simultaneous judgment of an
Argentine court. Subject to the foregoing, purchasers of Notes may be able to
enforce in Argentina judgments in civil and commercial matters obtained from
U.S. federal or state courts; however, there can be no assurance that such
judgments will be enforceable. In addition, there is doubt as to whether an
Argentine court would accept jurisdiction and impose civil liability in an
original action predicated solely upon U.S. federal securities law. The Company
and the Guarantor have appointed CT Corporation System as agent for service of
process in any suit, action or proceeding with respect to the Indenture or the
Notes and for actions brought under federal or state securities laws brought in
any federal or state court located in The City of New York, and the Company and
the Guarantor have submitted to the jurisdiction of such courts in connection
with such suits, actions or proceedings.
------------------------
The terms VSAT(R), Dataplus(R), Teledatos(R), Regional Teleport(R),
Difusat(R), Interplus(R) and Global Fax(R) are service marks or trademarks of
the Company or its subsidiaries that are registered or otherwise protected under
the laws of various jurisdictions.
5
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, the term
"Company" refers to IMPSAT Corporation and its combined subsidiaries. Financial
data for the Company and the Guarantor are presented in accordance with United
States generally accepted accounting principles. Certain of the information
contained in this summary and elsewhere in this Prospectus, including that set
forth under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and information with respect to the
Company's plans and strategy for its business and related financing, are
forward-looking statements which are based on a number of assumptions and are
subject to significant business, economic and competitive uncertainties which
are beyond the control of the Company. For a discussion of important factors
that could cause actual results to differ materially from the forward-looking
statements, investors should carefully consider the information set forth under
the caption "Risk Factors." Certain information contained herein is derived from
industry research data which the Company has not independently verified. See
"Glossary" for the definition of certain terms used in this Prospectus.
THE COMPANY
The Company is a leading provider of private telecommunications network
services in Latin America. The Company provides private network integrated data
and voice telecommunications services for national and multinational companies,
financial institutions, governmental agencies and other business customers in
Latin America. The Company believes that it operates one of the largest shared
hub VSAT networks in Latin America. A substantial majority of the Company's
revenues currently are derived from Argentina and Colombia. The Company is an
established provider of such services in Venezuela and Ecuador and recently has
commenced operations in Mexico and the United States. Services are provided
through the Company's advanced telecommunications networks comprised of owned
teleports, earth stations, fiber optic and microwave links, and leased satellite
and fiber optic capacity.
The Company has grown rapidly since the commencement of its operations in
Argentina in 1990. Its customer base has expanded from 125 customers in two
countries as of December 31, 1992 to 656 customers in six countries as of
December 31, 1995. During the same period, total revenues on a combined basis
have grown from $20 million to $106 million, and EBITDA (as defined) has grown
from $7.9 million to $27.5 million. Contracts with customers are generally
denominated in, or tied to the value of, U.S. dollars, with terms that range
from six months to five years, but generally are for three years in duration.
Contracts generally may be terminated by customers without penalty.
The Company's goal is to become the leading provider of private
telecommunications network services in Latin America. The key elements of the
Company's strategy include: (i) providing tailor-made solutions to meet the
particular telecommunications needs of its customers; (ii) delivering premium
services using state-of-the-art telecommunications technology that is updated
and improved on an ongoing basis, as well as round-the-clock customer support;
(iii) expanding the Company's revenue base by taking advantage of increasing
demand for new services from existing customers, increasing the customer base in
each of the countries in which it operates and, potentially, expanding its
operations into Brazil; and (iv) utilizing a mix of technologies and suppliers.
The Company anticipates continued growth in the demand for private
telecommunications network services in Latin America. Continued deregulation of
the telecommunications market throughout the region should lead to growth in the
telecommunications sector, which is relatively limited as compared with more
developed countries. As the Latin American telecommunications sector matures,
the Company believes that the proportionate share accounted for by data
transmission services will also increase, as it has in more developed countries.
The Company also expects that continuing economic growth in Latin America will
bring greater opportunities for expansion and that economic integration of the
Latin American countries should add to the demand for private network services
in the region.
6
<PAGE> 8
The Company believes it has significant advantages over its competitors as
a result of its: (i) operating experience as a pioneer in providing shared hub
VSAT services; (ii) ability to provide diverse, cost-efficient networking
solutions; (iii) superior marketing skill, knowledge of the customer's needs and
responsiveness; and (iv) position as a market leader and its significant
existing network infrastructure in its markets.
The Company is a privately-held corporation, with two stockholders.
Seventy-five percent of the common stock of the Company is controlled by the
Pescarmona group, a prominent Argentine industrial group, and the remaining 25%
is controlled by STET International Netherlands NV ("STET International"), a
wholly-owned subsidiary of STET International SpA, the international
communications affiliate of the Italian telecommunications holding company STET
SpA ("STET"). The Company's business commenced in 1990 in Argentina. In 1991 and
1992, operating companies were established in Colombia and Venezuela. IMPSAT
Corporation was organized in 1994 as a Delaware holding company and the capital
stock of the operating companies (other than IMPSAT Argentina) was contributed
to IMPSAT Corporation in 1995. On July 5, 1996, 51% of the capital stock of
IMPSAT Argentina was contributed to IMPSAT Corporation.
In 1990 the STET group invested $10 million for a 25% equity stake in
IMPSAT Argentina; and in 1994 STET group invested a total of $65.9 million for a
25% equity stake in IMPSAT Corporation (which, at that time, did not hold an
equity interest in IMPSAT Argentina). STET International employees are seconded
to the Company and its subsidiaries from time to time. The Company believes its
relationship with STET International provides it with additional expertise and
opportunities in the telecommunications business. STET is the holding company
for one of the world's largest telecommunications operators, Telecom Italia,
S.p.A. ("Telecom Italia"), through which STET operates the Italian national
telephone company.
STET International owns 25% of Corporacion Interamericana de
Telecomunicaciones, S.A. de CV, a company that holds 49% of Empresa de
Telecomunicaciones de Cuba, S.A. ("ETECSA"), the public telecommunications
operator in Cuba. Volante de Comercio, an indirect subsidiary of STET, owns 49%
of Sociedad Cubana de Telecomunicaciones, S.A., a Cuban company established for
the manufacture and sale of telecommunications equipment. SEAT, Divisione STET
S.p.A. has assembled and printed the 1996 edition of the Cuban telephone
directories for ETECSA. The Company does not conduct any business with the
government of Cuba or with any person or affiliate located in Cuba. This
information is accurate as the date hereof. Current information with respect to
such holdings may be obtained from the Florida Department of Banking and
Finance, The Capital, Tallahassee, Florida 32399-0350; telephone number (904)
488-9805.
The Company's principal offices are located at Alferez Pareja 256 (1107),
Buenos Aires, Argentina and its telephone number is (541) 362-4240.
THE EXCHANGE
THE EXCHANGE OFFER............ The Company is offering to exchange $1,000
principal amount of New Notes for each $1,000
principal amount of Old Notes that are
properly tendered and accepted. The Company
will issue the New Notes on or promptly after
the Expiration Date. There are $125,000,000
aggregate principal amount of Old Notes
outstanding. See "The Exchange Offer."
Based on an interpretation of the staff of the
Commission set forth in no-action letters
issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred
by any holder thereof (other than (i) a
broker-dealer who purchases such New Notes
directly from the Company to resell pursuant
to Rule 144A or any other available exemption
under the Securities Act or (ii) any such
holder which is an "affiliate" of the Company
within the meaning of Rule 405 under the
Securities Act) without compliance with the
registration
7
<PAGE> 9
and prospectus delivery provisions of the
Securities Act, provided that such New Notes
are acquired in the ordinary course of such
holder's business and that such holder has no
arrangement or understanding with any person
to participate in the distribution of such New
Notes. In the event that the Company's belief
is inaccurate, holders of New Notes who
transfer New Notes in violation of the
prospectus delivery provisions of the
Securities Act and without an exemption from
registration thereunder may incur liability
thereunder. The Company does not assume or
indemnify holders against such liability. The
Exchange Offer is not being made to, nor will
the Company accept surrenders for exchange
from, holders of Old Notes (i) in any
jurisdiction in which the Exchange Offer or
the acceptance thereof would not be in
compliance with the securities or blue sky
laws of such jurisdiction or (ii) if any
holder is engaged or intends to engage in a
distribution of New Notes. Each broker-dealer
that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a
result of market-making activities or other
trading activities, must acknowledge that it
will deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of such New Notes.
See "Plan of Distribution."
EXPIRATION DATE............... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on January , 1997,
unless extended, in which case the term
"Expiration Date" shall mean the latest date
and time to which the Exchange Offer is
extended. The Company will accept for exchange
any and all Old Notes which are properly
tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration
Date. The New Notes issued pursuant to the
Exchange Offer will be delivered on or
promptly after the Expiration Date.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Company may terminate the Exchange Offer
if it determines that its ability to proceed
with the Exchange Offer could be materially
impaired due to any legal or governmental
action, any new law, statute, rule or
regulation, any interpretation by the staff of
the Commission of any existing law, statute,
rule or regulation or the failure to obtain
any necessary approvals of governmental
agencies or holders of the Old Notes. The
Company does not expect any of the foregoing
conditions to occur, although there can be no
assurances any such conditions will not occur.
PROCEDURES FOR TENDERING
NOTES......................... Each holder of Old Notes wishing to accept the
Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with such Old
Notes and any other required documentation to
The Bank of New York, as Registrar, at the
address set forth herein. By executing the
Letter of Transmittal, each holder will
represent to the Company that, among other
things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such New Notes, whether or not such
person has an arrangement or understanding
with any person
8
<PAGE> 10
to participate in the distribution of such New
Notes and that neither the holder nor any such
other person is an "affiliate", as defined in
Rule 405 under the Securities Act, of the
Company.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............. Any beneficial owner whose Old Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and who wishes to tender such Old
Notes in the Exchange Offer should contact
such registered holder promptly and instruct
such registered holder to tender on such
beneficial owner's behalf. If such beneficial
owner wishes to tender on such owner's own
behalf, such owner must, prior to completing
and executing the Letter of Transmittal and
delivering his Old Notes, either make
appropriate arrangements to register ownership
of the Old Notes in such owner's name or
obtain a properly completed bond power from
the registered holder. The transfer of
registered ownership may take considerable
time and may not be able to be completed prior
to the Expiration Date.
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Old Notes who wish to tender their
Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes or the Letter of Transmittal
to The Bank of New York, as Exchange Agent,
prior to the Expiration Date, must tender
their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS............. Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time,
on the Expiration Date.
CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS................ For a discussion of certain federal income tax
considerations relating to the exchange of the
New Notes for the Old Notes, see "Certain
United States Federal Income Tax
Considerations."
EXCHANGE AGENT................ The Bank of New York is the Exchange Agent.
Its telephone number is (212) 815-6333. The
address of the Exchange Agent is set forth in
"The Exchange Offer -- Exchange Agent." The
Bank of New York also serves as trustee under
the Indenture.
SHELF REGISTRATION
STATEMENT..................... Under certain circumstances described in the
Registration Rights Agreement, certain holders
of Notes (including holders who are not
permitted to participate in the Exchange Offer
or who may not freely resell New Notes
received in the Exchange Offer) may require
the Company to file, and use best efforts to
cause to become effective, a shelf
registration statement under the Securities
Act, which would cover resales of Notes by
such holders. See "Description of
Notes -- Registration Rights."
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is not conditioned on any
minimum principal amount of Old Notes being
tendered for exchange. The Exchange Offer is
subject to certain other customary conditions,
each of which may be waived by the Company.
See "The Exchange Offer -- Certain
Conditions."
9
<PAGE> 11
SUMMARY DESCRIPTION OF THE NEW NOTES
The terms of the New Notes and the Old Notes are identical in all material
respects, except for certain transfer restrictions relating to the Old Notes.
Whenever defined terms of the Indenture not otherwise defined herein are
referred to, such defined terms are incorporated herein by reference. In the
Event that the Exchange Offer is not consummated and a Shelf Registration
Statement is not declared effective on or prior to January 30, 1997, the annual
interest rate borne by the Notes will be increased by 0.5%. If the Exchange
Offer is not consummated and the Shelf Registration statement is not declared
effective by July 30, 1997, the annual interest rate borne by the Notes will be
increased by an additional 0.5%. Upon consummation of the Exchange Offer or the
effectiveness of the Shelf Registration Statement, the interest rate on the
Notes will revert to the rate set forth on the cover page of this Prospectus.
The New Notes will bear interest from the most recent date to which interest has
been paid on the Old Notes or, if no interest has been paid on the Old Notes,
from July 30, 1996. Accordingly, registered holders of New Notes on the relevant
record date for the first interest payment date following the consummation of
the Exchange Offer will receive interest accruing from the most recent date to
which interest has been paid on the Old Notes or, if no interest has been paid,
from July 30, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
whose Old Notes are accepted for exchange will not receive any payment in
respect of interest on such Old Notes otherwise payable on any interest payment
date the record date for which occurs on or after consummation of the Exchange
Offer.
THE NEW NOTES
SECURITIES OFFERED............ $125,000,000 Senior Guaranteed Notes due 2003.
See "Description of the Notes."
MATURITY...................... July 15, 2003.
INTEREST...................... 12 1/8% per annum payable semiannually in cash
on January 15 and July 15 of each year,
commencing January 15, 1997.
GUARANTEE..................... The Notes will have the benefit of a guarantee
issued on a senior, unsecured basis by IMPSAT
Argentina, the Company's 51%-owned Argentine
operating subsidiary.
ADDITIONAL AMOUNTS............ Any payments in respect of the Notes made by
the Guarantor pursuant to the Guarantee will
be made without withholding or deduction for
or on account of any present or future taxes,
duties, levies or other governmental charges
of whatever nature imposed by or on behalf of
the Republic of Argentina or any political
subdivision or taxing authority thereof
("Argentine taxes"), unless such Argentine
taxes are required by law or the
interpretation or administration thereof, in
which case the Guarantor will pay such
additional amounts as may be necessary so that
the net amount received by the holders after
such withholding or deduction will not be less
than the amount that would have been received
in the absence of such withholding or
deduction. See "Description of the
Notes -- Additional Amounts."
RANKING....................... The Notes and the Guarantee will be unsecured,
unsubordinated indebtedness of the Company and
the Guarantor, respectively, will rank pari
passu in right of payment with all existing
and future unsecured, unsubordinated
indebtedness and will be senior in right of
payment to all subordinated indebtedness of
the Company and the Guarantor, respectively.
At September 30, 1996, on an as adjusted
basis, after giving effect to the Offering (as
defined herein), the defeasance and repayment
of the Guarantor's
10
<PAGE> 12
$30 million 9.5% Negotiable Obligations due
1996 and the repayment of $61.5 million of
other short-term obligations of the Company's
subsidiaries with the proceeds of the
Offering, the Company (on an unconsolidated
basis) and the Guarantor (on a consolidated
basis and excluding inter-company payables to
the Company) had $4.4 million of indebtedness
other than the Notes (which represents a
guarantee of certain subsidiary indebtedness
described below) and $31.1 million of
indebtedness (other than the Guarantee),
respectively, all of which were senior
indebtedness. The Company is a holding
company. As an equity holder of its
subsidiaries, the right of the Company to
receive assets from a subsidiary upon the
bankruptcy, liquidation or reorganization of
such subsidiary (and therefore the right of
the holders of the Notes to participate in
those assets) will be effectively subordinated
to all liabilities, including trade payables,
of the Company's subsidiaries (other than the
Guarantor) except to the extent that the
Company is recognized as a creditor of the
subsidiary. Although the proceeds of the Old
Notes have been or will be distributed to the
Company's subsidiaries in the form of
intercompany loans (thereby creating a
creditor-debtor relationship between the
Company and its subsidiaries), there are no
restrictions upon the Company's ability to
capitalize such amounts at a later date. On
September 30, 1996, on an as adjusted basis
and excluding inter-company payables to the
Company or the Guarantor, the Company's
subsidiaries (other than the Guarantor) had
approximately $47.3 million of liabilities,
including approximately $32.4 million of
indebtedness. At such date and on such an as
adjusted basis, the Company's operating
subsidiaries (including the Guarantor) had a
total of approximately $22.3 million of
secured indebtedness. The Notes would also be
subordinated to certain statutorily created
preferences in the countries in which the
Company's subsidiaries operate with respect to
certain liabilities of the Company's
subsidiaries, such as accrued tax liabilities
and accrued salary, severance, social security
and pension liabilities. The Company and its
subsidiaries are expected to incur substantial
amounts of additional indebtedness in the
future, subject to compliance with the
limitations contained in the Indenture. See
"Risk Factors -- Significant Capital
Requirements" and "Holding Company Structure:
Effective Subordination of Notes to
Obligations of Subsidiaries."
CERTAIN COVENANTS............. The Indenture contains certain covenants
which, among other things, restrict the
ability of the Company and its restricted
subsidiaries, including the Guarantor, to:
incur additional indebtedness; create liens;
engage in sale-leaseback transactions; make
restricted payments; sell assets; create
restrictions on the ability of restricted
subsidiaries to make certain payments; issue
or sell stock of certain subsidiaries; enter
into transactions with stockholders or
affiliates; and, with respect to the Company,
consolidate, merge or sell all or
substantially all of its assets. See
"Description of the Notes -- Covenants."
11
<PAGE> 13
REDEMPTION WITH PUBLIC OR
PRIVATE EQUITY PROCEEDS....... At any time on or prior to July 15, 1999, the
Company may, at its option from time to time,
redeem Notes having an aggregate principal
amount of up to $25 million at a redemption
price equal to 112.125% of the principal
amount thereof on the redemption date,
together with accrued and unpaid interest
thereon, with the net cash proceeds of one or
more public or private issuances of common
stock of the Company ("Equity Offerings");
provided that (i) Notes having an aggregate
principal amount of at least $100 million
remain outstanding after each such redemption
and (ii) each such redemption occurs within
180 days after consummation of such Equity
Offering.
CHANGE OF CONTROL............. Upon a Change of Control (as defined herein),
the Company is required to make an offer to
purchase the Notes at a purchase price equal
to 101% of their principal amount, plus
accrued interest. However, certain
transactions with affiliates may not be deemed
to be a Change of Control. See "Description of
the Notes -- Certain Definitions" and
"-- Repurchase of Notes upon a Change of
Control."
RISK FACTORS.................. See "Risk Factors," immediately following this
Summary, for a discussion of certain risks
that should be considered when evaluating an
investment in the Notes.
12
<PAGE> 14
CORPORATE STRUCTURE AND SUMMARY OF INDEBTEDNESS
The following chart summarizes the Company's corporate structure and the
indebtedness at September 30, 1996 of IMPSAT Corporation and each of its
operating subsidiaries (other than inter-company indebtedness) on an as adjusted
basis after giving effect to the Offering (as defined herein) and the defeasance
and repayment of IMPSAT Argentina's $30 million of 9.5% Negotiable Obligations
due 1996 and the repayment of $61.5 million of other short-term obligations of
the Company's subsidiaries with the proceeds of the Offering.
IMPSAT FLOWCHART
- ---------------
(1) Does not include a guarantee of $4.4 million of indebtedness of IMPSAT
Venezuela. See "Description of Certain Indebtedness."
13
<PAGE> 15
USE OF PROCEEDS
On July 30, 1996 the Company issued $125 million principal amount of Old
Notes (the "Offering"). The Old Notes were sold by the Company to a limited
number of institutional investors pursuant to exemptions from, or in
transactions not subject to, the registration requirements of the Securities Act
and applicable state securities laws. The Old Notes were priced at par and are
guaranteed on a senior unsecured basis by IMPSAT Argentina. The Company has
distributed and/or will distribute the net proceeds of the Offering, which
totalled approximately $120 million, to its operating subsidiaries through
inter-company loans. Such subsidiaries will in turn use the proceeds to repay
certain other existing indebtedness in the amount of approximately $91.5 million
and will use the remainder of such proceeds for working capital purposes
including debt service obligations on their outstanding indebtedness.
14
<PAGE> 16
SUMMARY FINANCIAL DATA
The following summary financial and other data are for the Company on a
combined basis and separately for IMPSAT Argentina and its consolidated
subsidiaries in each case in accordance with U.S. GAAP. The Company's
subsidiaries use the U.S. dollar as their functional currency. The Company owns
less than a 100% equity interest in certain of its operating subsidiaries,
including a 51% equity interest in IMPSAT Argentina, a 74% equity interest in
IMPSAT Colombia and a 75% equity interest in Telecomunicaciones IMPSAT
Venezuela. The financial data for the Company on a combined basis (including
EBITDA) generally reflect 100% of the revenues and expenses for each of the
Company's subsidiaries in operation during the relevant period, with the amounts
of net income (loss) and stockholders' equity attributable to the minority
interests in such subsidiaries deducted as a separate line item. The combined
financial data contained herein are presented as if IMPSAT Corporation owned its
current percentage of the capital stock of its subsidiaries during all periods,
and as of all balance sheet dates, presented.
The fiscal year of the Company and all of its subsidiaries, other than
IMPSAT Argentina, ends on December 31, and IMPSAT Argentina's fiscal year ends
on November 30. The combined financial results of the Company for the years
ended December 31, 1993, 1994 and 1995 incorporate IMPSAT Argentina's results
for the twelve months ended November 30, 1993, 1994 and 1995, respectively; and
the combined financial results of the Company for the nine months ended
September 30, 1995 and 1996 incorporate IMPSAT Argentina's results for the nine
months ended August 31, 1995 and 1996, respectively.
The summary financial data for the Company and for IMPSAT Argentina set
forth below have been derived from the Company's combined financial statements
and IMPSAT Argentina's consolidated financial statements, audited by Deloitte &
Touche LLP and Deloitte & Touche, Argentina, respectively, independent auditors,
whose reports thereon are included elsewhere in this Prospectus. The summary
financial data for the Company for the nine months ended September 30, 1995 and
1996 and for IMPSAT Argentina for the nine months ended August 31, 1995 and 1996
have been derived from the unaudited financial statements of the Company and
IMPSAT Argentina included elsewhere in this Prospectus and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the information set forth therein.
15
<PAGE> 17
The information set forth below should be read in conjunction with, and is
qualified in its entirety by reference to, the combined financial statements of
the Company and the notes thereto and the consolidated financial statements of
IMPSAT Argentina and the notes thereto included elsewhere in this Memorandum and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
THE COMPANY
-------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- ---------------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services............................ $ 37,695 $ 77,679 $105,641 $ 75,324 $ 93,393
Operating expenses(1)............................. (35,355) (66,054) (98,758) (68,082) (80,203)
Operating income.................................. 2,340 11,625 6,883 7,242 13,190
Interest expense, net............................. (6,220) (8,231) (15,677) (10,725) (16,849)
Minority interest................................. (1,218) (5,464) (1,712) (976) (1,509)
Net income (loss)................................. (2,836) 3,036 (7,417) (4,889) (5,378)
OTHER FINANCIAL DATA:
Capital expenditures.............................. $ 36,172 $ 87,541 $ 67,060 $ 57,075 $ 37,301
EBITDA(2)......................................... 8,664 24,499 27,536 21,991 32,383
Cash flow from (used by):
Operating activities.......................... 4,821 17,257 18,894 18,025 2,563
Investing activities.......................... (35,261) (87,603) (66,910) (56,443) (31,086)
Financing activities.......................... 33,994 95,351 22,097 14,558 116,170
Ratio of earnings to fixed charges(3)............. -- 1.38x -- -- --
Ratio of earnings to pro forma fixed
charges(3)(4)................................... -- -- -- -- --
Ratio of EBITDA to interest expense............... 1.30x 2.90x 1.67x 1.77x 1.82x
Ratio of EBITDA to pro forma interest
expense(4)...................................... -- -- 1.42x -- 1.92x
Ratio of total debt to EBITDA(5).................. 5.36x 4.39x 4.64x 4.14x 5.76x
Pro forma ratio of total debt to EBITDA(4)(5)..... -- -- 6.13x -- 4.37x
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1996
---------------------------------- ----------------------------
1993 1994 1995 ACTUAL AS ADJUSTED(6)
-------- -------- -------- -------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 7,130 $ 32,135 $ 6,216 $ 93,863 $ 33,663
Total assets...................................... 111,283 222,684 249,095 363,135 302,935
Total debt........................................ 46,398 107,484 127,710 248,651 188,451
Total long-term debt, net......................... 35,152 59,437 30,200 159,240 159,240
Minority interest................................. 19,614 24,893 28,476 29,985 29,985
Stockholders' equity.............................. 26,794 62,780 55,363 49,985 49,985
OTHER FINANCIAL DATA:
Total debt as a percentage of total
capitalization(7)............................... 50.0% 55.1% 60.4% 75.7% 70.2%
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------- ----------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations installed...................... 931 1,925 2,841 2,710 3,311
Dataplus earth stations installed................. 129 271 443 347 609
Satellites linked(8).............................. 3 4 4 4 6
Leased satellite capacity (Mhz)................... 51.5 128.4 198.3 196.25 261.58
Teleports......................................... 2 3 4 4 4
Teleport antennas................................. 10 16 22 20 21
Regional Teleports................................ 6 9 10 10 10
Teledatos Networks................................ 6 12 12 12 12
Customers......................................... 262 445 656 554 850
</TABLE>
(footnotes appear on page 19)
16
<PAGE> 18
<TABLE>
<CAPTION>
IMPSAT ARGENTINA
------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED NOVEMBER 30, AUGUST 31,
---------------------------------- ---------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services............................ $ 34,672 $ 63,999 $ 80,346 $ 58,352 $ 62,939
Operating expenses(1)............................. (21,946) (50,113) (66,019) (46,968) (49,328)
Operating income.................................. 12,726 13,886 14,327 11,384 13,611
Interest expense, net............................. (5,453) (4,556) (10,384) (7,607) (9,173)
Minority interest................................. -- (3) 6 6 14
Net income........................................ 6,805 12,464 4,472 3,722 3,031
OTHER FINANCIAL DATA:
Capital expenditures.............................. $ 23,699 $ 70,350 $ 38,248 $ 32,446 $ 16,746
EBITDA(2)......................................... 18,296 24,605 30,394 23,083 27,505
Cash flow from (used by):
Operating activities.......................... 8,225 22,298 27,697 22,380 6,365
Investing activities.......................... (22,762) (69,832) (37,984) (31,814) (16,483)
Financing activities.......................... 19,864 41,299 10,933 9,821 53,182
Ratio of earnings to fixed charges(3)............. 2.24x 2.92x 1.37x 1.50x 1.69x
Ratio of earnings to pro forma fixed
charges(3)(4)................................... -- -- 1.48x -- 1.38x
Ratio of EBITDA to interest expense............... 3.22x 5.17x 2.90x 3.03x 3.41x
Ratio of EBITDA to pro forma interest
expense(4)...................................... -- -- 3.15x -- 2.79x
Ratio of total debt to EBITDA(5).................. 1.93x 3.12x 2.62x 2.79x 3.76x
Pro forma ratio of total debt to EBITDA(4)(5)..... -- -- 2.97x -- 2.71x
<CAPTION>
AS OF NOVEMBER 30, AS OF AUGUST 31, 1996
---------------------------------- ---------------------------
1993 1994 1995 ACTUAL AS ADJUSTED(6)
-------- -------- -------- -------- --------------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......................... $ 6,749 $ 514 $ 1,160 $ 44,224 $ 5,524
Total assets...................................... 83,650 144,504 165,945 213,035 174,335
Total debt (includes advances from Parent
Company)........................................ 35,343 76,884 79,703 138,029 99,329
Total long-term debt, net (includes advances from
Parent Company)................................. 31,476 39,609 8,705 75,970 75,970
Minority interest................................. -- 9 3 (11) (11)
Stockholders' equity.............................. 33,000 43,964 48,436 51,467 51,467
OTHER FINANCIAL DATA:
Total debt as a percentage of total
capitalization(7)............................... 51.7% 63.6% 62.2% 72.8% 65.9%
<CAPTION>
AS OF NOVEMBER 30, AS OF AUGUST 31,
---------------------------------- ---------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations installed...................... 756 1,462 1,951 1,935 2,042
Dataplus earth stations installed................. 114 236 355 347 394
Satellites linked(8).............................. 3 4 4 4 4
Leased satellite capacity (Mhz)................... 31.0 96.0 148.0 148.0 161.0
Teleports......................................... 1 1 1 1 1
Teleport antennas................................. 8 11 12 12 12
Regional Teleports................................ 5 6 6 6 6
Teledatos Networks................................ 6 7 7 7 7
Customers......................................... 200 292 319 320 363
</TABLE>
(footnotes appear on page 19)
17
<PAGE> 19
The following supplemental summary financial data are for IMPSAT Argentina
for the fiscal years ended November 30, 1993, 1994 and 1995 and for each of
IMPSAT Colombia and IMPSAT Venezuela for the years ended December 31, 1993, 1994
and 1995 and have been derived from the consolidating schedules prepared by the
Company for the combined financial statements for the years ended December 31,
1993, 1994 and 1995. The following supplemental financial data for IMPSAT
Argentina, IMPSAT Colombia and IMPSAT Venezuela for the first nine months of
1995 and 1996 have been derived from the Company's and IMPSAT Argentina's
unaudited financial statements for the nine months ended September 30, 1995 and
1996 and August 31, 1995 and 1996, respectively.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services:
Argentina............................ $ 34,672 $ 63,999 $ 80,346 $ 58,352 $ 62,939
Colombia(9).......................... 2,777 12,756 22,417 15,068 25,021
Venezuela(10)........................ 246 910 2,204 1,524 3,105
Other(11)............................ -- 14 674 380 2,328
-------- -------- -------- -------- --------
TOTAL........................... $ 37,695 $ 77,679 $105,641 $ 75,324 $ 93,393
======== ======== ======== ======== ========
Operating expenses(1):
Argentina............................ $(21,946) $(50,113) $(66,019) $(46,968) $(49,328)
Colombia............................. (5,570) (10,757) (17,627) (10,300) (15,367)
Venezuela............................ (7,839) (3,699) (4,257) (2,139) (3,931)
Other................................ (1,485) (10,855) (8,675) (11,577)
-------- -------- -------- -------- --------
TOTAL........................... $(35,355) $(66,054) $(98,758) $(68,082) $(80,203)
======== ======== ======== ======== ========
Net income (loss):
Argentina............................ $ 6,805 $ 12,464 $ 4,472 $ 3,722 $ 3,031
Colombia............................. (970) (80) (135) (1,602) 1,587
Venezuela............................ (7,455) (2,582) (1,723) (1,717) (1,482)
Other................................ (1,216) (6,766) (10,031) (5,292) (8,514)
-------- -------- -------- -------- --------
TOTAL........................... $ (2,836) $ 3,036 $ (7,417) $ (4,889) $ (5,378)
======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(2):
Argentina............................ $ 18,296 $ 24,605 $ 30,394 $ 23,083 $ 27,505
Colombia............................. (2,038) 3,739 8,748 5,922 11,576
Venezuela............................ (7,592) (2,373) (1,675) (1,140) (822)
Other................................ (2) (1,472) (9,931) (5,874) (5,876)
-------- -------- -------- -------- --------
TOTAL........................... $ 8,664 $ 24,499 $ 27,536 $ 21,991 $ 32,383
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1996
-------------------------------- --------------------------
1993 1994 1995 ACTUAL AS ADJUSTED(6)
-------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets:
Argentina......................... $ 83,650 $144,504 $165,945 $213,035 $174,335
Colombia.......................... 22,308 51,640 59,929 65,389 65,389
Venezuela......................... 5,801 8,015 11,192 17,516 17,516
Other............................. (476) 18,525 12,029 67,195 45,695
-------- -------- -------- -------- --------------
TOTAL........................ $111,283 $222,684 $249,095 $363,135 $302,935
======== ======== ======== ======== ===========
Stockholders' equity:
Argentina......................... $ 33,000 $ 43,964 $ 48,436 $ 51,467 $ 51,467
Colombia.......................... 12,811 22,498 10,467 17,525 17,525
Venezuela......................... 4,006 1,312 7,072 18,865 18,865
Other............................. (23,023) (4,994) (10,612) (37,872) (37,872)
-------- -------- -------- -------- --------------
TOTAL........................ $ 26,794 $ 62,780 $ 55,363 $ 49,985 $ 49,985
======== ======== ======== ======== ===========
</TABLE>
(footnotes appear on page 19)
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(1) Operating expenses consist of direct cost of services, selling expenses,
general and administrative expenses and depreciation and amortization.
(2) EBITDA as presented consists of operating income (loss) plus depreciation
and amortization. EBITDA is presented because it is a measure commonly used
in the industry and to enhance an understanding of the Company's operating
results and is not intended to represent or be a substitute for cash flow
under generally accepted accounting principles. See the Company's combined
financial statements contained elsewhere in this Prospectus, which include
a statement of cash flows. If EBITDA had been calculated excluding the
depreciation, amortization, interest expense and net losses allocable to
the minority interest in non-wholly-owned subsidiaries (other than the
Guarantor), it would not have produced material differences from EBITDA as
presented because the Company's non-wholly-owned subsidiaries (other than
the Guarantor) had losses or relatively small net income for the periods
indicated.
(3) The ratio of earnings to fixed charges is computed by dividing operating
income before fixed charges (other than capitalized interest), by fixed
charges. Fixed charges consist of interest charges and amortization of debt
expense and discount or premium related to indebtedness. Earnings of the
Company were insufficient to cover fixed charges by approximately $4.3
million, $9.6 million, $5.2 million, $4.6 million and $12.4 million for the
years ended December 31, 1993 and 1995, for the nine months ended September
30, 1995 and 1996 and for the pro forma year ended December 31, 1995,
respectively.
(4) Pro forma ratios are presented for the year ended December 31, 1995 and for
the nine-month period ended September 30, 1996 as if the Offering and the
application of the proceeds thereof to repay $91.5 million of short-term
indebtedness had occurred at the beginning of the relevant period.
(5) This figure represents the ratio of debt at the end of the period to EBITDA
over the preceding four quarters, except that for the nine-month periods
EBITDA has been annualized.
(6) As adjusted balance sheet data is presented as if the Offering and the
application of the proceeds thereof to repay $91.5 million of indebtedness
had occurred on the balance sheet date.
(7) Total debt is the sum of short-term and long-term debt. Total
capitalization is the sum of total debt, minority interest and
stockholders' equity.
(8) "Satellites linked" refers to satellites with respect to which the Company
has leased transponder capacity. The Company does not own any satellites.
(9) IMPSAT Colombia commenced operations in December 1992.
(10) IMPSAT Venezuela commenced operations in January 1993.
(11) The category "Other", as it relates to revenues, operating expenses, total
assets, and EBITDA, consists of (i) amounts relating to IMPSAT Ecuador;
IMPSAT Mexico; IMPSAT USA; International Satellite Capacity Holding, Ltd.
("ISCH"), a wholly-owned subsidiary that leases satellite capacity on
behalf of the Company's operational subsidiaries; and Resis Ingenieria,
S.A. ("Resis"), a wholly-owned subsidiary that provides management services
for the Company; (ii) parent company amounts, including overhead expenses;
and (iii) the elimination of inter-company balances and transactions. As it
relates to net income (loss) and stockholders' equity, the category "Other"
also includes the allocation to minority interest.
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RISK FACTORS
Holders of the Old Notes should consider carefully all of the information
set forth in the Prospectus and, in particular, should evaluate the following
risks before tendering their Old Notes in the Exchange Offer, although the risk
factors set forth below (other than "-- Consequences of Failure to Exchange")
are generally applicable to the Old Notes as well as the New Notes.
SUBSTANTIAL INDEBTEDNESS
As of September 30, 1996, on an as adjusted basis after giving effect to
the Offering, the defeasance and repayment of IMPSAT Argentina's $30 million
9.5% Negotiable Obligations due 1996 and the repayment of $61.5 million of other
short-term obligations of the Company's subsidiaries to be repaid with the
proceeds of the Offering, the Company on an unconsolidated basis and the
Guarantor (on a consolidated basis but excluding inter-company payables to the
Company) had approximately $4.4 million of indebtedness other than the Notes
(which represents a guarantee of certain indebtedness of IMPSAT Venezuela) and
$31.1 million of indebtedness (other than the Guarantee), and the Company's
other subsidiaries had approximately $32.4 million of indebtedness. Total
stockholders' equity of the Company on a consolidated basis as of September 30,
1996 was approximately $50.0 million. At the same date, total stockholders'
equity of the Guarantor was $51.5 million. At September 30, 1996, on an as
adjusted basis, IMPSAT Colombia and the Guarantor would have had approximately
$15.6 million and $6.7 million, respectively, of secured indebtedness. The Notes
would also be subordinated to certain statutorily created preferences in the
countries in which the Company's subsidiaries operate with respect to certain
liabilities of the Company's subsidiaries, such as accrued tax liabilities and
accrued salary, severance, social security and pension liabilities.
After giving pro forma effect to the Offering as if it had occurred at the
beginning of the period, the Company would have had interest expense of
approximately $19.3 million and $16.9 million, respectively, for 1995 and for
the nine months ended September 30, 1996. As of September 30, 1996 on an as
adjusted basis, the Company's total debt was 70.2% of total capitalization. In
addition, for 1995 and as of September 30, 1996, on a pro forma basis the
Company's debt to EBITDA ratio would have been 6.13 times and 4.37 times,
respectively. Earnings of the Company were insufficient to cover fixed charges
by approximately $4.3 million, $9.6 million, $5.2 million, $4.6 million and
$12.4 million for the years ended December 31, 1993 and 1995, for the nine
months ended September 30, 1995 and 1996 and for the pro forma year ended
December 31, 1995, respectively. The Company and its subsidiaries are expected
to incur substantial amounts of indebtedness in the future subject to compliance
with the limitations contained in the Indenture.
The levels of the Company's and the Guarantor's indebtedness could have
important consequences to holders of the Notes, including the following: (i) the
debt service requirements of any additional indebtedness could make it more
difficult for the Company and the Guarantor to make payments on the Notes; (ii)
the ability of the Company and the Guarantor to obtain any necessary financing
in the future for working capital, capital expenditures, debt service
requirements or other purposes may be limited; (iii) a substantial portion of
the Company's and the Guarantor's cash flow from operations must be dedicated to
the payment of principal of and interest on its indebtedness and other
obligations and will not be available for other purposes; (iv) the Company's and
the Guarantor's levels of indebtedness could limit their respective flexibility
in planning for, or reacting to changes in, their businesses; (v) the Company
and the Guarantor will be more highly leveraged than some of their competitors,
which may place them at a competitive disadvantage; and (vi) the Company's and
the Guarantor's high degrees of indebtedness will make them more vulnerable in
the event of a downturn in their businesses.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
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<PAGE> 22
offered or sold, unless registered under the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will register
Old Notes under the Securities Act. See "Exchange Offer"; "Description of the
Notes -- Registration Rights". Based on interpretations by the staff of the SEC,
as set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold or otherwise transferred by holders thereof
(other than any such holder which is an 'affiliate' of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders, other than broker-dealers, have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the SEC has not considered the Exchange Offer in the context of
a no-action letter and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of such New
Notes and has no arrangement or understanding to participate in a distribution
of New Notes. If any Holder is an affiliate of the Company or is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) may not rely on the applicable interpretations of the staff of
the SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes pursuant to the Exchange Offer must acknowledge that such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution". In addition, to comply with the securities
laws of certain jurisdictions, if applicable, the New Notes may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with. The Company has agreed, pursuant to the Registration
Rights Agreement, subject to certain limitations specified therein, to register
or qualify the New Notes for offer or sale under the securities laws of such
jurisdictions as any holder reasonably requests in writing. Unless a holder so
requests, the Company does not currently intend to register or qualify the sale
of the New Notes in any such jurisdictions. See, "The Exchange Offer".
SIGNIFICANT CAPITAL REQUIREMENTS
The expansion of the Company's business, including working capital
requirements, and the further development of the Company's products and services
will require capital substantially in excess of amounts currently available.
After application of the net proceeds of this Offering, the Company anticipates
that it will require approximately $45 million of new capital during 1997, of
which approximately $25 million would contemplate refinancing of short-term
indebtedness, including under IMPSAT Argentina's Global Commercial Paper
Program, and $20 million would be additional indebtedness for the Company's
subsidiaries outside of Argentina for capital expenditures and working capital
purposes. During 1995 and the nine months ended September 30, 1996, the
Company's cash flow from operations amounted to $18.9 million and $2.6 million,
respectively and capital expenditures during the same periods amounted to $67.1
million and $37.3 million, respectively. In addition as of December 31, 1995,
approximately $8.4 million of long-term debt is scheduled to mature under the
Company's debt and credit facilities in 1997, approximately $8.8 million in
1998, approximately $6.5 million in 1999 and approximately $6.5 million
(excluding the Notes) in the year 2000 and thereafter. While the Company has had
discussions with certain potential lenders, it currently has only
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<PAGE> 23
minimal commitments for additional financing, and there can be no assurance that
required financing will be available.
The Company's projected capital requirements do not take into account the
establishment of operations and development of private telecommunications
network systems in Brazil. The Company is currently studying the establishment
of operations in Brazil, and any such operations would require significant
additional financing beyond that already contemplated by the Company.
Failure to obtain such financing on a timely basis would have a material
adverse effect on the Company and its ability to make payments of principal and
interest on the Notes. Additional sources of capital may include public and
private equity and debt financings by the Company or its subsidiaries. The
incurrence of additional indebtedness could subject the Company to additional or
more restrictive financial covenants. There can be no assurance that additional
financing will be available on acceptable terms or at all. Failure to obtain
such financing could result in the delay or abandonment of some or all of the
Company's development and expansion plans and expenditures, which could have a
material adverse effect on its business, results of operations and financial
condition and could limit the ability of the Company to make principal and
interest payments on the Notes. The ability of the Company to satisfy its
obligations on its indebtedness, including the Notes, is subject to various
factors beyond the Company's control, including general economic conditions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."
HOLDING COMPANY STRUCTURE: EFFECTIVE SUBORDINATION OF NOTES TO OBLIGATIONS OF
SUBSIDIARIES
IMPSAT Corporation, the issuer of the Notes, is a holding company with no
business operations of its own. IMPSAT Corporation's assets consist solely of
its ownership interests in its subsidiaries, the most significant of which are
not wholly-owned. IMPSAT Corporation will use substantially all of the net
proceeds from the Offering to make loans to certain of its subsidiaries, for use
by the subsidiaries to repay certain existing short-term indebtedness and to
finance the expansion and development of their operations. IMPSAT Corporation
must rely upon debt service payments, dividends and other payments from its
subsidiaries to generate the funds necessary to meet its obligations, including
the payment of principal of and interest on the Notes. The subsidiaries,
however, are legally distinct from IMPSAT Corporation and (except for IMPSAT
Argentina) have no obligation, contingent or otherwise, to pay amounts due
pursuant to the Notes. IMPSAT Corporation's subsidiaries (except for IMPSAT
Argentina) will not guarantee the Notes and the most significant of such
subsidiaries have minority investors. The ability of IMPSAT Corporation's
subsidiaries to make such payments to IMPSAT Corporation will be subject to,
among other things, availability of funds, the terms of such subsidiaries'
indebtedness and applicable local laws, including withholding taxes and foreign
exchange controls. The maximum withholding tax on interest payments abroad from
Argentina, Colombia, Venezuela, Ecuador and Mexico is 13.2%, 30%, 34%, 0%, and
35%, respectively. The Company expects to be able to reduce the applicable
withholding tax rates by taking advantage of certain exemptions and financing
structures available to it. The maximum withholding tax on dividends remitted
abroad from Argentina, Colombia, Venezuela, Ecuador and Mexico is 0%, 7%, 0%,
25%, and 0%, respectively. Such withholding tax rates could change at any time.
The laws governing all of the Company's subsidiaries, except IMPSAT USA, permit
companies to pay dividends only out of positive retained earnings determined in
accordance with local generally accepted accounting principles and also require
companies to allocate a minimum percentage of each year's net income to a legal
reserve until the total amount of such reserve equals a certain percentage of
their authorized and outstanding capital stock, and to pay dividends only out of
excess income after allocation of such percentages to legal reserves. As a
result of such requirements and in light of the accumulated net losses incurred
to date by IMPSAT Colombia, IMPSAT Venezuela, IMPSAT Ecuador and IMPSAT Mexico,
the Company does not believe that any of its subsidiaries other than IMPSAT
Argentina would be able to pay dividends to the Company in the foreseeable
future.
Claims of creditors of the subsidiaries, including trade creditors, will
generally have priority as to the assets of such subsidiaries over the claims of
IMPSAT Corporation and the holders of IMPSAT Corporation's
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<PAGE> 24
indebtedness, including the Notes. As an equity holder of its subsidiaries, the
right of the Company to receive assets from a subsidiary upon the bankruptcy,
liquidation or reorganization of such subsidiary (and therefore the right of the
holders of the Notes to participate in those assets) will be effectively
subordinated to the liabilities including trade payables, of the subsidiaries of
IMPSAT Corporation except to the extent that the Company is recognized as a
creditor of the subsidiary. Although the proceeds of the Old Notes have been or
will be distributed to the Company's subsidiaries in the form of intercompany
loans (thereby creating a creditor-debtor relationship between the Company and
its subsidiaries), there are no restrictions upon the Company's ability to
capitalize such amounts at a later date. In addition, although IMPSAT Argentina
is guaranteeing the Notes, it will receive only a portion of the proceeds
thereof. The Company has been advised by Nicholson & Cano, Argentine counsel to
the Guarantor, that the Guarantee will be a valid and binding obligation of
IMPSAT Argentina, subject to the usual qualifications regarding bankruptcy and
similar circumstances. At September 30, 1996, on an as adjusted basis after
giving effect to the defeasance and repayment of IMPSAT Argentina's $30 million
9.5% Negotiable Obligations due 1996 and certain other short-term debt of the
Company's subsidiaries with the proceeds of the Offering; the subsidiaries of
IMPSAT Corporation (other than the Guarantor) had approximately $47.3 million of
liabilities (excluding intercompany payables to IMPSAT Corporation or the
Guarantor), including $32.4 million of indebtedness. Such liabilities (other
than indebtedness) include customer advances, accrued taxes, accrued insurance
and accrued obligations for salaries, severance, social security and pensions,
and satellite band lease payments. Certain of these liabilities, such as accrued
tax obligations and accrued obligations for salaries, severance, social security
and pensions, may be afforded a statutory preference in the countries in which
the Company's subsidiaries operate over the obligations of the Company with
respect to the intercompany loans disbursed by the Company to its subsidiaries
with the proceeds of the Notes.
SHORT OPERATING HISTORY; RISKS OF EXPANSION STRATEGY
The Company, which commenced commercial operations in Argentina in 1990,
has a relatively short operating history and has experienced rapid growth,
increasing revenues from $8 million in 1991 to approximately $106 million in
1995. Although IMPSAT Argentina has recorded annual net income since 1992, the
Company has incurred net losses in every year except 1994. The Company currently
conducts significant operations in Argentina and Colombia, is an established
provider of private telecommunications network services in Venezuela and Ecuador
and has limited operations in Mexico and the United States. The Company intends
to expand its business in Latin America and is actively considering the
possibility of beginning operations in Brazil.
The Company's ability to manage its expansion effectively will require it
to continue to implement and improve its operating, financial and accounting
systems and to hire, train and manage employees. The continued expansion and
development of the Company's business will also depend upon, among other things,
the Company's ability to design integrated private telecommunications networks,
secure financing, install facilities, acquire rights-of-way and building access,
obtain any required government authorizations and assess potential markets, all
in a timely manner, at reasonable costs and on satisfactory terms and
conditions. In addition, such expansion may involve acquisitions, which, if
made, could divert the Company's resources and management and would require
integration with the Company's existing operations. The inability to manage its
planned expansion effectively could have a material adverse effect on the
Company's business, growth, financial condition and results of operations.
COMPETITION
The private telecommunications network industry in Latin America is highly
competitive and is generally characterized by low barriers to entry. The Company
expects that competition in the industry could substantially increase. The
Company competes on the basis of price, quality, customer service and range of
services offered.
Although the Company to date has been able to charge its customers premium
prices, the Company has faced and expects to continue to face declining prices
in the future as the public telephony operators (the "PTOs") modernize their
facilities and adapt to a competitive marketplace. These price and margin
declines
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<PAGE> 25
may be accelerated if new competitors enter its markets. The Company believes
that as its markets become less regulated, there will be increasing demand for
private network services and that such increased demand should offset any
decline in prices, but there can be no assurance in this regard.
In most of its markets, the Company's principal current competitor is the
local PTO or an affiliate of the local PTO. The PTOs generally have significant
competitive advantages (which may decrease as deregulation progresses),
including their close ties with national regulatory authorities, their control
over connections to local telephone lines, their ability to subsidize
competitive services with revenues generated from services they provide on a
monopoly basis and the reluctance of some regulators to adopt policies and grant
regulatory approvals that will result in increased competition for the local
PTO. The Company faces competition from Startel, S.A. ("Startel"), a joint
venture formed in 1990 by Telecom Argentina Stet-France Telecom S.A. ("Telecom
Argentina") and Telefonica de Argentina S.A. ("Telefonica"), the PTOs in
northern and southern Argentina, respectively. Startel uses the infrastructure
of its PTO owners to deliver its services to its customers. Since the
commencement of Startel's operations, its total revenues from all services,
including data transmission, have increased to approximately $100 million in
1995. In the future the PTOs may devote substantially more resources to the
sale, marketing and provision of services that compete with the Company's
services.
The Company also competes with private operators of VSAT networks, other
satellite data transmission networks and terrestrial telecommunications links,
as well as with companies that sell the equipment for data transmission networks
that are privately owned and maintained by the user. The Company could face new
competition in the future from large international long distance carriers, such
as AT&T Corporation, MCI Communications Corporation and Sprint Corporation, or
from other industry participants. While these companies have in the past focused
on long distance telephony services, they may focus on the private
telecommunications network systems segment of the telecommunications market as
deregulation continues. For example, when Argentina authorizes full competition
in long distance telephony, these large long distance carriers may decide to
enter the Argentine telephony market and to provide data transmission services
as well. These potential competitors have financial and other resources
substantially greater than those of the Company. If any of such competitors or
potential competitors were to devote significant additional resources to the
provision of private network services to the Company's core customer base, there
could be a material adverse effect on the Company's business, results of
operations and financial condition. In addition, consolidation of
telecommunications companies and the formation of strategic alliances within the
telecommunications industry, as well as the development of new technologies,
could give rise to significant new competitors to the Company. The Company's
private telecommunications services also could face future competition from
entities using or proposing to use new or emerging voice and data transmission
services or technologies which currently are not widely available in Latin
America, such as personal communications services (PCS) and digital cellular
radio. While the Company does not foresee significant near-term competition in
its existing markets from such new technologies, there can be no assurance that
such competing technologies will not be successful and, as a result, provide
significant competition that could adversely affect the Company's results of
operations in the longer term. See "-- Technological Considerations" and
"Business -- Competition."
DEPENDENCE ON CERTAIN CUSTOMERS
Direct sales of services to the Company's ten largest customers (which are
also the ten largest customers of IMPSAT Argentina) represented approximately
30% of the Company's total revenues and approximately 40% of IMPSAT Argentina's
revenues in 1995. Revenues from Banco de la Nacion Argentina, IMPSAT Argentina's
largest customer, accounted for approximately 9.1% and 7.1% of revenues from
services in 1995 for IMPSAT Argentina and the Company, respectively. In
addition, the ten largest customers of IMPSAT Colombia represented approximately
35% of IMPSAT Colombia's total revenues in 1995. A loss of any of these
customers or any significant reduction in sales to them could adversely affect
the Company's results of operations. See "Business -- Customers."
A number of the Company's largest customers are governmental agencies, and
such public sector customers have been and continue to be a significant part of
the Company's business. Such public sector customers have considerable ability
to force the renegotiation of the terms of a contract upon other parties and
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frequently are significantly slower in paying outstanding accounts than are
private sector entities. Forced renegotiation of contracts with the Company's
public sector customers or delays in payments from public sector entities could
have a material adverse affect on the Company's financial condition and results
of operations.
AGING OF RECEIVABLES
The Company's subsidiaries provide trade credit to their customers in the
normal course of business. Prior to extending credit, the customers' financial
history is analyzed. As of December 31, 1995, approximately 7.0% of the
Company's gross accounts receivable were past due more than six months but less
than one year and approximately 5.4% of gross accounts receivable were past due
more than one year. Substantially all of such receivables are IMPSAT
Argentina's. The Company established an allowance for doubtful accounts of
approximately $1.1 million at December 31, 1995. During 1996, the level of such
past due receivables has increased. As of August 31, 1996, approximately 17.3%
of IMPSAT Argentina's gross accounts receivable were past due more than six
months but less than one year and approximately 16.3% of gross accounts
receivable were past due more than one year. Accordingly, the related allowance
has also been increased to $2.8 million at September 30, 1996, of which all but
$20,000 related to IMPSAT Argentina. See Note 3 to the Company's combined
financial statements. The Company's current policy is to reserve 30% for
accounts receivable in excess of 180 days but less than one year, and 100% for
all accounts receivable in excess of 360 days; except with respect to Empresa
Nacional de Correos y Telegrafos S.A. (ENCOTESA), the Argentine national postal
service, as to which the Company as of August 31, 1996 had reserves for
uncollectible accounts receivable of $500,000 with respect to a total of $3.4
million in accounts receivable in excess of 180 days at such time. While the
Company believes that its credit and collection policies and allowance for
doubtful accounts are adequate and that it is not at risk of substantial
customer defaults, there can be no assurance in this regard.
Of IMPSAT Argentina's receivables past due in excess of six months as of
August 31, 1996, governmental agencies accounted for 57% of the total of such
past due receivables. One customer, ENCOTESA, accounted for 47.9% of IMPSAT
Argentina's receivables past due more than six months but less than one year and
for 51.0% of IMPSAT Argentina's receivables past due in excess of one year.
ENCOTESA, which was the Company's fifth largest customer as of December 31,
1995, is experiencing financial and operating difficulties, and the Argentine
legislature is currently debating the means to address ENCOTESA's difficulties,
including the possible privatization of the agency. In November 1996, IMPSAT
Argentina filed suit against ENCOTESA for amounts due and arising under IMPSAT
Argentina's contracts with ENCOTESA totalling $5.1 million, plus interest on
such amounts. IMPSAT Argentina believes that its contracts with ENCOTESA should
be recognized by the Argentine courts and intends to pursue its claims against
ENCOTESA to the fullest extent. IMPSAT Argentina is currently discussing with
ENCOTESA modifications to the amount of services being provided under ENCOTESA's
contracts with IMPSAT Argentina, which currently result in monthly invoices of
$218,000. As of September 30, 1996, the Company was providing ENCOTESA with 200
VSATs and 7 Dataplus earthstations, under contracts which are scheduled to
expire in August 1997 and 1999, respectively. The Company will continue to
assess the effect that the ENCOTESA receivables situation will have on its
results of operations, liquidity or capital resources.
RISKS RELATING TO OPERATIONS IN LATIN AMERICA
Substantially all of the Company's combined revenues are derived from
operations in Latin America. During 1995, approximately 76% and 21% of the
Company's combined revenues were derived from IMPSAT Argentina and IMPSAT
Colombia, respectively. The Company also currently has operations in Latin
America in Venezuela, Mexico and Ecuador, and is actively considering expanding
its operations to Brazil. While the Company believes that such geographic
diversification provides the benefit of ameliorating potential economic and
political risks associated with operating in any single Latin American country,
an investment in the Notes is subject to certain risks common in the conduct of
business in Latin America. Other than the United States, where the Company does
not have material operations, each country where the Company operates, or
intends to operate, has experienced political and economic instability in recent
years. Moreover, as
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recent events in the Latin American region have demonstrated, negative economic
or political developments in one country in the region can lead to or exacerbate
economic or political crises elsewhere in the region. The economies of Latin
America are characterized by extensive government intervention in the economy;
inflation and hyperinflation; currency devaluations, fluctuations, controls and
shortages; troubled and insolvent financial institutions; capital flight;
political instability, turmoil and violence; and economic contraction and
unemployment.
Argentina. While the Company intends to increase the concentration of its
business outside Argentina, Argentina is expected to remain the Company's most
significant market for the foreseeable future. Developments in Argentina are
accordingly of particular importance to the Company.
For several decades prior to the 1990s, the Argentine economy was plagued
by erratic, interventionist and generally unsuccessful economic policies. The
Argentine government had nationalized substantially all public utilities as well
as the country's leading producers of steel, oil, gas and petrochemicals. These
businesses were operated in a highly inefficient manner, contributing to
increased fiscal deficits that were financed through uncontrolled expansions of
the money supply as well as national and international financing arrangements
that were ultimately rescheduled, resulting in substantial losses to Argentina's
creditors. In addition, the government imposed capital and exchange controls and
levied heavy tariffs that distorted the country's production costs and impaired
its export competitiveness.
These difficulties culminated in a period of severe hyperinflation and
currency devaluation. In 1988, 1989 and 1990 the Argentine consumer price index
increased by approximately 388%, 4,924% and 1,344%, respectively. For many years
before December 1989, the Argentine foreign exchange market was subject to
exchange controls. Under current law, Argentine currency is convertible into
U.S. dollars without restrictions and Argentina has a free exchange market for
all foreign currency transactions. However, there can be no assurance that this
will continue. Any foreign exchange restrictions could prevent or restrict the
Guarantor's, and indirectly the Company's, access to U.S. dollars to meet their
obligations under the Notes.
Although Argentina has, since 1991, enjoyed a period of relative economic
stability and prosperity, Mexico's 1994 devaluation heightened investor concerns
that Argentina would be forced to devalue its currency which could have provoked
a renewed bout of inflation. These concerns promoted capital flight in early
1995 which resulted in the depletion of Argentina's international currency
reserves and imperiled both the Argentine banking sector and the Convertibility
Plan that underlies the Argentine peso's parity with the U.S. dollar. According
to the Central Bank of Argentina, gross international reserves fell to $12.5
billion as of March 31, 1995 from $17.9 billion as of December 31, 1994.
Consequently, banks and other financial intermediaries contracted credit,
Argentina's real gross domestic product ("GDP") experienced a 4.4% decline in
1995 and unemployment reached a peak of 18.4%.
Based on recently reported economic data by the Argentine government and
the apparent return of "flight" capital and increasing international reserves,
there are a number of signs that indicate that the Argentine economy is in the
process of recovering from the recession experienced in 1995 and that the
financial sector crisis has eased. The Argentine government reported preliminary
estimates of a decline in GDP for the first quarter of 1996 of 3.2%, an
improvement over the third and fourth quarters of 1995, when GDP declined by
8.1% and 7.7%, respectively, compared to the same periods in 1994. In addition
gross international reserves as of August 31, 1996 had increased to $18.9
billion. However, due to its history of instability and to inherent structural
weakness, especially in the public sector, Argentina's economy is susceptible to
pressures, including devaluation, inflation, recession and other adverse
economic effects. Any of the foregoing could have a material adverse effect on
the business, results of operations and financial condition of the Company.
Colombia. While Colombia is the Company's second largest market, the
percentage of the Company's revenues derived from its business in Colombia is
currently significantly less than in Argentina. This disparity, however, is
expected to decrease over time.
The Colombian government exercises significant control over the Colombian
economy. Accordingly, Colombian governmental actions concerning the economy
could significantly affect private sector entities in
26
<PAGE> 28
general, and the Company in particular. Colombian law permits the Colombian
government to impose foreign exchange controls in the event that foreign
currency reserves fall below a specified level. Any such imposition of controls
could adversely affect the Company's access to U.S. dollars to meet its
obligations under the Notes.
Colombia has continuously experienced periods of criminal violence,
primarily relating to leftist guerilla groups and drug-related and other
criminal activities. There have been persistent allegations that President
Ernesto Samper knowingly received election campaign contributions from members
of the Cali cocaine cartel, which have led to the resignation of a number of
members of Mr. Samper's cabinet and to calls for Mr. Samper's resignation. On
June 12, 1996, Mr. Samper was exonerated of these charges by the Colombian
legislature. In recent months, leftist guerilla activity has increased, creating
both political and economic instability which in turn has led to a decline in
the rate of growth of Colombia's gross domestic product. Continued political
instability in Colombia could have an adverse effect on the Colombian economy
which could have an adverse effect on the Company. In addition, in March 1996
President Clinton declined to certify Colombia as a country that was taking
sufficient steps to prevent international drug trafficking. Such action has the
effect of reducing the U.S. foreign assistance available to Colombia and may
discourage future trade with and investment in Colombia, any of which could have
an adverse effect on the Company.
Venezuela. The Company's operations in Venezuela are currently relatively
limited. The Venezuelan government exercises significant control over the
Venezuelan economy. Such control has included extensive regulation, including
price controls. In addition, the Venezuelan government experienced two attempted
coups d'etat in 1992. In the last 15 years, Venezuela has experienced periods of
slow or negative growth, high inflation, currency devaluations and limited
availability of foreign exchange.
Venezuela is currently experiencing a recession occasioned in part by a
widespread crisis among financial institutions that began in 1994. In that year,
banking institutions holding approximately 70% of total deposits in Venezuela
were acquired by the government or were closed. The cost to the Venezuelan
government of the acquisition of or assistance to financial institutions has
been estimated at 13% of the country's 1994 GDP. After contracting by 2.8% in
1994, Venezuela's real gross domestic product ("GDP") is estimated to have
increased in 1995 by 2.2% (or 0.8% without regard to the oil economy).
As a result of inflationary pressures, the bolivar has suffered substantial
devaluation since 1989. Capital flight resulting from the financial crisis led
to a significant drop in the value of the bolivar and led the Venezuelan
government to impose exchange controls to stem the depletion of Venezuela's
foreign currency reserves and fix the value of the bolivar against the U.S.
dollar at Bs. 170 per $1.00. In December 1995, the Venezuelan government
devalued the bolivar to Bs. 290 per $1.00. The government of Venezuela announced
a series of further economic adjustment measures in April 1996 aimed at
improving the country's fiscal situation. On April 22, 1996, the Venezuelan
government removed all exchange controls and permitted the bolivar to float
against the U.S. dollar. As of December 5, 1996, the exchange rate between the
bolivar and the U.S. dollar was Bs. 473.3 = U.S.$1.00.
The Venezuelan consumer price index registered increases of 38.4%, 70.8%
and 56.6% for the years 1993, 1994 and 1995, respectively. The effect of the
economic adjustment measures announced by the Venezuelan government in April
1996 is expected to result in inflation for 1996 of in excess of 100%.
Continued adverse macroeconomic conditions in Venezuela, including high
rates of inflation, the continuation of exchange controls and a decrease in the
country's international reserves, or political instability could have an adverse
effect on the Company's operations and prospects in Venezuela.
Mexico. Although its business in Mexico is currently very limited, the
Company expects Mexico to constitute a larger portion of its business in the
future. Since 1994 Mexico has experienced an economic crisis characterized by
exchange rate volatility and devaluation of the Mexican peso against foreign
currencies, increased inflation, high domestic interest rates, negative economic
growth, reduced consumer purchasing power and high unemployment. The economic
crisis resulted in part from a series of internal disruptions and political and
economic events that adversely affected the Mexican economy, combined with a
large current account deficit (7.8% of gross domestic product in 1994),
reduction of international investments and an increase in U.S. interest rates.
Mexico experienced a rate of inflation of 52.0% in 1995 (as compared to 11.9%
27
<PAGE> 29
in 1992, 8.0% in 1993 and 7.1% in 1994) and 8.4% during the first three months
of 1996, and a liquidity crisis which, among other things, affected the ability
of the Mexican Government and the banking system and other borrowers to
refinance or refund maturing debt and also adversely affected consumer spending.
Gross domestic product for 1995 was approximately 7% lower than it was for 1994.
Mexico experienced sharply higher interest rates in 1995, both domestically
and internationally, on Mexican public- and private-sector debt and sharply
reduced opportunities for refinancing or refunding maturing debt issues. The
value of the Mexican peso sharply declined since December 1994 as compared to
the U.S. dollar and may be subject to further significant fluctuations in the
future. The value of the Mexican peso declined by 60.8% against the U.S. dollar
during the period from December 31, 1993 to December 31, 1994, with a decline of
42.9% from December 19, 1994 to December 31, 1994. In 1995 the Mexican peso
depreciated an additional 53.6% and equalled Ps. 7.69 = U.S.$1.00 at December
31, 1995. As of December 5, 1996, the value of the Mexican peso against the U.S.
dollar equalled Ps. 7.89 = U.S.$1.00.
In response to the adverse economic developments in 1994, the
administration of President Ernesto Zedillo announced in 1995 a series of
emergency economic recovery and stabilization plans, which sought to stabilize
the exchange rate and maintain the present floating rate exchange policy,
stabilize and strengthen the Mexican banking sector, increase public-sector
revenues and increase the minimum wage.
No assurance can be given that the Mexican government's economic plans will
be successful in reversing the crises that have plagued Mexico's economy.
Continued adverse economic conditions in Mexico, such as high rates of
inflation, currency devaluations and a decrease in the country's international
reserves, or political instability could have an adverse effect on the Company's
operations and prospects in Mexico.
Brazil The Company is actively considering plans to expand its operations
into Brazil which, if implemented, could subject its financial condition and
results of operations would to various additional economic and political risks.
Throughout the 1980s and into the 1990s, Brazilian economy has suffered from
periods of extremely high rates of inflation and recession. In December 1993,
the Brazilian government announced the Plano Real, an economic stabilization
plan designed to reduce inflation by, among other things, reducing certain
public expenditures, collecting debts owned to the Brazilian government,
increasing tax revenues and continuing the national program of privatizing
certain state-owned enterprises.
On July 1, 1994, as part of the Plano Real, the Brazilian government
introduced a new currency, the real. Since reaching its highest quotation of
R$0.829 per U.S. dollar on October 14, 1994, the real has experienced a
cumulative devaluation of 23.2%, reaching R$1.0215 per U.S. dollar on September
30, 1996. There can be no assurance that the real will not again be devalued
relative to the U.S. dollar, or that the real will not fluctuate significantly
relative to the U.S. dollar. Recently, the Brazilian economy has shown
improvement in a number of other areas. Inflation, as measured by the general
price index domestic supply, was approximately 1,158% in 1992, 2,709% in 1993,
909.6% in 1994 and 14.8% in 1995. Average monthly inflation for the first nine
months of 1996 was 0.84%. GDP grew in constant real terms by 4.1% in 1995, 5.8%
in 1994 and 4.2% in 1993, compared with a decrease of 0.8% in 1993. Unemployment
decreased to 4.6% in 1995 from 5.1% in 1994. There can be no assurance, however,
that the Plano Real will continue to be successful in controlling the level of
inflation, stabilizing the real or maintaining economic growth in Brazil.
The Brazilian political scene has been marked by high levels of uncertainty
since its return to civilian rule in 1985 following two decades of military
governments. Mr. Fernando Henrique Cardoso, Brazil's Finance Minister at the
time of the implementation of the Plano Real, was elected President of Brazil in
October 1994 by a coalition of political parties. As a result, his
administration may not have alone have the votes required to secure the passage
of economic reform or other legislation necessary to further implement the Plano
Real. In addition, under Brazilian Constitution, the President is not eligible
for re-election when his current term expires in 1998. There can be no assurance
that any of the administration's policies, including the Plano Real, will be
supported by Brazil's legislature or future administrations. Present or future
governmental actions or continued political instability in Brazil could trigger
an increase in inflation, currency fluctuation or other negative economic
developments in that country that could, in turn, have a material adverse effect
on the Company's ability to successfully establish operations in Brazil.
28
<PAGE> 30
CURRENCY FLUCTUATIONS, DEVALUATIONS AND RESTRICTIONS
A substantial portion of the Company's costs, including lease payments for
satellite transponder capacity, purchases of capital equipment and interest on
the Notes, is payable in U.S. dollars. To date, the Company has not hedged its
currency risks with third parties. The Company's contracts with its customers
generally provide for payment in U.S. dollars or for payment in local currency
linked to the exchange rate at the time of payment between the local currency
and the U.S. dollar. Such contractual provisions are structured to protect the
Company against the risk of fluctuations in currency exchange rates. However,
the revenues of customers of the Company are generally denominated in local
currencies, and although the Company's customers include governmental agencies
and some of the largest and most financially sound companies and financial
institutions in their markets, substantial or continued devaluations in such
currencies relative to the U.S. dollar could have a negative effect on the
ability of customers of the Company to absorb the costs of a devaluation. This
could result in the Company's customers seeking to renegotiate their contracts
with the Company or, failing satisfactory renegotiation, defaulting on such
contracts. The Company is therefore affected by currency fluctuations. The
Company's competitors and potential future competitors, including the PTOs and
large, multinational long distance companies, may be less exposed to currency
risk or may be better able to hedge their currency risk and could thereby gain a
relative competitive advantage in the event of a currency devaluation. In
addition, from time to time, Latin American countries have experienced shortages
in foreign currency reserves and restrictions on the ability to expatriate local
earnings and convert local currencies into U.S. dollars. Currency devaluations
in one country may have adverse effects in another country, as in late 1994 and
1995, when several Latin American countries were adversely impacted by the
devaluation of the Mexican peso. Any devaluation of local currencies in the
countries where the Company operates, or restrictions on the expatriation of
earnings or capital from such countries, could have a material adverse effect on
the business, results of operations and financial condition of the Company.
GOVERNMENT REGULATION; REGULATORY UNCERTAINTY
Local laws and regulations differ significantly among the jurisdictions in
which the Company currently operates and in which the Company may operate in the
future, and the interpretation and enforcement of such laws and regulations vary
and are often based on the informal views of the local ministries which, in some
cases, are subject to influence by the PTOs. The current conditions governing
the Company's service offerings may be altered by future legislation or
regulation. In certain of the Company's principal existing and target markets,
there are laws and regulations that prohibit or limit certain of the
transmission methods by which the Company's services can be provided as well as
the provision of certain of the Company's services. For example, IMPSAT
Argentina's license for the provision of data transmission services permits
IMPSAT Argentina to offer ancillary voice channels but does not specify what is
meant by "ancillary" voice channels. While the Company believes that IMPSAT
Argentina's services are in accordance with the terms of the license, a
significant minority of IMPSAT Argentina's revenues are derived from voice
transmission, and an adverse interpretation of what constitutes "ancillary"
voice channels could have a material adverse effect on the Company. The Company
is prohibited by law from providing Interplus services to or from Argentina
during the term of a monopoly granted to Telecomunicaciones Internacionales de
Argentina S.A. ("Telintar"), which is jointly owned by Telecom Argentina and
Telefonica, with respect to international telecommunications services to or from
Argentina, unless the Company obtains Telintar's consent. Telintar's monopoly is
due to expire in 1997, with a possible extension through the year 2000.
The Company's business is dependent upon the procurement and maintenance of
licenses to provide private telecommunications network services in the various
countries in which it operates. The Company believes that it currently has all
licenses required for the conduct of its operations in its existing markets and
expects that those of its licenses that are subject to expiration will be
renewed in due course upon application by the Company. However, due to the
political and economic risks associated with the countries in which the Company
operates, there can be no assurance that the Company will be able to maintain
its licenses in force or that they will be renewed upon their expiration. The
loss of, or substantial limitation upon the terms of the Company's licenses
could have a material adverse effect on the results of operations of the
Company. For specific details of the Company's licenses in the various countries
in which it operates, including the expiration
29
<PAGE> 31
date of such licenses, see "Business -- Description of Country Operations."
There can also be no assurance that the Company will succeed in obtaining all
requisite regulatory approvals to operate in those countries which the Company
may desire to enter, including Brazil.
TECHNOLOGICAL CONSIDERATIONS
The telecommunications industry is subject to rapid and significant
technological advancements and the related introduction of new products and
services. The Company does not possess significant intellectual property rights
with respect to the technologies it uses and depends on third parties for the
development of and access to new technology. While the Company believes that it
will be able to acquire and commercialize necessary technologies, the effect of
technological changes on the business of the Company cannot be predicted, and
there can be no assurance that the Company will be able to obtain access to
appropriate technologies on a timely basis or on acceptable terms or that new
technologies will not render the Company's services out of date. In addition,
the Company (not its customers, with the exception of YPF S.A.) owns the
equipment, such as VSAT microstations, used by the Company in providing its
services. Therefore, technological changes that render the Company's equipment
out of date could require substantial increases in capital expenditures to
update such equipment.
Substantially all of the Company's VSAT microstations and related
technology are supplied by Hughes Network Systems ("Hughes"). If for any reason
Hughes were unable or unwilling to continue supplying the Company (an
eventuality the Company does not foresee), the Company could incur substantial
costs and delays, principally in relation to the use of another manufacturer's
VSAT equipment, in the growth and expansion of the Company's business.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree on members of the
Company's senior management and certain key employees, none of whom is bound by
employment contracts with the Company, although Mr. Ricardo Verdaguer (President
and Chief Executive Officer) and Mr. Roberto Vivo (Deputy Chief Executive
Officer) are indirect shareholders of the Company. The success of the Company
also depends in part upon its ability to hire and retain highly skilled and
qualified operating, marketing, financial and technical personnel. Competition
for qualified employees in the telecommunications industry is intense, and
accordingly, there can be no assurance that the Company will be able to hire or
retain necessary personnel. See "Management."
CONTROL BY EXISTING STOCKHOLDERS
The Company and the Guarantor are privately held corporations. Seventy-five
percent of the common stock of the Company is held by Nevasa Holdings Ltd.
("Nevasa"), and the remaining 25% is held by STET International. The Company,
Nevasa and STET International hold 51%, 29.7% and 11.5% of the common stock of
the Guarantor, respectively. Nevasa is a holding company controlled largely by
the Pescarmona family interests; Mr. Vivo, Deputy Chief Executive Officer of
IMPSAT Corporation; and Mr. Verdaguer, President and Chief Executive Officer of
IMPSAT Corporation. See "Principal Stockholders." As a result of such stock
ownership, these shareholders can effectively control the affairs and business
policies of the Company, including the election of directors.
The Company has been advised that the Pescarmona group intends to conduct
all of its Latin American telecommunications business through the Company
although from time to time such interests may initially be pursued by an
affiliate of the Company. STET currently has interests in other
telecommunications businesses in Latin America. STET holds a 32% share in Nortel
Inversora, S.A. ("Nortel"), a holding company that owns 60% of the equity of
Telecom Argentina, and through such investment in Nortel has interest in Startel
and Telintar. In addition, STET owns interests in telephone companies in Chile
and Bolivia and in a paging company in Brazil, and STET can be expected to make
further investments in the region through vehicles other than the Company.
Certain of those interests, particularly STET's indirect interest in Startel
through Nortel, pose potential conflicts of interest with IMPSAT Argentina.
30
<PAGE> 32
LACK OF PUBLIC MARKET
The New Notes are being offered to the Holders of the Old Notes. The Old
Notes were sold by the Company on July 30, 1996 to a limited number of
institutional investors and are eligible for trading in the Private Offerings,
Resale and Trading through Automated Linkages (PORTAL) Market. To the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for the remaining untendered Old Notes could be adversely affected. There
is no existing trading market for the New Notes, and there can be no assurance
regarding the future development of a market for the New Notes, or the ability
of Holders of the New Notes to sell their New Notes or the price at which such
Holders may be able to sell their New Notes. If such a market were to develop,
the New Notes could trade at prices that may be higher or lower than their
principal amount or purchase price, depending on many factors, including
prevailing interest rates, the Company's operating results and the market for
similar securities. Therefore, there can be no assurance as to the liquidity of
any trading market for the New Notes or that an active public market for the New
Notes will develop. The Company does not intend to apply for listing or
quotation of the New Notes on any securities exchange or stock market.
Historically, the market for noninvestment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that the market for the New Notes will not
be subject to similar disruptions. Any such disruptions may have an adverse
effect on Holders of the New Notes.
31
<PAGE> 33
CAPITALIZATION
The following table sets forth as of September 30, 1996: (i) the historical
cash and cash equivalents, short-term debt and capitalization of the Company,
and (ii) the as adjusted cash and cash equivalents, short-term debt and
capitalization after giving effect to the Offering and the application of the
net proceeds thereof to repay approximately $91.5 million of existing
indebtedness, including the defeasance and repayment of IMPSAT Argentina's $30
million of 9.5% Negotiable Obligations due 1996, which mature in November 1996,
and the repayment of $61.5 million of other short-term obligations of the
Company's subsidiaries with the proceeds of the Offering. This table should be
read in conjunction with the financial statements of the Company and the notes
related thereto included elsewhere in this Memorandum.
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1996
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS.............................................. $ 93,863 $ 33,663
======== =========
SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT:
Short-term debt................................................... 52,001 21,801
Current portion of long-term debt................................. 37,410 7,410
-------- -----------
Total short-term debt and current portion of long-term
debt....................................................... 89,411 29,211
-------- -----------
LONG-TERM DEBT:
Old Notes......................................................... 125,000 125,000
Other long-term debt, net of current portion...................... 34,240 34,240
-------- -----------
Total long-term debt, net.................................... 159,240 159,240
-------- -----------
MINORITY INTEREST IN COMBINED SUBSIDIARIES............................. 29,985 29,985
-------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $1.00 par value
77,750,640 shares authorized, issued and outstanding............ 77,750 77,750
Accumulated deficit............................................... (27,765) (27,765)
-------- -----------
Total stockholders' equity................................... 49,985 49,985
-------- -----------
Total capitalization.................................... $328,621 $ 268,421
======== =========
</TABLE>
32
<PAGE> 34
SELECTED FINANCIAL AND OTHER DATA
The following selected financial and other data are for the Company on a
combined basis and separately for IMPSAT Argentina and its consolidated
subsidiaries, in each case in accordance with U.S. GAAP. The Company's
subsidiaries use the U.S. dollar as their functional currency. The Company owns
less than a 100% equity interest in certain of its subsidiaries, including a 51%
equity interest in IMPSAT Argentina, a 74% equity interest in IMPSAT Colombia
and a 75% equity interest in IMPSAT Venezuela. The financial data for the
Company on a combined basis (including EBITDA) generally reflect 100% of the
revenues and expenses for each of the Company's subsidiaries in operation during
the relevant period, with the amounts of net income (loss) and stockholders'
equity attributable to the minority interests in such subsidiaries deducted as a
separate line item. The combined financial data contained herein are presented
as if IMPSAT Corporation owned its current percentage of capital stock of its
operating subsidiaries during all periods, and as of all balance sheet dates,
presented.
The fiscal year of the Company and all of its subsidiaries, other than
IMPSAT Argentina, ends on December 31, and IMPSAT Argentina's fiscal year ends
on November 30. The combined financial results of the Company for the years
ended December 31, 1991, 1992, 1993, 1994 and 1995 incorporate IMPSAT
Argentina's results for the twelve months ended November 30, 1991, 1992, 1993,
1994 and 1995, respectively; and the combined financial results of the Company
for the nine months ended September 30, 1995 and 1996 incorporate IMPSAT
Argentina's results for the nine months ended August 31, 1995 and 1996,
respectively.
The selected financial data for the Company and for IMPSAT Argentina have
been derived from the Company's combined financial statements and IMPSAT
Argentina's consolidated financial statements audited by Deloitte & Touche LLP
and Deloitte & Touche, Argentina, respectively, independent auditors, whose
reports thereon are included elsewhere in this Prospectus. The selected
financial data for the Company for the nine months ended September 30, 1995 and
1996 and for IMPSAT Argentina for the nine months ended August 31, 1995 and 1996
have been derived from the unaudited financial statements of the Company and
IMPSAT Argentina included elsewhere in this Prospectus and, in the opinion of
management, include all adjustments (consisting of normal recurring adjustments)
necessary to present fairly the information set forth therein.
33
<PAGE> 35
<TABLE>
<CAPTION>
THE COMPANY
-----------------------------------------------------------------------------
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ----------------------
1991(1) 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services........................ $ 8,166 $ 20,449 $ 37,695 $ 77,679 $105,641 $ 75,324 $ 93,393
Operating expenses(2)
Direct cost of services................... (3,036) (15,371) (22,256) (32,999) (43,051) (28,501) (35,470)
Selling expenses.......................... (1,153) (1,185) (3,284) (9,714) (16,962) (11,467) (11,703)
General and administrative expense........ (3,371) (3,230) (3,491) (10,467) (18,092) (13,365) (13,124)
Reorganization costs -- severance......... -- -- -- -- -- -- (713)
Depreciation and amortization............. (2,123) (3,699) (6,324) (12,874) (20,653) (14,749) (19,193)
-------- -------- -------- -------- -------- -------- -----------
Operating income (loss)....................... (1,517) (3,036) 2,340 11,625 6,883 7,242 13,190
Interest (expense) income, net................ (1,518) 37 (6,220) (8,231) (15,677) (10,725) (16,849)
Net gain on foreign exchange.................. -- 340 1,518 1,352 1,838 (9) 1,166
Other income (expenses), net.................. (38) 1,032 (684) 599 511 (543) 1,119
-------- -------- -------- -------- -------- -------- -----------
Income (loss) before taxes.................... (3,073) (1,627) (3,046) 5,345 (6,445) (4,035) (1,374)
Benefit (expense) for income
taxes -- foreign............................ -- 1,977 1,428 3,155 740 122 (2,495)
-------- -------- -------- -------- -------- -------- -----------
Income (loss) before minority interest........ (3,073) 350 (1,618) 8,500 (5,705) (3,913) (3,869)
Minority interest............................. -- (1,315) (1,218) (5,464) (1,712) (976) (1,509)
-------- -------- -------- -------- -------- -------- -----------
Net income (loss)............................. $ (3,073) $ (965) $ (2,836) $ 3,036 $ (7,417) $ (4,889) $ (5,378)
======== ======== ======== ======== ======== ======== =========
OTHER FINANCIAL DATA:
Capital expenditures.......................... $ 12,332 $ 24,630 $ 36,172 $ 87,541 $ 67,060 $ 57,075 $ 37,301
EBITDA(3)..................................... 606 663 8,664 24,499 27,536 21,991 32,383
Cash flow from (used by):
Operating activities...................... 4,199 (3,091) 4,821 17,257 18,894 18,025 2,563
Investing activities...................... (12,332) (27,548) (35,261) (87,603) (66,910) (56,443) (31,086)
Financing activities...................... 6,073 26,021 33,994 95,351 22,097 14,558 116,170
Ratio of earnings to fixed charges(4)......... -- -- -- 1.38x -- -- --
Ratio of earnings to pro forma fixed
charges(4)(5)............................... -- -- -- -- -- -- --
Ratio of EBITDA to interest expense........... 0.20x 4.22x 1.30x 2.90x 1.67x 1.77x 1.82x
Ratio of EBITDA to pro forma interest
expense(5).................................. -- -- -- -- 1.42x -- 1.92x
Ratio of total debt to EBITDA(6).............. 14.56x 22.51x 5.36x 4.39x 4.64x 4.14x 5.76x
Pro forma ratio of total debt to
EBITDA(5)(6)................................ -- -- -- -- 6.13x -- 4.37x
<CAPTION>
AS OF SEPTEMBER 30,
1996
AS OF DECEMBER 31, ----------------------
---------------------------------------------------- AS
1991(1) 1992 1993 1994 1995 ACTUAL ADJUSTED(7)
-------- -------- -------- -------- -------- -------- -----------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 279 $ 1,426 $ 7,130 $ 32,135 $ 6,216 $ 93,863 $ 33,663
Total current assets.......................... 5,093 13,657 26,344 57,948 36,906 129,994 69,794
Net property, plant and equipment............. 26,996 47,926 77,970 152,909 199,701 218,094 218,094
Total assets.................................. 32,270 67,139 111,283 222,684 249,095 363,135 302,935
Total current liabilities..................... 7,176 25,528 24,796 68,984 128,813 119,662 59,462
Total short-term debt and current portion of
long-term debt.............................. 4,853 14,924 11,246 48,047 97,510 89,411 29,211
Total long-term debt, net..................... 3,972 2 35,152 59,437 30,200 159,240 159,240
Minority interest............................. -- 1,345 19,614 24,893 28,476 29,985 29,985
Stockholders' equity.......................... 20,914 22,579 26,794 62,780 55,363 49,985 49,985
OTHER FINANCIAL DATA:
Total debt as a percentage of
capitalization(8)........................... 29.7% 38.4% 50.0% 55.1% 60.4% 75.7% 70.2%
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30,
---------------------------------------------------- ----------------------
1991(1) 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations installed.................. 282 558 931 1,925 2,841 2,710 3,311
Dataplus earth stations installed............. 13 42 129 271 443 347 609
Satellites linked(9).......................... 2 3 3 4 4 4 6
Leased satellite capacity (Mhz)............... 17.0 30.0 51.5 128.4 198.3 196.25 261.58
Teleports..................................... 1 2 2 3 4 4 4
Teleport antennas............................. 2 5 10 16 22 20 21
Regional Teleports............................ 1 2 6 9 10 10 10
Teledatos Networks............................ 1 3 6 12 12 12 12
Customers..................................... 71 133 262 445 656 554 850
</TABLE>
(footnotes appear on page 37)
34
<PAGE> 36
<TABLE>
<CAPTION>
IMPSAT ARGENTINA
---------------------------------------------------------
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services........ $ 8,166 $ 20,379 $ 34,672 $ 63,999 $ 80,346
Operating expenses(2)
Direct cost of services... (3,036) (8,242) (13,186) (25,420) (30,721)
Selling expenses.......... (1,153) (1,185) (1,279) (7,027) (11,036)
General and administrative
expense................. (3,371) (3,073) (1,911) (6,947) (8,195)
Reorganization
costs -- severance...... -- -- -- -- --
Depreciation and
amortization............ (2,123) (3,667) (5,570) (10,719) (16,067)
-------- -------- -------- -------- --------
Operating income (loss)....... (1,517) 4,212 12,726 13,886 14,327
Interest (expense) income,
net......................... (1,518) 37 (5,453) (4,556) (10,384)
Other income (expenses)....... (38) 1,032 (468) (83) 523
-------- -------- -------- -------- --------
Income (loss) before taxes.... (3,073) 5,281 6,805 9,247 4,466
Benefit (expense) for income
taxes....................... -- -- -- 3,220 --
-------- -------- -------- -------- --------
Income before minority
interest.................... (3,073) 5,281 6,805 12,467 4,466
Minority interest............. -- -- -- (3) 6
-------- -------- -------- -------- --------
Net income (loss)............. $ (3,073) $ 5,281 $ 6,805 $ 12,464 $ 4,472
======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
Capital expenditures.......... $ 12,332 $ 16,936 $ 23,699 $ 70,350 $ 38,248
EBITDA(3)..................... 606 7,879 18,296 24,605 30,394
Cash Flow from (used by):
Operating activities...... 4,199 11,977 8,225 22,298 27,697
Investing activities...... (12,332) (16,936) (22,762) (69,832) (37,984)
Financing activities...... 6,073 6,101 19,864 41,299 10,933
Ratio of earnings to fixed
charges(4).................. -- 2.26x 2.24x 2.92x 1.37x
Ratio of earnings to pro forma
fixed charges(4)(5)......... -- -- -- -- 1.48x
Ratio of EBITDA to interest
expense..................... 0.20x 4.22x 3.22x 5.17x 2.90x
Ratio of EBITDA to pro forma
interest expense(5)......... -- -- -- -- 3.15x
Ratio of total debt to
EBITDA(6)................... 14.56x 1.89x 1.93x 3.12x 2.62x
Pro forma ratio of total debt
to EBITDA(5)(6)............. -- -- -- -- 2.97x
<CAPTION>
AS OF NOVEMBER 30,
---------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 279 $ 1,422 $ 6,749 $ 514 $ 1,160
Total current assets.......... 5,093 10,664 24,441 22,169 20,776
Net property, plant and
equipment................... 26,996 40,264 58,393 118,024 140,205
Total assets.................. 32,270 51,666 83,650 144,504 165,945
Total current liabilities..... 7,176 21,157 14,245 54,331 102,557
Total short-term debt and
current portion of long-term
debt........................ 4,853 14,924 3,867 37,275 70,998
Total long-term debt, net
(includes advances from
Parent Company)............. 3,972 2 31,476 39,609 8,705
Minority interest............. -- -- -- 9 3
Stockholders' equity.......... 20,914 26,194 33,000 43,964 48,436
OTHER FINANCIAL DATA:
Total debt as a percentage of
total capitalization(8)..... 29.7% 36.3% 51.7% 63.6% 62.2%
<CAPTION>
AS OF NOVEMBER 30,
---------------------------------------------------------
1991 1992 1993 1994 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
VSAT microstations
installed................... 282 543 756 1,462 1,951
Dataplus earth stations
installed................... 13 40 114 236 355
Satellites linked(9).......... 2 2 3 4 4
Leased satellite capacity
(Mhz)....................... 17.0 25.0 31.0 96.0 148.0
Teleports..................... 1 1 1 1 1
Teleport antennas............. 2 4 8 11 12
Regional Teleports............ 1 2 5 6 6
Teledatos Networks............ 1 3 6 7 7
Customers..................... 71 125 200 292 319
<CAPTION>
NINE MONTHS ENDED AUGUST
31,
--------------------------
1995 1996
--------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services........ $ 58,352 $ 62,939
Operating expenses(2)
Direct cost of services... (20,473) (22,878)
Selling expenses.......... (8,621) (6,845)
General and administrative
expense................. (6,175) (4,998)
Reorganization
costs -- severance...... -- (713)
Depreciation and
amortization............ (11,699) (13,894)
-------- --------
Operating income (loss)....... 11,384 13,611
Interest (expense) income,
net......................... (7,607) (9,173)
Other income (expenses)....... (61) 563
-------- --------
Income (loss) before taxes.... 3,716 5,001
Benefit (expense) for income
taxes....................... -- (1,984)
-------- --------
Income before minority
interest.................... 3,716 3,017
Minority interest............. 6 14
-------- --------
Net income (loss)............. $ 3,722 $ 3,031
======== ========
OTHER FINANCIAL DATA:
Capital expenditures.......... $ 32,446 $ 16,746
EBITDA(3)..................... 23,083 27,505
Cash Flow from (used by):
Operating activities...... 22,380 6,365
Investing activities...... (31,814) (16,483)
Financing activities...... 9,821 53,182
Ratio of earnings to fixed
charges(4).................. 1.50x 1.69x
Ratio of earnings to pro forma
fixed charges(4)(5)......... -- 1.38x
Ratio of EBITDA to interest
expense..................... 3.03x 3.41x
Ratio of EBITDA to pro forma
interest expense(5)......... -- 2.79x
Ratio of total debt to
EBITDA(6)................... 2.79x 3.76x
Pro forma ratio of total debt
to EBITDA(5)(6)............. -- 2.71x
AS OF AUGUST 31, 1996
--------------------------
AS
ACTUAL ADJUSTED(7)
-------- --------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 44,224 $ 5,524
Total current assets.......... 66,984 28,284
Net property, plant and
equipment................... 143,057 143,057
Total assets.................. 213,035 174,335
Total current liabilities..... 81,346 42,646
Total short-term debt and
current portion of long-term
debt........................ 62,059 23,359
Total long-term debt, net
(includes advances from
Parent Company)............. 75,970 75,970
Minority interest............. (11) (11)
Stockholders' equity.......... 51,467 51,467
OTHER FINANCIAL DATA:
Total debt as a percentage of
total capitalization(8)..... 72.8% 65.9%
AS OF AUGUST 30,
--------------------------
1995 1996
-------- --------
<S> <C> <C>
OPERATING DATA:
VSAT microstations
installed................... 1,935 2,042
Dataplus earth stations
installed................... 347 394
Satellites linked(9).......... 4 4
Leased satellite capacity
(Mhz)....................... 148.0 161.0
Teleports..................... 1 1
Teleport antennas............. 12 12
Regional Teleports............ 6 6
Teledatos Networks............ 7 7
Customers..................... 320 363
</TABLE>
(footnotes appear on page 37)
35
<PAGE> 37
The following supplemental selected financial data are for IMPSAT Argentina
for the fiscal years ended November 30, 1993, 1994 and 1995 and for each of
IMPSAT Colombia and IMPSAT Venezuela for the years ended December 31, 1993, 1994
and 1995 and have been derived from the consolidating schedules prepared by the
Company for the combined financial statements for the years ended December 31,
1993, 1994 and 1995. The following supplemental financial data for IMPSAT
Argentina, IMPSAT Colombia and IMPSAT Venezuela for the first nine months of
1995 and 1996 have been derived from the Company's and IMPSAT Argentina's
unaudited financial statements for the nine months ended September 30, 1995 and
1996 and August 31, 1995 and 1996, respectively.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------- ---------------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues from services:
Argentina.................................. $ 34,672 $ 63,999 $ 80,346 $ 58,352 $ 62,939
Colombia(10)............................... 2,777 12,756 22,417 15,068 25,021
Venezuela(11).............................. 246 910 2,204 1,524 3,105
Other(12).................................. -- 14 674 380 2,328
-------- -------- -------- -------- --------------
TOTAL................................. $ 37,695 $ 77,679 $105,641 $ 75,324 $ 93,393
========= ========= ========= ========= ==============
Operating expenses(2):
Argentina.................................. $(21,946) $(50,113) $(66,019) $(46,968) $(49,328)
Colombia................................... (5,570) (10,757) (17,627) (10,300) (15,367)
Venezuela.................................. (7,839) (3,699) (4,257) (2,139) (3,931)
Other...................................... -- (1,485) (10,855) (8,675) (11,577)
-------- -------- -------- -------- --------------
TOTAL................................. $(35,355) $(66,054) $(98,758) $(68,082) $(80,203)
========= ========= ========= ========= ==============
Net income (loss):
Argentina.................................. $ 6,805 $ 12,464 $ 4,472 $ 3,722 $ 3,031
Colombia................................... (970) (80) (135) (1,602) 1,587
Venezuela.................................. (7,455) (2,582) (1,723) (1,717) (1,482)
Other...................................... (1,216) (6,766) (10,031) (5,292) (8,514)
-------- -------- -------- -------- --------------
TOTAL................................. $ (2,836) $ 3,036 $ (7,417) $ (4,889) $ (5,378)
========= ========= ========= ========= ==============
OTHER FINANCIAL DATA:
EBITDA(3):
Argentina.................................. $ 18,296 $ 24,605 $ 30,394 $ 23,083 $ 27,505
Colombia................................... (2,038) 3,739 8,748 5,922 11,576
Venezuela.................................. (7,592) (2,373) (1,675) (1,140) (822)
Other...................................... (2) (1,472) (9,931) (5,874) (5,876)
-------- -------- -------- -------- --------------
TOTAL................................. $ 8,664 $ 24,499 $ 27,536 $ 21,991 $ 32,383
========= ========= ========= ========= ==============
<CAPTION>
AS OF DECEMBER 31, AS OF SEPTEMBER 30, 1996
---------------------------------- ---------------------------
1993 1994 1995 ACTUAL AS ADJUSTED(6)
-------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets:
Argentina.................................. $ 83,650 $144,504 $165,945 $213,035 $174,335
Colombia................................... 22,308 51,640 59,929 65,389 65,389
Venezuela.................................. 5,801 8,015 11,192 17,516 17,516
Other...................................... (476) 18,525 12,029 67,195 45,695
-------- -------- -------- -------- --------------
TOTAL................................. $111,283 $222,684 $249,095 $363,135 $302,935
========= ========= ========= ========= ==============
Stockholders' equity:
Argentina.................................. $ 33,000 $ 43,964 $ 48,436 $ 51,467 $ 51,467
Colombia................................... 12,811 22,498 10,467 17,525 17,525
Venezuela.................................. 4,006 1,312 7,072 18,865 18,865
Other...................................... (23,023) (4,994) (10,612) (37,872) (37,872)
-------- -------- -------- -------- --------------
TOTAL................................. $ 26,794 $ 62,780 $ 55,363 $ 49,985 $ 49,985
========= ========= ========= ========= ==============
</TABLE>
(footnotes appear on page 37)
36
<PAGE> 38
- ---------------
(1) Financial and other data presented for the Company on a combined basis for
1991 include information only for IMPSAT Argentina since IMPSAT Argentina
was the only one of the Company's operating subsidiaries in existence in
1991.
(2) Operating expenses consist of direct cost of services, selling expenses,
general and administrative expenses and depreciation and amortization.
(3) EBITDA consists of operating income (loss) plus depreciation and
amortization and income taxes. EBITDA is presented because it is a measure
commonly used in the industry and to enhance an understanding of the
Company's operating results and is not intended to represent or be a
substitute for cash flow under generally accepted accounting principles.
See the Company's combined financial statements contained elsewhere in this
Prospectus, which include a statement of cash flows. If EBITDA had been
calculated excluding the depreciation, amortization, interest expense and
net losses allocable to the minority interest in non-wholly-owned
subsidiaries (other than the Guarantor), it would not have produced
material differences from EBITDA as presented because the Company's
non-wholly-owned subsidiaries (other than the Guarantor) had losses or
relatively small net income for the periods indicated.
(4) The ratio of earnings to fixed charges is computed by dividing operating
income before fixed charges (other than capitalized interest), by fixed
charges. Fixed charges consist of interest charges and amortization of debt
expense and discount or premium related to indebtedness. Earnings of the
Company were insufficient to cover fixed charges by approximately $4.3
million, $9.6 million, $5.2 million, $4.6 million and $12.4 million for the
years ended December 31, 1993 and 1995, for the nine months ended September
30, 1995 and 1996, and for the pro forma year ended December 31, 1995,
respectively. Earnings of IMPSAT Argentina were insufficient to cover fixed
charges by approximately $4.5 million for the year ended November 30, 1991.
(5) Pro forma ratios are presented for the year ended December 31, 1995 and for
the nine month period ended September 30, 1996 as if the Offering and the
application of the proceeds thereof to repay $91.5 million of short-term
indebtedness had occurred at the beginning of the relevant period.
(6) This figure represents the ratio of debt at the end of the period to EBITDA
over the preceding four quarters, except that for the nine month periods
EBITDA has been annualized.
(7) As adjusted balance sheet data is presented as if the Offering and the
application of the proceeds thereof to repay $91.5 million of indebtedness
had occurred on the balance sheet date.
(8) Total debt is the sum of short-term and long-term debt. Total
capitalization is the sum of total debt, minority interest and
stockholders' equity.
(9) "Satellites linked" refers to satellites with respect to which the Company
has leased transponder capacity. The Company does not own any satellites.
(10) IMPSAT Colombia commenced operations in December 1992.
(11) IMPSAT Venezuela commenced operations in January 1993.
(12) The category "Other", as it relates to revenues, operating expenses, total
assets, and EBITDA, consists of (i) amounts relating to IMPSAT Ecuador,
IMPSAT Mexico, IMPSAT USA, ISCH and Resis; (ii) parent company amounts,
including overhead expenses; and (iii) the elimination of inter-company
balances and transactions. As it relates to net income (loss) and
stockholders' equity, the category "Other" also includes the allocation to
minority interest.
37
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the Company's
combined financial statements and the notes thereto and with IMPSAT Argentina's
consolidated financial statements and the notes thereto, each of which are
included elsewhere in this Prospectus, and with the other financial data also
included elsewhere in this Prospectus. IMPSAT Argentina's financial statements
are presented as of November 30, the end of its fiscal year, and as of August
31, the end of the first three quarters of its fiscal year, and the combined
financial statements of the Company incorporate IMPSAT Argentina's fiscal year
and first three quarters of its fiscal year results. The Company's fiscal year
and that of all of its other subsidiaries end on December 31.
The Company owns less than a 100% equity interest in certain of its
subsidiaries, including a 51% equity interest in IMPSAT Argentina, a 74% equity
interest in IMPSAT Colombia and a 75% equity interest in IMPSAT Venezuela. The
financial data for the Company on a combined basis generally reflect 100% of the
revenues and expenses for each of the Company's subsidiaries in operation during
the relevant period, with the amounts of net income (loss) and stockholders'
equity attributable to the minority interests in such subsidiaries deducted as a
separate line item. The combined financial data contained herein are presented
as if IMPSAT Corporation owned its current percentage of the capital stock of
its subsidiaries during all periods, and as of all balance sheet dates,
presented. The following discussion of the Company's combined financial
condition and results of operations reflects primarily the results of IMPSAT
Argentina, which was the first subsidiary of the Company and which as of the
date hereof constitutes, and for all periods discussed in this Prospectus has
constituted, the Company's largest subsidiary.
Certain of the information with respect to the Company's plans and strategy
for its business and related financing included herein are forward-looking
statements which are based on a number of assumptions and are subject to
significant business, economic and competitive uncertainties which are beyond
the control of the Company. For a discussion of important factors that could
cause actual results to differ materially from the forward-looking statements,
investors should carefully consider the information set forth under the caption
"Risk Factors."
The Company's revenues are derived principally from fixed monthly fees from
its customers, as well as from initial engineering and installation charges. The
installation charge generally is structured to cover the Company's actual costs
of installation of customer site-based equipment and represents an insignificant
percentage of the total revenues. Depending on the complexity of the services to
be provided to a customer, the period between the date of signature of a
contract and the commencement of actual services (and receipt of monthly fees)
typically ranges from 45 days to four months. The Company's contracts with its
customers range from six months to five years but generally are for three years.
The monthly fee is based on the number of VSAT microstations or Dataplus earth
stations utilized, and/or the number of connections into the Company's Teledatos
networks. The Company generally charges its customer a fee denominated in U.S.
dollars, although most of the customers have the option of paying either in U.S.
dollars or in their respective local currencies (based on the exchange rate
between the respective local currency and the U.S. dollar on the date of
payment). The Company records revenues upon the submission of an invoice to a
customer.
The Company generally has been able to maintain premium prices in each of
the countries in which it operates, in part due to its position as a market
leader in providing high quality private telecommunications network services.
The Company recently has experienced, and anticipates that it will continue to
experience, downward pressure on its prices as it continues to expand its
customer base and as competition for private telecommunications network services
grows. Upon the renewal and/or expansion of its contracts with existing
customers, the prices charged to such customers have generally declined. In
addition, the prices charged to new customers generally are lower than the
prices charged in past years. See "Risk Factors -- Competition." The Company to
date has been able to counterbalance to some extent decreases in prices by
increasing the amount of services provided to its customers, and the Company's
business plan contemplates that as its prices decline due to competition, the
volume of services to be provided to particular customers, and the total number
of customers served, should increase. See "Business -- Customers." For a
discussion of important factors that could prevent the Company from sufficiently
increasing its customers and the volume of services
38
<PAGE> 40
to the degree necessary to offset declining prices, see "Risk
Factors -- Significant Capital Requirements," "-- Short Operating History; Risks
of Expansion Strategy," "-- Competition," and "-- Risks Relating to Operations
in Latin America."
The Company's direct cost of services include principally (i) satellite
lease payments for transponder capacity, (ii) costs relating to the installation
and removal by the Company of VSAT and Dataplus earth stations at its customers'
premises, (iii) sales commissions paid to third party sales representatives with
respect to customer contracts, and (iv) personnel costs for the design and
engineering of its private telecommunications network systems infrastructure
and, once such infrastructure is installed and operating, personnel costs for
the maintenance thereof. General and administrative expenses for the Company
consist of personnel costs other than for selling and engineering, design and
maintenance of the Company's infrastructure, insurance, professional and legal
fees and general overhead.
Certain management, sales and administrative services are performed on
behalf of IMPSAT Corporation and its operating subsidiaries by Resis Ingenieria
S.A., a wholly-owned subsidiary of the Company. Resis was formed as an Argentine
corporation for reasons of administrative convenience and efficiency to employ
the executive officers of the Company, most of whom are Argentine nationals. See
"Management."
RESULTS OF OPERATIONS
The following table presents the Company's results of operations as a
percentage of revenues:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------------- ----------------------------------
1993 1994 1995 1995 1996
--------------- --------------- ---------------- ---------------- ---------------
(IN THOUSANDS OF U.S. DOLLARS AND AS A PERCENTAGE OF COMBINED REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............ $37,695 100.0% $77,679 100.0% $105,641 100.0% $75,324 100.0% $93,393 100.0%
Direct cost of
services.......... 22,256 59.0 32,999 42.5 43,051 40.8 28,501 37.8 35,470 38.0
Selling expenses.... 3,284 8.7 9,714 12.5 16,962 16.1 11,467 15.2 11,703 12.5
General and
administrative
expenses.......... 3,491 9.3 10,467 13.5 18,092 17.1 13,365 17.7 13,124 14.1
Depreciation and
amortization...... 6,324 16.8 12,874 16.6 20,653 19.6 14,749 19.6 19,193 20.6
Interest expense,
net............... 6,220 16.5 8,231 10.6 15,677 14.8 10,725 14.2 16,849 18.0
Net gain (loss) on
foreign
exchange.......... 1,518 4.0 1,352 1.7 1,838 1.7 (9) 0.0 1,166 1.3
Benefit (Expense)
for foreign income
taxes............. 1,428 3.8 3,155 4.1 740 0.7 122 0.2 (2,495) (2.7)
Net income (loss)... (2,836) (7.5) 3,036 3.9 (7,417) (7.0) (4,889) (6.5) (5,378) (5.8)
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
Revenues. Revenues for the nine months ended September 30, 1996 totalled
$93.4 million, an increase of $18.1 million, or 24.0%, from the nine months
ended September 30, 1995. The increase in revenues reflects principally a growth
in revenues of IMPSAT Colombia, which totalled $25.0 million, representing an
increase of $10.0 million, or 66.1%, from the nine months ended September 30,
1995. In addition, revenues at IMPSAT Argentina for the nine months ended August
31, 1996 totalled $62.9 million (an increase of $4.5 million, or 7.7%, from the
nine months ended August 31, 1995), revenues at IMPSAT Venezuela totalled $3.1
million for the nine months ended September 30, 1996 (an increase of $1.6
million from the nine months ended September 30, 1995), and revenues at IMPSAT
Ecuador totalled $1.9 million for the nine months ended September 30, 1996 (an
increase of $1.5 million from the nine months ended September 30, 1995). Revenue
growth for the nine months ended September 30, 1996 is attributable to an
increase in the number of customers and services provided.
IMPSAT Colombia's customer base increased from 188 at September 30, 1995 to
373 at September 30, 1996. During the first nine months of 1996 IMPSAT Colombia
installed 252 VSAT microstations and 88 Dataplus earth stations for new and
existing customers. IMPSAT Venezuela also experienced growth in the
39
<PAGE> 41
number of customers and services provided. In Venezuela, the number of customers
increased from 33 at September 30, 1995 to 71 at September 30, 1996, and IMPSAT
Venezuela installed 56 VSAT microstations and 30 Dataplus earth stations for new
and existing customers during the nine months ended September 30, 1996. In
Ecuador, the number of customers increased from 11 as of September 30, 1995 to
33 as of September 30, 1996, and IMPSAT Ecuador installed 34 VSAT microstations
and 7 Dataplus earth stations during the nine month period ended September 30,
1996.
The operations at IMPSAT Argentina experienced slower growth than that
registered in the other principal countries in which the Company operates. The
number of customers at IMPSAT Argentina as of August 31, 1996 totalled 363,
compared with 320 customers as of August 31, 1995. During the nine months ended
August 31, 1996, IMPSAT Argentina installed 91 VSAT microstations and 39
Dataplus earth stations for new and existing customers, as compared to 473 VSAT
microstations and 119 Dataplus earth stations installed for the nine month
period ended August 31, 1995. The significant diminution in the level of growth
of IMPSAT Argentina's revenues and customer base is related to the recession
experienced in Argentina during 1995 and the first six months of 1996. See "Risk
Factors -- Risks Relating to Operations in Latin America -- Argentina."
During periods of economic uncertainty certain customers of the Company in
Argentina and in other countries in which the Company operates have deferred
major corporate expenditures and business decisions, such as the contracting of
their telecommunications services. The Company anticipates that its geographic
diversification will provide some protection against economic downturns in any
particular country, although there can be no assurance in this regard. See "Risk
Factors -- Risks Relating to Operations in Latin America."
The Company's contracts with its customers generally provide for payment in
U.S. dollars or for payment in local currency linked to the exchange rate at the
time of payment between the local currency and the U.S. dollar. Accordingly,
inflationary pressures experienced in the Company's country of operations did
not have direct effect on the Company's revenues for 1995 and the first three
quarters of 1996. Nevertheless, inflation has in the past, and could in the
future, adversely affect the economies of the Company's countries of operations
by, among other things, increasing the cost of local capital and deterring
capital inflows from the United States and elsewhere. There can be no assurance
that, in the future inflation will not produce such negative macroeconomic
consequences in the Company's countries of operations which, in turn, could have
a material adverse effect on the business, results of operations and financial
condition of the Company. See "Risk Factors -- Risks Relating to Operations in
Latin America."
Direct Cost of Services. The Company's direct cost of services for the
nine months ended September 30, 1996 totalled $35.5 million, an increase of $7.0
million, or 24.5%, from the Company's direct cost of services for the nine
months ended September 30, 1995. Of total direct cost of services, $22.9 million
related to the operations of IMPSAT Argentina and $6.9 million related to the
operations of IMPSAT Colombia, compared to direct cost of services of $20.5
million at IMPSAT Argentina for the nine months ended August 31, 1995 and direct
cost of services of $4.4 million at IMPSAT Colombia for the nine months ended
September 30, 1995.
Of the Company's total direct cost of services for the nine months ended
September 30, 1996, satellite lease payments totalled $10.5 million, or 29.6% of
total direct cost of services. Satellite lease payments for the nine months
ended September 30, 1995 totalled $8.9 million, or 31.1% of total direct cost of
services for such period. The Company's costs for satellite capacity are
directly related to the increase in the Company's customer and revenue bases,
and the Company has acquired additional leased satellite capacity as needed to
meet current and projected levels of business. Total leased satellite capacity
has increased from 196.25 MHz as of September 30, 1995 to 261.58 MHz as of
September 30, 1996. The Company believes that it has adequate leased satellite
capacity and does not anticipate acquiring additional capacity until at least
1998. The Company anticipates that satellite lease payments will represent the
major subcomponent of direct cost of services in the foreseeable future. The
Company believes that such trend is anticipated and that such an increase has
not had and is not likely to have a material effect on the Company's results of
operations, liquidity or capital resources. See
"Business -- Infrastructure -- Satellites."
Installation costs totalled $7.2 million for the nine months ended
September 30, 1996, or 20.3% of total direct cost of services. The Company
utilizes the services of outside providers of installation services in
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Argentina and Colombia and intends over time to expand the practice of using
outside providers in the other countries in which it operates.
Sales commissions paid to third party representatives totalled $6.8 million
for the nine months ended September 30, 1996, or 19.2% of the Company's total
direct cost of services during such period. The overwhelming amount of such
sales commissions ($6.0 million, or 88.2% of total sales commissions) were paid
with respect to customers of IMPSAT Argentina. To date, the practice of
utilizing third party sales representatives in connection with the generation
and servicing of customer contracts has been employed predominantly in the case
of IMPSAT Argentina, although third party sales representatives have also
recently been utilized in connection with IMPSAT Colombia's customer generation.
See "Business -- Sales, Marketing and Customer Service."
Finally, personnel costs for the engineering, design and maintenance of the
Company's network infrastructure for the nine months ended September 30, 1996
totalled $5.3 million, or 15.0% of the Company's total direct cost of services
during such period. In the second quarter of 1996, IMPSAT Argentina reduced its
technical support staff by 17 persons. Such terminations resulted in the payment
of legally required severance payments for such personnel of $250,000 in the
second quarter of 1996. However, the Company anticipates future savings in the
direct cost of services relating to personnel as a result of such decrease in
workforce.
Selling Expenses. Selling expenses for the Company consist of personnel
costs of the Company's sales force, advertising and publicity costs. The Company
incurred selling expenses of $11.7 million for the nine months ended September
30, 1996, an increase of $0.2 million or 1.7%, from selling expenses incurred by
the Company during the nine months ended September 30, 1995. Selling expenses at
IMPSAT Argentina for the nine months ended August 31, 1996 totalled $6.8
million, a decrease of $1.8 million, or 20.9%, from selling expenses incurred by
IMPSAT Argentina for the nine months ended August 31, 1995. Selling expenses at
IMPSAT Colombia for the nine months ended September 30, 1996 totalled $2.5
million, a increase of $0.8 million, or 47.1%, from selling expenses incurred by
IMPSAT Colombia for the nine months ended September 30, 1995. Such increase was
related to increased personnel and publicity costs incurred by IMPSAT Colombia
in connection with its growth in customer revenues and base.
As described below under "-- 1995 Compared to 1994 -- General and
Administrative Expenses," the Company has taken steps beginning in the first
quarter of 1996 to reduce selling expenses. As a percentage of revenues, selling
expenses have been reduced for the nine month period ended September 30, 1996 to
12.5% of total revenues from 15.2% of total revenues for the nine month period
ended September 30, 1995. During the second quarter of 1996, IMPSAT Argentina
decreased its sales workforce by 16 people. This reduction in workforce, which
was made possible by increases in productivity realized as a result of IMPSAT
Argentina's organizational restructuring in 1995 (see "-- 1995 Compared to
1994 -- General and Administrative Expenses"), resulted in legally required
severance payments of approximately $406,000 in the second quarter of 1996.
However, the Company expects future savings in selling personnel costs as a
result of the decrease in workforce.
General and Administrative Expenses. The Company recorded general and
administrative expenses of $13.1 million for the nine months ended September 30,
1996, a decrease of $241,000, or 1.8%, from general and administrative costs
incurred by the Company during the nine months ended September 30, 1995. General
and administrative expenses incurred by IMPSAT Corporation and Resis for the
nine month period ended September 30, 1996 totalled $4.2 million, an increase of
$261,000, or 6.6%, from such expenses incurred for the none month period ended
September 30, 1995, reflecting the effect of the establishment in the second
quarter of 1995 of a holding company management tier to coordinate the Company's
operations in the different countries in which it operates. General and
administrative expenses at IMPSAT Argentina for the nine months ended August 31,
1996 totalled $5.0 million, a decrease of $1.2 million, or 19.4%, from general
and administrative expenses incurred by IMPSAT Argentina for the nine months
ended August 31, 1995.
The Company has commenced efforts to decrease and rationalize its general
and administrative expenses. Those steps included a small decrease in the number
of employees at Resis, a decrease in administrative expenses such as corporate
travel expenses and a more efficient use of space requirements. IMPSAT
Corporation has moved its executive offices from the office space which it
leased in the business district in downtown Buenos Aires and has centralized its
personnel at IMPSAT Argentina's new facility at its Buenos Aires Teleport. The
move of IMPSAT Corporation's headquarters personnel to the Buenos Aires Teleport
is anticipated to result in a savings of $300,000 annually in reduced rental
expense. Also, as part of the general
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reduction in workforce described in the preceding paragraphs, IMPSAT Argentina
reduced its administrative personnel workforce by 11 persons in the second
quarter of 1996, which resulted in legally required severance payments of
$57,000 in that quarter.
The Company's reserve for uncollectible receivables, principally relating
to IMPSAT Argentina, totalled $2.8 million as of September 30, 1996, an increase
of $1.7 million, or 149%, from the reserve maintained as of December 31, 1995.
Over 99% of the reserve for uncollectible receivables relates to the operation
of IMPSAT Argentina. The Company has increased its reserve for uncollectible
accounts as a result of certain payment arrears experienced by a number of
customers in Argentina. The Company's current policy is to reserve 30% for
accounts receivable in excess of 180 days but less than one year, and 100% for
all accounts receivable in excess of 360 days; except with respect to ENCOTESA,
as to which the Company as of August 31, 1996 had reserves for uncollectible
accounts receivable of $500,000 with respect to a total of $3.4 million in
accounts receivable in excess of 180 days at such time. As a percentage of gross
total revenues, the Company's reserve of uncollectible receivables has increased
from 1.1% of total revenues for the nine month period ended September 30, 1995
to 3.0% of total revenues for the nine month period ended September 30, 1996.
The single largest delinquent customer as of September 30, 1996 was
ENCOTESA, the Argentine national postal service. ENCOTESA accounted for 47.9% of
IMPSAT Argentina's receivables past due more than six months but less than one
year and for 51.0% of IMPSAT Argentina's receivables past due in excess on one
year. ENCOTESA, which was the Company's fifth largest customer as of December
31, 1995, is experiencing financial and operating difficulties, and the
Argentine legislature is currently debating the means to address ENCOTESA's
difficulties, including the possible privatization of the agency. In November
1996, IMPSAT Argentina filed suit against ENCOTESA for amounts due and arising
under IMPSAT Argentina's contracts with ENCOTESA totalling $5.1 million, plus
interest on such amounts. IMPSAT Argentina believes that its contracts with
ENCOTESA should be recognized by the Argentine courts and intends to pursue its
claims against ENCOTESA to the fullest extent. IMPSAT Argentina is currently
discussing with ENCOTESA modifications to the amount of services being provided
under ENCOTESA's contracts with IMPSAT Argentina, which currently result in
monthly invoices of $218,000. As of September 30, 1996, the Company was
providing ENCOTESA with 200 VSATs and 7 Dataplus earthstations, under contracts
which are scheduled to expire in August 1997 and 1999, respectively. The Company
will continue to assess the effect that the ENCOTESA receivables situation will
have on its results of operations, liquidity or capital resources.
Depreciation and Amortization. The Company's depreciation and amortization
for the nine months ended September 30, 1996 totalled $19.2 million, an increase
of $4.4 million, or 29.7%, compared to depreciation and amortization for the
nine months ended September 30, 1995. Depreciation and amortization for IMPSAT
Argentina totalled $13.9 million for the nine months ended August 31, 1996, an
increase of $2.2 million, or 18.8%, compared to the nine months ended August 31,
1995.
The increase in depreciation and amortization is related principally to the
growth in the Company's private telecommunications network systems and the
expansion of its facilities. Depreciation and amortization will continue to
increase in future periods as the Company anticipates continued expansion of its
private telecommunications network systems.
Interest Expense, Net. The Company's net interest expense for the nine
months ended September 30, 1996 totalled $16.8 million, comprising interest
expense of $17.8 million and interest income of $1 million. Net interest expense
increased $6.1 million, or 57.0%, from net interest expense for the nine months
ended September 30, 1995. IMPSAT Argentina's net interest expense for the nine
months ended August 31, 1996 totalled $9.2 million, an increase of $1.6 million,
or 21.1% from net interest expense for the nine months ended August 31, 1995.
Net interest expense at IMPSAT Colombia for the nine months ended September 30,
1996 totalled $5.6 million, an increase of $1.4 million, or 33%, from IMPSAT
Colombia's net interest expense for the nine months ended September 30, 1995.
The increase in net interest expense reflects primarily increased
indebtedness of the Company, which increased from $121.3 million as of September
30, 1995 to $248.6 million as of September 30, 1996. As of August 31, 1996,
total outstanding indebtedness at IMPSAT Argentina equalled $138.0 million
(including parent company advances of $68.2 million from the proceeds of the
Notes), compared to $77.0 million as of August 31, 1995. Of the amount of total
indebtedness of IMPSAT Argentina outstanding on August 31, 1996, a total of
$38.7 million has been or as of November 30, 1996 will be repaid from the
proceeds of the Offering. Total outstanding indebtedness at IMPSAT Colombia as
of September 30, 1996 equalled $45.1 million,
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compared to $40.8 million as of September 30, 1995. Of the amount of total
indebtedness of IMPSAT Colombia outstanding on September 30, 1996, a total of
$18.0 million has been or as of November 30, 1996 will be repaid through the
proceeds of the Offering. However, during the period between the consummation of
the Offering and the maturity dates for the indebtedness being refinanced with
the proceeds of the Offering, the Company has been required to incur the
interest expense on the existing indebtedness as well as that on the Notes,
which additional interest expense has been offset only partially by the receipt
of interest income on the Company's cash balances being held pending repayment.
The average interest rate on the Company's indebtedness for the nine months
ended September 30, 1996 was 14.4%, compared to an average interest rate of
14.4% for the nine months ended September 30, 1995.
Net Gain (Loss) on Foreign Exchange. The Company recorded a net gain on
foreign exchange for the nine months ended September 30, 1996 of $1.2 million.
As a result of the devaluation of the Colombian peso and the Venezuelan bolivar,
the Company experienced a decrease in the indebtedness of IMPSAT Colombia
incurred in Colombian pesos and of IMPSAT Venezuela incurred in Venezuelan
bolivars by $0.15 million and $1.0 million, respectively, in U.S. dollar terms.
Benefit (Expense) for Foreign Income Taxes. The Company recorded an
expense for foreign income taxes for the nine months ended September 30, 1996 of
$2.5 million, a decrease of $2.6 million from the benefit for foreign income
taxes recorded for the nine months ended September 30, 1995. The expense for
foreign income taxes reflects the income taxes owed by the Company's operating
subsidiaries in their countries of operation. For the nine months ended August
31, 1996, IMPSAT Argentina recorded deferred income tax expense of $2.0 million,
and IMPSAT Colombia recorded deferred tax expense of $0.3 million for the nine
months ended September 30, 1996. IMPSAT Argentina currently has available
certain net loss carryforwards of $4.1 million which is expects to use to offset
its current income tax liability for 1996. See Note 8 to the Company's combined
financial statements and Note 8 to IMPSAT Argentina's consolidated financial
statements.
Net Loss. For the nine months ended September 30, 1996, the Company
incurred a net loss of $5.4 million, an increase of $0.5 million, or 10.2%,
compared to the Company's net loss of $4.9 million for the nine months ended
September 30, 1995. The Company's net loss as a percentage of total revenues for
the nine month period ended September 30, 1996 declined to 5.8% of total
revenues from a loss of 6.5% of total revenues for the nine month period ended
September 30, 1995. The Company's net loss for the nine months ended September
30, 1996 is primarily related to the costs of the Company's operations in
Venezuela (a net loss of $1.5 million after deduction for minority interests),
Ecuador (a net loss of $1.2 million), Mexico (a net loss of $1.3 million), as
well as management services provided, and overhead expenses incurred by IMPSAT
Corporation of $4.5 million Such losses were offset by IMPSAT Argentina's net
income for the nine month period ended August 31, 1996 of $3.0 million, of which
the Company's interest after deduction for minority interests totalled $1.5
million and IMPSAT Colombia's net income of $1.6 million for the nine month
period ended September 30, 1996, of which the Company's interest after deduction
for minority interests totalled $1.2 million. The increase in the Company's net
loss for the nine month period ended September 30, 1996 is primarily
attributable to increased interest expenses associated with the Company's higher
levels of indebtedness and to the deferred provision for $2.0 million in income
taxes at IMPSAT Argentina. The Company does not believe that the decrease in its
prices described above under "-- Overview" contributed in any significant
respect to the net loss recorded by the Company during the first nine months of
1996.
The losses recorded at the Company's newer and less established
subsidiaries in Venezuela, Ecuador and Mexico reflect the pattern experienced in
the results of IMPSAT Argentina and IMPSAT Colombia in their initial years of
operation. In these cases, the Company's subsidiaries have been established with
a full complement of technical, sales and other personnel required to meet the
needs of such entities' potential customer bases in order to provide from the
outset the level of quality and service which the Company strives to provide to
all of its customers. As a result, such subsidiaries have had relatively high
costs per current revenue and customer bases. In addition, the financing costs
relating to the establishment of the main Teleport in each country, prior to the
generation of significant customer revenues, has affected the net results of the
newer subsidiaries. In addition, the particular case of IMPSAT Venezuela, the
adverse macroeconomic situation experienced since 1994 in Venezuela (see "Risk
Factors -- Risk Related to Operations in Latin America -- Venezuela") has
affected IMPSAT Venezuela's revenue growth.
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1995 COMPARED TO 1994
Revenues. Revenues for 1995 totalled $105.6 million, an increase of $28.0
million, or 36.0%, from 1994. The increase in revenues reflected principally
growth in revenues of IMPSAT Argentina ($80.3 million, representing an increase
of $16.3 million, or 25.5%, from 1994) and of IMPSAT Colombia ($22.4 million,
representing an increase of $9.7 million, or 75.7%, from 1994), as the Company's
operations in Argentina and Colombia continued to expand during 1995.
The growth in the Company's revenues in 1995 reflected both growth in the
number of customers and growth in the amount of services provided to existing
customers. The number of customers grew from 445 at December 31, 1994, to 656 at
December 31, 1995. During 1995, IMPSAT Argentina's customer base expanded from
292 to 319 customers and IMPSAT Argentina installed 489 VSAT microstations and
119 Dataplus earth stations for existing and new customers. Revenue for IMPSAT
Argentina did not increase as much as the Company had anticipated, principally
because of the economic recession experienced in Argentina. IMPSAT Colombia
increased its customer base from 135 to 271 during 1995 and installed 371 VSAT
microstations and 36 Dataplus earth stations for existing and new customers in
1995. Substantially all of the customers of IMPSAT Argentina that completed the
term of their original contracts with IMPSAT Argentina during 1995 entered into
renewal contracts.
In addition to general service revenues, IMPSAT Argentina recorded revenues
of $2.2 million in 1995 as a result of the sale to YPF S.A. of VSAT
microstations and Dataplus earth stations in connection with the implementation
of YPF's contract with IMPSAT Argentina, of which $0.7 million was recorded as a
gain of the sale of such equipment. Unlike the Company's other customers, YPF
preferred to own the ground-based portions of the private telecommunications
network systems infrastructure utilized by IMPSAT to provide such services to
YPF. The Company does not anticipate that a substantial number of additional
customers will seek to own their customer-site located infrastructure.
Direct Cost of Services. The Company's direct cost of services for 1995
totalled $43.1 million, an increase of $10.1 million, or 30.5%, from the
Company's direct cost of services for 1994. Of the total direct cost of
services, $30.7 million related to the operations of IMPSAT Argentina and $6.9
million to IMPSAT Colombia. IMPSAT Argentina's direct cost of services of $30.7
million in 1995 represented an increase of $5.3 million, or 20.9%, from IMPSAT
Argentina's direct cost of services for 1994.
Of the Company's total direct cost of services in 1995, satellite lease
payments totalled $10.9 million, or 25.5% of total direct cost of services.
Personnel costs for engineering, design and maintenance of the Company's network
infrastructure totalled $6.7 million, or 15.5% of the Company's total direct
cost of services. Sales commissions paid to third party sales representatives in
1995 totalled $8.3 million in 1995, or 19.3% of the Company's total direct cost
of services in 1995. Finally, installation costs totalled $5.7 million in 1995,
or 13.3% of the Company's total direct cost of services.
Selling Expenses. The Company incurred selling expenses of $17.0 million
for 1995, an increase of $7.2 million, or 74.6%, from selling expenses incurred
by the Company in 1994. Selling expenses at IMPSAT Argentina in 1995 totalled
$11.0 million, an increase of $4.0 million, or 57.1%, from 1994. The increase in
selling expenses in 1995 related primarily to increased personnel levels
throughout the Company as the Company expanded its sales force in connection
with its anticipated growth in revenues and customer base which did not
materialize to the extent anticipated in 1995, principally because of the
recession in Argentina.
General and Administrative Expenses. The Company recorded general and
administrative expenses of $18.1 million for 1995, an increase of $7.6 million,
or 72.8%, from general and administrative expenses incurred by the Company in
1994. The increase in general and administrative expenses in 1995 reflected
principally increased personnel expense incurred in connection with the
establishment of a management infrastructure for IMPSAT Corporation and of the
operations of IMPSAT Ecuador and IMPSAT Mexico. In addition, the Company
recorded an expense of $1.5 million in 1995 for consultants' fees and related
charges in connection with the restructuring of personnel with respect to the
implementation of the Company's business unit concept. See "Business -- Sales,
Marketing and Customer Service." General and administrative expenses at IMPSAT
Argentina in 1995 totalled $8.2 million, an increase of $1.2 million, or 18.0%,
from general and administrative expenses incurred by IMPSAT Argentina in 1994.
The rapid increase in both selling and general and administrative expenses
in 1995 resulted from the establishment of operations at the IMPSAT Corporation
level, as well as Resis, and from the creation of a
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personnel infrastructure to support an expected growth in customers and
revenues. Although the Company has continued to experience significant customer
and revenue growth in certain of its markets, particularly Colombia and Ecuador,
continued adverse economic conditions in Argentina and Venezuela in 1995 and the
first quarter of 1996 resulted in less than anticipated growth for the Company.
See "Risk Factors -- Risks Relating to Operations in Latin
America -- Argentina," and "-- Venezuela." The Company recently has taken steps
to address the significant increases in selling expenses and in general and
administrative expenses recorded in 1995. See "-- Six Months Ended June 30, 1996
Compared to Six Months Ended June 30, 1995 -- General and Administrative
Expenses."
The Company maintains a reserve for uncollectible receivables, which as of
December 31, 1995, related principally to IMPSAT Argentina and totalled $1.1
million, an increase of $0.4 million, or 58.7%, from the Company's reserve for
uncollectible receivables as of December 31, 1994. The increase is attributable
to the provisions for doubtful accounts of $0.8 million less write-offs of $0.4
million.
Depreciation and Amortization. The Company's depreciation and amortization
in 1995 totalled $20.7 million, an increase of $7.8 million, or 60.4%, compared
to depreciation and amortization in 1994. Depreciation and amortization for
IMPSAT Argentina in 1995 totalled $16.1 million, an increase of $5.3 million, or
49.9%, compared to 1994.
Interest Expense, Net. The Company's net interest expense for 1995
totalled $15.7 million, comprising interest expense of $16.5 million and
interest income of $0.8 million. Net interest expense increased $7.4 million, or
90.5%, compared to the Company's net interest expense for 1994. IMPSAT
Argentina's net interest expense totalled $10.4 million and increased $5.9
million, or 129.9%, compared to IMPSAT Argentina's net interest expense for
1994.
The increase in net interest expense reflects both increased outstanding
indebtedness of the Company, which increased from $107.5 million as of December
31, 1994 to $127.7 million as of December 31, 1995, an increase of 18.8%, and to
higher interest costs with respect to such indebtedness. The Company
substantially increased its level of indebtedness throughout the second half of
1994 and throughout 1995 in order to develop and commence the operations of its
private telecommunications network systems in Colombia and Venezuela and also
incurred significant indebtedness to expand its operations and customer base in
Argentina. Total outstanding indebtedness of the Company equalled $69.4 million
at June 30, 1994, and $81.7 million at September 30, 1994. Net interest expense
of IMPSAT Colombia for 1995 totalled $6.0 million, an increase of $3.0 million,
or 97.7%, compared to net interest expense for 1994. In addition, the adverse
economic effects in Argentina in the first half of 1995 as a result of the
Mexican peso crisis in December 1995 (see "Risk Factors -- Risks Relating to
Operations in Latin America -- Argentina"), resulted in the Company's having to
pay higher rates of interest on portions of its short-term debt. During the
first two quarters of 1995, IMPSAT Argentina was required to pay interest on its
short-term debt at rates as high as 30% on an annual basis. While the Argentine
banking sector stabilized during the second half of 1995 and interest rates
declined from the extraordinarily high rates experienced in the first half of
1995, interest rates for IMPSAT Argentina's short-term debt nonetheless remained
high. The average interest rate on the Company's indebtedness for 1995 was
14.1%, compared to an average interest rate of 11.0% for 1994.
Net Gain (Loss) on Foreign Exchange. The Company recorded a net gain on
foreign exchange in 1995 of $1.8 million, an increase of $0.5 million from the
net gain on foreign exchange recorded by the Company in 1994, as the devaluation
of the Colombian peso and the Venezuelan bolivar, resulted in a decrease in U.S.
dollar terms of the Company's net liabilities for indebtedness denominated in
such currencies.
Benefit (Expense) for Foreign Income Taxes. The Company recorded a benefit
for foreign income taxes in 1995 of $0.7 million, a decrease of $2.4 million,
from the benefit for foreign income taxes recorded in 1994. The benefit for
foreign income taxes reflects the difference in treatment for certain
preoperating costs and with respect to net operating loss carryforwards. See
Note 8 to the Company's combined financial statements.
Net Income (Loss). For 1995, the Company incurred a net loss of $7.4
million, compared to net income of $3.0 million for 1994. The principal reasons
for the Company's net loss for 1995 related to the costs of $5.4 million
associated with the establishment of operations at the IMPSAT Corporation level
and thereafter to the costs of management services provided, and overhead
expenses incurred by IMPSAT Corporation and to the organizational and start-up
costs of the Company's operations in Ecuador (a net loss of $1.3 million) and
Mexico (a net loss of $1.2 million). In addition, the Company's operations in
Venezuela recorded a net
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loss of $1.7 million for 1995, which after deduction for minority interests
resulted in a net loss of $1.3 million for the Company. For 1995, IMPSAT
Argentina recorded net income of $4.4 million, of which the Company's interest
therein after reduction for minority interests totalled $2.2 million. During the
same period, IMPSAT Columbia recorded a net loss of $0.2 million, which after
deduction for minority interests resulted in a loss of $0.1 million for the
Company. IMPSAT Argentina's net income decreased $8.0 million between 1995 and
1994, principally as a result of the recession in Argentina, increases in
selling expenses and interest expenses described above and an increase in
depreciation and amortization.
1994 COMPARED TO 1993
Revenues. Revenues for 1994 totalled $77.7 million, an increase of $40.0
million, or 106.1%, from the Company's combined revenues for 1993. The increase
in revenues reflected principally growth in revenues of IMPSAT Argentina ($64.0
million, representing an increase of $29.3 million, or 84.6%, from 1993) and of
IMPSAT Colombia ($12.8 million, representing an increase of $10 million, from
1993), as the Company's operations in Argentina and Colombia continued to
expand. During 1994, IMPSAT Argentina's customer base expanded from 200 to 292
customers and IMPSAT Argentina installed an additional 706 VSAT microstations
and 122 Dataplus earth stations for existing and new customers. IMPSAT Colombia
increased its customer base from 58 to 135 during 1994 and installed 266 VSAT
microstations and 16 Dataplus earth stations for customers in 1994.
Direct Cost of Services. The Company's direct cost of services for 1994
totalled $33.0 million, an increase of $10.7 million, or 48.3%, from 1993. Of
total direct cost of services, $25.4 million related to IMPSAT Argentina, with
the remainder relating to IMPSAT Colombia and IMPSAT Venezuela. Of total direct
cost of services of the Company in 1994, satellite lease payments in 1994
totalled $7.7 million, or 23.4% of the Company's total direct cost of services.
Personnel costs for the engineering, design and maintenance of the Company's
network infrastructure in 1994 totalled $5.3 million, or 16.1% of the Company
total direct cost of services in 1994. Sales commissions to third party sales
representatives in 1994 totalled $7.9 million, or 22.7% of the Company's total
direct cost of services in 1994, and installation costs totalled $4.3 million,
or 13.2% of the Company's total direct cost of services in 1994.
Selling Expenses. The Company recorded selling expenses of $9.7 million
for 1994, an increase of $6.4 million or 195.8%, from selling expenses incurred
by the Company in 1993. Selling expenses at IMPSAT Argentina in 1994 totalled
$7.0 million, an increase of $5.7 million, from 1993. The increase in selling
expenses in 1994 reflected principally increased personnel expense incurred in
connection with the growth of the Company's operations in Argentina.
General and Administrative Expenses. General and administrative expenses
for the Company for 1994 totalled $10.5 million, an increase of $7.0 million
from general and administrative expenses incurred by the Company in 1993.
General and administrative expenses for IMPSAT Argentina totalled $6.9 million,
an increase of $5.0 million from total general and administrative expenses at
IMPSAT Argentina in 1993. The increase in general and administrative expenses
during 1994 reflects the expansion of the Company's work force as a result of
the increased customer and revenue base of IMPSAT Argentina and, to a lesser
extent, in Colombia.
Depreciation and Amortization. The Company's depreciation and amortization
in 1994 totalled $12.9 million, an increase of $6.5 million, or 103.6%, compared
to depreciation and amortization in 1993. Depreciation and amortization at
IMPSAT Argentina totalled $10.7 million and increased $5.1 million, or 92.4%
from 1993. The increase in depreciation and amortization for IMPSAT Argentina is
related principally to the growth in IMPSAT Argentina's private
telecommunications network systems and the expansion of its facilities
throughout 1994.
Interest Expense, Net. The Company's net interest expense for 1994
totalled $8.2 million, comprising interest expense of $8.4 million and interest
income of $0.2 million. Net interest expense increased $2.0 million, or 32.3%,
compared to the Company's net interest expense for 1993. IMPSAT Argentina's net
interest expense totalled $4.6 million, an decrease of $0.9 million, or 16.4%,
compared to interest expense for 1994. Interest expense for the Company
increased in 1994 as a result of increased borrowing in connection with the
build-out and establishment of operations of IMPSAT Colombia and IMPSAT
Venezuela. Interest expense at IMPSAT Argentina decreased during 1994 in part
from the lower interest costs resulting from IMPSAT Argentina's refinancing of
expensive short-term debt with the issuance of its $30 million 9.5%
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Negotiable Obligations due 1996 on November 29, 1993. The average interest rate
on the Company's indebtedness for the year ended December 31, 1994 was 11.0%,
compared to an average interest rate of 19.3% for the year ended December 31,
1993.
Net Gain (Loss) on Foreign Exchange. The Company recorded a net gain on
foreign exchange in 1994 of $1.4 million, a decrease of $0.2 million from net
gain on foreign exchange recorded by the Company in 1993. In 1994, the
devaluation of the Colombian peso and the Venezuelan bolivar, resulted in a
decrease in U.S. dollar terms of the Company's net liabilities for indebtedness
denominated in such currencies.
Benefit (Expense) for Foreign Income Taxes. The Company recorded a benefit
for foreign income taxes in 1994 of $3.2 million, an increase of $1.7 million,
or 120.9%, from the benefit for foreign income taxes recorded in 1993. Such
benefit related primarily to IMPSAT Argentina, which was able to utilize prior
years' net operating losses to offset income taxes on the net profit recorded in
1994 by IMPSAT Argentina.
Net Income (Loss). For 1994, the Company recorded net income of $3.0
million, compared to a net loss of $2.8 million for 1993. The principal reason
for the Company's net income for 1994 related to the increase in net income at
IMPSAT Argentina. For 1994, IMPSAT Argentina recorded net income of $12.5
million, of which the Company's interest therein after reduction for minority
interests totalled $6.4 million. IMPSAT Argentina's net income increased $5.7
million between 1994 and 1993, principally as a result of the increase in
revenues and decrease in net interest expenses described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have required significant capital expenditures for
the development and construction of its private telecommunications network
systems in each country in which it operates. See "Risk Factors -- Significant
Capital Requirements." The Company anticipates that it will continue to incur
significant capital expenditures in the next several years in connection with
the expected growth of its existing operations currently in the commercial
stages (Argentina, Colombia, Venezuela and Ecuador), with the planned
development of its operations now primarily in the build-out stage (principally
Mexico) and, potentially, with the establishment of operations in Brazil.
The ability of the Company to continue the expansion of its private
telecommunications network systems at their current rate of expansion and to
meet its debt service obligations will be dependent upon the future performance
of the Company, including the ability of the Company to obtain additional debt
financing and potential equity financing. While the Company anticipates that it
will generate sufficient cash flows from operations to be able to meet all of
its debt service requirements in the foreseeable future, the Company's ability
to maintain its planned program of capital expenditures will be dependent on its
ability to obtain additional sources of financing, including the refinancing of
certain short-term debt that remains outstanding after the completion of the
Offering. If the Company is unable to obtain such additional sources of
financing, it will not be able to maintain its historical levels of growth and
market position in each of the countries in which it operates, which could have
an adverse effect on the business and prospects of the Company.
As set forth in its combined statements of cash flow, the Company generated
$18.9 million in net cash flow from operating activities for 1995, compared to
$17.3 million for 1994. The increase in net cash flow for 1995 from operating
activities was primarily attributable to the continued growth of the Company's
private telecommunications network infrastructure ($20.7 million in 1995 versus
$12.9 million in 1994) and an increase in trade payables ($8.4 million in 1995
versus $3.3 million in 1994), net of a net loss of $7.4 million and an increase
in accounts receivable ($5.9 million in 1995 versus $1.2 million in 1994).
Financing activities provided $22.1 million in cash flow in 1995, which
represented a decrease of $73.3 million from 1994, principally as a result of a
$18.8 million decrease in net borrowings from short-term credit facilities, a
$19.7 million decrease in proceeds from long-term debt and a $32.4 million
decrease in capital contributions from shareholders and third parties. Financing
activities provided $95.4 million in 1994. During 1995, the Company used $66.9
million in net cash flow in investing activities, compared to $87.6 million for
1994. The decrease in net cash used in 1995 for investing activities resulted
principally from a decrease in purchases of property, plant and equipment ($66.8
million in 1995 versus $87.0 million in 1994).
At December 31, 1995, the Company had a cash balance of $6.2 million. At
that date, the Company's combined total debt was $127.7 million, approximately
$97.5 million of which was short-term debt (including the current portion of
long-term debt). As of December 31, 1995, approximately $8.4 million of the
Company's long-term debt was scheduled to mature in 1997, approximately $8.8
million in 1998, approxi-
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<PAGE> 49
mately $6.5 million in 1999 and approximately $6.5 million in the year 2000 and
thereafter. The Company intends to repay approximately $91.5 million of its
indebtedness with the proceeds of this Offering.
In the nine months ended September 30, 1996, the Company generated $2.6
million in net cash flow from operating activities, compared with $18.0 million
for the nine months ended September 30, 1995. Financing activities provided
$116.2 million cash flow for the nine months ended September 30, 1996, compared
with $14.6 million provided by financing activities for the nine months ended
September 30, 1995. Such increase is primarily attributable to the Offering. The
Company's net outstanding indebtedness increased by $120.9 million during the
nine months ended September 30, 1996. During such period, the Company used $31.1
million in net cash flow for investing activities, compared to $56.4 million for
the nine months ended September 30, 1995. Such decrease relates to a decrease in
purchases of property, plant and equipment as the Company's rate of installation
of private telecommunications network infrastructure declined in light of the
recession experienced in Argentina. The Company had a cash balance of $93.9
million as of September 30, 1996.
After giving effect to the Offering on an as adjusted basis as of September
30, 1996, the Company had approximately $21.8 million in outstanding short-term
debt, of which $20.0 million was owed by IMPSAT Argentina. As a result of the
refinancing of its short-term liabilities with the proceeds of the Offering, the
Company anticipates that its current assets should be sufficient to cover its
remaining current liabilities.
The Company intends to meet its future capital requirements from cash flow
from operations, from additional lines of credit and from future private or
public offerings of equity or debt securities of IMPSAT Corporation and/or any
of its subsidiaries. The Company anticipates that it will require approximately
$45 million of new capital during 1997, of which approximately $25 million would
contemplate refinancing of short-term indebtedness, including under IMPSAT
Argentina's Global Commercial Paper Program, and $20 million would be additional
indebtedness for the Company's subsidiaries outside of Argentina for capital
expenditures and working capital purposes. As of September 30, 1996 IMPSAT
Argentina had outstanding $25.0 million of commercial paper issued under its
$25.0 million Global Commercial Paper Program, with maturities of up to 360 days
and anticipates being able to access the Euro commercial paper market as its
outstanding commercial paper comes due. In the event that the Company were
unable to access such additional financing at commercially reasonable rates or
on commercially reasonable terms, it would be required to defer or cease
additional planned capital expenditures.
The Company anticipates accessing additional lines of credit from financial
institutions in the countries in which it operates. The Company also anticipates
requesting certain lines of credit from certain multilateral financial
institutions and bilateral export credit agencies including CAF, the
Inter-American Investment Corporation ("IIC"), The Export-Import Bank of the
United States and FMO for financing capital purchases. There can be no assurance
that any such financings will be consummated.
The Company's projected capital requirements and capital sources described
in the preceding paragraphs do not take into account the establishment of
operations and development of private telecommunications network systems in
Brazil. As described in "Business -- History," the Company currently is studying
the establishment of operations in Brazil, subject to satisfactory legal and
regulatory conditions. In the event that the Company were to establish
operations in Brazil, the Company's financial plans contemplate that the Company
would need to access additional sources of equity and debt financing for the
adequate build-out of a private telecommunications network system in Brazil. The
Company currently expects that the establishment of operations in Brazil would
be undertaken in connection with a partner or partners and that such partner
would provide a substantial portion of the funds necessary for the initial
establishment of such operations. There can be no assurance that the Company
will be able to access the additional financing required for any future
Brazilian operations or that the Company will reach agreement with any potential
minority partners on an investment in such operations. An affiliate of the
Company, controlled by the Pescarmona group, which is not a subsidiary of IMPSAT
Corporation, recently concluded a contract to provide six Dataplus earth
stations to Shell do Brasil S.A.
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<PAGE> 50
BUSINESS
OVERVIEW
The Company is a leading provider of private telecommunications network
services in Latin America. The Company provides private network integrated data
and voice telecommunications services for national and multinational companies,
financial institutions, governmental agencies and other business customers in
Latin America. The Company believes that it operates one of the largest shared
hub VSAT networks in Latin America. A substantial majority of the Company's
revenues currently are derived from Argentina and Colombia where it began
commercial operations in October 1990 and December 1992, respectively. The
Company is an established provider of such services in Venezuela and Ecuador,
where it began operations in January 1993 and January 1995, respectively, and
recently has commenced commercial operations in Mexico and the United States in
August 1995 and February 1996, respectively. Services are provided through the
Company's advanced telecommunications networks comprised of owned teleports,
earth stations, fiber optic and microwave links, and leased satellite and fiber
optic capacity.
The Company has grown rapidly since the commencement of its operations in
Argentina in 1990. Its customer base has expanded from 125 customers in two
countries as of December 31, 1992 to 656 customers in six countries as of
December 31, 1995. During the same period, total revenues on a combined basis
have grown from $20 million to $106 million, and EBITDA has grown from $7.9
million to $27.5 million. Contracts with customers are generally denominated in,
or tied to the value of, U.S. dollars, with initial terms that range from six
months to five years, but are generally for three years in duration. Contracts
generally may be terminated by customers without penalty.
The Company anticipates continued growth in the demand for private
telecommunications network services in Latin America. Continued deregulation of
the telecommunications market throughout the region should lead to growth in the
telecommunications sector, which is relatively limited as compared with more
developed countries. As the Latin American telecommunications sector matures,
the Company believes that the proportionate share accounted for by data
transmission services will also increase, as it has in more developed countries.
The Company also expects that continuing economic growth in Latin America will
bring greater opportunities for expansion and that economic integration of the
Latin American countries should add to the demand for private network services
in the region.
The Company believes it has significant advantages over its competitors as
a result of its: (i) operating experience as a pioneer in providing shared hub
VSAT services; (ii) ability to provide diverse cost-efficient networking
solutions; (iii) superior marketing skill, knowledge of the customer's needs and
responsiveness; and (iv) position as a market leader and its significant
existing network infrastructure in its markets.
As a result of its strong relationships with a broad base of customers, its
presence in numerous Latin American countries, its existing infrastructure and
experience and the experience and expertise of its principal shareholders, the
Company believes that it will be particularly well-positioned to consider other
opportunities that may arise in the Latin American telecommunications sector.
STRATEGY
The Company's goal is to become the leading provider of private
telecommunications network services in Latin America. The key elements of the
Company's strategy include the following:
Provide Tailor-Made Solutions. The Company distinguishes itself by
providing tailor-made solutions to meet the particular telecommunications needs
of each of its customers. The Company strives to design integrated packages of
data, voice and video transmission services using the various components of its
terrestrial and satellite networks to achieve the most technologically advanced,
efficient and cost-effective solution to each customer's needs. The particular
mix of services provided to each customer is determined by such factors as the
customer's locale, transmission volume and cost requirements.
Deliver Premium Services. The Company provides premium services using
state-of-the-art telecommunications technology that is continually updated and
improved, as well as round-the-clock customer support
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<PAGE> 51
and does not simply provide its customers with the equipment and infrastructure
for a private telecommunications network system. The Company views its
relationships with its customers as a long-term partnership in which customer
satisfaction is critical and believes that private companies, financial
institutions and governmental agencies will increasingly demand high levels of
customer service and responsiveness to satisfy their telecommunications needs
and that providers of private telecommunications networks will be better
situated to meet those needs than will operators of traditional public switched
telephony systems.
Expand Services Sold and Customer Base. The Company plans to increase its
business by taking advantage of demand for additional services from existing
customers, increasing its customer base in each of the countries in which it
operates, in particular to address a broader universe of smaller and
medium-sized business customers and expanding its business in Latin America.
The first prong of this strategy is to continue to sell additional services
to existing clients. The Company's customers often begin by purchasing limited
VSAT services from the Company and then expand the services purchased from the
Company by adding significant numbers of additional VSAT microstations and/or
adding additional services. For examples of such customer histories, see
"-- Customers."
The second prong of this strategy is to expand the number of customers in
each of the countries in which the Company operates, both by selling services to
new large national and multinational corporations, financial institutions and
governmental agencies, as well as by targeting smaller and medium-sized
businesses, as such businesses in Latin America increase their use of computers
and begin to require data transfer services. The Company's customer base has
grown from 125 customers in two countries as of December 31, 1992 to 850
customers in six countries as of September 30, 1996.
The third prong of this strategy is to expand the Company's presence in
Latin American countries in which it currently does not have operations. The
Company is actively considering establishing operations in Brazil. While the
Company currently has no plans to establish operating subsidiaries or extensive
telecommunications networks in countries other than Brazil in which it currently
does not have operations, the Company intends to explore opportunities -- for
example, through joint ventures or other cooperative efforts with local partners
in such countries -- to be able to provide its customers with private network
telecommunications services throughout Latin America.
Utilize a Mix of Technologies and Suppliers. The Company believes that one
of its key strengths is that it does not rely on any particular technology or
equipment supplier except that substantially all of its VSAT microstations and
related technology are supplied by Hughes. While satellite technology
constitutes the Company's principal technology, the Company utilizes a variety
of transmission media in its private telecommunications network services,
including terrestrial fiber optic networks, microwave radio links and undersea
cable capacity. The Company currently obtains its hardware and software from a
number of different suppliers. See "-- Infrastructure -- Equipment" for the
names of some of the Company's suppliers. The Company's lack of dependence on
any single technology, transmission medium or equipment supplier, provides the
Company the flexibility to react quickly and take full advantage of
technological developments and advancements as well as regulatory changes. The
Company believes that the technical sophistication of its equipment and the
reliability and efficiency of its services are critical to maintaining customer
satisfaction.
HISTORY
IMPSAT Corporation was organized in 1994 as a Delaware holding company to
combine the IMPSAT businesses in Argentina, Colombia and Venezuela. The
Company's operations commenced with the provision of VSAT services in Argentina
in 1990 under the name IMPSAT S.A. The Company began operations outside of
Argentina with the establishment of IMPSAT Colombia in 1991 and the
establishment of IMPSAT Venezuela in 1992. IMPSAT Argentina became a 51% owned
subsidiary of IMPSAT Corporation on July 5, 1996. New operating subsidiaries
were created in Ecuador in 1994 and Mexico and the United States in 1995. See
"Summary" for an organizational chart showing the Company's subsidiaries.
50
<PAGE> 52
TECHNOLOGY
General. The Company utilizes satellite, fiber optic cable and microwave
links and employs state-of-the-art technology in its network systems. Satellite
communication links, which constitute the core of the Company's private network
service infrastructure, are complemented and supported by terrestrial microwave
radio and fiber optic cable systems.
The following diagram illustrates a typical network configuration:
CHART INSERTED
Satellites are well-suited for transmissions that must reach many locations
over vast distances simultaneously. Satellites can be accessed from virtually
anywhere within the geographic area they cover. Thus, satellite systems are
ideal for connecting locations that cannot be connected efficiently or
cost-effectively by terrestrial telecommunications networks. In addition, unlike
other transmission systems, the cost of satellite services does not increase
with distance. Satellite communications are therefore particularly appropriate
as a "last-mile" link for customers in Latin America, where access to the
existing public switched networks often is not readily available.
Fiber optic cable networks have significantly higher transmission capacity
and are less susceptible to electronic interference than copper wire networks,
which continue to be used to varying degrees in Latin American countries. The
higher capacity and lower maintenance characteristics of fiber optic cable are
well-suited for relaying the large amounts of digital information traffic found
in high density areas. Ground-based microwave systems disseminate signals in the
form of radio waves from an antenna on top of a building or a transmission tower
and are suitable for use in local transmission because the reach of the
transmission signal typically is limited to one discrete area.
Satellite Technology. The two primary satellite based private network
solutions offered by the Company are: (1) VSAT microstations utilizing Time
Division Multiple Access ("TDMA") technology; and (2) larger satellite antenna
earth stations utilizing SCPC technology.
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<PAGE> 53
The VSAT service permits communications between and among remote locations
and a central location via satellite and a hub earth station known as a
Teleport. The Teleport has a relatively large antenna (typically ranging from
3.8 to 11 meters in diameter) as well as sophisticated radio frequency and
network management equipment. The remote VSAT location has a smaller antenna
(typically ranging from 1.2 to 2.4 meters in diameter) and is designed to
receive and transmit digital information via the satellite to the Teleport using
TDMA. TDMA enables multiple VSATs to share a single satellite channel thus
enhancing the use of satellite capacity. Upon receipt of a VSAT transmission,
the Teleport can amplify and retransmit the information via the satellite to the
rest of the VSAT network with each VSAT decoding only those messages addressed
to it. The Company's VSAT service is integrated into the customer's network
architecture, in part through protocol emulation technology which provides
support for various communications protocols including X.25 and Frame Relay.
Single Channel per Carrier ("SCPC") is an earlier and more established
technology than VSAT. SCPC provides the customer with a dedicated, permanent
channel, whereas communication channels are shared among customers using the
VSAT service. SCPC uses a multiplexer, a device that enables transmissions to be
made either through several channels bundled into one or through a single
channel that can be used by a number of different terminals (such as data,
facsimile or video).
Satellites transmissions utilize both C-band and Ku-band frequencies. The
Company's VSAT and SCPC services are able to take advantage of either C-band or
Ku-band satellite technology.
SERVICES
The Company provides a full range of private network services which are
tailored to meet the individual system requirements of its customers. The
Company's array of service offerings may be combined in different ways to create
a customized package that best suits each customer's private network system
needs. The particular mix of services purchased by each customer depends upon
such factors as the customer's locale, transmission volume and cost
requirements. The Company does not merely provide the equipment and hardware for
private telecommunications networks, but provides telecommunications solutions
which permit its customers to enjoy the advantages of a private network while
freeing the customers from the burdens of purchasing, operating and maintaining
the network. The principal services offered by the Company described below are
identified by their service marks:
- VSAT -- a digital information transmission service which permits
communications between and among many remote locations and a central
location via satellite and a central earth station, known as a
Teleport. Access to satellite channels is allocated among the remote
locations through several TDMA methods, depending on user traffic.
- Dataplus -- an SCPC digital information transmission service designed
for customers that require speedy transmission of large quantities of
information between relatively few fixed locations.
- Teledatos Networks -- microwave and fiber optic cable Metropolitan
Area Networks ("MANs"), which currently exist in twelve major cities
in Argentina, Colombia and Venezuela. Customers are able to transmit
information within the network and also be linked with any other place
in the Company's network by means of combining the Teledatos network
through a Teleport or a Regional Teleport with VSAT, Dataplus or other
services provided by the Company.
- Regional Teleports -- earth stations linking smaller MANs outside a
country's capital to the Teleport in that country via satellite, which
currently exist in ten cities in Argentina, Colombia and Ecuador.
- Difusat -- a unidirectional VSAT broadcast system whereby a signal
received by a Teleport through the Teledatos network is transmitted to
multiple locations.
- Interplus -- an SCPC transmission service which provides international
transmission of data, voice and video. The Company currently provides
Interplus links among eleven countries.
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<PAGE> 54
- Global Fax -- a fax store and forward service which receives facsimile
transmissions from customers, temporarily stores the data and then
retransmits it to designated addressees.
The following table shows the Company's revenue breakdown by service for
the years ended December 31, 1993, 1994 and 1995 and for the nine months ended
September 30, 1996:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------------ SEPTEMBER 30,
SERVICE 1993 1994 1995 1996
-------------------------------- ------- ------- -------- -----------------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
<CAPTION>
<S> <C> <C> <C> <C>
VSAT............................ $22,308 $44,092 $ 52,756 $40,263
Dataplus........................ 11,295 19,161 23,953 22,000
Other (1)....................... 4,092 14,426 28,932 31,130
------- ------- -------- -----------------
Total................. $37,695 $77,679 $105,641 $93,393
======= ======= ======== ==============
</TABLE>
- ---------------
(1) The figure for "Other" include revenues from the Company's Teledatos
network, Regional Teleport, Difusat, Interplus and Global Fax services.
VSAT. The Company's VSAT service permits communications between and among
many remote locations and a central location via satellite and a high-capacity
hub earth station known as a Teleport. Teleports are currently located in Buenos
Aires, Argentina; Bogota, Colombia; Caracas, Venezuela; and Quito, Ecuador. VSAT
was the first private network service provided by the Company and continues to
account for a significant portion of the Company's revenues. Although VSAT
technology is widespread in the United States for private network systems, the
Company is a pioneer in Latin America in the use of a shared hub whereby many
different customers share one central earth station operated by the Company. The
use of a shared hub earth station allows the Company to reduce the cost of
telecommunications services to its customers, which expands the Company's
addressable market, particularly to smaller and medium-sized businesses. The
Company believes that it currently operates one of the largest shared VSAT
network in Latin America measured by the number of microstations installed.
VSAT services are particularly well-suited to customers who need to
communicate bursts of information for relatively short periods of time and who
do not require a permanent, dedicated transmission channel. VSAT has proven to
be a cost-effective alternative to fixed-link data transmission in Latin America
for financial institutions, industrial companies and governmental agencies that
have geographically dispersed locations because the service is reliable and
customers pay a fixed monthly charge rather than a fee based on usage and
distance. A typical VSAT customer would have several VSAT microstations linked
to each other by the Teleport and then linked to terrestrially connected sites
in one or more local Teledatos networks.
VSAT generates the largest share of the Company's revenues from services,
accounting for approximately 49.9% of such revenues during 1995. The Company's
customers often begin by purchasing limited VSAT services from the Company and
then expand the services purchased from the Company by adding significant
numbers of additional VSAT microstations and/or adding additional services. For
examples of such customer histories, see "-- Customers." The Company believes
that its ability to customize its VSAT and/or other services to meet the
specific transmission volume and cost requirements of each of its customers will
permit it to expand its customer base, both by selling services to new large
national and multinational corporations, financial institutions and governmental
agencies, as well as by targeting smaller and medium-sized businesses.
VSAT customers are billed according to the number of VSAT microstations
installed, the number of ports on each VSAT and the rate of the satellite
transmission. As of September 30, 1996, the Company had 3,311 VSAT microstations
installed throughout Latin America.
Dataplus. Dataplus is the brand name for the Company's SCPC service, which
is designed for customers that require speedy point-to-point transmission of
large quantities of information. SCPC offers greater transmission capacity than
do VSATs because SCPC utilizes dedicated satellite links. In addition, a
Dataplus earth station (having a satellite dish larger and more powerful than
that of the VSAT) can communicate via satellite to another SCPC earth station or
to a Teleport where the transmission can be integrated with the Teledatos and
VSAT networks. The Dataplus service is therefore a particularly attractive
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<PAGE> 55
private network option for customers who tend to communicate relatively heavy
flows of information. Many of the Company's Dataplus customers began with the
less expensive VSAT service and then supplemented or replaced VSAT with Dataplus
at their higher volume locations.
Dataplus is the second most significant of the Company's private
telecommunications network service offerings in terms of revenue generation.
Dataplus accounted for approximately 22.7% of the Company's revenues from
services in 1995. The Company's customers typically begin by purchasing limited
VSAT services from the Company and, as their private network needs expand to
require the transmission of larger quantities of data at higher rates, they may
expand the services purchased from the Company by supplementing or replacing
VSAT with Dataplus. For examples of such customer histories, see "-- Customers."
The Company charges its customers for the use of each Dataplus earth
station, for the multiplexer which makes possible the multiple use of an SCPC
earth station, and according to the transmission rate of the SCPC earth station.
At September 30, 1996, the Company had a total of 609 Dataplus earth stations
installed.
Teledatos Networks. Teledatos is the brand name of the Company's MANs
comprised of microwave and fiber optic links among and between points in a
metropolitan area and a nearby Teleport or Regional Teleport. Customers are able
to transmit information within the network and also be linked with any other
place in the Company's network by means of combining the Teledatos network
through a Teleport or a Regional Teleport with VSAT, Dataplus or other services
provided by the Company. While the primary use of the Teledatos networks is for
interconnection with the Company's Teleports and Regional Teleports, the Company
has customers who only use the Teledatos service locally (for example, for air
reservation systems, and between a stock exchange and its members) and who are
not users of the satellite communication system.
The following diagram illustrates the configuration of a typical Teledatos
network:
CHART INSERTED HERE
The Company's first Teledatos network was established in Buenos Aires,
Argentina in 1990. Other Teledatos networks now exist in Cordoba, Mendoza,
Rosario, Mar del Plata, Tucuman and La Plata, Argentina; Bogota, Medellin, Cali
and Barranquilla, Colombia; and Caracas, Venezuela. Each Teledatos network is
composed of two elements: the "backbone," which consists primarily of fiber
optic cable, microwave radio, switching equipment and related infrastructure,
and the "last mile," which includes fiber
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<PAGE> 56
optic cable or microwave radio and equipment, such as modems and drivers that
connect the customer to the backbone. A Teledatos network may consist of leased
capacity on existing fiber optic networks owned and maintained by a local PTO
(as is the case in Bogota) or the Company may design, engineer, own and manage
the installation of its own fiber optic network (as is the case in Buenos
Aires).
Customers pay a monthly fee for each connection to the Teledatos network
and for the number of connections to the Teleport. At December 31, 1995, there
were 2,050 connections in service on the Teledatos networks.
Regional Teleports. Another component of the Company's customized private
network solutions is the Regional Teleport, which is the Company's brand name
for its earth stations which link smaller metropolitan area networks outside a
country's capital via satellite to the Teleport in that country. The Company
extends its networks to the interior of countries in which it operates through
its Regional Teleports. The first Regional Teleport was established in Mendoza,
Argentina in 1991, and the Company now has Regional Teleports in Cordoba,
Rosario, Tucuman, La Plata and Mar del Plata in Argentina; Medellin, Cali and
Barranquilla in Colombia; and Guayaquil in Ecuador. Each Regional Teleport has
an antenna ranging from 3.8 to 4.5 meters in diameter which provides SCPC links
through satellite to other Regional Teleports and to the Teleport in that
country. Customers are connected to a Regional Teleport through one of the
Company's Teledatos networks, or by microwave radio or satellite links.
The customer generally pays a fixed monthly fee for access to the Regional
Teleport. The monthly fee is based on the number of services and connections
provided and varies with the particular specifications of the private network
system designed and developed for the customer.
Difusat. Difusat is the brand name for the Company's unidirectional
Teleport-to-VSAT broadcast service whereby a signal received by a Teleport is
transmitted to multiple locations. A Difusat network typically consists of the
Teleport and numerous receive-only remote VSAT terminals. The source of the
information to be broadcast is generally connected to the Teleport through a
Teledatos network. The Teleport transmits the information to the VSAT receptors
via satellite. The largest Difusat customer is Telam, the Argentine news
service. Other customers include Reuters, Bloomberg L.P. and DHL International.
At December 31, 1995, the Company had installed 451 Difusat microstations.
The customer generally pays a fixed monthly fee for the Difusat service.
The monthly fee is based on the number of Difusat microstations installed, the
number of ports on each microstation and the rate of the satellite transmission.
Interplus. Interplus is the brand name for the Company's international
private line service which utilizes a combination of fiber optic, microwave or
SCPC satellite circuits to provide a dedicated telecommunications link between
customer locations in different countries. The Company currently provides
international integrated data, voice and video transmission services between and
among eleven countries -- Colombia, Venezuela, Bolivia, Peru, Ecuador, Curacao,
Mexico, Chile, Panama, the United States and Italy -- through Interplus. The
Company is prohibited by law from providing Interplus services to or from
Argentina during the term of a monopoly granted to Telintar with respect to
international telecommunications services to or from Argentina, unless the
Company obtains Telintar's consent or unless specifically authorized by the
Argentine Comision Nacional de Telecomunicaciones ("CNT"). Telintar's monopoly
is due to expire in 1997, with a possible extension through the year 2000.
Pursuant to authorization by the CNT, the Company provides an Interplus link for
one customer which, to date, has been the Company's sole Interplus customer in
Argentina.
International private line services such as Interplus are traditionally
provided by local carriers in each country acting as correspondents and
establishing dedicated telecommunications links between their facilities. Due to
its widespread operational presence in Latin America, the Company is often able
to offer its Interplus service using its own facilities and personnel at both
ends of the private line circuit. For example, utilizing the Teleport serving
the country from which a transmission originates, Interplus can provide the
customer with SCPC access via a dedicated satellite transponder to a Teleport in
another country. Information thus received by the destination Teleport can then
be transmitted over the "last mile" using VSAT, Dataplus or Teledatos networks.
This end-to-end control provides the Company with the ability to maintain
customer service and
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<PAGE> 57
quality assurance at both ends of an Interplus link between the countries in
which it operates and allows the Company to realize better margins than when it
uses a correspondent carrier.
Where the regulatory environment in the destination country precludes
direct transmissions across its border, as is currently the case in Argentina,
or where the Company has no operational presence in the destination country, the
Interplus service will involve the Company's proprietary control of only part of
the transmission circuit. In such a case, a transmission between two customer
locations in different countries may be commenced using the Company's facilities
in the originating country and completed through a correspondent local carrier
in the destination country or vice-versa. To date, the Company has signed
Interplus correspondent agreements with carriers in Curacao, Nicaragua, Costa
Rica, Paraquay, Uruguay and Panama. In addition, the Company is currently
negotiating correspondent agreements with carriers in El Salvador, Honduras and
Guatemala, and expects such agreements to be signed in the near future. The
Company is in the early stages of negotiating correspondent agreements with
carriers in Brazil and Bolivia.
The Company charges customers a monthly fee for Interplus which is based on
the capacity of the circuit provided.
New Services. The Company works closely with its suppliers to keep abreast
of new technologies and evaluates its technology requirements to remain among
the most technologically advanced digital information transmission providers in
Latin America. While the Company relies on its suppliers for hardware and
software upgrades, it devotes significant attention to the identification and
commercialization of new services to meet the changing needs of its clients. The
Company currently has a core group of seven engineers dedicated to conducting
research with respect to available technologies and the development and
application of such technologies in the Company's new product developments
efforts. The Company's Frame Relay data transmission capability resulted from
such product development efforts.
In 1994, the Company created a new business unit called Global Fax, which
was charged with identifying and developing new value added products and
services. In March 1995, the Company initiated its fax store and forward service
under the brand name Global Fax in Argentina through its Buenos Aires Teleport,
and began offering the same service in Colombia in April 1996. The Company
receives a customer's facsimile transmission, temporarily stores the
transmission and then transmits it to addressees throughout the world, with
automatic retries in the event initial transmission attempts are not successful.
In Argentina, as of December 31, 1995, the Company had 146 customers for this
service and was handling approximately 70,000 pages per month and as of
September 30, 1996 had 243 customers and was handling approximately 135,000
pages per month. Global Fax customers are billed by the Company at a per minute
rate that varies with the destination of the transmission. The Company also
charges a one-time connection fee for each customer facsimile machine connected
to the Global Fax service, as well as an annual subscription fee of $100.
The Company is actively pursuing plans to become a regional Internet access
provider of dedicated and dial-up connections between Latin America and the
United States Internet backbone. To this end, the Company is pursuing several
avenues, including entering into marketing agreements with local retail service
providers, establishing relationships with Internet service providers in the
United States, and acquiring significant undersea fiber optic cable capacity.
See "-- Infrastructure -- Undersea Fiber Optic Cable Networks." The Company has
already entered into agreements with several retail entities which will market
the Company's Internet access service to their customers, including agreements
with VideoCable Comunicaciones S.A. (VCC), a leading Argentine cable company,
Banco Mayo, a commercial bank and Diario Uno, one of the principal newspapers in
Mendoza, Argentina. The Company intends to offer Internet access services to new
and existing customers, including universities, institutions, governmental
agencies and corporations. Services offered are expected to include access
software, electronic mail, network and worldwide web site implementation and
maintenance.
CUSTOMERS
The Company has grown rapidly since the commencement of its operations in
Argentina in 1990. Its customer base has grown from 125 customers in two
countries as of December 31, 1992 to 656 customers in
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six countries as of December 31, 1995. During the same period, total revenues
have grown from $20 million to $106 million, and EBITDA has grown from $7.9
million to $27.5 million.
Larger entities, which often have significant needs for reliable,
cost-effective data transmissions and other telecommunications services, were
the first to use the private telecommunications network services offered by the
Company. As a result, a significant proportion of the Company's revenues are
derived from the Company's largest customers. In addition, because of the
Company's relatively short operational history outside of Argentina, a
significant number of the Company's customers, including its largest customers,
are located in Argentina. See "Risk Factors -- Dependence on Certain Customers."
An important component of the Company's strategy is to continue to increase
both the depth and breadth of its customer base. In furtherance of the first
goal, the Company seeks to sell additional services to existing customers. In
furtherance of the second goal, the Company attempts to market its services to
an expanded number of potential customers, both additional large national and
multinational corporations, financial institutions and governmental agencies, as
well as medium-sized and smaller business customers, as such businesses in Latin
America increase their use of computers and begin to require data transfer
services.
The Company's largest customers consist of major governmental agencies,
financial institutions and leading national and multinational corporations and
private sector companies, including YPF S.A., Reuters, Banco de Galicia y Buenos
Aires S.A. and Occidental Petroleum. During 1995, the Company's ten largest
customers, each of which is headquartered in Argentina, accounted for
approximately 30% of the Company's revenues. The percentage of revenues
represented by the Company's ten largest customers during 1994 and 1993 was
37.2% and 41.8%, respectively.
The Company's ten largest customers as of December 31, 1995 were: Banco de
la Nacion Argentina (BNA), a state-owned bank and the largest bank in Argentina,
with 525 branches throughout Argentina; Administracion Nacional de la Seguridad
Social (ANSeS), the Argentine Social Security Administration; YPF S.A., which is
engaged in hydrocarbon exploitation and is the largest company in Argentina;
Gendarmeria Nacional Argentina (GNA), the Argentine governmental agency charged
with policing Argentina's borders; ENCOTESA, the Argentine national postal
service; Gobierno de la Provincia de Buenos Aires, an Argentine provincial
government; Direccion General Impositiva (DGI), the Argentine governmental
agency charged with the collection of taxes; Banco de Galicia y Buenos Aires
S.A., a private bank with 170 branches throughout Argentina; BANELCO S.A., a
private company engaged in electronic banking activities, with approximately 510
electronic banking posts in Argentina; and Banco del Sud, a private bank with
approximately 120 branches in Argentina. For a discussion of certain matters
relating to the Company's contracts with BNA and DGI, see "-- Legal Matters."
ENCOTESA, IMPSAT Argentina's fifth largest customer as of December 31,
1995, is experiencing financial and operating difficulties, and the Argentine
legislature is currently debating the means to address ENCOTESA's difficulties,
including the possible privatization of the agency. As of August 31, 1996,
ENCOTESA owed IMPSAT Argentina a total of $3.4 million in respect of accounts
receivable past due in excess of six months. In November 1996, IMPSAT Argentina
filed suit against ENCOTESA for amounts due and arising under IMPSAT Argentina's
contracts with ENCOTESA totalling $5.1 million, plus interest on such amounts.
IMPSAT Argentina is currently discussing with ENCOTESA modifications to the
amount of services being provided under ENCOTESA's contracts with IMPSAT
Argentina, which currently result in monthly invoices of $218,000. As of
September 30, 1996, the Company was providing ENCOTESA with 200 VSATs and 7
Dataplus earthstations, under contracts which are scheduled to expire in August
1997 and 1999, respectively.
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The following table sets forth the Company's customers by country as of the
dates indicated(1):
<TABLE>
<CAPTION>
NUMBER OF CUSTOMERS
AS OF DECEMBER 31,
-------------------- AS OF
COUNTRY 1993 1994 1995 SEPTEMBER 30, 1996
------------------------------------------- ---- ---- ---- ------------------
<S> <C> <C> <C> <C>
Argentina(2)............................... 200 292 319 363
Colombia................................... 58 135 271 373
Venezuela.................................. 4 18 39 71
Ecuador.................................... -- -- 25 33
Mexico..................................... -- -- 2 6
USA........................................ -- -- -- 4
---- ---- ---- ---
Total................................. 262 445 656 850
==== ==== ==== ==============
</TABLE>
- ---------------
(1) Totals presented do not include customers from the Company's new services
such as Internet and Global Fax. See "-- Services -- New Services."
(2) The number of customers for IMPSAT Argentina is presented as of November 30,
1993, 1994 and 1995 and August 31, 1996.
The Company's contracts with its customers are generally denominated in, or
tied to the value of, U.S. dollars and range from six months to five years and
average three years. Contracts generally may be terminated by the customer
without penalty. The customer generally pays a fixed monthly fee based on the
number of services and connections provided and varies with the particular
specifications of the private network system designed and developed for the
customer. See "-- Sales, Marketing and Customer Service." In addition, the
Company charges its customers a one-time fee that is intended to cover the
Company's costs of installing customer premises equipment.
Because of the relatively short period of the Company's operations, a
significant number of the Company's customers have not completed the term of
their initial contracts with the Company. Many of the Company's customers have,
however, expanded the amount and value of the services purchased from the
Company. The Company's customers typically begin by purchasing limited VSAT
services from the Company and then expand the services purchased from the
Company by adding significant numbers of additional VSAT microstations and/or
adding additional services such as Dataplus and Regional Teleport connections.
For example, Molinos Rio de la Plata S.A. ("Molinos"), a major Argentine company
in the food industry, began by purchasing five VSAT microstations for use by its
principal manufacturing plants in electronic mail transmission. Molinos then
expanded the services it purchases from the Company to include file transfer
capabilities for the majority of its facilities, and Dataplus and ancillary
voice transmission services for certain principal facilities. The Company is
currently in the process of implementing a comprehensive integrated private
network system for Molinos to serve its day-to-day commercial and administrative
data transmission needs. Similarly, Banco de Galicia y Buenos Aires S.A.
initially purchased services for 31 VSAT microstations, and currently purchases
services for over 160 VSAT microstations, 50 with voice channels, and eight
Regional Teleports.
By providing private network solutions and superior customer support
service to serve comprehensively the particular needs of each customer, the
Company has been able to maintain ongoing relationships with existing customers,
thus sustaining a base of continuing revenues. The stability of the Company's
revenues is also supported by the nature of the private network services offered
by the Company and the difficulty of obtaining alternate services on short
notice. The Company lost approximately 23 customers in 1995. The principal
reasons for such losses include mergers of existing customers, particularly
among financial institution customers in Argentina; customer bankruptcies or
closings; customer development or purchase of their own private networks; and no
more than three instances of customer dissatisfaction.
The Company's contracts generally provide for payment in U.S. dollars or
for payment in local currency linked to the exchange rate at the time of payment
between the local currency and the U.S. dollar. Notwithstanding such
arrangements, the revenues of the customers of the Company are generally denomi-
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nated in local currencies, and although the Company's customers include some of
the largest and most financially sound companies and financial institutions in
their markets, substantial or continued devaluation in such currencies relative
to the U.S. dollar could have a negative effect on the ability of the customers
to pay the Company for its services. Such currency devaluations could also
result in the Company's customers seeking to renegotiate their contracts with
the Company or, failing satisfactory renegotiation, defaulting on such
contracts. In addition, the imposition of exchange controls in the countries in
which the Company operates could affect the Company's access to, or the exchange
rate for, U.S. dollars. See "Risk Factors -- Currency Fluctuations, Devaluations
and Restrictions."
SALES, MARKETING AND CUSTOMER SERVICE
The Company views its relationship with its customers as a long-term
partnership in which customer satisfaction is of paramount importance. The
Company does not simply provide its customers with the equipment and
infrastructure for a private telecommunications network system, but draws on a
diverse range of technologies to provide customized telecommunications solutions
to each customer.
The Company applies an integrated approach to its sales, marketing and
customer service functions. In 1995 the Company reorganized its sales, marketing
and customer service functions into a total of 34 business units. Each business
unit typically comprises up to 12 persons and includes individuals with
backgrounds in and responsibilities for marketing, operations, engineering,
maintenance, customer service and administration. The business unit concept was
established with the view that each unit would be jointly responsible for all
aspects of a particular customer's or a group of customers' relationship with
the Company and that each customer would be able to call upon any of its
business unit representatives to respond to the customer's service requirements.
Each individual within each business unit is trained in a variety of skills so
that no business unit is dependent upon any one individual to address the
critical and time sensitive needs of its customers.
In the Company's larger operations, including in Argentina and Colombia,
the Company has established several business units, with business units focusing
on a particular type of client. For example, in Argentina, the Company has one
business unit devoted to industrial customers, one business unit devoted to
financial institutions, another devoted to governmental agencies, a business
unit that is devoted to companies with headquarters in the interior of the
country, and a special business unit that was established to service the
particular needs of key customers. Within each segment of the Company's market,
the respective business unit is responsible both for new sales to potential
customers within such segment as well as for the servicing and follow-up of
existing customers. In addition, each customer is assigned an account manager,
who has overall responsibility for relations with that customer. An important
function of the account manager is to identify new or enhanced services that can
be marketed to the existing customer.
As the first step in the Company's marketing process, after an initial
contact has been established between the Company and a potential customer, the
Company evaluates the customer's telecommunications needs. After the Company has
completed its study, the Company creates a plan for the customer which includes
a description of the Company's proposed tailor-made technological solution,
utilizing and combining those components of the Company's private network
services that best serve the customer's particular needs. With respect to the
provision of services to governmental agency customers, such proposals often are
delivered in response to public bid solicitations and related governmental
bidding procedures that govern the contracting of services by governmental
agencies.
Following execution of a contract with a new customer, the Company
commences the detailed technical engineering work required to implement the
private network system tailored to the customer's needs, including fine-tuning
the customer's software applications, and begins to purchase the microstations
and other equipment to construct the network and connect the customer to the
Company's existing facilities and infrastructure. Depending on the complexity of
the package of services and the network to be provided to the customer, the
period between the date a contract is signed and the customer's services are
operating and generating revenue is typically between 45 days and four months.
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Once a customer's system is in operation, the Company provides customer
service to address questions or problems on a 24-hour per day, 365-day per year
basis.
The employees of the Company engaged in the sales and marketing functions
receive a straight salary and do not receive any commissions. In addition to its
salaried business unit personnel, the Company often utilizes the services of
third party sales representatives to assist in generating sales and managing the
contract process between the Company and potential customers. Such third parties
typically receive a commission and royalties from the Company based on the value
of the contract signed. To date the practice of utilizing third party sales
representatives in connection with the generation and servicing of customer
contracts has been employed predominantly in the case of IMPSAT Argentina. With
respect to the other countries in which the Company currently operates,
including Colombia and Venezuela, the Company principally has utilized its own
sales force for the generation and servicing of customer contracts. The Company
anticipates that it will continue to rely on such third party sales
representatives in connection with its operations in Argentina and that it
primarily will use its own salesforce in other countries in which it does
business.
As of November 30, 1995, of IMPSAT Argentina's total customer base of 319,
IMPSAT Argentina had entered into contracts with third party sales
representatives for approximately 20% of its customer contracts, including a
number of its largest contracts. Pursuant to the terms of its contracts with
third party sales representatives, such representatives help to identify and
assist IMPSAT Argentina in negotiating contracts for telecommunications services
with identified customers. Third party sales representatives are generally
retained with respect to a specific customer or group of customers and receive a
fixed monthly fee that is based on the fee received by IMPSAT Argentina from the
customer or customers with respect to whom the consultant is engaged. In the
event that the customer fails to pay IMPSAT Argentina with respect to the
services provided or cancels its contract with IMPSAT Argentina, no further
payment is made to the third party sales representative. Although the financial
terms of IMPSAT Argentina's contracts with the third party sales representatives
vary based on the customers involved and the particular assistance provided by
the representatives, the commissions paid to third party sales representatives
equal approximately 9% of IMPSAT Argentina's total revenues for 1995.
COMPETITION
Although the Company is a leading provider of private telecommunications
network services in Latin America, the markets in which the Company offers its
services are highly competitive. In each country in which it operates or
anticipates operating, the Company has a number of competitors, many of whom
have greater financial resources than the Company. The Company's private
telecommunications services also could face future competition from entities
using or proposing to use new or emerging voice and data transmission services
or technologies which currently are not widely available in Latin America, such
as personal communications services (PCS), digital cellular radio. While the
Company does not foresee significant near-term competition in its existing
markets from such new technologies, there can be no assurance that such
competing technologies will not be successful and, as a result, provide
significant competition that could adversely affect the Company's results of
operations in the longer term. See "Risk Factors -- Technological
Considerations" and "-- Competition."
The Company's competitors fall into three broad categories. The first
category is comprised of the PTOs in each of the countries in which it operates.
The second category of competitors is comprised of other companies, engaged in
essentially the same business as the Company, that operate competing VSAT and
other satellite data transmission businesses, along with other terrestrial
telecommunications links. The third category is comprised of companies that do
not sell data transmission services, but only the equipment for privately owned
networks that are operated and maintained by the customer. In addition,
potential future competitors include certain of the large international long
distance carriers which will be able to enter the local Latin American
telecommunications markets in the coming years as the monopolies granted to the
PTOs expire.
Regarding the first group of competitors, the Company's further expansion
into the integrated private network systems market, along with continued
deregulation of the telecommunications industry in Latin
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America, will bring the Company into direct competition with the PTOs. The
Company believes that by establishing itself in the short-term as a reliable,
high-quality provider of private network systems it will be able to maintain its
current customers and successfully attract new customers. The Company will
consider strategic alliances and other cooperative ventures with the PTOs in the
area of private telecommunications network services to take advantage of each
partner's relative strengths.
With respect to the second category, i.e., current operators in the data
transmission sector of the telecommunications industry, the Company's
competitors, many of whom operate VSAT systems, include international satellite
providers such as COMSAT Corp. ("COMSAT") and local data transmission providers.
Regarding these competitors, the Company believes that it is able to compete
successfully in data transmission by virtue of having a broad array of services
and of providing high-quality, custom-designed services that are tailored to
meet the specific needs of each customer. For a description of the Company's
principal competitors in each of the countries in which the Company operates,
see "-- Description of Country Operations."
The third category of competitors are comprised of companies that do not
sell data transmission services, but merely supply the equipment necessary for a
customer to establish and maintain its own private network. The Company believes
that, with respect to this category of competitors, the Company possesses
significant competitive advantages by providing comprehensive telecommunications
services that offer the benefits of a private network while freeing the
customers from the burdens of operating and maintaining the network.
The principal barriers to entry for prospective providers of private
network services such as those offered by the Company are the development of the
requisite understanding of customer needs, and the technological and commercial
experience and know-how to provide quality services to meet those needs. The
Company believes that its operating experience as a pioneer in providing shared
hub VSAT services, its position as market leader and its significant existing
network infrastructure in its markets, and ability to offer a diversity of
cost-efficient networking solutions, create significant competitive advantages.
While the PTOs and international long distance carriers have in the past
focused on local and long distance telephony services, they may focus on the
private network telecommunications systems segment of the telecommunications
market in the future. Such entities have significantly greater financial and
other resources than the Company, including greater access to financing, and may
be able to subsidize their private network businesses with revenues from public
telephony until public telephony becomes fully competitive. In addition, there
can be no assurance that competing technologies will not become available that
will adversely affect the Company's position, although the Company believes that
it has the flexibility to act quickly to take advantage of any significant
technological development. In any event, the Company believes that increased
competition in the coming years will affect its ability to charge premium prices
as compared to its competitors. There can be no assurance that such greater
competition will not adversely affect the Company's financial condition or
results of operations. See "Risk Factors -- Competition".
REGULATION
The Company is subject to regulation by the national telecommunications
authorities of the countries in which it operates, and its operations require
the procurement of permits and licenses from such authorities. While the Company
believes it has received all authorizations from regulatory authorities that are
required for it to offer its services in the countries in which it currently
operates, the current conditions governing the Company's service offerings may
be altered by future legislation or regulation. Such future legislation or
regulation could favorably or unfavorably affect the Company's business and
operations. The regulatory regime in each of the countries in which the Company
has operations, and the licenses and permits obtained by the Company, are
separately described in the country-specific business descriptions under
"-- Description of Country Operations" below.
EMPLOYEES
As of December 31, 1995, the Company employed a total of 612 persons, of
whom 259 were employed by IMPSAT Argentina and 164 were employed by IMPSAT
Colombia. The number of employees of the
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Company has generally increased and is expected to continue to increase as a
result of the Company's expansion in the countries in which it operates and into
new countries. The Company does not have any long-term employment contracts with
any of its employees, including management, and none of its employees are
members of any union. The Company believes that its relations with its employees
are good.
INFRASTRUCTURE
Satellites. As of September 30, 1996, the Company had a total leased
capacity of 261.58 MHz on six satellites. The Company has satellite leases on
the Intelsat 603, 706 and 709 satellites for 1.28 MHz, 50 MHz and 124 MHz of
capacity, respectively, which are not scheduled to expire before April 1, 2000.
The Company also had leased 23 MHz of capacity on Paracomsat's Nahuel C1
satellite which expires on December 31, 1996. The Company has 62.4 MHz of leased
capacity on PanAmSat's PAS-1 satellite until the end of the useful life of the
satellite (estimated to be December 31, 2001). The Company currently has 0.9 MHz
of capacity (with an option to lease up to 9 MHz of capacity) on Mexico's
Solidaridad-II satellite which expires on February 28, 1998. The Company's total
lease payments for satellite capacity totaled $10.9 million in 1995, and are
expected to increase to approximately $14.2 million in 1996.
Certain amounts of the Company's satellite capacity is leased by ISCH, a
wholly-owned, non-operating Liechtenstein subsidiary of the Company. While each
of the Company's operating subsidiaries other than IMPSAT USA leases satellite
capacity directly, ISCH's principal function is to lease private satellite
capacity from satellite carriers and then sublease such capacity at market rates
to the Company's operating subsidiaries as required by those subsidiaries.
Approximately 17.7% of the Company's total leased satellite capacity at
September 30, 1996 was subleased at market rates to the Company's operating
subsidiaries through ISCH.
In April 1996, IMPSAT Argentina acquired a 0.06% interest in Intelsat for
$1.1 million. As a direct member of Intelsat, IMPSAT Argentina will be able to
lease 7 MHz of satellite capacity on Intelsat 705 directly from Intelsat without
being required to pay a 10% fee with respect to such capacity to the Argentine
Comision Nacional de Telecomunicaciones ("CNT"). Depending upon the availability
of financing, IMPSAT Argentina is considering possible additional investments in
Intelsat that would permit it to access directly up to 36 MHz of capacity on
Intelsat 705.
The Company currently has excess satellite capacity, especially with
respect to IMPSAT Argentina, and does not anticipate a need to increase such
capacity until at least 1998. The Company believes that it will be able to
access necessary satellite capacity at competitive prices, either directly
through agreements with the major satellite carriers or through subleases with
various entities, such as the local PTOs.
Equipment. Since its inception, the Company has placed significant
emphasis on employing technologically advanced equipment. After a period of
study, the Company selected Hughes as its primary supplier of VSAT technology,
including VSAT microstations and related software. The Company entered into a
non-exclusive agreement with Hughes in 1988, pursuant to which Hughes provides
equipment, related software licenses and technical assistance to the Company.
While the terms of the agreement with Hughes permit the Company to resell the
equipment, the software license is nontransferable. The agreement may be
terminated by either party upon 60 days notice. During the past three years, the
Company has purchased a total of $46.2 million in equipment and technical
assistance under this agreement.
With respect to SCPC technology, the Company's current major suppliers are
among the leading companies in the industry, and include EF Data Corporation,
Scientific-Atlanta Inc., SSE Technologies Inc. and Fairchild Data Corporation.
Other equipment suppliers to the Company include General DataComm, Inc. for time
division multiplexers; ACT Networks Inc. for frame relay multiplexers; Digital
Microwave Corporation and California Microwave Corporation for radiolink
systems; and Alcatel Data Networks for packet switches. The Company also employs
local companies in each location where it operates for installation and
groundwork services.
The Company analyzes and studies potential suppliers and equipment with the
goal of obtaining the most technologically advanced equipment on a cost
efficient basis. The Company believes that there are a number
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of potential providers of each of the significant items that are used in the
Company's operations and therefore that the Company is not dependent on any
single source of supply.
Teleports. The Company operates Teleports in Buenos Aires, Argentina;
Bogota, Colombia; Caracas, Venezuela; Quito, Ecuador; and Mexico City, Mexico.
Each of the Company's Teleports serves as the command center for the
Company's VSAT networks in the host country. The Teleports also are linked to
the Company's SCPC installations and Teledatos networks. Each Teleport also
contains a radio microwave tower to transmit and receive transmissions to and
from nearby customer locations which are not connected to the Company's existing
Teledatos networks.
Regional Teleports. In addition to the Teleports described in the
preceding paragraphs, the Company has smaller SCPC-based earth stations called
Regional Teleports in other important cities in the countries in which it
operates. As of December 31, 1995, the Company was operating a total of ten
Regional Teleports in major cities in Argentina, Colombia and Ecuador. See
"-- Services -- Regional Teleports."
Teledatos Networks. The Company has fiber optic and microwave Metropolitan
Area Networks ("MANs") in eleven major cities in which it operates for
connection with the Teleport or Regional Teleport in such cities. Additionally,
the Company manages and operates a fiber optic network covering 186 route miles
in Bogota, Colombia, pursuant to a joint venture with Empresa de
Telecomunicaciones de Santafe de Bogota ("ETB"), the Colombian PTO that provides
local telephone service in the Bogota, Colombia region. The Teledatos networks,
which as of December 31, 1995 were operating in a total of twelve cities and
covered a total of 2,658 square miles, permit efficient connection to the
Company's Teleports and Regional Teleports.
In addition to utilizing the Company's Teledatos networks as conduits to
and from the Company's Teleports, the Company offers its customers the use of
its Teledatos networks for telecommunications transmission solely within the
Teledatos networks.
The Company also operates in Argentina a high capacity digital microwave
circuit that provides voice and data telecommunications links between user sites
in Buenos Aires and Mendoza.
Undersea Fiber Optic Cable Networks. The Company is a member of the
Americas-1 and Columbus-II undersea fiber optic cable consortia, and has
purchased an initial total of 2 Mbps capacity on both systems for use in its
Interplus service. If needed, more capacity may be purchased by the Company in
the future. Americas-1, which commenced commercial operation in December 1994,
is a 4,960 mile fiber optic cable system connecting Vero Beach, Florida in the
United States with the U.S. Virgin Islands, Trinidad, Brazil and Venezuela.
Americas-1 is owned by a consortium of 64 carriers from 42 countries and plans
to extend its links to Curacao and Argentina. Columbus-II, which commenced
service in mid-1994 and is owned by 56 telecommunications administrations in 40
countries, links Mexico, Florida, the U.S. Virgin Islands, Spain, Portugal and
Italy with about 7,440 miles of fiber optic cable.
The Company also expects to be a partner in the Pan American undersea cable
consortium, comprising AT&T and 13 PTOs from Latin America and Spain. The
Company expects to have capacity on the proposed Pan American Cable System
running from the U.S. Virgin Islands in the Caribbean through points in Panama,
Colombia, and the west coast of South America to Chile, which is currently
scheduled for completion in August 1998. The Company will decide the extent of
its participation in the Pan American Cable System after capital costs of the
project have been projected later this year.
LEGAL MATTERS
The Company is involved in or subject to various other litigation and legal
proceedings incidental to the normal conduct of the Company's business,
including with respect to regulatory matters.
According to Argentine press reports during February 1996, the General
Auditor of the Argentine Republic commenced an investigation into the manner in
which Banco de la Nacion Argentina ("BNA"), a state-owned commercial bank which
is IMPSAT Argentina's largest customer, awarded contracts to its service
providers, including IMPSAT Argentina. Such reports stated that the General
Auditor raised concerns regarding the failure by BNA to follow its public
bidding procedures in selecting IMPSAT Argentina to
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provide it with private telecommunications network services. IMPSAT Argentina
has not received any formal or informal notice from the General Auditor, BNA or
any other person concerning such matter and does not believe that such matter
will have an adverse effect on its financial condition or results of operations.
IMPSAT Argentina's current contracts with BNA expire in the first quarter of
1997. IMPSAT Argentina believes that the award of its contract by BNA and its
dealings with BNA have been in full compliance with all applicable legal norms.
In June 1996, as a result of certain controversies regarding a contract
between the Direccion General Impositiva ("DGI"), the Argentine governmental
agency charged with the collection of taxes, and another company, a member of
the Argentine legislature made public statements suggesting that certain other
contracts entered into by DGI, including DGI's contract with IMPSAT Argentina,
be reviewed. IMPSAT Argentina has not received any indication that any review is
being undertaken in respect of its contract with DGI, which is scheduled to
expire in the fourth quarter of 1996. IMPSAT Argentina and DGI have recently
entered into a one-year extension of IMPSAT Argentina's contract with DGI.
IMPSAT Argentina believes that its contract with DGI was awarded in compliance
with applicable law and does not believe that such matter will have an adverse
effect on its financial condition or results of operations.
DESCRIPTION OF COUNTRY OPERATIONS
The following are brief descriptions of certain specific matters relating
to the operations of the Company's subsidiaries in Argentina, Venezuela,
Colombia, Ecuador, Mexico and the United States.
IMPSAT ARGENTINA
BACKGROUND
IMPSAT Argentina, the first of the Company's subsidiaries, was established
in April 1988 and began commercial operations in October 1990. The Company holds
a 51% equity interest in IMPSAT Argentina. Other shareholders of IMPSAT
Argentina are Nevasa, which holds a 29.7% equity interest, STET International,
which holds an 11.5% equity interest, Credit Suisse, which holds a 4.8% equity
interest, and the Inter-American Investment Corporation (the "IIC"), which holds
a 3% equity interest. The IIC is an affiliate of the Inter-American Development
Bank. The IIC recently has agreed to sell its interest in IMPSAT Argentina to
Nevasa. Nevasa and STET International have been having discussions with third
parties concerning the potential sale of their combined 41.2% interest in IMPSAT
Argentina, which so far have been inconclusive. The terms of the Notes would
permit such a sale, subject to certain conditions.
IMPSAT Argentina is a leader in data transmission and VSAT services in
Argentina, and estimates that it had over 70% of the market share in VSAT
services and over 40% of the market share in data transmission services during
1995. Argentina has been the site of the initial introduction of each of the
services provided by the Company, except Interplus.
The Company's principal competitors in Argentina for the provision of
private telecommunications network services include Startel and Comsat
Investments Inc. ("Comsat Argentina"), a wholly-owned subsidiary of COMSAT,
which provides corporate data transmission services, primarily through VSAT and
SCPC technology.
IMPSAT Argentina had 363 customers at August 31, 1996. Financial
institution customers provided approximately 37% of IMPSAT Argentina's revenues
during 1995. The second largest sector of IMPSAT Argentina's customer base
consists of governmental agencies, which represented approximately 15% of its
revenues during 1995. IMPSAT Argentina's largest customers during 1995 included
Banco de la Nacion Argentina, a state-owned bank and the largest bank in
Argentina, with 525 branches throughout Argentina (9.1% of IMPSAT Argentina's
1995 revenues); the Argentine social security administration, which has 136
branch offices (5.7% of IMPSAT Argentina's 1995 revenues); the Argentine
national postal service, with over 5,500 branches, post offices and postal units
throughout the country (3.0% of IMPSAT Argentina's 1995 revenues); and YPF S.A.,
the largest company in Argentina, which is engaged in hydrocarbon exploitation
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(6.0% of IMPSAT Argentina's 1995 revenues). Revenues from IMPSAT Argentina's top
ten customers accounted for approximately 40% of IMPSAT Argentina's revenues
during 1995.
SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER NINE MONTHS ENDED
30, AUGUST 31,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR OPERATING AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Revenues from services......................... $34,672 $63,999 $80,346 $58,352 $62,939
Operating income............................... 12,726 13,886 14,327 11,384 13,611
Net income..................................... 6,805 12,464 4,472 3,722 3,031
EBITDA......................................... 18,296 24,605 30,394 23,083 27,505
Capital expenditures........................... 23,699 70,350 38,248 32,446 16,746
OPERATING DATA:
VSAT microstations installed................... 756 1,462 1,951 1,935 2,042
Dataplus earth stations installed.............. 114 236 355 347 394
Satellites linked.............................. 3 4 4 4 4
Leased satellite capacity (Mhz)................ 31.0 96.0 148.0 148.0 161.0
Teleports...................................... 1 1 1 1 1
Teleport antennas.............................. 8 11 12 12 12
Regional Teleports............................. 5 6 6 6 6
Teledatos Networks............................. 6 7 7 7 7
Customers...................................... 200 292 319 320 363
OTHER DATA:
Per capita GDP................................. $ 7,654 $ 8,239 $ 8,150
relative to U.S. ......................... 30.2% 31.0% 29.7%
Telephony revenue (U.S.$ millions)............. $ 4,147 $ 4,947 --
Per capita telephony revenues.................. 124 146 --
relative to U.S. ......................... 18.9% 21.4% --
Teledensity (lines in service/population x
100)......................................... 12.3 14.1 --
relative to U.S. ......................... 21.3% 23.7% --
Population (in millions)....................... 33.7 34.2 34.7
GDP growth rate (real)......................... 6.0% 7.4% (4.4)%
Inflation rate................................. 7.4% 3.9% 1.6%
</TABLE>
- ---------------
Sources: The WEFA Group -- Latin America Outlook. International
Telecommunication Union -- World Telecommunication Development
International Data and Statistics, 1996.
REGULATION
The supervision and control of the Argentine telecommunications sector is
under the jurisdiction of the CNT and the Secretary of Communications. Prior to
1989, telecommunication services in Argentina were provided by Empresa Nacional
de Telecomunicaciones ("ENTel"), the former state-owned national
telecommunications monopoly. In 1989, the Argentine government enacted a series
of laws to deregulate the telecommunications sector. Under the current regime,
"basic telephone services" are supplied domestically by Telefonica and Telecom
Argentina, pursuant to an exclusive license until 1997, with a possible
extension until 2000 at the option of such companies provided they meet certain
operating targets. International voice and transmission services are supplied by
Telintar, a joint venture between Telecom Argentina and Telefonica, which has an
exclusive license until at least 1997, with a possible extension until 2000 at
the option of Telintar, provided it meets certain requirements. Other services,
such as those rendered by IMPSAT Argentina, are provided on a non-exclusive
basis upon authorization by the CNT.
65
<PAGE> 67
IMPSAT Argentina obtained a permit in 1989 from the Executive Branch of the
Federal Government, which was converted into a license with no expiration date
in 1992, for the provision of data transmission services with ancillary voice
channels within Argentina. The license does not specify what is meant by
"ancillary" voice channels, and no official interpretation has been provided. In
the event that regulations or other administrative guidance defining "ancillary"
voice were to be issued in a manner that caused IMPSAT Argentina to restrict the
use of its networks, the Company could be adversely affected. IMPSAT Argentina's
license is subject to no material conditions and has no expiration date. Under
the terms of the license, IMPSAT Argentina may provide point-to-point voice
service in Argentina only if such voice transmission is accomplished without use
of the local public telephone networks and only in connection with providing a
service channel to its data transmission customers. IMPSAT Argentina is not
permitted under its license to provide data transmission services from Argentina
to points outside Argentina during the term of Telintar's statutory monopoly,
unless Telintar permits IMPSAT Argentina to provide such services or unless
specifically authorized by the CNT.
IMPSAT Argentina provides value added services in the domestic and
international market pursuant to a license granted by the Secretary of
Communications in September 1995 to Teledatos, S.A., a wholly-owned subsidiary
of IMPSAT Argentina. Value added services include such services as electronic
data, voice and fax mail, fax store and forward and Internet access. Argentine
law requires that IMPSAT Argentina use international point-to-point trunk lines
leased from Telintar to provide value added services internationally.
IMPSAT Argentina has obtained licenses with no expiration date for the
provision of trunking and paging services within Argentina, although the Company
currently has no intention of entering into the business of providing trunking
and paging services. IMPSAT Argentina also has licenses with no expiration date
to provide videoconferencing services on a national and international level.
Although certain services are provided on a competitive basis, the CNT is
in charge of the authorization, supervision and control of the
telecommunications services. IMPSAT Argentina is required to pay the CNT a
monthly fee of 0.5% of its net revenues.
FACILITIES
The Company's private telecommunications network services are provided in
Argentina through the Company's fiber optic, microwave and satellite facilities.
The Company's principal transmission facilities in Argentina include the
Teleport in Buenos Aires, Regional Teleports located in Cordoba, Mendoza,
Rosario, Mar del Plata, Tucuman and La Plata, and Teledatos networks in Buenos
Aires, Cordoba, Mendoza, Rosario, Mar del Plata, Tucuman and La Plata, with an
aggregate of approximately 465 miles of fiber. In addition, IMPSAT Argentina
operates a digital microwave circuit that provides voice and data
telecommunications links between user sites in Buenos Aires and Mendoza. As of
August 31, 1996, the Company had installed approximately 2,042 VSAT
microstations and 394 Dataplus earth stations in Argentina. The Company operates
on both the C-band and Ku-band in Argentina with access to the Intelsat 706 and
709 satellites and the PAS-1 and Nahuel C1 satellites.
IMPSAT COLOMBIA
BACKGROUND
IMPSAT Colombia began operations in December 1992. The Company holds a
74.2% equity interest in IMPSAT Colombia, of which 8.9% is held directly and
65.3% held indirectly. Through Colinvertel S.A. ("Colinvertel"), a holding
company in which the Company holds a 71.7% equity interest, which holds a 91%
equity interest in IMPSAT Colombia. Other principal shareholders of Colinvertel
are Suramericana de Seguros and Suramericana de Capitalizacion, the insurance
and finance arms of the Sindicato Antioqueno (Suramericana de Seguros,
Suramericana de Capitalizacion and all other entities affiliated with the
Sindicato Antioqueno being referred to as the "Suramericana Group"), which
together hold a 27% equity interest in Colinvertel. Sindicato Antioqueno, which
was formed in Medellin, Colombia in the mid-1970s, is a group of over 100
financial services, food, textile and apparel, construction and real estate
companies related through
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cross-ownerships and interlocking directorates. Member companies of the
Sindicato Antioqueno include Banco Industrial Colombiano, one of the ten largest
commercial banks in Colombia; Cemento Argos, Colombia's largest cement
manufacturer; and Nacional de Chocolates, one of Colombia's largest food
processing firms. Nevasa, Corporacion IMPSA S.A. ("CORIM"), the holding company
for the Pescarmona family, and Mr. Alexander Rivelis, a director of IMPSAT
Corporation, each hold less than a 1% equity interest in IMPSAT Colombia.
IMPSAT Colombia has experienced significant growth since it began
operations. While the Company's original business plan for IMPSAT Colombia
contemplated the installation of approximately 1,000 VSAT microstations by 1998,
IMPSAT Colombia had approximately 1,015 VSAT microstations installed at
September 30, 1996. The Company estimates that it is the leader in terms of
market share in VSAT services and a leader in terms of the market share in data
transmission services at December 31, 1995.
The Company's principal competitors in Colombia are Telecom Colombia;
Colomsat, S.A., a privately owned provider of facsimile, data and voice
transmission services; Telegan, a provider of VSAT services; and Americatel
Colombia, a joint venture between ENTEL Chile and Grupo Santo Domingo,
Colombia's largest conglomerate, which provides voice, data and video services
primarily to Grupo Santo Domingo.
IMPSAT Colombia had 373 customers at September 30, 1996. Financial
institutions provided approximately 40% of IMPSAT Colombia's revenues for 1995.
The second largest sector of IMPSAT Colombia's customer base is comprised of
industrial companies (including oil companies) which provided approximately 25%
of IMPSAT Colombia's revenues for 1995. IMPSAT Colombia's largest customers
during 1995 included Banco de la Republica, Colombia's central bank; the
Colombian social security administration; Corporacion de Ahorro y Vivienda
(AHORRAMAS), a savings and loan institution; Banco Cafetero; and Banco de
Colombia. Revenues from IMPSAT Colombia's top ten customers accounted for
approximately 35% of IMPSAT Colombia's revenues for 1995.
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<PAGE> 69
SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT FOR OPERATING AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Revenues from services......................... $ 2,777 $12,756 $22,417 $15,068 $25,021
Operating income (loss)........................ (2,794) 2,000 4,858 4,768 9,654
Net income (loss).............................. (970) (80) (135) (1,602) 1,587
EBITDA......................................... (2,038) 3,739 8,748 5,922 11,576
Capital expenditures........................... 6,746 14,220 19,684 17,205 8,990
OPERATING DATA:
VSAT microstations installed................... 175 441 812 723 1,064
Dataplus earth stations installed.............. 13 29 65 57 153
Satellites linked.............................. 1 1 2 2 3
Leased satellite capacity (Mhz)................ 16 23.9 34.4 34.4 55.98
Teleports...................................... 1 1 1 1 1
Teleport antennas.............................. 2 4 7 6 7
Regional Teleports............................. 1 3 3 3 3
Teledatos Networks............................. -- 4 4 4 4
Customers...................................... 58 135 271 188 373
OTHER DATA:
Per capita GDP................................. $ 1,590 $ 1,994 $ 2,257
relative to U.S. ......................... 6.3% 7.5% 8.2%
Telephony revenues (U.S. $ millions)........... -- 935 --
Per capita telephony revenues.................. -- $ 27 --
relative to U.S. ......................... -- 4.0% --
Teledensity (lines in service/population x
100)......................................... 8.2 11.0 --
relative to U.S. ......................... 14.2% 18.5% --
Population (in millions)....................... 34.0 34.5 35.1
GDP growth rate (real)......................... 5.4% 5.5% 5.2%
Inflation rate................................. 22.6% 22.6% 19.5%
</TABLE>
- ---------------
Sources: The WEFA Group -- Latin America Outlook. International
Telecommunication Union -- World Telecommunication Development
International Data and Statistics, 1996.
REGULATION
The telecommunications industry in Colombia is subject to regulation by the
Colombian Ministry of Communications. Since 1992, the Ministry of Communications
has pursued a policy of liberalization, and has encouraged joint ventures
between public and private telecommunications companies to provide new and
improved telecommunications services.
IMPSAT Colombia obtained a license in September 1991 which permits it to
operate national and international digital information transmission services for
twenty years. The license expires in 2011 and may be renewed at that time so
long as IMPSAT Colombia complies with the terms and conditions of the license
and any applicable laws and regulations. The license permits IMPSAT Colombia to
engage in digital voice, data and video transmission services, the provision of
value added services such as fax store and forward and electronic mail and
Internet access services, and authorizes the use by IMPSAT Colombia of radio
frequencies and satellite links in Colombia necessary to provide such services.
IMPSAT Colombia is prohibited by the terms of the license from connecting to the
Colombian public telecommunications network for purposes of reselling voice
communications.
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<PAGE> 70
IMPSAT Colombia is required to pay taxes equal to 5% of its net revenues to
the Ministry of Communications.
FACILITIES
The Company's private telecommunications network services are provided in
Colombia through fiber optic, microwave and satellite networks. The Company's
principal transmission facilities in Colombia include the Teleport and Teledatos
network in Bogota and Regional Teleports and Teledatos networks located in
Medellin, Cali and Barranquilla. The Company's Teledatos network in Bogota is
provided through a joint venture with the Empresa de Telecomunicaciones de
Santafe de Bogota ("ETB"), the Colombian PTO that provides local telephone
service in the Bogota region, under which ETB provides the fiber optic
infrastructure for the network while IMPSAT Colombia controls and monitors the
network, provides technical support and sells network services to customers. As
of September 30, 1996, IMPSAT Colombia had installed approximately 1,064 VSAT
microstations and 153 Dataplus earth stations in Colombia. IMPSAT Colombia
operates on the C-band with access to PAS-1 and the Intelsat 603 and 709
satellites.
IMPSAT VENEZUELA
BACKGROUND
IMPSAT Venezuela began operations in January 1993. The Company holds a 75%
equity interest in IMPSAT Venezuela. The remaining 25% equity interest in IMPSAT
Venezuela is held by Compania Suramericana de Construcciones, a construction
company within the Suramericana Group.
IMPSAT Venezuela had approximately 9% of the market share in VSAT services
and approximately 3.6% of the market share in data transmission services as of
December 31, 1995. The Company's principal competitors in Venezuela are Compania
Anonima Nacional de Telefonos de Venezuela ("CANTV"), the Venezuelan PTO, which
is operated by a consortium led by GTE Corporation; Infosat, C.A., a private
provider of data and video transmission services; MCI, which provides, data
transmission and value-added services in Venezuela; Telcel, one of Venezuela's
two cellular telephone providers and which also offers data transmission and
Internet services; and Bantel, which provides data and voice transmission
services.
IMPSAT Venezuela had 71 customers at September 30, 1996. IMPSAT Venezuela's
largest customers are generally large national and multinational corporations.
IMPSAT Venezuela's largest customers during 1995 included Corporacion Andina de
Fomento, a multilateral development bank; Reuters, an international news service
company; Banco Mercantil, Venezuela's second largest bank; Cigarrera Bigott,
Venezuela's largest cigarette manufacturer; and Compania Occidental de
Hidrocarburos, Inc., a subsidiary of Occidental Petroleum Corp. Revenues from
IMPSAT Venezuela's top ten customers accounted for approximately 79% of IMPSAT
Venezuela's revenues for 1995.
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<PAGE> 71
SELECTED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------ ------
(IN THOUSANDS, EXCEPT FOR OPERATING AND OTHER DATA)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL DATA:
Revenues from services........................ $ 246 $ 910 $ 2,204 $1,524 $3,105
Operating loss................................ (7,592) (2,790) (2,106) (615) (826)
Net loss...................................... (7,455) (2,582) (1,723) (1,717) (1,482)
EBITDA........................................ (7,592) (2,373) (1,675) (1,140) (822)
Capital expenditures.......................... 5,232 1,979 2,941 2,836 1,279
OPERATING DATA:
VSAT microstations installed.................. -- 22 38 34 146
Dataplus earth stations installed............. 2 6 20 20 53
Satellites linked............................. 1 1 2 3 3
Satellite capacity (Mhz)...................... 4.5 8.5 12.7 10.65 31.85
Teleports..................................... -- 1 1 1 1
Teleport antennas............................. -- 1 1 1 7
Teledatos Networks............................ -- 1 1 1 1
Customers..................................... 4 18 39 33 71
OTHER DATA:
Per capita GDP................................ $ 2,850 $ 2,688 $ 3,491
relative to U.S.......................... 11.2% 10.1% 12.7%
Telephony revenues (U.S. $ millions).......... $ 1,147 $ 1,040 --
Per capita telephony revenues................. 55 49 --
relative to U.S. ........................ 8.4% 7.2% --
Teledensity (lines in service/population x
100)........................................ 9.9 10.9 --
relative to U.S.......................... 17.1% 18.3% --
Population (in millions)...................... 20.7 21.2 21.7
GDP growth rate (real)........................ (0.3)% (2.8)% 2.0%
Inflation rate................................ 45.9% 70.8% 56.6%
</TABLE>
- ---------------
Sources: The WEFA Group -- Latin America Outlook. International
Telecommunication Union -- World Telecommunication Development
International Data and Statistics, 1996.
REGULATION
The Venezuelan telecommunications industry is regulated by the Comision
Nacional de Telecomunicaciones ("CONATEL"), which is under the jurisdiction of
the Ministry of Transport and Communications.
IMPSAT Venezuela obtained a license in December 1992, authorizing it to
build, maintain and operate a private telecommunications network for the
transmission of data, voice and video information. The license is valid for a
period of ten years, with an option to renew for an additional ten years. The
license prohibits IMPSAT Venezuela from providing its services through the
public switched telephone networks operated by CANTV and from switching and
sharing infrastructure with other operators of private telecommunications
networks.
A license was also issued to IMPSAT Venezuela in February 1996 for a period
of ten years, with an option to renew for an additional ten years, for the
provision of value added services such as fax store and forward, electronic mail
and Internet access. There are no prohibitions under this license with respect
to IMPSAT Venezuela's ability to switch with CANTV or other private networks in
connection with the provision of value added services.
IMPSAT Venezuela received a 10-year license which permits it to switch with
CANTV for the national and international transmission of data. The license would
not permit it to switch with CANTV in connection with the transmission of voice
until the year 2000. IMPSAT Venezuela is currently negotiating a concession
agreement with CONATEL pursuant to which IMPSAT Venezuela would be entitled to
exercise its rights under the license.
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Under each of the licenses described above, IMPSAT Venezuela is or will be
required to pay taxes and fees equal to 5.5% of its gross revenues from the
services that are provided pursuant to such license.
FACILITIES
The Company's private telecommunications network services are provided in
Venezuela by fiber optic, microwave and satellite networks. The Company's
principal transmission facility in Venezuela is its Teleport in Caracas. The
Company also has a Teledatos network in Caracas. The Company had installed 146
VSAT microstations and 53 Dataplus earth stations in Venezuela as of September
30, 1996. The Company operates on the C-band in Venezuela utilizing the PAS-1
and the Intelsat 603 and 709 satellites.
IMPSAT Venezuela's plans for facilities-based expansion include the
installation of Regional Teleports to increase business in principal cities in
Venezuela, including Barquisimeto, Valencia, Maracaibo and Puerto Ordaz.
Additionally, IMPSAT Venezuela expects to install a second high-capacity antenna
at the Teleport in Caracas.
OPERATIONS IN OTHER COUNTRIES
IMPSAT ECUADOR
Background. The Company holds a 100% equity interest in IMPSAT Ecuador,
which began operations in January 1995. Its operating revenue for 1995 was $0.6
million. IMPSAT Ecuador's net losses for 1994 and 1995 were $0.5 million and
$1.3 million, respectively.
The data transmission market in Ecuador is currently dominated by Empresa
Estatal de Telecomunicaciones del Ecuador ("EMETEL"), the Ecuadoran state-owned
PTO. IMPSAT Ecuador is, however, the leading provider of private
telecommunications network services in Ecuador. The Company's other principal
competitors in Ecuador include Americatel del Ecuador S.A., which provides
national and international SCPC services as well as voice, paging and trunking;
Consorcio Ecuatoriano de Telecomunicaciones S.A., which provides national VSAT
services, national and international SCPC services, and cellular telephony; and
Ram Telecom Telecomunicaciones S.A., which provides international telephone
services and SCPC services between Quito and Guayaquil.
IMPSAT Ecuador had approximately 33 customers as of September 30, 1996.
Banks and financial institutions, provided approximately 56%, and industrial and
commercial companies provided approximately 44%, of IMPSAT Ecuador's revenues
for 1995.
IMPSAT Ecuador's largest customers at December 31, 1995 included Banco del
Pichincha, the third largest Ecuadoran bank; Aduanas, the Ecuadoran customs
agency; and Diners Club del Ecuador and Mastercard del Ecuador, two leading
credit card companies. Revenues from IMPSAT Ecuador's top ten customers
accounted for approximately 95% of its revenues for the fiscal year 1995. The
Company has recently entered into an agreement to provide international
communications services for the regional PTO located in the city of Cuenca.
Regulation. The telecommunications industry in Ecuador is regulated by the
Consejo Nacional de Telecomunicaciones, the Secretaria Nacional de
Telecomunicaciones and the Superintendencia de Telecomunicaciones. Ecuadoran law
provides for the privatization of the telecommunications industry in Ecuador
over a five year period ending in the year 2000.
IMPSAT Ecuador obtained a license in June 1994, which is effective for
fifteen years, to provide data, voice and video transmission services so long as
the provision of such services does not use the installed networks owned by
EMETEL or any other company granted a monopoly for the provision of fixed
telephony services. The license authorizes the installation, operation and
exploitation by IMPSAT Ecuador of a satellite system to offer national and
international information transmission services, including the construction of
two teleports (in Quito and Guayaquil), VSAT microstations and Dataplus earth
stations. IMPSAT Ecuador is required to pay an annual fee equal to 6% of its
revenues in connection with this license.
Facilities. The Company's private telecommunications network services are
provided in Ecuador through fiber optic, microwave and satellite links. The
Company operates on the C-band in Ecuador with
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<PAGE> 73
access to PAS-1 satellite. A Teleport located in Quito, Ecuador was constructed
in September 1995. During the period in which the Quito Teleport was being
constructed, the Company's VSAT microstations in Ecuador utilized the Company's
Caracas, Venezuela Teleport for shared hub services. The Company also operates a
Regional Teleport in Guayaquil, Ecuador.
IMPSAT MEXICO
Background. IMPSAT Mexico began commercial operations in August 1995. The
Company's 99.9% equity interest in IMPSAT Mexico comprises all but one share of
IMPSAT Mexico's outstanding equity. IMPSAT Mexico's revenues for 1995 and for
the nine months ending September 30, 1996 were $12,500 and $137,000,
respectively. IMPSAT Mexico recorded a net loss of $1.2 million in 1995.
Because IMPSAT Mexico only began offering services in August 1995, its
current market share is insignificant. However, the Company believes that its
technical experience, know-how and commitment to customer service will enable it
to increase its revenues and market share.
The Company's principal competitors in Mexico include: Telecomunicaciones
de Mexico ("Telecom Mexico"), the PTO charged with the provision of national
satellite and telegraph services, including satellite transmission services;
Redes Via Satelites S.A. de C.V., which sells telecommunications equipment and
provides equipment maintenance services, and recently began providing
outsourcing services; SERSA/GeoComm, which provides teleport services; Vitacom
de Mexico S.A. de C.V., which sells and manufactures equipment, provides
maintenance and installation services, and recently began to offer teleport
services; Optel Telecommunications, S.A. de C.V., which offers data transmission
services and provides national and international telecommunications services;
and Satelitron, S.A. de C.V., which principally offers national and
international data transmission links.
As of December 31, 1995, IMPSAT Mexico had two customers: Wang de Mexico
S.A. de C.V. and Carvajal S.A. de C.V. Wang is a developer of computer equipment
software. Carvajal, headquartered in Colombia, publishes textbooks and books of
general interest and manufactures school products such as notebooks. Both
customers have entered into three year contracts.
Regulation. The telecommunications industry is regulated primarily by the
Secretaria de Comunicaciones y Transportes ("SCT"). An agency of the SCT,
Telecom Mexico, is charged with the regulation of national satellite and
telegraph services, including satellite transmission services. Telecom Mexico
supervises carriers and allocates electronic frequencies for satellite
communications.
IMPSAT Mexico obtained a permit from the SCT in May 1994, which authorizes
the installation, operation and exploitation by IMPSAT Mexico of a network of
earth stations to provide dedicated-link services, including VSAT services, for
the transmission of voice, data and videoconferencing signals. The permit
provides that such services must use Mexican satellites or those designated or
approved by the Mexican government. IMPSAT Mexico's permit imposes no
restrictions on IMPSAT Mexico's ability to carry voice or interconnect with the
public switched system. Interconnection of IMPSAT Mexico's network to networks
in other countries requires the approval of the SCT. IMPSAT Mexico operates its
network under the permit through a Teleport located in Mexico City which is
equipped with one high-capacity antenna capable of Ku-Band transmissions. The
Teleport, construction of which was completed at the end of November 1996, is
capable of providing dedicated-link and private network services using
satellites for the transmission of voice, data and video signals. While IMPSAT
Mexico's permit is valid for a period of fifteen years, its terms and conditions
may be revised for a nominal fee after the first five years if the SCT believes
such changes to be in the public interest. IMPSAT Mexico has the right to renew
the permit for an additional fifteen years if it has complied with the
provisions of the permit and agrees to accept any new conditions that may be
imposed by the SCT.
IMPSAT Mexico is required to pay 5% of its telecommunications income to the
Mexican government. In addition, IMPSAT Mexico is required to pay to the
government certain fees for having its signals transmitted and received by
satellite, and nominal fees for the installation of new earth stations.
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<PAGE> 74
On June 7, 1995, the Mexican government promulgated a law which restricts
foreign investment in concession holders to no more than a 49% interest. The
Company has been advised by local Mexican counsel that this restriction does not
apply to IMPSAT Mexico because IMPSAT Mexico provides its services pursuant to a
permit, and does not hold a concession. In addition, the law does not apply to
concessions granted prior to its enactment.
Facilities. The Company operates on the C-band in Mexico with access to
PAS-1, which has been approved by the SCT, and to Solidaridad-II, a Mexican
satellite.
IMPSAT USA
Background. IMPSAT USA began offering Interplus services between Latin
America and North America in February 1996. The Company holds a 100% equity
interest in IMPSAT USA. IMPSAT USA had no operating revenue for 1995, and
operating expenses of $0.3 million. IMPSAT USA had revenues of $157,000 and
operating expenses of $855,000 during the first nine months of 1996.
IMPSAT USA expects intense competition in the market for international
private line network services between the United States and Latin America. Such
competition is expected to come primarily from the "Big Four" long-distance
carriers (AT&T, MCI, Sprint and Worldcom) in conjunction with Latin American
PTOs, as well as from alternative regional carriers. The Company believes that
IMPSAT USA is positioned to compete effectively by offering better end-to-end
customer service and quality assurance in Latin America through its regional
knowledge and in-country contacts using IMPSAT sister companies.
IMPSAT USA's target customer base can be divided into two distinct
segments: retail and wholesale. The retail segment consists of multinational
corporations with extensive voice and data communications needs, which are the
primary end-users in the United States/Latin American market for international
private-line services. IMPSAT USA's wholesale marketing campaign as presently
envisioned targets the Competitive Access Providers (CAPs) which have already
penetrated the corporate private line markets in major metropolitan areas
throughout the United States. Utilizing a teleport located in south Florida that
is leased from PanAmSat, IMPSAT USA currently provides Interplus service to four
customers. Intermedia Communications of Florida Inc., one of the largest CAPs in
the United States, has an Interplus link between Florida and its customer's
location in Medellin, Colombia. UBESA, the Ecuadoran subsidiary of Dole Fresh
Fruit International Ltd., and Business Technology Services, Inc., a call back
services provider based in Miami, Florida, each have Interplus links between
Florida and their locations in Ecuador. On June 2, 1996 IMPSAT USA signed a
five-year agreement to provide the U.S. multinational paper company,
Kimberly-Clark Corporation, with an Interplus link to Tocancipa, Colombia.
Regulation. The Federal Communications Commission ("FCC") exercises
exclusive U.S. jurisdiction over all facilities and services of communications
carriers to the extent that such facilities and services are used for interstate
or international communications. IMPSAT USA received an authorization from the
FCC in September 1995 to provide facilities-based telecommunications services,
including switched voice and data and private line services, between the United
States and various international points using certain international satellite
facilities. In connection with these services, IMPSAT USA also is authorized to
lease and operate any necessary U.S. connecting facilities. On July 1, 1996,
IMPSAT USA was granted a six-month Special Temporary Authorization to resell
telecommunications services of other international carriers between the United
States and various international points. IMPSAT USA and its customers may not,
however, connect private lines provided over its facilities to the public
switched network at either the United States or foreign end unless authorized to
do so by the FCC.
Facilities. IMPSAT USA has adopted an outsourcing strategy for its
Teleport facilities. IMPSAT USA intends to establish its point-of-presence in
leased facilities and intends to purchase switching hardware and software from
General Datacom and Cascade Communications Corporation.
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<PAGE> 75
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The Certificates of Incorporation of IMPSAT Corporation and IMPSAT
Argentina, respectively, provide for an eight-member Board of Directors. The
directors of the Company and the Guarantor, respectively, will hold office until
the next annual meeting of their respective stockholders and until successors of
such directors have been elected and qualified, or until their earlier death,
resignation or removal.
The President of IMPSAT Corporation is elected at the annual meeting of
stockholders. The other officers are elected at the annual meetings of the Board
of Directors. All officers hold office until their successors are elected and
qualified, or until their earlier death, resignation or removal. The Chairman of
the Board of Directors of IMPSAT Argentina is elected at the regular annual
meeting of the Board of Directors. Officers of IMPSAT Argentina are appointed by
its Board of Directors.
Set forth below are the names, ages and positions of directors and
executive officers of the Company and the Guarantor as of September 30, 1996.
The officers designated as Vice Presidents of the Company are employees of
Resis, a wholly-owned subsidiary of the Company, which provides services to the
Company pursuant to a management services agreement with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- -------------------------------------------------
<S> <C> <C>
DIRECTORS
- ----------------------------------------
Enrique M. Pescarmona................... 54 Chairman of the Board; Director of IMPSAT
Argentina
</TABLE>
<TABLE>
<S> <C> <C>
Ricardo A. Verdaguer.................... 46 President and Chief Executive Officer;
Chairman of the Board of Directors of IMPSAT
Argentina
Roberto Vivo............................ 43 Director, Deputy Chief Executive Officer and Vice
President, Marketing; Director of IMPSAT
Argentina
Alexander Rivelis....................... 56 Director and Vice President, International
Development
Lucas Pescarmona........................ 26 Director
Sofia Pescarmona........................ 23 Director
Renato De Rimini........................ 45 Director
Girolamo Di Genova...................... 57 Director
EXECUTIVE OFFICERS
- ----------------------------------------
Hector Alonso........................... 39 Chief Operating Officer
Guillermo Jofre......................... 41 Vice President, Finance
Guillermo V. Pardo...................... 46 Vice President, Planning
Jose R. Torres.......................... 38 Vice President, Administration, Chief Accounting
Officer; Director of IMPSAT Argentina
Luca Minzolini.......................... 35 Vice President, Control Management
Norberto Daniel Musante................. 39 Vice President, Operations
Giulio Masserano........................ 43 Vice President, New Business
Alejandro Suarez del Cerro.............. 42 Vice President, Technology
Rafael Carchak Canes.................... 47 President and Director of IMPSAT Argentina
Claudio Albanese........................ 49 Director of IMPSAT Argentina
Archimede Del Vecchio................... 55 Director of IMPSAT Argentina
Pedro O. Mayol.......................... 57 Director of IMPSAT Argentina
Jorge Marine............................ 34 Manager, Administrator of IMPSAT Argentina
Maria Zavalski.......................... 31 Manager, Marketing of IMPSAT Argentina
Horacio Sajoux.......................... 44 President of IMPSAT Colombia
</TABLE>
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<PAGE> 76
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- -------------------------------------------------
<S> <C> <C>
Susana Gregori.......................... 39 Chairman of the Board of Directors and President
of IMPSAT Venezuela
Diego N. Rausei......................... 46 President of IMPSAT Mexico
Mariano Torre Gomez..................... 45 President of IMPSAT Ecuador
Richard Horner.......................... 45 President of IMPSAT USA
Federico Saurina........................ 45 President of Teledatos S.A., a wholly-owned
subsidiary of IMPSAT Argentina
</TABLE>
BIOGRAPHIES OF DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to the business experience and the affiliations of
the directors and executive officers of the Company is set forth below.
Enrique M. Pescarmona has been Chairman of the Board of Directors of IMPSAT
Corporation since September 1994 and a member of the Board of Directors of
IMPSAT Argentina since March 1994. Mr. Pescarmona is also Chairman of CORIM and
Industrias Metalurgicas Pescarmona S.A.I.C. y F. ("IMPSA"). He is a director of
Lagarde, S.A. (a wine company), Ingenieria y Computacion S.A. ("ICSA") (a
manufacturer of electronic components), La Mercantil Andina S.A. (an insurance
company), Puerto Seco S.A. (a manufacturer of automobile parts), Buenos Aires al
Pacifico San Martin S.A. and Ferrocarriles Mesopotomico General Urquiza S.A.
(Argentine railway companies); and is Vice President of Henri Lagarde S.A. (an
agribusiness). Mr. Pescarmona is an electromechanical engineer with a master's
degree in economics and business administration from the University of Navarra
in Spain.
Ricardo A. Verdaguer has been President, Chief Executive Officer and a
member of the Board of Directors of IMPSAT Corporation since September 1994. Mr.
Verdaguer also has served as President of IMPSAT Argentina since April 1988
until February 1990 and has served as Chairman of the Board of Directors of
IMPSAT Argentina since 1990. Mr. Verdaguer served in a number of management
positions with IMPSA from 1976 to 1988, including as Manager of the Contracts
and Construction Department and Manager of the Commercial Department. Mr.
Verdaguer holds a degree in electromechanical engineering from Ingenieria de la
Universidad Juan Agustin Maza, Mendoza.
Roberto Vivo has been Deputy Chief Executive Officer, Vice President,
Marketing and a member of the Board of Directors of IMPSAT Corporation since
September 1994. Mr. Vivo has also served as Marketing Director of IMPSAT
Argentina from April 1988 to December 1994 and as a member of the Board of
Directors of IMPSAT Argentina since 1988 to the present. Mr. Vivo also serves as
Chairman of the Board of Directors of FAICSA, an Argentina company engaged in
public construction projects. Mr. Vivo holds a degree in business administration
from Universidad Argentina de la Empresa.
Alexander Rivelis has been Vice President of International Development and
a member of the Board of Directors of IMPSAT Corporation since December 1994.
Mr. Rivelis also serves as a member of the Board of Directors of IMPSAT USA. Mr.
Rivelis served as President of IMPSAT USA from 1995 to March 1996, President of
IMPSAT Colombia from 1991 to 1993, and has held a variety of managerial
positions with companies in the Pescarmona group from 1978 through 1990. Mr.
Rivelis holds a degree in electrical and mechanical engineering from the
University of Rosario, Argentina.
Lucas Enrique Pescarmona, the son of Enrique M. Pescarmona, has been a
member of the Board of Directors of IMPSAT Corporation since February 1996. From
1993 to 1995 he held positions in the Buenos Aires, Argentina office of Arthur
Andersen & Co. In 1995 he transferred to Tecnologica em Componentes Automotivas
Ltda., a Brazilian manufacturer of automotive parts that is part of the
Pescarmona group, as senior investment analyst in Brasil. Mr. Pescarmona is also
a member of the Board of Directors of Puerto Seco S.A., a company within the
Pescarmona group. Mr. Pescarmona holds degrees in Economics and Political
Science from the University of Pittsburgh and is currently completing a master
of business administration degree at SDA Bocconi in Milan.
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<PAGE> 77
Sofia Pescarmona, the daughter of Enrique M. Pescarmona, has been a member
of the Board of Directors of IMPSAT Corporation since February 1996. Ms.
Pescarmona has worked in the marketing area of IMPSAT Corporation since January
1995. Prior to this, since August 1994, Ms. Pescarmona worked as an accounts
assistant in the sales department of IMPSAT Argentina. Ms. Pescarmona holds a
degree in International Relations from Tufts University.
Renato De Rimini has been a member of the Board of Directors of IMPSAT
Corporation since December 1994. Mr. De Rimini previously held senior positions
with Telecom Italia with responsibility for the Latin America region and has
been in charge of business acquisition projects for STET International in Latin
America and in particular in Bolivia, Chile, Brazil and Argentina. Mr. De Rimini
currently holds the position of Director, Business Operations, with STET
International. Mr. De Rimini is a member of the Board of Directors of Entel
Bolivia, Intelcom San Marino and RTH Holland. Mr. De Rimini holds a degree in
telecommunications engineering.
Girolamo Di Genova has been a member of the Board of Directors of IMPSAT
Corporation since February 1996. Mr. Di Genova joined SIP, now Telecom Italia,
in 1967 and has since held several positions in the company, the latest of which
are: Regional Director in Venice (1986-89); Head of the Strategic Planning
(1989-91); Head of the Information Technologies (1991-92) and since January 1993
Head of the Business Division of Telecom Italia. He is a member of the boards of
various companies of the IRI-STET Group, and he was a member of the Technical
Superior Council of Parti e Telegrafi, an Italian PTO. Mr. Di Genova holds a
degree in electronic engineering and has completed postgraduate studies in
telecommunications at the Balileo Ferraris Institute, Turin, Italy.
Hector Alonso has been Chief Operating Officer of IMPSAT Corporation
beginning in September 1996 and was President of IMPSAT Colombia from September
1993 to August 1996. Prior to joining IMPSAT Colombia, Mr. Alonso had 14 years
of experience in a variety of senior management positions with companies in the
Pescarmona group. Mr. Alonso is a member of the Asociacion Nacional de Industria
of Colombia. Mr. Alonso holds a degree in industrial engineering from
Universidad Argentina de la Empresa.
Guillermo Jofre has been Vice President, Finance of IMPSAT Corporation
since May 1995. Prior to joining the Company, Mr. Jofre was Executive Vice
President of Banque Indosuez in Argentina from 1993 to 1995, and has had
approximately ten years of experience in management positions with companies in
Argentina, Germany and Switzerland. Presently, Mr. Jofre also serves as a member
of the Board of Directors of the investment fund Bemberg Inversiones S.A. Mr.
Jofre holds a degree in public accounting from University of Cordoba and an MBA
from Imede of Switzerland.
Guillermo V. Pardo has been Vice President, Planning of IMPSAT Corporation
since January 1995. Mr. Pardo was previously Managing Director of the Guido Di
Tella companies and has had over 20 years of experience in finance positions in
a number of companies in Argentina and Spain. Mr. Pardo is currently a member of
the Board of Directors of IMPSAT Argentina, FAICSA and the Fundacion Torcuato Di
Tella. Mr. Pardo holds a degree in business administration from Universidad de
Buenos Aires.
Jose R. Torres has been Vice President, Administration and Chief Accounting
Officer of IMPSAT Corporation since January 1995 and a Director of IMPSAT
Argentina since 1990. Mr. Torres served as external auditor of the Mendoza Stock
Exchange from 1982 to 1983. Mr. Torres previously worked as assistant finance
manager of IMPSA and as finance manager of IMPSAT Argentina until December 1994.
Mr. Torres holds a degree in public accounting from Universidad Nacional de
Cuyo.
Luca Minzolini has been Vice President, Control Management of IMPSAT
Corporation since December 1995. Prior to joining the Company, Mr. Minzolini had
10 years of experience in various management positions with the ENI Group,
including as Control Manager of Enichem Elastomers America Inc. from 1992 to
1995. Mr. Minzolini holds a degree in Business Administration from the
University of Rome, Italy and is a public accountant.
Norberto Musante has been Vice President, Operations of IMPSAT Corporation
since January 1995. Mr. Musante has held a number of management positions in the
Operations area of IMPSAT Argentina from 1990 to 1995. From 1980 to 1990, Mr.
Musante was Chief of the Logistic Department of Sisteval S.A., a
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<PAGE> 78
company engaged in the maintenance of radar systems and naval communications.
Mr. Musante holds a degree in electrical engineering from Universidad
Tecnologica Nacional.
Giulio Masserano has been Vice President, New Business of IMPSAT
Corporation since January 1995. Previously, Mr. Masserano has served as
Marketing Manager for IMPSAT Argentina from 1993 to 1994. Prior to joining the
Company, Mr. Masserano served in a number of management positions with STET and
its affiliates since 1985, including project leader for regulated and value
added services, and marketing expert for international projects related to
satellite activities. Mr. Masserano holds a degree in electronic engineering
from Universidad la Sapienza, Rome, Italy.
Alejandro Suarez del Cerro has been Vice President, Technology of IMPSAT
Corporation since January 1995. Previously, Mr. Suarez del Cerro has held a
number of management positions with IMPSAT Argentina, including the positions of
Technical Project Leader from 1988 to 1990, Technical Manager from 1990 to 1991
and Development Manager from 1991 to 1994. Mr. Suarez del Cerro holds a degree
in electronic engineering from Universidad de Buenos Aires.
Rafael Carchak Canes has been President and a Director of IMPSAT Argentina
since May 1995. Prior to joining the Company, Mr. Carchak served in a variety of
management positions with Eveready over a 15 year period, including Operations
Manager of Eveready Argentina from 1990 to 1992, and as President of Eveready
Argentina from 1992, in which position Mr. Carchak had responsibility for
Eveready's operations in Argentina, Paraguay and Chile. Mr. Carchak holds a
degree in engineering from Universidad Nacional de Buenos Aires.
Claudio Albanese has been a member of the Board of Directors of IMPSAT
Argentina since March 1996. Prior to joining IMPSAT Argentina, he held executive
positions with ITALCABLE-Servizi Cablegrafici Radiotelegrafici e Radioelettrici
S.p.A. ("ITALCABLE"), Telecom Italia S.p.A., Telemedia International, Inc.
(TMI), Ericsson Telecommunicazioni, Italy, Sirti S.p.A. and Mitel Corp. More
recently, he was appointed Managing Director of British Telecom, Italy and
Syncordia Italy. Mr. Albanese holds a degree in electronics.
Archimede Del Vecchio has been a member of the Board of Directors of IMPSAT
Argentina since March 1995. Mr. Del Vecchio, an engineer, previously held
executive positions with ITALCABLE and Telemedia International, Inc. (TMI). He
is presently International Manager with Telecom Italia S.p.A.
Pedro 0. Mayol has been a member of the Board of Directors of IMPSAT
Argentina since 1990. He also serves as a member of the Board of Directors of
several other Argentine corporations, including Lagarde S.A., ICSA, Puerto Seco
S.A., La Mercantil Andina S.A., CORIM and IMPSA. Mr. Mayol, who is a brother-in-
law of Enrique Pescarmona, is an architect.
Jorge Marine joined the Company as Manager, Administration in June 1995.
Previously, Mr. Marine was employed as a Manager, Administration and Finance by
BNL Inversiones, a company within the Banca Nazionale del Lavoro group. Mr.
Marine is a public accountant.
Maria Zavalski joined IMPSAT Argentina as Marketing Manager in April 1994.
Prior to joining IMPSAT Argentina she was employed by IBM Argentina as an
accounts executive in the marketing division. Ms. Zavalski holds a degree in
business administration.
Horacio Sajoux has been President of IMPSAT Colombia since September 1996.
Previously, Mr. Sajoux held several management positions with IMPSAT Colombia,
including General Director of Teledatos S.A., the joint venture entity formed by
IMPSAT Colombia and ETB; Vice President, Commercial and Technology; and
Commercial Manager and Director of Technology. Prior to joining IMPSAT Colombia
in 1992, Mr. Sajoux was employed in a number of management positions at IMPSAT
Argentina beginning in 1989. Mr. Sajoux received a degree in Electromechanical
Engineering from Universidad Nacional de Buenos Aires.
Susana Gregori has been President of IMPSAT Venezuela since September 1996
and before that from 1993 to November 1995. Ms. Gregori has also been Chairman
of the Board of Directors of IMPSAT
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<PAGE> 79
Venezuela since November 1995. Ms. Gregori holds a degree in industrial
engineering from Universidad Nacional de Cuyo.
Diego Nicasio Rausei has been President of IMPSAT Mexico since September
1994. Starting in 1980, Mr. Rausei has previously held various senior management
positions with companies of the Pescarmona group. Mr. Rausei holds a degree in
chemical engineering from Universidad del Litoral.
Mariano Torre Gomez has been President of IMPSAT Ecuador since June 1994.
Mr. Torre has served in a variety of positions involving engineering,
production, planning, business development and new markets for companies in the
Pescarmona group over a period of 17 years. Mr. Torre served four years at
IMPSAT Argentina in the Commercial and New Licenses Departments. Mr. Torre holds
a degree in engineering from Universidad Tecnologica Nacional.
Richard Horner has been President of IMPSAT USA since July 1995. Prior to
joining IMPSAT USA, Mr. Horner was South American Sales Manger for
Scientific-Atlanta Network Systems Group from 1991 to 1995, where he was
responsible for commercialization of satellite-based network products to both
PTOs and emerging private sector carriers. Mr. Horner holds a degree in
electrical engineering from University of Kansas and a degree in Latin American
studies from the University of Texas.
Federico Saurina has been President of Teledatos, S.A., a wholly-owned
subsidiary of IMPSAT Argentina responsible for the Global Fax business since
1994. Mr. Saurina served as Manager of Regional Teleports of IMPSAT Argentina
from 1991 to 1994, and as Purchasing Manager of Cielos del Sur-Austral Lineas
Aereas from 1989 to 1991. Mr. Saurina holds a degree in electromechanical
engineering from Universidad J.A. Maza, Mendoza.
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<PAGE> 80
EXECUTIVE COMPENSATION
The following tables set forth the compensation paid or accrued to the
chief executive officer and the four other most highly compensated executive
officers receiving over $100,000 per year for services rendered of each of the
Company and the Guarantor during fiscal year 1995. No bonuses were paid by the
Company or the Guarantor to such executive officers during fiscal year 1995. The
Company and the Guarantor do not maintain any long-term incentive plans and do
not grant stock appreciation rights, stock options or restricted stock awards.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
- --------------------------------------------------------- ---- -------- ----- ------------
<S> <C> <C> <C> <C>
THE COMPANY
Ricardo A. Verdaguer..................................... 1995 $199,792 $-- $--
President and
Chief Executive Officer
Enrique M. Pescarmona.................................... 1995 $287,569 $-- $--
Chairman of the Board
Roberto Vivo............................................. 1995 $172,726 $-- $--
Director, Deputy Chief
Executive Officer and
Vice President, Marketing
Jose R. Torres........................................... 1995 $145,240 $-- $--
Vice President, Administration
Chief Accounting Officer
Alejandro Suarez del Cerro............................... 1995 $144,460 $-- $--
Vice President, Technology
THE GUARANTOR
Rafael Carchak Canes..................................... 1995 $128,700 $-- $--
President and
Chief Executive Officer
Daniel Horquescos(1)..................................... 1995 $123,077 $-- $--
</TABLE>
- ---------------
(1) In May 1995 Mr. Daniel Horquescos was replaced by Mr. Rafael Carchak Canes
as President and Chief Executive Officer of the Guarantor.
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<PAGE> 81
PRINCIPAL STOCKHOLDERS
The following table and the accompanying notes set forth certain
information concerning the beneficial ownership of IMPSAT Corporation's and
IMPSAT Argentina's common stock as of November 1, 1996 by (i) each person who
owned of record, or was known to own beneficially, more than five percent of
IMPSAT Corporation's Common Stock, (ii) each director, (iii) each executive
officer and (iv) all directors and executive officers as a group. Except as
otherwise indicated, each person listed in the table has informed the Company
that such person has (i) sole voting and investment power with respect to such
person's shares of Common Stock and (ii) record and beneficial ownership with
respect to such person's shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- --------------------------------------------------------------------- ---------- -------
<S> <C> <C>
IMPSAT Corporation
- ---------------------------------------------------------------------
Beneficial Owners of more than 5%
Nevasa Holdings Ltd.(1).............................................. 58,312,980 75.0%
17 Dame Street
Dublin 2, Ireland
STET International Netherlands NV(2)................................. 19,437,660 25.0%
6-8 Hoeckenrode
Amsterdam, The Netherlands
Directors and Executive Officers(1).................................. 0 0%
All Directors and Executive Officers as a Group (26 persons)(1)...... 0 0%
IMPSAT Argentina
- ---------------------------------------------------------------------
Beneficial Owners of more than 5%
Invertel S.A.(3)..................................................... 2,613 51.0%
Viamonte 1526
Buenos Aires, Argentina
Nevasa Holdings Ltd.(1).............................................. 1,519 29.7%
17 Dame Street
Dublin 2, Ireland
STET International Netherlands NV(2)................................. 590 11.5%
6-8 Hoeckenrode
Amsterdam, The Netherlands
Directors and Executive Officers(1).................................. 0 0%
All Directors and Executive Officers as a Group (10 persons)(1)...... 0 0%
</TABLE>
- ------------------
(1) Nevasa Holdings Ltd. ("Nevasa") is controlled by CORIM, Militello Ltd. and
Rotling International Corporation. CORIM, an Argentine corporation that
holds an 82.54% equity interest in Nevasa, is controlled by Mr. Enrique
Pescarmona, Chairman of the Board of Directors of IMPSAT Corporation, and
other members of the Pescarmona family and is a holding company for
businesses engaged in a variety of activities including property, casualty
and other insurance, heavy-steel capital goods, manufacturing auto parts,
cargo transportation and environmental services. Militello Ltd., a British
Virgin Islands corporation, holds an 11.62% equity interest in Nevasa and
is itself controlled by Mr. Roberto Vivo, Deputy Chief Executive Officer of
IMPSAT Corporation. Rotling International Corporation, a British Virgin
Islands corporation, holds a 5.84% equity interest in Nevasa and is itself
controlled by Mr. Ricardo Verdaguer, President and Chief Executive Officer
of IMPSAT Corporation.
(2) STET International Netherlands NV ("STET International") is a wholly-owned
subsidiary of STET International SpA. STET International SpA is in turn
held 51% by STET SpA ("STET"), 37% by
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<PAGE> 82
Telecom Italia and 12% by Telecom Italia Mobile, each of which are
controlled by IRI-Instituto per la Ricostruzione Industriale SpA.
(3) The Company holds a 99.9% equity interest in Invertel S.A.
The shareholders of IMPSAT Corporation and IMPSAT Argentina have entered
into shareholders agreements relating to the joint management of IMPSAT
Corporation and IMPSAT Argentina. The shareholders agreements provide STET with
veto rights with respect to certain significant corporate actions and provides
STET with the right of first refusal with respect to sales of IMPSAT Argentina's
capital stock.
STET RELATIONSHIP
In 1990 the STET group invested $10 million for 25% of IMPSAT Argentina;
and in 1994 STET International paid a total of $65.9 million for 25% of IMPSAT
Corporation (without IMPSAT Argentina). STET group employees are seconded to the
Company and its subsidiaries from time to time. The Company believes its
relationship with STET International provides it with additional expertise and
opportunities in the telecommunications business.
STET is the holding company for one of the world's largest
telecommunications operators, Telecom Italia, S.p.A. ("Telecom Italia"), through
which STET controls substantially all of the Italian telecommunications
industry. Telecom Italia was formed as part of a restructuring of Italy's
telecommunications industry into a single operator to compete more effectively
in the international marketplace. Telecom Italia was formed through the merger
in August 1994 of Italy's then-existing telecommunications companies, including
SIP-Societa Italiana per l'Esercizio delle Telecomunicazioni p.a. ("SIP"), the
carrier of national telecommunications services including data transmission,
cellular telephone and value added services, ITALCABLE-Servizi Cablegrafici
Radiotelegrafici e Radioelettrici S.p.A. ("ITALCABLE"), a company that managed
international telecommunications services, and TELESPAZIO Societa per Azioni per
le Comunicazioni Spaziali p.a., the satellite carrier for SIP, ITALCABLE and the
national broadcasting service. The shares of STET and Telecom Italia are
publicly traded in Italy. The Italian government recently announced plans to
privatize its controlling interest in STET in 1997.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company in the normal course of its business provides private
telecommunications network services to companies in which CORIM, members of the
Pescarmona family and entities affiliated with the Suramericana Group have an
interest. Total telecommunications services provided to companies in which CORIM
or other members of the Pescarmona family have an interest during 1995 and for
the first nine months of 1996 totalled approximately $1.3 million. Total
telecommunications services provided to companies affiliated with the
Suramericana Group for the period from January 1, 1995 to September 30, 1996
totalled approximately $1.8 million. The following is a description of the most
significant of such transactions. Although the Company believes that
transactions with its affiliates are generally conducted on an arm's length
basis, conflicts of interest are inherent in such transactions.
IMPSAT Argentina telecommunications services to Industrias Metalurgicas
Pescarmona S.A.I.C. y F. ("IMPSA"), a company controlled by CORIM that produces
heavy steel capital goods, including hydromechanical equipment and cranes, and
through subsidiaries, engages in other businesses including cargo
transportation, auto parts manufacture and environmental services. Total
telecommunications services provided to IMPSA for the period from January 1,
1995 to August 31, 1996 equalled $533,000.
IMPSAT Argentina provides telecommunications services to Puerto Seco, S.A.
("Puerto Seco"), a company controlled by CORIM and IMPSA that produces wire
harnesses for automobile electrical systems and coil springs for automobile
suspension systems in Argentina and Brazil. Total telecommunications services
provided to Puerto Seco for the period from January 1, 1995 to August 31, 1996
equalled $141,000.
IMPSAT Argentina provides telecommunications services to Buenos Aires al
Pacifico San Martin S.A. ("BAPSA"), a company controlled by CORIM and IMPSA that
operates the San Martin Railway between
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<PAGE> 83
Buenos Aires and the Cuyo region in central-western Argentina and provides cargo
transportation services along the San Martin Railway. Total telecommunications
services provided to BAPSA for the period from January 1, 1995 to August 31,
1996 equalled $386,000.
IMPSAT Argentina provides telecommunications services to La Mercantil
Andina S.A., an insurance company owned by CORIM and members of the Pescarmona
family. Total telecommunications services provided to La Mercantil Andina S.A.
for the period from January 1, 1995 to August 31, 1996 equalled $210,000.
IMPSAT Argentina provides telecommunications services to Lagarde S.A., a
company owned by members of the Pescarmona family that owns and operates a
winery in the Mendoza area of Argentina. Total telecommunications services
provided to Lagarde S.A. for the period from January 1, 1995 to August 31, 1996
equalled $93,000.
IMPSAT Colombia provides telecommunications services to IMPSA Andina, S.A.
("IMPSA Andina"), a subsidiary of IMPSA that operates a production facility for
heavy steel capital goods near Bogota, Colombia. Total telecommunications
services provided to IMPSA Andina during 1995 and the first nine months of 1996
equalled $77,000. In addition, IMPSAT Colombia subleases office space at a
location in Bogota, Colombia from IMPSA Andina. Total lease payments from IMPSA
Andina to IMPSAT Colombia for the period from January 1, 1995 to September 30,
1996 totalled $73,000.
IMPSAT Colombia provides telecommunications services to several companies
within the Suramericana Group, including Suramericana de Seguros, an insurance
company, Corporacion Financiera Nacional y Suramericana S.A. ("Corfinsura"), a
financial institution, Susalud, a health services company, Proteccion S.A., a
pension fund, Suleasing, a finance company, and Sufinanciamento, a finance
company. For the period from January 1, 1995 to September 30, 1996, the total
amount of telecommunications services rendered to such companies equalled $1.0
million, $198,000, $253,000, $113,000, $103,000 and $235,000, respectively.
In addition, in the normal course of business the Company enters into
transactions with companies in which CORIM, members of the Pescarmona family or
the Suramericana Group had an interest. The following is a description of the
most significant of such transactions.
La Mercantil Andina acts from time to time as an insurance broker and an
insurer for IMPSAT Argentina. IMPSAT Argentina invoiced premiums to La Mercantil
Andina S.A. totalling $973,000 for the period from January 1, 1995 to August 31,
1996.
In connection with the purchase of telecommunications equipment from Hughes
Network Services pursuant to a financing from Citibank, N.A. that is guaranteed
by The Export-Import Bank of the United States, IMPSA International Inc., a
wholly-owned subsidiary of IMPSA located in Pittsburgh, Pennsylvania, acted as
supplier of such equipment to IMPSAT Argentina and received a commission of 3%
of the total value of the equipment subject to the Eximbank financing. The total
commissions paid by IMPSAT Argentina to IMPSA International Inc. in connection
with such transactions for the period from January 1, 1995 to August 31, 1996
equalled $165,000.
The Company receives technical assistance from Telecom Italia and
ITALCABLE, companies within the STET group and affiliates of STET International,
which assistance consists of the seconding of three employees from Telecom
Italia and ITALCABLE to the Company. Total payments to Telecom Italia and
ITALCABLE for such services for the period from January 1, 1995 to September 30,
1996 equalled $0.4 million.
IMPSAT Argentina received a loan of $5 million from IMPSA for a period of
30 days in March 1996 in connection with the refinancing of certain commercial
paper of IMPSAT Argentina. The loan, which bore interest at a rate of 15% per
annum, was repaid with the proceeds of the issuance of a subsequent series of
commercial paper of IMPSAT Argentina.
In December 1995, Mr. Vivo advanced IMPSAT Argentina $792,000. The loan,
which bore interest at a rate of 9.5% per annum, was repaid in May 1996.
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In December 1995, a company affiliated with Mr. Verdaguer advanced IMPSAT
Argentina $720,000. The loan, which bore interest at a rate of 13.8% per annum,
was repaid in May 1996. The interest rates on the loans to IMPSAT Argentina from
IMPSA, Mr. Vivo and Mr. Verdaguer were comparable to or less than prevailing
market rates. See "Management's Discussion and Analysis of Financial Condition
and Results of Operation -- Nine Months Ended September 30, 1996 Compared to
Nine Months Ended September 30, 1995 -- Interest Expense, Net."
Corfinsursa is a creditor of IMPSAT Colombia. As of September 30, 1996,
IMPSAT Colombia was indebted to Corfinsura for indebtedness in the amount of
$6.1 million. See "Description of Certain Indebtedness" for a summary of the
terms and conditions of such indebtedness.
Suramericana de Seguros acts from time to time as an insurance broker and
an insurer for IMPSAT Colombia. IMPSAT Colombia paid premiums to Suramerica de
Seguros totalling $1.0 million for the period from January 1, 1995 to September
30, 1996.
Susalud provides medical services on behalf of IMPSAT Colombia for its
employees. Total payments to Susalud for the period from January 1, 1995 to
September 30, 1996 totalled $244,000.
Certain other companies within the Suramericana group, including Suleasing
S.A. and Suleasing Panama, provide financial leasing services to IMPSAT
Colombia. The total payments by IMPSAT Colombia under leases from such companies
were $893,000 for the period from January 1, 1995 to September 30, 1996.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summary of the material provisions of certain agreements
governing certain long-term indebtedness of IMPSAT Argentina, IMPSAT Colombia
and IMPSAT Venezuela that will remain outstanding after the consummation of the
Offering. Such summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of such
agreements, including the definition of certain terms therein. Terms used and
not defined herein have the meanings given to them in the documents described
herein. Copies of such agreements are available upon request from the Company.
Itaco Agreements. In October 1993, Teledatos S.A., which became a
wholly-owned subsidiary of IMPSAT Argentina in 1994, through a series of
transactions, acquired Satelnet, S.A. ("Satelnet"), from Information,
Technology, Acquisition Corporation S.A. ("ITACO"). In connection with such
transaction, Teledatos S.A. entered into a stock purchase agreement with ITACO
for $3.0 million and assumed indebtedness of $7.0 million owed by Satelnet to
ITACO. Prior to such acquisition, Satelnet was a leading competitor of IMPSAT
Argentina. IMPSAT Argentina has since incorporated the private
telecommunications network systems of Satelnet into the operations of IMPSAT
Argentina. Pursuant to the agreements entered into with ITACO, Teledatos and
Satelnet agreed to pay the amounts owed to ITACO in eight equal semiannual
principal installments commencing in March 1995, with a final maturity on
September 30, 1998. The ITACO obligations, which had an outstanding balance of
$5.8 million as of August 31, 1996, bear interest at a rate per annum equal to
LIBOR plus 2.5% and are secured by a pledge of 99.9% of the capital stock of
Satelnet.
Credit Lyonnais Facility. IMPSAT Argentina is a party to a Loan and
Repayment Agreement with Credit Lyonnais dated April 9, 1996 (the "Credit
Lyonnais Facility") in the amount of $0.9 million as of August 31, 1996. IMPSAT
Argentina used the proceeds of the Credit Lyonnais Facility to acquire a 0.06%
interest in Intelsat. See "Business -- Infrastructure -- Satellites." The
principal amount of the Credit Lyonnais loan, which bears interest at a rate per
annum equal to LIBOR plus 1% payable quarterly, is payable in a single
installment on April 9, 2001.
The Credit Lyonnais Facility is secured by a first priority lien in IMPSAT
Argentina's interest in Intelsat, including all amounts payable by Intelsat to
IMPSAT Argentina in its capacity as a participant in Intelsat. The Credit
Lyonnais Facility contains certain covenants, including covenants limiting the
ability of IMPSAT Argentina to dispose of all or substantially all of its assets
and to effect mergers or consolidations into entities
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other than those that are controlled by IMPSAT Argentina. In addition, IMPSAT
Argentina has agreed to maintain its membership in Intelsat until the Credit
Lyonnais Facility is repaid in full.
Inter-American Investment Corporation Term Loan Agreement. IMPSAT Colombia
is party to a Term Loan Agreement dated as of March 2, 1994 (the "IIC Term Loan
Agreement") with the IIC. Pursuant to the IIC Term Loan Agreement, the IIC lent
to IMPSAT Colombia a total of $12.0 million, of which $9.4 is outstanding as of
September 30, 1996. The IIC Term Loan is divided into two tranches, an A Loan
and a B Loan. The outstanding balance of the A Loan, which is currently $6.7
million, is repayable in ten equal semiannual installments, with a final
maturity on March 15, 2001, and bears interest at a rate per annum equal to
LIBOR plus 3.0%. The outstanding balance of the B Loan, which is currently $2.9
million, is repayable in six equal semiannual installments, with a final
maturity on March 15, 1999, and bears interest at a rate per annum equal to
LIBOR plus 2.5%. The IIC Term Loan Agreement is guaranteed by CORIM and by
Colinvertel S.A., a subsidiary of IMPSAT that holds a 90.9% interest in IMPSAT
Colombia.
The IIC Term Loan Agreement contains certain covenants, including covenants
placing limitations on the ability of IMPSAT Colombia to create liens, incur
additional indebtedness, make capital expenditures and declare dividends in the
event of a default by IMPSAT Colombia under the IIC Term Loan Agreement. In
addition, IMPSAT Corporation and the Suramericana Group shareholders of IMPSAT
Colombia have agreed with IIC that they will maintain a majority interest in
Colinvertel during the term of the IIC Term Loan Agreement, and Colinvertel has
agreed to maintain a majority interest in IMPSAT Colombia during the term of the
IIC Term Loan Agreement.
The IIC notified IMPSAT Colombia in June 1996 of its position that IMPSAT
Colombia is not in compliance with applicable covenants relating to the maximum
permitted level of short-term debt and the maximum permitted debt to equity
ratio. IMPSAT Colombia's noncompliance with the maximum permitted level of
short-term debt was resolved by the refinancing of IMPSAT Colombia's short-term
debt with the proceeds of the Offering. Regarding compliance with IMPSAT
Colombia's debt to equity ratio, IMPSAT Colombia and IMPSAT Corporation have
reached an agreement in principle with IIC, pursuant to which agreement $7
million of the proceeds of the Offering being lent to IMPSAT Colombia will be
subordinated in the event of any payment default by IMPSAT Colombia under the
IIC Term Loan Agreement or in the event that EBITDA for IMPSAT Colombia for any
six-month period is less than $5 million. EBITDA for IMPSAT Colombia for the
six-month period ended June 30, 1996 was $7.5 million and EBITDA for the
nine-month period ended September 30, 1996 was $11.6 million. The Company
expects to execute definitive documentation with IIC regarding IIC's waiver and
amendments prior to the end of 1996.
IMPSAT Venezuela Credit Facility. IMPSAT Venezuela is a party to a Credit
Agreement dated September 30, 1995 (the "CAF Credit Facility") with the
Corporacion Andino de Fomento ("CAF"), a multilateral development agency
headquartered in Caracas, Venezuela. Pursuant to the CAF Credit Facility, CAF
extended to IMPSAT Venezuela a revolving line of credit of $1.0 million for
working capital purposes and a medium-term loan facility of $5.0 million for
capital expenditures. As of September 30, 1996, IMPSAT Venezuela had drawn down
the entire line of credit and loan facility and the outstanding balance of the
CAF Credit Facility as of such date was $5.9 million. The line of credit is
repayable in six equal semiannual installments commencing in October 1996, with
a current final maturity in April 1999 and bears interest at a rate per annum
equal to LIBOR plus 3.5%. The term loan is repayable in six equal semiannual
installments, commencing in March 1998 with a final maturity in March 2001 and
bears interest at a rate per annum equal to LIBOR plus 4.75%. The CAF Credit
Facility is guaranteed by IMPSAT Corporation and the Suramericana Group in
proportion to their shareholdings in IMPSAT Venezuela. The CAF Facility contains
certain covenants, including covenants placing limitations on IMPSAT Venezuela's
ability to enter into transactions out of the ordinary course of business or to
enter into profit-sharing arrangements with third parties.
IMPSAT Colombia Local Bank Facilities. IMPSAT Colombia is party to a
series of loan agreements with a group of local Colombian financial
institutions, including Corfinsura, a member of the Suramericana Group,
Corporacion Financiera del Valle S.A. ("Corfivalle"), Corporacion Financiera de
Caldas S.A. ("Corficaldas"), Corporacion Financiera Colombiana S.A.
("Corficolombiana") and Corporacion Financiera
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de Occidente S.A. ("Corfioccidente", and with Corfinsura, Corfivalle,
Corficaldas and Corficolombiana, the "Colombian Lenders").
Pursuant to a series of related agreements entered into between IMPSAT
Colombia and the Colombian Lenders between October 1993 and March 1995, IMPSAT
received loans, partially in U.S. dollars and partially in Colombian pesos, in
order to develop its private telecommunications network system infrastructure.
As of September 30, 1996, the total amount outstanding under such facilities
equalled the U.S. dollar equivalent of $12.8 million, of which approximately 19%
is denominated and payable in U.S. dollars and the remainder is denominated and
payable in Colombian pesos. Of such amount, approximately $6.1 million will be
payable to Corfinsura, $2.9 million will be payable to Corfivalle, $1.9 million
will be payable to Corficaldas, $941,000 will be payable to Corfioccidente and
$954,000 will be payable to Corficolombiana.
The terms of the outstanding obligations to the Colombian Lenders call for
such indebtedness to be repaid in equal semiannual installments with final
maturity dates in the fourth quarter of 2000. The majority of the obligations
have an initial principal repayment date falling in the second quarter of 1997,
although certain of the obligations to Corfinsura have initial principal payment
dates falling in the second quarter of 1996. The obligations bear interest,
payable semiannually, with interest rates on the U.S. dollar portions thereof
ranging from 8% per annum to 10% per annum and with interest rates on the
Colombian peso portions thereof ranging from 30% per annum to 41% per annum in
nominal terms in Colombian pesos.
IMPSAT Colombia's obligations to the Colombian Lenders are secured by
pledges of various items of telecommunications equipment comprising IMPSAT
Colombia's private telecommunications network infrastructure.
THE EXCHANGE OFFER
The Old Notes were sold by the Company on July 30, 1996 to a limited number
of institutional investors (the "Purchasers"). In connection with the sale of
the Old Notes, the Company and the Purchasers entered into a registration rights
agreement dated as of July 30, 1996 (the "Registration Rights Agreement"), which
requires the Company (i) to cause the Old Notes to be registered under the
Securities Act or (ii) to file with the Commission a registration statement
under the Securities Act with respect to the New Notes of the Company identical
in all material respects to the Old Notes, and to use its best efforts to cause
such registration statement to become effective under the Securities Act. The
Company is further obligated, upon the effectiveness of that registration
statement, to offer the holders of the Old Notes the opportunity to exchange
their Old Notes for a like principal amount of New Notes, which will be issued
without a restrictive legend and may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Exchange Offer is being made
pursuant to the Registration Rights Agreement to satisfy the Company's
obligations thereunder. The term "Holder" with respect to the Exchange Offer
means any person in whose name Old Notes are registered on the Company's books
or any other person who has obtained a properly completed assignment from the
registered holder.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on January , 1997; provided, however, that if the Company, in
its sole discretion, has extended the period of time during which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended.
As of the date of this Prospectus, $125,000,000 aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1996, to all Holders
of Old Notes known to the Company. The Company's obligation to accept Old Notes
for exchange pursuant to the Exchange Offer is subject to certain customary
conditions as set forth under "-- Certain Conditions to the Exchange Offer"
below.
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The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice of such extension to the Holders thereof as described below.
During any such extension, all Old Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by the Company. Any Old
Notes not accepted for exchange for any reason will be returned without expense
to the tendering Holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
Old Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 or any integral multiple thereof.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Company
will give oral or written notice of any extension, amendment, non-acceptance or
termination to the Holders of the Old Notes as promptly as practicable, such
notice in the case of any extension to be issued by means of a press release or
other public announcement no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
Only a registered holder of Old Notes may tender such Old Notes in the
Exchange Offer. The tender to the Company of Old Notes by a Holder thereof as
set forth below and the acceptance thereof by the Company will constitute a
binding agreement between the tendering Holder and the Company upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal. Except as set forth below, a Holder who
wishes to tender Old Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal, including
all other documents required by such Letter of Transmittal, to The Bank of New
York (the "Exchange Agent") at one of the address[es] set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer ("a Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the Holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
Any beneficial owner whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company, or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's behalf, such owner must, prior
to completing and executing the Letter of Transmittal and delivering such
owner's Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal Rights"), as the case may be, must be guaranteed (see
"-- Guaranteed Delivery Procedures") unless the Old Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered Holder of the Old
Notes who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution (as defined below). In the event that
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signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guaranties must be by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program (collectively, "Eligible Institutions"). If Old Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder exactly as the name or names of the registered
holder or holders appear on the Old Notes with the signature thereon guaranteed
by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Note which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any Holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. None of the Company, the Exchange Agent or any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted with the Letter of Transmittal.
By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the Holder, and that neither the Holder nor such
other person has any arrangement or understanding with any person to participate
in the distribution of the New Notes. If any Holder or any such other person is
an "affiliate", as defined under Rule 405 of the Securities Act, of the Company
or is engaged in or intends to engage in, or has an arrangement or understanding
with any person to participate in, a distribution of such New Notes to be
acquired pursuant to the Exchange Offer, such Holder or any such other person
(i) may not rely on the applicable interpretation of the staff of the SEC and
(ii) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. See "Plan of Distribution." The Letter of Transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "-- Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company will be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
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For each Old Note accepted for exchange, the Holder of such Old Note will
receive as set forth below under "Description of the Notes -- Book-Entry,
Delivery and Form" a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from July 30, 1996. Old Notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the Exchange Offer.
Holders whose Old Notes are accepted for exchange will not receive any payment
in respect of accrued interest on such Old Notes otherwise payable on any
interest payment date the record date for which occurs on or after consummation
of the Exchange Offer. If the Exchange Offer is not consummated and a Shelf
Registration Statement is not declared effective on or prior to January 30,
1997, the annual interest rate borne by the Notes will be increased by 0.5%. If
the Exchange Offer is not consummated and the Shelf Registration Statement is
not declared effective by July 30, 1997, the annual interest rate borne by the
Notes will be increased by an additional 0.5%. Upon consummation of the Exchange
Offer or the effectiveness of the Shelf Registration Statement, the interest
rate on the Notes will revert to the rate set forth on the cover page of this
Prospectus. See "Description of the Notes -- Registration Rights." Old Notes not
tendered or not accepted for exchange will continue to accrue interest from and
after the date of consummation of the Exchange Offer.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
Holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering Holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry procedures described
below, such non-exchanged Old Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or a facsimile thereof,
with any required signature guarantees and any other required documents, must,
in any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
Holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) on or prior to 5:00 P.M., New York City
time, on the Expiration Date, the Exchange Agent receives from such Eligible
Institution a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by the Company (by telegram, telex, facsimile transmission, mail or
hand delivery), setting forth the name and address of the Holder of Old Notes
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and the amount of Old Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three New York Stock Exchange ("NYSE")
trading days after the date of execution of the Notice of Guaranteed Delivery,
the certificates for all physically tendered Old Notes, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the Letter
of Transmittal will be deposited by the Eligible Institution within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal must be received by the Exchange Agent at one of
the addresses set forth below under "-- Exchange Agent." Any such notice of
withdrawal must specify the name of the person having tendered the Old Notes to
be withdrawn, identify the Old Notes to be withdrawn (including the principal
amount of such Old Notes), and (where certificates for Old Notes have been
transmitted) specify the name in which such Old Notes are registered, if
different from that of the withdrawing Holder. If certificates for Old Notes
have been delivered or otherwise identified to the Exchange Agent, then, prior
to the release of such certificates the withdrawing Holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
unless such Holder is an Eligible Institution in which case such guarantee will
not be required. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Old Notes and otherwise comply with the procedures
of such facility. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Company,
whose determination will be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Notes which have been tendered for
exchange but which are not exchanged for any reason will be returned to the
Holder thereof without cost to such Holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, and subject to
its obligations pursuant to the Registration Rights Agreement, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such New Notes for exchange, any of the following
events shall occur:
(i) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer will violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company in whole or in part at any time and from time to time in
its sole discretion. The failure by the Company at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
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In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order is threatened by the SEC or in effect with respect
to the Registration Statement of which this Prospectus is a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended.
The Exchange Offer is not conditioned on any minimum principal amount of
Old Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests or Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
The Bank of New York, Exchange Agent
By Mail:
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Operations, 7E
By Hand or Overnight Courier:
101 Barclay Street
New York, New York 10286
Attn: Securities Processing Window
Ground Level Reorganization, 7E
By Facsimile:
212-571-3080
Confirm by Telephone:
212-815-2742
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Company will not make any payment to brokers, dealers, or others
soliciting acceptances of the Exchange Offer.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, among others.
TRANSFER TAXES
Holders who tender their Old Notes for exchanges will not be obligated to
pay any transfer taxes in connection therewith, except that Holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of the
applicable transfer tax thereon.
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CONSEQUENCES OF FAILURE TO EXCHANGE OLD NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the provisions in
the Indenture regarding transfer and exchange of the Old Notes and the
restrictions on transfer of such Old Notes as set forth in the legend thereon as
a consequence of the issuance of the Old Notes pursuant to exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Old Notes may not be
offered or sold, unless registered under the Securities Act and applicable state
securities laws. The Company does not currently anticipate that it will register
Old Notes under the Securities Act. See "Description of the Notes -- Exchange
Offer; Registration Rights". Based on interpretations by the staff of the SEC,
as set forth in no-action letters issued to third parties, the Company believes
that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold or otherwise transferred by holders thereof
(other than any such holder which is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course or such holders'
business and such holders, other than broker-dealers, have no arrangement or
understanding with any person to participate in the distribution of such New
Notes. However, the SEC has not considered the Exchange Offer in the context of
a no-action letter and there can be no assurance that the staff of the SEC would
make a similar determination with respect to the Exchange Offer as in such other
circumstances. Each Holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of such New
Notes and has no arrangement or understanding to participate in a distribution
of New Notes. If any Holder is an affiliate of the company or is engaged in or
intends to engage in or has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such Holder (i) may not rely on the applicable interpretations of the staff of
the SEC and (ii) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes pursuant to the Exchange Offer must acknowledge that such Old Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities and that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution". In addition, to comply with the securities
laws of certain jurisdictions, if applicable, the New Notes may not be offered
or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with. The Company has agreed, pursuant to the Registration
Rights Agreement, subject to certain limitations specified therein, to register
or qualify the New Notes for offer or sale under the securities laws of such
jurisdictions as any holder reasonably requests in writing. Unless a holder so
requests, the Company does not currently intend to register or qualify the sale
of the New Notes in any such jurisdictions.
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DESCRIPTION OF THE NOTES
The Old Notes were issued under an Indenture, dated as of July 30, 1996
(the "Indenture"), among the Company, as issuer, IMPSAT Argentina, as guarantor
(the "Guarantor"), and The Bank of New York, as Trustee (the "Trustee"). The New
Notes also will be issued under the Indenture. The Old Notes and the New Notes
will be treated as a single class of securities under the Indenture. The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended. A copy of the Indenture is available from the Company upon request.
Whenever defined terms of the Indenture not otherwise defined herein are
referred to, such defined terms are incorporated herein by reference. As used in
this "Description of the Notes," the term "Company" means IMPSAT Corporation, a
Delaware corporation, and excludes its Subsidiaries. The term "Notes" means the
New Notes and the Old Notes treated as a single class.
GENERAL
The Notes will be unsecured senior obligations of the Company, limited to
$125 million aggregate principal amount, and will mature on July 15, 2003. Each
Note will bear interest at the rate per annum shown on the front cover of this
Memorandum from the Closing Date, or from the most recent Interest Payment Date
to which interest has been paid or provided for, payable semiannually (to
Holders of record at the close of business on the July 1 or January 1
immediately preceding the Interest Payment Date) on July 15 and January 15 of
each year, commencing January 15, 1997.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially will
be the corporate trust office of the Trustee at 101 Barclay Street, Floor 21
West, New York, New York 10286); provided that, at the option of the Company,
payment of interest may be made by check mailed to the address of the Holders as
such address appears in the Security Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and any integral multiple thereof.
No service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
For purposes of determining compliance with the Indenture, the U.S. dollar
equivalent of any amounts denominated in a foreign currency shall be calculated
using the noon dollar buying rate in New York City for wire transfers of such
currency as published by the Federal Reserve Bank of New York on the date such
foreign currency amount is received, incurred or paid. For other financial
reporting purposes, currency translations will be performed in accordance with
U.S. GAAP.
OPTIONAL REDEMPTION WITH PUBLIC OR PRIVATE EQUITY PROCEEDS
At any time on or prior to July 15, 1999, the Company may, at its option
from time to time, redeem Notes having an aggregate principal amount of up to
$25 million at a redemption price equal to 112.125% of the principal amount
thereof on the redemption date, together with accrued and unpaid interest
thereon, with the Net Cash Proceeds of one or more public or private issuances
and sales of Common Stock of the Company; provided that (i) Notes having an
aggregate principal amount of at least $100 million remain outstanding after
each such redemption and (ii) each such redemption occurs within 180 days after
consummation of any such issuance or sale.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis or by lot; provided that no Note of $1,000 in principal amount or
less shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof
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to be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note.
GUARANTEE
The Company's obligations under the Notes are fully and unconditionally
guaranteed on a senior basis by the Guarantor; provided that the Note Guarantee
shall not be enforceable against the Guarantor in an amount in excess of the net
worth of the Guarantor at the time that determination of such net worth is,
under applicable law, relevant to the enforceability of such Note Guarantee.
Such net worth shall include any claim of the Guarantor against the Company for
reimbursement and any claim against any grantor of a Subsidiary Guarantee for
contribution.
RANKING
The Indebtedness evidenced by the Notes and the Note Guarantee will rank
pari passu in right of payment with all existing and future unsubordinated
indebtedness of the Company or the Guarantor and senior in right of payment to
all existing and future subordinated indebtedness of the Company or the
Guarantor, respectively. At September 30, 1996, on an as adjusted basis after
giving effect to the Offering and the defeasance and repayment of $61.5 million
of other short-term debt to be repaid with the proceeds of the Notes, the
Company (on an unconsolidated basis) and the Guarantor (on a consolidated basis)
would have had approximately $4.5 million of indebtedness other than the Notes
(which represents a guarantee of indebtedness of IMPSAT Venezuela) and $31.1
million of indebtedness, respectively, all of which would have been senior
indebtedness. The Company is a holding company. As an equity holder of its
subsidiaries, the right of the Company to receive assets from a subsidiary upon
the bankruptcy, liquidation or reorganization of such subsidiary (and therefore
the right of the holders of the Notes to participate in those assets) will be
effectively subordinated to all existing and future liabilities (including trade
payables) of the Company's subsidiaries other than the Guarantor except to the
extent that the Company is recognized as a creditor of the subsidiary. Although
the proceeds of the Old Notes have been or will be distributed to the Company's
subsidiaries in the form of intercompany loans (thereby creating a
creditor-debtor relationship between the Company and its subsidiaries), there
are no restrictions upon the Company's ability to capitalize such amounts at a
later date. On such date on such as adjusted basis, the Company's Subsidiaries
(other than the Guarantor) would have had approximately $47.3 million of
liabilities (excluding inter-company payables to the Company or the Guarantor),
including approximately $32.4 million of indebtedness. At such date and on such
an as adjusted basis, the Company's operating subsidiaries (including the
Guarantor) had a total of approximately $22.3 million of secured indebtedness.
The Notes would also be subordinated to certain statutorily created preferences
in the countries in which the Company's subsidiaries operate with respect to
certain liabilities of the Company's subsidiaries, such as accrued tax
liabilities and accrued salary, severance, social security and pension
liabilities. See "Risk Factors -- Substantial Indebtedness" and "-- Holding
Company Structure: Effective Subordination of Notes to Obligations of
Subsidiaries."
REGISTRATION RIGHTS
The Company has agreed pursuant to the Registration Rights Agreement to use
its best efforts to cause to be filed a registration statement covering the
offering by the Company of the New Notes, to have the Exchange Offer consummated
not later than 60 days after the effective date of such registration statement
and to have such registration statement remain effective until the closing of
the Exchange Offer.
The Company and the Guarantor also agreed that in the event that the
Exchange Offer is not consummated by January 30, 1997, the Company will use its
best efforts (i) to cause to be filed as soon as possible, a shelf registration
statement (the "Shelf Registration Statement") providing for the sale by the
holders of all of the Old Notes; (ii) to have such Shelf Registration Statement
declared effective by the Commission; and (iii) to keep the Shelf Registration
continuously effective until July 30, 1999 or such shorter period that will
terminate when all of the Old Notes have been sold pursuant to the Shelf
Registration Statement. The Registration Rights Agreement provides that in the
event that the Exchange Offer is not consummated and a Shelf Registration
Statement is not declared effective on or prior to January 30, 1997, the
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annual interest rate borne by the Notes will be increased by 0.5%. If the
Exchange Offer is not consummated and the Shelf Registration Statement is not
declared effective by July 30, 1997, the annual interest rate borne by the Notes
will be increased by an additional 0.5%. Upon consummation of the Exchange Offer
or the effectiveness of the Shelf Registration Statement, the interest rate on
the Notes will revert to the rate set forth on the cover page of this
Prospectus.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, a copy of which has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the full definition of all terms as well as any other capitalized
term used herein for which no definition is provided.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries (or, for
purposes of determining whether the Guarantor may pay a dividend on or purchase
its Capital Stock under the "Limitation on Restricted Payments" covenant, of the
Guarantor and its Restricted Subsidiaries) for such period determined in
conformity with GAAP; provided that the following items shall be excluded in
computing Adjusted Consolidated Net Income (without duplication): (i) the net
income of any Person (other than net income attributable to a Restricted
Subsidiary) in which any Person (other than the Company or any of its Restricted
Subsidiaries) has a joint interest and the net income of any Unrestricted
Subsidiary, except to the extent of the amount of dividends or other
distributions actually paid to the Company or any of its Restricted Subsidiaries
by such other Person or such Unrestricted Subsidiary during such period; (ii)
solely for the purposes of calculating the amount of Restricted Payments that
may be made pursuant to clause (C) of the first paragraph of the "Limitation on
Restricted Payments" covenant described below (and in such case, except to the
extent includable pursuant to clause (i) above), the net income (or loss) of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is merged
into or consolidated with the Company or any of its Restricted Subsidiaries or
all or substantially all of the property and assets of such Person are acquired
by the Company or any of its Restricted Subsidiaries; (iii) the net income of
any Restricted Subsidiary (other than the Guarantor) (A) to the extent that the
declaration or payment of dividends or similar distributions by such Restricted
Subsidiary of such net income is not at the time permitted by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Restricted
Subsidiary; provided that, in calculating the amount of EBITDA for the purpose
of determining whether a Restricted Subsidiary may Incur Indebtedness under
clause (i)(B) of the second paragraph of the "Limitation on Indebtedness"
covenant, such net income shall not be excluded as a result of provisions (for
the benefit of owners (other than the Company, the Guarantor or any of their
Subsidiaries) of a any Common Stock of such Restricted Subsidiary) that are
contained in a stockholders' agreement, joint venture agreement or similar
agreement among owners of such Common Stock; and (B) equal to the portion, if
any, thereof that would be required to be withheld for taxes with respect to the
payment of dividends or distributions on the Capital Stock of such Restricted
Subsidiary during the relevant period if such net income were to be declared and
distributed to the shareholders of such Restricted Subsidiary; (iv) any gains or
losses (on an after-tax basis) attributable to Asset Sales; (v) except for
purposes of calculating the amount of Restricted Payments that may be made
pursuant to clause (C) of the first paragraph of the "Limitation on Restricted
Payments" covenant described below, any amount paid or accrued as dividends on
Preferred Stock of the Company or any Restricted Subsidiary owned by Persons
other than the Company and any of its Restricted Subsidiaries; and (vi) all
extraordinary gains and extraordinary losses.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company
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and its Restricted Subsidiaries (excluding intercompany items) and (ii) all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, all as set forth on the quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries,
prepared in conformity with GAAP and most recently sent to holders pursuant to
the "Commission Reports and Reports to Holders" covenant.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transactions) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company or such
Restricted Subsidiary and, in each case, that is not governed by the provisions
of the Indenture applicable to mergers, consolidations and sales of assets of
the Company; provided that "Asset Sale" shall not include (A) sales or other
dispositions of equipment that has become obsolete or no longer useful in the
business of the Company or its Restricted Subsidiaries or inventory, receivables
and other current assets; (B) dispositions of assets (including Common Stock) of
the Company or any of its Restricted Subsidiaries, in substantially simultaneous
exchanges for consideration consisting of any combination of cash, Temporary
Cash Investments and assets (including Capital Stock of another Person) that are
used or useful in the telecommunications business of the Company or its
Restricted Subsidiaries, if such consideration has an aggregate fair market
value substantially equal to the fair market value of the assets so disposed of;
provided, however, that any cash or Temporary Cash Investments received by the
Company or any of its Restricted Subsidiaries pursuant to any transaction
described in clause (B) above shall be applied in accordance with clause (A) or
(B) of the first paragraph of the "Limitation on Asset Sales" covenant; and (C)
issuances and sales of Common Stock of Restricted Subsidiaries in accordance
with clause (v) of the second paragraph of the "Limitation on the Issuance of
and Sale of Capital Stock of Restricted Subsidiaries" covenant.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Buenos Aires Teledatos Entity" means any entity that (i) owns
substantially all of the assets that, as of the Closing Date, constitute (A) the
Guarantor's Teledatos fiber optic ring (and equipment primarily related to such
fiber optic ring, including, without limitation, microwave radios that
constitute a part of such ring) in Buenos Aires and (B) the microwave radio link
between such ring and Mendoza, Argentina, (ii) is designated as the Buenos Aires
Teledatos Entity in an Officers' Certificate delivered to the Trustee; (iii) is
not a Subsidiary of the Company or the Guarantor and (iv) as of the date that
such entity ceased to be a Subsidiary
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of the Company and the Guarantor, did not own any material assets other than
those referred to in (A) or (B) above that it received from the Company or any
other Restricted Subsidiary.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the date of the Indenture, including, without limitation, all
Common Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease Obligations" means the discounted present value of the rental obligations
under such lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or "group" (within the meaning of Section 13(d) or
14(d)(2) of the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act) of Voting Stock representing more
than the voting power of the Voting Stock of the Company than is held by the
Existing Stockholders and (b) after the occurrence of a Public Market, a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Voting Stock representing more than 30% of the voting power of
the total Voting Stock of the Company on a fully diluted basis and such
ownership is greater than the voting power of the Voting Stock held by the
Existing Stockholders; (ii) individuals who on the Closing Date constitute the
Board of Directors (together with any new directors whose election by the Board
of Directors or whose nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the members of the Board of
Directors then in office who either were members of the Board of Directors on
the Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the members of the
Board of Directors then in office; (iii) any Existing Stockholder other than
STET (A) transfers any of its ownership interest in Capital Stock of the
Guarantor to any Person that is not an Existing Stockholder or a Permitted
Investor and (B) fails, within 10 days of such transfer, to make a cash equity
investment in the Company in an amount equal to 90% of the fair market value of
the ownership interests so transferred by it, net of any taxes actually payable
by it or its affiliates as a result of such transfer; provided that any transfer
of any such ownership interest by any Existing Stockholder to STET shall be
deemed to be a "Change of Control" if (1) a principal purpose of such transfer
was to avoid the provisions of this clause (iii) and (2) STET (A) subsequently
transfers such ownership interest and (B) fails, within 10 days of such
transfer, to make the cash equity investment referred to in clause (iii) (B)
above; or (iv) the Company shall cease to beneficially own Voting Stock
representing a majority of the voting power of the Voting Stock of the
Guarantor.
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Consolidated EBITDA" means, for any period, the sum of the amounts for
such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated Interest
Expense, to the extent such amount was deducted in computing Adjusted
Consolidated Net Income, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets), (iv) depreciation expense, to
the extent such amount was deducted in calculating Adjusted Consolidated Net
Income, (v) amortization expense, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income, and (vi) all other non-cash items
reducing Adjusted Consolidated Net Income (other than items that will require
cash payments and for which an accrual or reserve is, or is required by GAAP to
be, made), less all non-cash items increasing Adjusted Consolidated Net Income,
all as determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary (other than the Guarantor) is not a Wholly Owned Restricted
Subsidiary, Consolidated EBITDA shall be reduced (to the extent not otherwise
reduced in accordance with GAAP) by an amount equal to (A) the amount of the
Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by (B) the quotient of (1) the number of shares of outstanding Common
Stock of such Restricted
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Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries divided by (2) the total number of shares of outstanding
Common Stock of such Restricted Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and interest
paid or accrued (by any Person) on Indebtedness that is Guaranteed or secured by
the Company or any of its Restricted Subsidiaries) and all but the principal
component of rentals in respect of Capitalized Lease Obligations paid, accrued
or scheduled to be paid or to be accrued by the Company and its Restricted
Subsidiaries during such period; excluding, however, (i) any amount of such
interest of any Restricted Subsidiary if the net income of such Restricted
Subsidiary is excluded in the calculation of Adjusted Consolidated Net Income
pursuant to clause (iii) of the definition thereof (but only in the same
proportion as the net income of such Restricted Subsidiary is excluded from the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof) and (ii) any premiums, fees and expenses (and any
amortization thereof) payable in connection with the offering of the Notes, all
as determined on a consolidated basis (excluding Unrestricted Subsidiaries) in
conformity with GAAP.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the quarterly or annual consolidated balance sheet of the
Company and its Restricted Subsidiaries most recently sent to holders pursuant
to the "Commission Reports and Reports to Holders" covenant, less the amount of
stockholders' equity attributable to Unrestricted Subsidiaries and any amounts
attributable to Disqualified Stock or any equity security convertible into or
exchangeable for Indebtedness, the cost of treasury stock and the principal
amount of any promissory notes receivable from the sale of the Capital Stock of
the Company or any of its Restricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 52).
"Customer Owned Transmission Facilities" means VSAT or other transmission
facilities transferred to customers of any Restricted Subsidiary in connection
with the provision of services by a Restricted Subsidiary to such customer.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions in favor of Holders that are contained in
"Limitation on Asset Sales" and "Repurchase of Notes Upon a Change of Control"
covenants, as the case may be, and such Capital Stock specifically provides that
such Person will not repurchase or redeem any such stock pursuant to such
provision prior to the Company's repurchase of such Notes as are required to be
repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes
Upon a Change of Control" covenants.
"Existing Stockholders" means (i) Mr. Enrique Pescarmona, Mrs. Silvia
Monica Pescarmona de Baldini, Mrs. Liliana Pescarmona de Mayol, Mr. Roberto Vivo
and Mr. Ricardo Verdaguer, (ii) a parent, brother or sister of any of the
individuals named in clause (i), (iii) the spouse of any individual named in
clause (i) or (ii), (iv) the lineal descendants of any person named in clauses
(i) through (iii), (v) the estate
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or any guardian, custodian or other legal representative of any individual named
in clauses (i) through (iv), (vi) any trust established solely for the benefit
of any one or more of the individuals named in clauses (i) through (v), (vii)
any Person in which all of the equity interests are owned, directly or
indirectly, by any one or more of the Persons named in clauses (i) through (vi),
(viii) Nevasa Holdings Ltd., (ix) Invertel S.A., (x) Corporacion IMPSA, S.A. and
(xi) STET.
"fair market value" means the price that would be paid in an arms's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors (whose determination shall be conclusive)
and evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of determination, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained in the
Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes, (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17 and (iii) any non-recurring charges associated with
the adoption, after the Closing Date, of Financial Accounting Standard Nos. 106
and 109.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Guarantor" means IMPSAT, S.A., an Argentine corporation.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including, with respect to the Company and its Restricted Subsidiaries, an
"incurrence" of Indebtedness by reason of a Person becoming a Restricted
Subsidiary; provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all obligations of such Person as
lessee under Capitalized Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any asset of such Person, whether or not such Indebtedness is
assumed by such Person; provided that the amount of such Indebtedness shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of
other Persons Guaranteed by such Person to the extent such Indebtedness is
Guaranteed by such Person and (viii) to the extent not otherwise included in
this definition, obligations under Currency Agreements and Interest Rate
Agreements. The amount of
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Indebtedness of any Person at any date shall be (without duplication) the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation (unless the
underlying contingency has not occurred and the occurrence of the underlying
contingency is entirely within the control of the Company or its Restricted
Subsidiaries), provided (i) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the original issue price of
such Indebtedness and (ii) that Indebtedness shall not include any liability for
federal, state, local or other taxes.
"Indebtedness to EBITDA Ratio" means, as at any date of determination, the
ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis as at the date of determination
(the "Transaction Date") to (ii) the Consolidated EBITDA of the Company for the
then most recent four full fiscal quarters for which reports have been filed
pursuant to the "Commission Reports and Reports to Holders" covenant described
below or, until four such reports have been filed, the then most recent four
fiscal quarters that concluded more than 40 days prior to the Transaction Date
(such four full fiscal quarter period being referred to herein as the "Four
Quarter Period"); provided that (x) pro forma effect shall be given to any
Indebtedness Incurred from the beginning of the Four Quarter Period through the
Transaction Date (including any Indebtedness Incurred on the Transaction Date),
to the extent outstanding on the Transaction Date, (y) if during the period
commencing on the first day of such Four Quarter Period through the Transaction
Date (the "Reference Period"), the Company or any of its Restricted Subsidiaries
shall have engaged in any Asset Sale, Consolidated EBITDA for such period shall
be reduced by an amount equal to the EBITDA (if positive), or increased by an
amount equal to the EBITDA (if negative), directly attributable to the assets
which are the subject of such Asset Sale as if such Asset Sale had occurred on
the first day of such Reference Period and (z) if during such Reference Period
the Company or any of the Restricted Subsidiaries shall have made any Asset
Acquisition, Consolidated EBITDA of the Company shall be calculated on a pro
forma basis as if such Asset Acquisition had taken place on the first day of
such Reference Period.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement) or capital contribution to (by means of any transfer of
cash or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by, such Person and
shall include (i) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary and (ii) the fair market value of the Capital Stock (or any other
Investment) held by the Company and its Restricted Subsidiaries of (or in) any
Person that has ceased to be a Restricted Subsidiary, including, without
limitation, by reason of any transaction permitted by clause (iii) of the
"Limitation on the Issuance of Capital Stock of Restricted Subsidiaries"
covenant. For purposes of the definition of "Unrestricted Subsidiary" and the
"Limitation on Restricted Payments" covenant described below, (i) "Investment"
shall include the fair market value of the assets (net of liabilities, other
than liabilities to the Company or any Subsidiary) of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary, (ii) the fair market value of the assets (net of liabilities, other
than liabilities to the Company or any Subsidiary) of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary shall be considered a reduction in outstanding
"Investments" and (iii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer. Notwithstanding the foregoing, the term "Investment" shall not include
advances to customers (other than Unrestricted Subsidiaries of the Company) and
accounts payable to suppliers in the ordinary course of business that are, in
conformity with GAAP, recorded as accounts receivable or accounts payable, as
the case may be, and Trade Payables.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof, any sale with recourse
against the seller or any Affiliate of the seller, or any agreement to give any
security interest), but excluding any right of first refusal.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash
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equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary as a reserve against any liabilities
associated with such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as determined in conformity with GAAP and (b) with respect
to any issuance or sale of Capital Stock, the proceeds of such issuance or sale
in the form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the principal, but
not interest, component thereof) when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold with
recourse to the Company or any Restricted Subsidiary) and proceeds from the
conversion of other property received when converted to cash or cash
equivalents, net of attorney's fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage, consultant and
other fees incurred in connection with such issuance or sale and net of taxes
paid or payable as a result thereof.
"Note Guarantee" means the Guarantee by the Guarantor of the Company's
obligations under the Notes and the Indenture, pursuant to the Indenture.
"Offer to Purchase" means an offer to purchase Notes by the Company from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis; (ii)
the purchase price and the date of purchase, which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Company defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. On the Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The Trustee
shall act as the Paying Agent for an Offer to Purchase. The Company will comply
with Rule 14e-1 under the Exchange Act and any other securities laws
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and regulations thereunder to the extent such laws and regulations are
applicable, in the event that the Company is required to repurchase Notes
pursuant to an Offer to Purchase.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such Person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; (iv) loans or advances to employees made in the
ordinary course of business in accordance with past practice of the Company or
its Restricted Subsidiaries and that do not in the aggregate exceed $1 million
at any time outstanding; (v) stock, obligations or securities received in
satisfaction of judgments, work-outs or similar arrangements; (vi) Investments
in the Buenos Aires Teledatos Entity; provided that, if the Buenos Aires
Teledatos Entity is not a Restricted Subsidiary (A) such Investments are
reasonably related to the business of owning a fiber optic network in Buenos
Aires or a microwave radio link between Buenos Aires and Mendoza, Argentina and
(B) the Guarantor has the contractual right, upon an Event of Default with
respect to the Notes, to cause a Permitted Investor to purchase all of the
Company's and its Restricted Subsidiaries' Investments in the Buenos Aires
Teledatos Entity for cash, within 180 days after the giving of notice by the
Company, at a price at least equal to the lesser of (1) the fair market value
(as determined pursuant to such contract) of such Investments on any date within
the 90 days prior to making such cash payment and (2) the amount of such
Investments at the time they were made by the Company and its Restricted
Subsidiaries; (vii) Investments, in an aggregate amount at any one time
outstanding not to exceed $15 million during the first three years following the
Closing Date and $20 million thereafter in Common Stock of the International
Telecommunications Satellite Organization ("Intelsat"); provided that the
Company reasonably believes, at the time each such Investment is made, that the
benefits of such Investment will result in cash flow sufficient to pay the
interest and principal on such Investment; and (viii) participations in
Indebtedness of any Restricted Subsidiary permitted to be Incurred by clause
(ix) of the second paragraph of the "Limitation on Indebtedness" covenant.
"Permitted Investor" means (i) any entity that, (A) for its last four
consecutive fiscal quarters has generated revenues of at least $2 billion or
earnings before interest, income taxes, depreciation and amortization of at
least $300 million, or (B) on the date of determination has an equity market
capitalization of at least $3 billion, (ii) Teleport Communications Group Inc.,
MFS Communications Company, Inc., Nortel Inversora S.A. or Cointel S.A., or the
successor of any thereof, or (iii) any Subsidiary of any of the foregoing.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations, bankers' acceptances, surety and appeal bonds, contracts (other
than for Indebtedness), performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money) and any bank's
unexercised right of setoff with respect to deposits made in the ordinary course
of business of the Company or any Restricted Subsidiary; (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including
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extensions and renewals thereof) upon real or personal property acquired after
the Closing Date; provided that (a) such Lien is created solely for the purpose
of securing Indebtedness Incurred, in accordance with the "Limitation on
Indebtedness" covenant, (1) to finance the cost (including the cost of design,
development, construction, improvement, installation or integration) of the item
of property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the completion
of construction or the commencement of full operation of such property or (2) to
refinance any Indebtedness previously so secured, (b) the principal amount of
the Indebtedness secured by such Lien does not exceed 100% of such cost and (c)
any such Lien shall not extend to or cover any property or assets other than
such item of property or assets and any improvements on such item; (vii) leases
or subleases granted to others that do not materially interfere with the
ordinary course of business of the Company and its Restricted Subsidiaries,
taken as a whole; (viii) Liens encumbering property or assets under construction
arising from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets; (ix) any interest
or title of a lessor in the property subject to any Capitalized Lease or
operating lease; (x) Liens arising from filing Uniform Commercial Code financing
statements regarding leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any Person existing at the time such Person becomes, or becomes
a part of, any Restricted Subsidiary; provided that such Liens do not extend to
or cover any property or assets of the Company or any Restricted Subsidiary
other than the property or assets acquired; (xii) Liens in favor of the Company
or any Restricted Subsidiary; (xiii) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary that does not
give rise to an Event of Default; (xiv) Liens securing reimbursement obligations
with respect to letters of credit that encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (xv)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits, and
other Liens that are either within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case, securing
Indebtedness under Interest Rate Agreements and Currency Agreements and forward
contracts, options, future contracts, futures options or similar agreements or
arrangements designed to protect the Company or any of its Restricted
Subsidiaries from fluctuations in the price of commodities; (xvii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Restricted Subsidiaries prior to the Closing
Date; (xviii) Liens on or sales of existing or future receivables; and (xix) the
deposit of up to $32 million of assets to defease the 9.5% Negotiable
Obligations due 1996 of the Guarantor.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company or the
Guarantor other than an Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) accounted for
more than 10% of the consolidated revenues of the Company and its Restricted
Subsidiaries or (ii) was the owner of more than 10% of the consolidated assets
of the Company and its Restricted Subsidiaries, all as set forth on the
consolidated financial statements of the Company for the fiscal year most
recently filed pursuant to the "Commission Reports and Reports to Holders"
covenant.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"STET" means STET SpA and any Subsidiary thereof.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which Voting Stock representing more
than 50% of the total voting power of the outstanding Voting Stock is owned,
directly or indirectly, by such Person and one or more other Subsidiaries of
such Person.
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"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America with a rating
at the time as of which any investment therein is made of "P-1" (or higher)
according to Moody's Investors Service, Inc. or "A-1" (or higher) according to
Standard & Poor's Ratings Group, (v) securities with maturities of six months or
less from the date of acquisition issued or fully and unconditionally guaranteed
by any state, commonwealth or territory of the United States of America, or by
any political subdivision or taxing authority thereof, and rated at least "A" by
Standard & Poor's Ratings Group or Moody's Investors Service, Inc. and (vi)
certificates of deposit maturing not more than 180 days after the acquisition
thereof by a Restricted Subsidiary and issued by any of the ten largest banks
(based on assets as of the last December 31) organized under the laws of the
country in which the Restricted Subsidiary that acquires such certificates of
deposit is organized, provided that such bank is not under intervention,
receivership or any similar arrangement at the time of the acquisition of such
certificates of deposit.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services and required to be paid within one year.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company or the
Guarantor that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary (including any newly acquired or newly formed
Subsidiary of the Company or the Guarantor) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any Restricted Subsidiary; provided that any
Guarantee by the Company or any Restricted Subsidiary of any Indebtedness of the
Subsidiary being so designated shall be deemed an "Incurrence" of Indebtedness
by the Company or such Restricted Subsidiary (or both, if applicable) at the
time of such designation and either (A) the Subsidiary to be so designated has
total assets of $1,000 or less or (B) if such Subsidiary has assets greater than
$1,000, that such designation would be permitted under the "Limitation on
Restricted Payments" covenant described below and, if applicable, such deemed
Incurrence of Indebtedness would also be permitted under the Indenture. The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that immediately after giving effect to such designation
(x) the Company could Incur $1.00 of additional Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant described below and (y)
no Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions. Notwithstanding anything herein
contained to the contrary, the Guarantor may not be designated as an
Unrestricted Subsidiary.
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"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, such
Subsidiary if all of the outstanding Capital Stock in such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) is owned by such Person or one or more Wholly Owned
Subsidiaries of such Person.
COVENANTS
Limitation on Indebtedness
(a) Under the terms of the Indenture, the Company will not, and will not
permit any of its Restricted Subsidiaries to, Incur any Indebtedness (other than
the Notes and Indebtedness existing on the Closing Date); provided that the
Company may Incur Indebtedness if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Indebtedness to EBITDA Ratio would be greater than zero and less than 4:1.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness in an aggregate principal amount not to exceed the greater of (A)
$100 million or (B) the Consolidated EBITDA for the four preceding quarters for
which financial statements have been filed pursuant to the "Commission Reports
and Reports to Holders" covenant, in each case less any amount of Indebtedness
permanently repaid as provided under the "Limitation on Asset Sales" covenant
described below (other than any Notes permanently repaid); provided that no more
than 25% of the Indebtedness Incurred under this clause (i) may be used for
purposes other than capital expenditures; (ii) Indebtedness (A) owed to the
Company evidenced by an unsubordinated promissory note or (B) owed to any of the
Restricted Subsidiaries; provided that any event which results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any subsequent
transfer of such Indebtedness (other than to the Company or another Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness not permitted by this clause (ii); (iii) Indebtedness issued in
exchange for, or the net proceeds of which are used to refinance or refund, then
outstanding Indebtedness, other than Indebtedness Incurred under clause (ii) or
(v) of this paragraph, and any refinancings thereof in an amount not to exceed
the amount so refinanced or refunded (plus premiums, accrued interest, fees and
expenses); provided that Indebtedness the proceeds of which are used to
refinance or refund the Notes, the Note Guarantee or Indebtedness that is pari
passu with, or subordinated in right of payment to, the Notes or the Note
Guarantee shall only be permitted under this clause (iii) if (A) in case the
Notes or the Note Guarantee are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Notes or the Note Guarantee, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made pari
passu with, or subordinate in right of payment to, the remaining Notes or the
Note Guarantee, as the case may be, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes or the Note
Guarantee, such new Indebtedness, by its terms or by the terms of any agreement
or instrument pursuant to which such new Indebtedness is outstanding, is
expressly made subordinate in right of payment to the Notes or the Note
Guarantee at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes or the Note Guarantee, as the case may be, and (C)
such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; and provided further that in no event may Indebtedness
of the Company or the Guarantor be refinanced by means of any Indebtedness of
any Restricted Subsidiary other than the Guarantor pursuant to this clause
(iii); (iv) Indebtedness (A) in respect of performance, surety or appeal bonds
provided in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that such agreements do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by reason
of fees, indemnities and compensation payable thereunder; and (C) arising from
agreements providing for indemnification, adjustment
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of purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of the
Company or any of its Restricted Subsidiaries pursuant to such agreements, in
any case Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any
Person acquiring all or any portion of such business, assets or Restricted
Subsidiary for the purpose of financing such acquisition), in a principal amount
not to exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition; (v) Indebtedness of
the Company or the Guarantor not to exceed, at any one time outstanding, twice
the Net Cash Proceeds received by the Company or the Guarantor, as the case may
be, from the issuance and sale of its Common Stock after the Closing Date to a
Person that is not a Subsidiary of the Company or the Guarantor, less the amount
invested in the Company pursuant to clause (iii) of the definition of "Change of
Control"; (vi) Indebtedness Incurred to finance the cost (including the cost of
design, development, construction, improvement, installation or integration) of
property, plant or equipment acquired by the Company or any of its Restricted
Subsidiaries after the Closing Date and refinancings thereof; (vii) Indebtedness
of the Company, to the extent the proceeds thereof are promptly (A) deposited to
defease the Notes as described under "Defeasance" or (B) used to repurchase
Notes tendered in an Offer to Purchase made as a result of a Change of Control;
(viii) Guarantees of the Notes; (ix) Indebtedness of any Restricted Subsidiary,
to the extent that the Company or the Guarantor is the beneficial owner of such
Indebtedness and such Indebtedness is evidenced by an unsubordinated promissory
note or participation certificate issued to the Company or the Guarantor by the
record holder of such Indebtedness; and (x) Indebtedness of the Company or the
Guarantor, the proceeds of which are used to make an Investment in Intelsat, in
an amount at any one time outstanding not to exceed $15 million during the first
three years following the Closing Date and $20 million thereafter; provided that
the Company reasonably believes, at the time such Indebtedness is Incurred, that
the benefits of such Investment will result in cash flow sufficient to cover the
payment of interest and principal on such Indebtedness.
(b) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (a) Guarantees, Liens or obligations
with respect to letters of credit supporting Indebtedness otherwise included in
the determination of such particular amount shall not be included, (b) the
maximum amount of Indebtedness that may be Incurred pursuant to this "Limitation
on Indebtedness" covenant shall be deemed not to be exceeded, with respect to
any outstanding Indebtedness, solely due to the result of fluctuations in the
exchange rates of currencies and (c) any Liens granted pursuant to the equal and
ratable provisions referred to in the "Limitation on Liens" covenant described
below shall not be treated as Indebtedness. For purposes of determining
compliance with this "Limitation on Indebtedness" covenant, in the event that an
item of Indebtedness meets the criteria of more than one of the types of
Indebtedness described in the above clauses, the Company, in its sole
discretion, shall classify such item of Indebtedness and only be required to
include the amount and type of such Indebtedness in one of such clauses.
Limitation on Restricted Payments
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, (i) declare or pay any
dividend or make any distribution on or with respect to its Capital Stock held
by Persons other than the Company or any of its Restricted Subsidiaries (other
than dividends or distributions payable solely in shares of its or such
Restricted Subsidiary's Capital Stock (other than Disqualified Stock) or in
options, warrants or other rights to acquire shares of such Capital Stock and
other than pro rata dividends or distributions on Common Stock of Restricted
Subsidiaries other than the Guarantor), (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of the Company or the
Guarantor (including options, warrants or other rights to acquire such shares of
Capital Stock) held by Persons other than the Company or any of its Wholly Owned
Restricted Subsidiaries, (iii) make any voluntary or optional principal payment,
or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes or of the Guarantor that is
subordinated to the Note Guarantee or (iv) make any Investment, other than a
Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) being collectively "Restricted Payments")
if, at the time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and
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be continuing, (B) except with respect to Investments and dividends on the
Common Stock of the Guarantor, the Company could not Incur at least $1.00 of
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant or (C) the aggregate amount of all Restricted Payments after the
Closing Date shall exceed the sum of (1) 50% of the aggregate amount of the
Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net Income is
a loss, minus 100% of such amount) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
pursuant to the "Commission Reports and Reports to Holders" covenant plus (2)
the aggregate Net Cash Proceeds received by the Company or the Guarantor after
the Closing Date from the issuance and sale permitted by the Indenture of its
Capital Stock (other than Disqualified Stock) to a Person who is not a
Subsidiary of the Company or the Guarantor, or from the issuance to a Person who
is not a Subsidiary of the Company or the Guarantor of any options, warrants or
other rights to acquire Capital Stock of the Company (in each case, exclusive of
any convertible indebtedness, Disqualified Stock or any options, warrants or
other rights that are redeemable at the option of the holder, or are required to
be redeemed, prior to the Stated Maturity of the Notes), less the amount
invested in the Company pursuant to clause (iii) of the definition of "Change of
Control" plus (3) an amount equal to the net reduction in Investments (other
than Permitted Investments) made pursuant to this first paragraph of this
"Limitation on Restricted Payments" covenant in any Person resulting from
payments of interest on Indebtedness, dividends, repayments of loans or
advances, or other transfers of assets, in each case to the Company or any
Restricted Subsidiary (except to the extent any such payment is included in the
calculation of Adjusted Consolidated Net Income), or from redesignations of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued in each case as
provided in the definition of "Investments"), not to exceed the amount of
Investments previously made by the Company and any Restricted Subsidiary in such
Person.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of the "Limitation on Indebtedness" covenant; (iii) the declaration or
payment of dividends on the Common Stock of the Company, following a Public
Equity Offering of such Common Stock, of up to 6% per annum of the Net Cash
Proceeds received by the Company in such Public Equity Offering; (iv) the
repurchase, redemption or other acquisition of Capital Stock of the Company (or
options, warrants or other rights to acquire such Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of, shares of
Capital Stock (other than Disqualified Stock) of the Company (or options,
warrants or other rights to acquire such Capital Stock); (v) the making of any
principal payment or the repurchase, redemption, retirement, defeasance or other
acquisition for value of Indebtedness of the Company which is subordinated in
right of payment to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of the Capital Stock of the Company
(other than Disqualified Stock); (vi) payments or distributions, in the nature
of satisfaction of dissenters' rights, pursuant to or in connection with a
consolidation, merger or transfer of assets that complies with the provisions of
the Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the property and assets of the Company; (vii) Investments
in Unrestricted Subsidiaries not to exceed, at any one time outstanding, the
greater of (A) $5 million or (B) 10% of Consolidated EBITDA for the preceding
four quarters for which reports have been filed pursuant to the "Commission
Reports and Reports to Holders" covenant; and (viii) Investments in Unrestricted
Subsidiaries that, in Brazil, directly or indirectly, engage in a business
similar to the business of the Company and its Restricted Subsidiaries, in an
amount not to exceed $10 million at any one time outstanding; provided that,
except in the case of clauses (i) and (iv), no Default or Event of Default shall
have occurred and be continuing or occur as a consequence of the actions or
payments set forth therein. The value of any Restricted Payment made other than
in cash shall be the fair market value thereof. The amount of any Investment
"outstanding" at any time shall be deemed to be equal to the amount of such
Investment on
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the date made, less the return of capital to the Company and its Restricted
Subsidiaries with respect to such Investment (up to the amount of such
Investment).
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof and an
exchange of Capital Stock or Indebtedness referred to in clause (iv) or (v)
thereof), and the Net Cash Proceeds from any issuance of Capital Stock referred
to in clause (iii), (iv) or (v), shall be included in calculating whether the
conditions of clause (C) of the first paragraph of this "Limitation on
Restricted Payments" covenant have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Notes, or Indebtedness that is pari passu with the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first paragraph
of this "Limitation on Restricted Payments" covenant only to the extent such
proceeds are not used for such redemption, repurchase or other acquisition of
Indebtedness. For purposes of determining compliance with this "Limitation on
Restricted Payments" covenant, in the event that a Restricted Payment meets the
criteria of more than one of the types of Restricted Payments described in
clauses (i) through (viii) of the preceding paragraph, the Company, in its sole
discretion, shall classify such Restricted Payment and only be required to
include the amount and type of such Restricted Payment in one of such clauses.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
So long as any of the Notes are outstanding, the Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary (other than the Guarantor) to (i)
pay dividends or make any other distributions permitted by applicable law on any
Capital Stock of such Restricted Subsidiary owned by the Company or any other
Restricted Subsidiary, (ii) pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (iii) make loans or advances to the Company or any
other Restricted Subsidiary or (iv) transfer any of its property or assets to
the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those encumbrances
or restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such Person
acquired by the Company or any Restricted Subsidiary, existing at the time of
such acquisition and not incurred in contemplation thereof, which encumbrances
or restrictions are not applicable to any Person or the property or assets of
any Person other than such Person or the property or assets of such Person so
acquired; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (B) existing by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or assets
of the Company or any Restricted Subsidiary in any manner material to the
Company or any Restricted Subsidiary; (v) with respect to a Restricted
Subsidiary and imposed pursuant to an agreement that has been entered into for
the sale or disposition of any or all of the Capital Stock of, or property and
assets of, such Restricted Subsidiary during the period between the execution of
such agreement and the closing thereunder within three months of such execution;
(vi) with respect to Restricted Subsidiaries in which, on and subsequent to the
Closing Date, the Company and other Restricted Subsidiaries only make
Investments that are evidenced by unsubordinated promissory notes that bear a
reasonable rate of interest and are payable prior to the Stated Maturity of the
Notes; provided that such encumbrances and restrictions expressly allow the
payment of interest and principal on such promissory notes; or (vii)
encumbrances or
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restrictions solely of the type referred to in clause (iii) or (iv) of the
preceding paragraph that are contained in any stockholders' agreement, joint
venture agreement or similar agreement among owners of Common Stock of a
Restricted Subsidiary; provided that such restrictions consist solely of
requirements that transactions between such Restricted Subsidiaries and
affiliates thereof (including the Company and its Restricted Subsidiaries) be on
fair and reasonable terms no less favorable to such Restricted Subsidiary than
could be obtained in a comparable arm's-length transaction with a Person that is
not such an affiliate. Nothing contained in this "Limitation on Dividend and
Other Payment Restrictions Affecting Restricted Subsidiaries" covenant shall
prevent the Company or any Restricted Subsidiary from (1) creating, incurring,
assuming or suffering to exist any Liens otherwise permitted in the "Limitation
on Liens" covenant or (2) restricting the sale or other disposition of property
or assets of the Company or any of its Restricted Subsidiaries that secure
Indebtedness of the Company or any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
Under the terms of the Indenture, the Company will not sell, and will not
permit any Restricted Subsidiary (other than the Guarantor), directly or
indirectly, to issue or sell, any shares of Capital Stock of a Restricted
Subsidiary (including options, warrants or other rights to purchase shares of
such Capital Stock) except (i) to the Company or a Wholly Owned Restricted
Subsidiary, (ii) issuances or sales to foreign nationals of shares of Capital
Stock of foreign Restricted Subsidiaries, to the extent required by applicable
law, (iii) if, immediately after giving effect to such issuance or sale, such
Restricted Subsidiary would no longer constitute a Restricted Subsidiary and any
Investment in such Person remaining after giving effect to such issuance or sale
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant if made on the date of such issuance or sale, (iv) the sale
of Common Stock of Restricted Subsidiaries that is not Disqualified Stock, if
the proceeds of such issuance or sale are applied in accordance with clause (A)
or (B) of the first paragraph of the "Limitation on Asset Sales" covenant or (v)
the transfer of up to 3% of the Common Stock of each Restricted Subsidiary to
employees of such Restricted Subsidiary in connection with such employment.
Limitation on Issuances of Guarantees by Restricted Subsidiaries
Under the terms of the Indenture, the Company will not permit any
Restricted Subsidiary (other than the Guarantor), directly or indirectly, to
Guarantee any Indebtedness of the Company or the Guarantor ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Company or any other
Restricted Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee; provided that this paragraph shall not be
applicable to any Guarantee of any Restricted Subsidiary that (x) existed at the
time such Person became a Restricted Subsidiary and (y) was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is (A) pari passu with the Notes or
the Note Guarantee, then the Guarantee of such Guaranteed Indebtedness shall be
pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes or the Note Guarantee, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes or the Note Guarantee, as the case may be.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
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Limitation on Transactions with Shareholders and Affiliates
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, directly or indirectly, enter into, renew or
extend any transaction (including, without limitation, the purchase, sale, lease
or exchange of property or assets, or the rendering of any service) with any
holder (or any Affiliate of such holder) of 5% or more of any class of Capital
Stock of the Company or with any Affiliate of the Company or any Restricted
Subsidiary, except upon fair and reasonable terms no less favorable to the
Company or such Restricted Subsidiary than could be obtained, at the time of
such transaction or at the time of the execution of the agreement providing
therefor, in a comparable arm's-length transaction with a Person that is not
such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized U.S.
investment banking firm stating that the transaction is fair to the Company or
such Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; or (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant (other than
pursuant to clause (iv) of the definition of "Permitted Investment").
Notwithstanding the foregoing, any transaction or series of transactions covered
by the first paragraph of this "Limitation on Transactions with Shareholders and
Affiliates" covenant and not covered by clauses (ii) through (iv) of this
paragraph, the aggregate amount of which exceeds $1 million in value, must be
approved or determined to be fair in the manner provided for in clause (i)(A) or
(B) above.
Limitation on Liens
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, create, incur, assume or suffer to exist any Lien
on any of its assets or properties of any character, or any shares of Capital
Stock or Indebtedness of any Restricted Subsidiary, without making effective
provision for all of the Notes and all other amounts due under the Indenture to
be directly secured equally and ratably with (or, if the obligation or liability
to be secured by such Lien is subordinated in right of payment to the Notes,
prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of the "Limitation on Indebtedness" covenant;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets securing
the Indebtedness being refinanced; (v) Liens on assets having a fair market
value equal to no more than 10% of the fair market value of the Adjusted
Consolidated Net Tangible Assets that are not subject to Liens on the Closing
Date; or (vi) Permitted Liens.
Limitation on Sale-Leaseback Transactions
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, enter into any sale-leaseback transaction
involving any of its assets or properties whether now owned or hereafter
acquired, whereby the Company or a Restricted Subsidiary sells or transfers such
assets or properties and then or thereafter leases such assets or properties or
any part thereof or any other assets or properties
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which the Company or such Restricted Subsidiary, as the case may be, intends to
use for substantially the same purpose or purposes as the assets or properties
sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the transaction is between the Company and any Wholly Owned
Restricted Subsidiary or between Wholly Owned Restricted Subsidiaries; or (iii)
the Company or such Restricted Subsidiary, within six months after the sale or
transfer of any assets or properties is completed, applies an amount not less
than the net proceeds received from such sale in accordance with clause (A) or
(B) of the first paragraph of the "Limitation on Asset Sales" covenant described
below.
Limitation on Asset Sales
Under the terms of the Indenture, the Company will not, and will not permit
any Restricted Subsidiary to, consummate any Asset Sale, unless (i) the
consideration received by the Company or such Restricted Subsidiary is at least
equal to the fair market value of the assets sold or disposed of and (ii),
except with respect to Customer Owned Transmission Facilities, at least 85% of
the consideration received consists of cash or Temporary Cash Investments. In
the event and to the extent that the Net Cash Proceeds received by the Company
or any of its Restricted Subsidiaries from one or more Asset Sales occurring on
or after the Closing Date in any period of 12 consecutive months exceed 10% of
Adjusted Consolidated Net Tangible Assets (determined as of the date closest to
the commencement of such 12-month period for which a consolidated balance sheet
of the Company and its Subsidiaries has been filed pursuant to the "Commission
Reports and Reports to Holders" covenant), then the Company shall or shall cause
the relevant Restricted Subsidiary to (i) within six months after the date Net
Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to the "Limitation on Issuances of
Guarantees by Restricted Subsidiaries" covenant or Indebtedness of any other
Restricted Subsidiary, in each case owing to a Person other than the Company or
any of its Restricted Subsidiaries or (B) invest an equal amount, or the amount
not so applied pursuant to clause (A), (or enter into a definitive agreement
committing to so invest within six months after the date of such agreement), in
property or assets (other than current assets) of a nature or type or that are
used in a business (or in a company having property and assets of a nature or
type, or engaged in a business) similar or related to the nature or type of the
property and assets of, or the business of, the Company and its Restricted
Subsidiaries existing on the date of such investment (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) apply (no later than the end of the
six-month period referred to in clause (i)) such excess Net Cash Proceeds (to
the extent not applied pursuant to clause (i)) as provided in the following
paragraph of this "Limitation on Asset Sales" covenant. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such six-month period as set forth in clause (i) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 101% of the principal amount of the Notes, plus, in
each case, accrued interest (if any) to the date of purchase.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the date of purchase. Prior to the mailing of the notice to
Holders commencing such Offer to Purchase, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full all
indebtedness of the Company that would prohibit the repurchase of the Notes
pursuant to such Offer to Purchase or (ii) obtain any requisite consents under
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instruments governing any such indebtedness of the Company to permit the
repurchase of the Notes. The Company shall first comply with the covenant in the
preceding sentence before it shall be required to repurchase Notes pursuant to
this "Repurchase of Notes upon a Change of Control" covenant. The Company will
comply with any tender offer rules under the Exchange Act which may then be
applicable, including Rule 14e-1, in connection with an Offer to Purchase the
Notes as a result of a Change of Control.
If the Company is unable to repay all of its indebtedness that would
prohibit repurchase of the Notes or is unable to obtain the consents of the
holders of indebtedness, if any, of the Company outstanding at the time of a
Change of Control whose consent would be so required to permit the repurchase of
Notes, then the Company will have breached such covenant. This breach will
constitute an Event of Default under the Indenture if it continues for a period
of 30 consecutive days after written notice is given to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes outstanding. In addition, the failure by the Company to repurchase Notes
at the conclusion of the Offer to Purchase will constitute an Event of Default
without any waiting period or notice requirements.
There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
any covenant that may be contained in other securities of the Company which
might be outstanding at the time). The above covenant requiring the Company to
repurchase the Notes will, unless the consents referred to above are obtained,
require the Company to repay all indebtedness then outstanding which by its
terms would prohibit such Note repurchase, either prior to or concurrently with
such Note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is required to file reports with the Commission,
if any Notes are outstanding, the Company shall file with the Commission all
such reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of 1934,
as amended, if it were subject thereto, unless the Company shall be unable to
effect such filing or the Commission shall refuse to accept such filing. The
Company shall supply the Trustee and each Holder of Notes or shall supply to the
Trustee for forwarding to each such Holder, without cost to such Holder, copies
of such reports and other information, whether or not the Company shall be
unable to effect such filing or the Commission refuses to accept such filing.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture: (a) default in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period of 30
days; (c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes and
such default or breach continues for a period of 30 consecutive days after
written notice by the Trustee or the Holders of 25% or more in aggregate
principal amount of the Notes; (d) there occurs with respect to any issue or
issues of Indebtedness of the Company, the Guarantor or any Significant
Subsidiary having an outstanding principal amount of $5 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (e) any
final judgment or order for the payment of money in excess of $5 million in the
aggregate for all such final judgments or orders against all such Persons
(treating any deductibles, self-insurance or retention as not so covered) shall
be rendered against the Company, the Guarantor or any Significant Subsidiary and
shall not be paid or discharged, and either (A) an enforcement proceeding shall
have commenced by any creditor upon such judgment or order or (B) there shall be
any
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period of 30 consecutive days following entry of the final judgment or order
that causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to exceed $5
million during which a stay of enforcement of such final judgment or order, by
reason of a pending appeal or otherwise, shall not be in effect; (f) a court
having jurisdiction in the premises enters a decree or order for (A) relief in
respect of the Company, the Guarantor or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company,
the Guarantor or any Significant Subsidiary or for all or substantially all of
the property and assets of the Company, the Guarantor or any Significant
Subsidiary or (C) the winding up or liquidation of the affairs of the Company,
the Guarantor or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 30 consecutive days;
(g) the Company, the Guarantor or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consents to the entry of an order for relief in
an involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company, the Guarantor or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company, the Guarantor or any Significant Subsidiary or (C)
effects any general assignment for the benefit of creditors; or (h) the Note
Guarantee shall cease to be, or shall be asserted in writing by the Company or
the Guarantor not to be, in full force and effect or enforceable in accordance
with its terms.
If an Event of Default (other than an Event of Default specified in clause
(f) or (g) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes, then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (d)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (d) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto, and no other Defaults under the Indenture have occurred and are
continuing after giving pro forma effect to such remedy, cure or waiver. If an
Event of Default specified in clause (f) or (g) above occurs with respect to the
Company, the principal of, premium, if any, and accrued interest on the Notes
then outstanding shall ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any Holder.
The Holders of at least a majority in principal amount of the outstanding Notes
by written notice to the Trustee, may waive all past defaults and rescind and
annul a declaration of acceleration and its consequences if (i) all existing
Events of Default, other than the nonpayment of the principal of, premium, if
any, and interest on the Notes that have become due solely by such declaration
of acceleration, have been cured or waived and (ii) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction. For
information as to the waiver of defaults, see "-- Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders
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of a majority in aggregate principal amount of the outstanding Notes do not give
the Trustee a direction that is inconsistent with the request. However, such
limitations do not apply to the right of any Holder of a Note to receive payment
of the principal of, premium, if any, or interest on, such Note or to bring suit
for the enforcement of any such payment, on or after the due date expressed in
the Notes, which right shall not be impaired or affected without the consent of
the Holder.
The Indenture will require certain officers of the Company to certify, on
or before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's, and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Each of the Company and the Guarantor shall not consolidate with, merge
with or into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially an
entirety in one transaction or a series of related transactions) to, any Person
(other than a consolidation or merger with or into a Wholly Owned Restricted
Subsidiary with a positive net worth; provided that, in connection with any such
merger or consolidation, no consideration (other than Common Stock in the
surviving Person, the Company or the Guarantor, as the case may be) shall be
issued or distributed to the stockholders of the Company or the Guarantor, as
the case may be) or permit any Person to merge with or into the Company or the
Guarantor unless: (i) the Company or the Guarantor, as the case may be, shall be
the continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company or the Guarantor, as the case may be, is
merged or that acquired or leased such property and assets of the Company or the
Guarantor, as the case may be, shall be a corporation organized and validly
existing under the laws of the United States of America or any jurisdiction
thereof (or, in the case of a consolidation, merger or sale, conveyance,
transfer, lease or other disposition of all or substantially all of the property
or assets of the Guarantor, the Republic of Argentina) and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company or the Guarantor, as the case may be, with
respect to the Notes and under the Indenture; (ii) immediately after giving
effect to such transaction, no Default or Event of Default shall have occurred
and be continuing; (iii) immediately after giving effect to such transaction on
a pro forma basis, the Company or the Guarantor, as the case may be, or any
Person becoming the successor obligor of the Notes shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company or the
Guarantor, as the case may be, immediately prior to such transaction; (iv)
immediately after giving effect to such transaction on a pro forma basis the
Company, or any Person becoming the successor obligor of the Notes, as the case
may be, could Incur at least $1.00 of Indebtedness under the first paragraph of
the "Limitation on Indebtedness" covenant; and (v) the Company or the Guarantor,
as the case may be, delivers to the Trustee an Officers' Certificate (attaching
the arithmetic computations to demonstrate compliance with clauses (iii) and
(iv)) and Opinion of Counsel, in each case stating that such consolidation,
merger or transfer and such supplemental indenture complies with this provision
and that all conditions precedent provided for herein relating to such
transaction have been complied with; provided, however, that clauses (iii) and
(iv) above do not apply if, in the good faith determination of the Board of
Directors of the Company, whose determination shall be evidenced by a Board
Resolution, the principal purpose of such transaction is to change the state of
incorporation of the Company; and provided further that any such transaction
shall not have as one of its purposes the evasion of the foregoing limitations.
DEFEASANCE
Defeasance and Discharge
The Indenture will provide that the Company will be deemed to have paid and
will be discharged from any and all obligations in respect of the Notes on the
123rd day after the deposit referred to below, and the
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provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance with
the terms of the Indenture and the Notes, (B) the Company has delivered to the
Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this "Defeasance" provision and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable federal income tax law after
the Closing Date such that a ruling is no longer required or (y) a ruling
directed to the Trustee received from the Internal Revenue Service to the same
effect as the aforementioned Opinion of Counsel and (ii) an Opinion of Counsel
to the effect that the creation of the defeasance trust does not violate the
Investment Company Act of 1940 and after the passage of 123 days following the
deposit, the trust fund will not be subject to the effect of Section 547 of the
United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law, (C) immediately after giving effect to such deposit on a pro forma basis,
no Event of Default, or event that after the giving of notice or lapse of time
or both would become an Event of Default, shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd day after
the date of such deposit, and such deposit shall not result in a breach or
violation of, or constitute a default under, any other agreement or instrument
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound, and (D) if at such time the Notes
are listed on a national securities exchange, the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the Notes will not be delisted
as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default
The Indenture further will provide that the provisions of the Indenture
will no longer be in effect with respect to clauses (iii) and (iv) under
"Consolidation, Merger and Sale of Assets" and all the covenants described
herein under "Covenants," clause (c) under "Events of Default" with respect to
such covenants and clauses (iii) and (iv) under "Consolidation, Merger and Sale
of Assets," and clauses (d) and (e) under "Events of Default" shall be deemed
not to be Events of Default, upon, among other things, the deposit with the
Trustee, in trust, of money and/or U.S. Government Obligations that through the
payment of interest and principal in respect thereof in accordance with their
terms will provide money in an amount sufficient to pay the principal of,
premium, if any, and accrued interest on the Notes on the Stated Maturity of
such payments in accordance with the terms of the Indenture and the Notes, the
satisfaction of the provisions described in clauses (B)(ii), (C) and (D) of the
preceding paragraph and the delivery by the Company to the Trustee of an Opinion
of Counsel to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and Events of Default and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred.
Defeasance and Certain Other Events of Default
In the event the Company exercises its option to omit compliance with
certain covenants and provisions of the Indenture with respect to the Notes as
described in the immediately preceding paragraph and the Notes are declared due
and payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the Notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Notes at the time of the acceleration resulting from such Event of Default.
However, the Company will remain liable for such payments.
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MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company,
the Guarantor and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of each
Holder affected thereby, (i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, (ii) reduce the principal amount of,
or premium, if any, or interest on, any Note, (iii) change the place or currency
of payment of principal of, or premium, if any, or interest on, any Note, (iv)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Note, (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the Indenture, (vi) waive a default in the payment of principal of, premium, if
any, or interest on the Notes, (vii) release the Guarantor from the Note
Guarantee or (viii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS, OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, or interest on any of the Notes or for any claim based
thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, shareholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default,
the Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as
amended, incorporated by reference therein contain limitations on the rights of
the Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; provided, however, that if it acquires any
conflicting interest, it must eliminate such conflict or resign.
GOVERNING LAW AND SUBMISSION TO JURISDICTION
The Notes, the Note Guarantee and the Indenture will be governed by the
laws of the State of New York. The Company and the Guarantor will submit to the
jurisdiction of the U.S. federal and New York state courts located in the City
of New York for purposes of all legal actions and proceedings instituted in
connection with the Notes, the Note Guarantee and the Indenture. The Company and
the Guarantor have appointed CT Corporation System, 1633 Broadway, New York, New
York 10019 as their authorized agent upon which process may be served in any
such action.
CURRENCY INDEMNITY
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company or the Guarantor under or in connection with the Notes or
the Note Guarantee, including damages. Any amount received or recovered in a
currency other than dollars (whether as a result of, or of the enforcement of, a
judgment or order of a court of any jurisdiction, in the winding-up or
dissolution of the Company or the Guarantor or otherwise) by any Holder of a
Note in respect of any sum expressed to be due to it from the Company or the
Guarantor shall only constitute a discharge to the Company or the Guarantor to
the extent of the dollar amount which the recipient is able to purchase with the
amount so received or recovered in that
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other currency on the date of that receipt or recovery (or, if it is not
practicable to make that purchase on that date, on the first date on which it is
practicable to do so). If that dollar amount is less than the dollar amount
expressed to be due to the recipient under any Note or the Note Guarantee, the
Company and the Guarantor shall indemnify the recipient against any loss
sustained by it as a result. In any event, the Company and the Guarantor shall
indemnify the recipient against the cost of making any such purchase. For the
purposes of this paragraph, it will be sufficient for the Holder of a Note to
certify in a satisfactory manner (indicating the sources of information used)
that it would have suffered a loss had an actual purchase of dollars been made
with the amount so received in that other currency on the date of receipt or
recovery (or, if a purchase of dollars on such date had not been practicable, on
the first date on which it would have been practicable, it being required that
the need for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the Company's
and the Guarantor's other obligations, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by any Holder of a Note and shall continue in full force and effect despite any
other judgment, order, claim or proof for a liquidated amount in respect of any
sum due under any Note.
ADDITIONAL AMOUNTS
Any payments made by the Guarantor under or with respect to the Notes
pursuant to the Note Guarantee will be made free and clear of and without
withholding or deduction for or on account of any present or future tax, duty,
levy, impost, assessment or other governmental charge (including penalties,
interest and other liabilities related thereto) imposed or levied by or on
behalf of the Government of the Republic of Argentina or of any subdivision,
province or territory thereof or by any authority or agency therein or thereof
having power to tax (hereinafter "Taxes"), unless the Guarantor is required to
withhold or deduct Taxes by law or by the interpretation or administration
thereof. If the Guarantor is required to withhold or deduct any amount for or on
account of Taxes from any payment made under or with respect to the Note
Guarantee, the Guarantor will pay such additional amounts ("Additional Amounts")
as may be necessary, so that the net amount received by each Holder of Notes
(including Additional Amounts) after such withholding or deduction will not be
less than the amount such Holder would have received if such Taxes had not been
withheld or deducted; provided, however, that no Additional Amounts will be
payable with respect to a payment made to a Holder (an "Excluded Holder") (i)
who is liable for taxes or duties in respect of such Note by reason of its
having some connection with Argentina other than the mere holding of such Note
or the receipt of principal or interest in respect thereof; (ii) in respect of
any estate, inheritance, gift, sales, transfer or personal property tax or any
similar tax, assessment or governmental charge; or (iii) in respect of any tax,
assessment or other governmental charge which would not have been imposed but
for any failure to comply with certification, information or other report
requirements concerning the nationality, residence or identity of the Holder or
beneficial owner of such Note, if such compliance is required by statute or by
regulation of Argentina or of any political subdivision or taxing authority
thereof or therein as a precondition to relief or exemption from such tax,
assessment or other governmental charge. The Guarantor will, upon written
request of any Holder (other than an Excluded Holder), reimburse such Holder for
the amount of (i) any Taxes so levied or imposed and paid by such Holder as a
result of payments made under or with respect to the Notes and (ii) any Taxes so
levied or imposed with respect to any reimbursement under the foregoing clause
(i), but excluding any such Taxes on such Holder's net income so that the net
amount received by such Holder after such reimbursement will not be less than
the net amount the Holder would have received if Taxes on such reimbursement had
not been imposed.
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable, if the Guarantor will be obligated to
pay Additional Amounts with respect to such payment, the Guarantor will deliver
to the relevant Trustee an Officers' Certificate stating the fact that such
Additional Amounts will be payable and the amounts so payable and will set forth
such other information necessary to enable the Trustee to pay such Additional
Amounts to Holders on the payment date. Whenever either in the Indenture or in
this Memorandum there is mentioned, in any context, the payment of principal (or
premium, if any), Redemption Price, interest or any other amount payable under
or with respect to any Note, such mention shall be deemed to include mention of
the payment of Additional Amounts to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof.
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BOOK ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes to be issued upon the consummation
of the Exchange Offer will be issued in the form of a single global note (the
"Global Note"). The Global Note will be deposited with the Trustee as custodian
for, and registered in the name of, a nominee of DTC. Except as set forth below,
the Global Note may be transferred, in whole and not in part, only to the DTC or
another nominee of the DTC.
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Note represented by such Global Note for all
purposes under such Note. No beneficial owner of an interest in a Global Note
will be able to transfer that interest except in accordance with DTC's
applicable procedures.
Payments made with respect to a Global Note will be made to DTC or its
nominee, as the case may be, as the registered owner thereof. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests in a Global Note or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment
made with respect to a Global Note will credit participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the Global Note as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in such
Global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same day funds.
The Company expects that DTC will take any action permitted to be taken by
a holder of Note (including the presentation of Note for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note is credited and only in respect of such portion
of the aggregate liquidation preference of the Note as to which such participant
or participants has or have given such direction.
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of notes and
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
participants or indirect participants of their respective obligations under the
rules and procedures governing their operations.
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CERTIFICATED NOTES
The New Notes represented by the Global Note are exchangeable for
certificated New Notes in definitive form of like tenor as such New Notes, in
denominations of $1,000 and integral multiples thereof if (i) DTC notifies the
Company that it is unwilling or unable to continue as a depositary for the
Global Notes and a successor depositary is not appointed by the Company within
90 days of such notice or (ii) an Event of Default has occurred and is
continuing and the Registrar has received a request to the foregoing effect from
DTC.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the principal material United States federal
income tax consequences which may result to Holders from the purchase,
ownership, and disposition of the Notes is based on the advice of Arnold &
Porter, counsel to the Company. This discussion is based on existing provisions
of the U.S. Internal Revenue Code (the "Code"), applicable permanent, temporary
and proposed Treasury Regulations ("Treasury Regulations"), judicial authority,
and administrative rulings and pronouncements of the Internal Revenue Service
(the "Service") and is based on facts concerning the Company and its
subsidiaries as of the date hereof. There can be no assurance that the Service
will not take a contrary view, and no ruling from the Service has been or will
be sought, on the issues discussed herein. Legislative, judicial, or
administrative changes or interpretations may be forthcoming that could alter or
modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to Holders. This discussion applies only to a person who is (i) a
citizen or resident of the United States for U.S. federal income tax purposes,
(ii) a corporation, partnership or other entity created or organized under the
laws of the United States or any political subdivision thereof, or (iii) an
estate or trust the income of which is subject to U.S. federal income taxation
regardless of its source (a "U.S. Holder").
This summary does not purport to deal with all aspects of U.S. federal
income taxation that may be relevant to particular U.S. Holders of Notes in
light of their personal investment or tax circumstances, or to certain types of
investors (including insurance companies, certain financial institutions,
broker-dealers, tax-exempt organizations, foreign corporations and persons who
are not citizens or residents of the United States, and U.S. Holders who
directly or indirectly own 10% or more of the voting power of the Company) who
are subject to special treatment under the United States federal income tax
laws, or persons that hold Notes that are a hedge against, or that are hedged
against, currency risk or that are part of a straddle or conversion transaction,
or persons whose functional currency is not the U.S. dollar. Moreover, the
effect of any applicable state, local or foreign tax laws is not discussed.
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO THEM OF PURCHASING, HOLDING, AND DISPOSING OF THE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN TAX LAWS.
Exchange of Old Notes for New Notes. An exchange of the Old Notes for the
New Notes pursuant to the Exchange Offer will not constitute a taxable event for
federal income tax purposes because the New Notes will not be considered to
differ materially in kind or extent from the Old Notes. Rather, the New Notes
received by U.S. Holders will be treated as a continuation of the Old Notes in
the hands of such holders. As a result, U.S. Holders who exchange their Old
Notes for New Notes should not recognize any income, gain or loss for federal
income tax purposes with respect to such exchange.
Interest and Additional Amounts. Interest on the Notes will be taxable to
a U.S. Holder as ordinary interest income at the time such amounts are accrued
or received, in accordance with the U.S. Holder's method of accounting for U.S.
federal income tax purposes. In addition, in the event that Additional Amounts
are paid under the Guarantee in respect of Argentine taxes imposed on payments
on the Notes (as described in "Description of the Notes -- Additional Amounts")
such Additional Amounts will be taxable to a U.S. Holder as ordinary interest
income at the time such amounts are accrued or received, in accordance with the
U.S. Holder's method of accounting for U.S. federal income tax purposes. The
amount of interest (including original issue discount) taxable to a U.S. Holder
will include all Argentine taxes withheld by the Guarantor in respect thereof.
Thus, a U.S. Holder will be required to report income in an amount greater than
the cash it receives in respect of payments on its Notes. However, a U.S. Holder
may, subject to certain limitations, be eligible to claim as a credit or
deduction for purposes of computing its U.S. federal income tax liability the
Argentine taxes withheld, notwithstanding that the payment of such taxes will be
made by the Guarantor. The rules relating to foreign tax credits are extremely
complex, and U.S. Holders should consult with their own tax advisors with regard
to the availability of a foreign tax credit and the application of the foreign
tax credit to their particular situations.
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Further, under U.S. federal income tax rules, interest payments on a debt
instrument generally are treated as derived from U.S. sources or foreign sources
based on the country of incorporation of the issuer of the debt instrument.
However, interest paid by a U.S. corporation that qualifies as an "80/20
company" for U.S. federal income tax purposes is treated as foreign source
interest income. A U.S. corporation will qualify as an 80/20 company if at least
80% of such corporation's gross income from all sources for a three-year testing
period ending with the close of the taxable year preceding payment is "active
foreign business income." The 80% active business requirement may be met by a
U.S. corporation alone or by a group including domestic and foreign subsidiaries
in which the U.S. corporation owns, directly or indirectly, at least 50% of both
the voting power and value of stock of the subsidiary corporation.
The Company expects to be an 80/20 company for U.S. federal income tax
purposes, although this determination will be made periodically based on the
Company's operations and source of income at the time of each determination. If
interest payments received by U.S. Holders are treated as foreign source income
for a taxable year, U.S. Holders who are otherwise claiming a foreign tax credit
should consult with their own tax advisors to determine the effect of including
such income in their foreign tax credit calculations.
Original Issue Discount. The Company intends to take the position that
stated interest on the Notes does not represent original issue discount. If the
Notes, however, were treated as having original issue discount, a U.S. Holder
(including a cash basis holder) generally would be required to include the
interest on the Notes in income for U.S. federal income tax purposes under the
accrual method on a constant yield basis (or perhaps at the beginning of each
interest period) resulting in the inclusion of interest in income somewhat in
advance of the receipt of cash attributable to that income.
In general, the amount of original issue discount, if any, on a debt
instrument is the excess of its "stated redemption price at maturity" over its
"issue price," subject to a statutorily defined de minimis exception. The "issue
price" of a debt instrument issued for cash is equal to the offering price to
the public (excluding sales to bond houses, brokers or similar persons or
organizations acting in the capacity of an underwriter, placement agent or
wholesaler) at which price a substantial amount of such debt instruments was
sold. According to the Treasury Regulations, the issue price of the Notes does
not change even if part of the issue is subsequently sold at a different price.
The "stated redemption price at maturity" of a debt instrument is the sum of its
principal amount plus all other payments required thereunder, other than
payments of "qualified stated interest" (defined generally as stated interest
that is unconditionally payable in cash or in property (other than the debt
instruments of the issuer), at least annually at a single fixed rate that
appropriately takes into account the length of intervals between payments).
In general, the amount of original issue discount that a holder of a debt
instrument with original issue discount must include in gross income for United
States federal income tax purposes will be the sum of the "daily portions" of
original issue discount with respect to such debt instrument for each day during
the taxable year or portion of a taxable year on which such holder holds the
debt instrument. The daily portion is determined under a constant yield method
by allocating to each day of an accrual period (generally, a six month period or
a shorter or longer period) a pro rata portion of an amount equal to the
"adjusted issue price" of the debt instrument at the beginning of the accrual
period multiplied by the yield to maturity of the debt instrument. The yield to
maturity of a debt instrument is the discount rate that, when applied to all
payments due under the debt instrument produces a present value equal to the
issue price of the debt instrument. The "adjusted issue price" is the issue
price of the debt instrument increased by the accrued original issue discount
for all prior accrual periods (and decreased by the amount of cash payments made
in all prior accrual periods, other than qualified stated interest payments).
As described under "Exchange Offer -- Acceptance of Old Notes for Exchange;
Delivery of New Notes," in the event that an exchange offer is not consummated
and a shelf registration is not declared effective prior to the date that is six
months after the Closing Date, then additional interest of 0.5% per annum
("Additional Interest") shall become payable with respect to the Notes. It is
not expected that such a failure by the Company would materially affect the U.S.
federal income tax consequences of the ownership of Notes by U.S. Holders,
except that U.S. Holders using the cash method of tax accounting may be required
to include such additional interest in gross income on an economic accrual
basis. Treasury Regulations provide that in
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the case of a debt instrument such as a Note that provides for an alternative
payment schedule applicable upon the occurrence of one or more contingencies,
the yield and maturity of such debt instrument for purposes of calculating the
amount of original issue discount, if any, are determined by assuming that the
payments will be made according to the stated payment schedule of the debt
instrument unless, based on all the facts and circumstances as of the closing
date, it is more likely than not that payments will not be made in accordance
with the stated payment schedule of the debt instrument. The Company has
determined that it is more likely than not that Additional Interest will not be
required to be paid. As a result, the Company will assume that no Additional
Interest will be paid. This determination by the Company is generally binding on
all Holders of Notes, unless a Holder explicitly discloses on a statement
attached to such Holder's timely filed United States federal income tax return
for the taxable year that includes the acquisition date of the Note that its
determination of yield and maturity is different from that of the Company. The
yield to maturity of the Notes is 12 1/8%, based on the issue price and computed
on the basis of semiannual compounding. The above yield does not take into
account any Additional Interest. There can be no assurance that forthcoming
Treasury regulations will not require that such amounts be included in computing
the yield to maturity. If Additional Interest does become payable, then solely
for purposes of the accrual of original issue discount, if any, the yield and
maturity of the Notes will be redetermined by treating the Notes as reissued on
the date the exchange offer requirement is not met for an amount equal to its
adjusted issue price on that date.
Tax Basis. A U.S. Holder's initial tax basis in a Note will be equal to
the purchase price paid by such U.S. Holder for such Note. The tax basis of the
Notes in the hands of each U.S. Holder will be increased by the amount of
original issue discount, if any, on such Note that is included in the U.S.
Holder's gross income and will be decreased by the amount of any cash payments
received with respect to the debt instrument, whether such payments are
denominated as principal or interest.
Election. A Holder of Notes, subject to certain limitations, may elect to
include all interest and discount on the Notes in gross income under the
constant yield method. For this purpose, interest includes stated and unstated
interest, acquisition discount, original issue discount, de minimis market
discount and market discount, as adjusted by any amortizable bond premium or
acquisition premium. Any such election, if made in respect of a market discount
bond, will constitute an election to include market discount in income currently
on all market discount bonds acquired by such Holder on or after the first day
of the first taxable year to which the election applies. See "Market Discount."
Acquisition Premium. If a U.S. Holder of a Note acquired such Note for an
amount in excess of its "adjusted issue price" but less than or equal to the sum
of all amounts payable on the Note after the date of such purchase, such Note
will have an acquisition premium to the extent of such excess. Notwithstanding
the original issue discount rules described in "Original Issue Discount" above,
the Holder of a Note with an acquisition premium would be entitled to reduce the
daily portion of original issue discount includible in income by a fraction, the
numerator of which is the excess of the adjusted tax basis of the Note
immediately after its acquisition over the adjusted issue price of the Note and
the denominator of which is the excess of the sum of all payments (other than
payments of qualified stated interest) after the purchase date over such Note's
adjusted issue price.
Market Discount. The Code generally requires holders of "market discount
bonds" to treat as ordinary income any gain realized on the disposition (or
gift) of such bonds to the extent of the accrued market discount during the
holder's period of ownership. A "market discount bond" is a debt obligation
purchased at a discount, subject to a statutory de minimis exception. For this
purpose, a purchase at a market discount includes (i) a purchase after the
original issue at a price below the stated redemption price at maturity, (ii) a
purchase at original issue at a price below its "issue price" and the stated
redemption price at maturity, or (iii) in the case of a debt instrument (such as
a Note) issued with original issue discount, a purchase at a price below (a) its
"issue price" plus (b) the amount of original issue discount includible in
income by all prior holders of the debt instrument, minus (c) all cash payments
(other than payments constituting qualified stated interest) received by such
prior holders. The accrued market discount generally equals a ratable portion of
the bond's market discount, based on the number of days the taxpayer has held
the bond at the time of such disposition, as a percentage of the number of days
from the date the taxpayer acquired the bond to its date of maturity.
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A holder of "market discount bonds" generally is not required to include
accrued market discount in income until (i) such holder receives a partial
principal payment; (ii) such holder sells or otherwise disposes of such market
discount bonds; or (iii) such market discount bonds are retired or redeemed by
the issuer. If a market discount bond is exchanged or otherwise disposed of in a
transaction which under the Code does not require the recognition of gain or
loss, the transferor of such debt instrument nevertheless will be required with
respect to certain nonrecognition transactions to recognize gain, if any, to the
extent of any accrued market discount.
Amortizable Bond Premium. Generally, if the tax basis of an obligation
held as a capital asset exceeds the amount payable at maturity of the
obligation, such excess will constitute amortizable bond premium that the holder
may elect to amortize under the constant yield method over the period from his
acquisition date to the obligation's maturity date. A holder who elects to
amortize bond premium must reduce his tax basis in the related obligation by the
amount of the aggregate amortization allowable for amortizable bond premium.
Amortizable bond premium will be treated under the Code as an offset to interest
income on the related debt instrument for federal income tax purposes, subject
to the promulgation of Treasury Regulations altering such treatment.
Disposition. Unless a nonrecognition provision applies, the sale,
exchange, redemption (including pursuant to an offer by the Company) or other
disposition of a Note, will be a taxable event for U.S. federal income tax
purposes. In such event, in general, a U.S. Holder of Notes will recognize gain
or loss equal to the difference between (i) the amount of cash plus the fair
market value of property received (except to the extent attributable to accrued
interest on the Notes) and (ii) the Holder's tax basis in the Notes (as
increased by any original issue discount and market discount previously included
in income by the U.S. Holder and decreased by any amortizable bond premium, if
any, deducted over the term of the Notes). Subject to the market discount rules
discussed above, any such gain or loss will generally be long-term capital gain
or loss, provided the Notes have been held for more than one year. The
deductibility of capital losses is subject to limitations. At the time of sale,
exchange, disposition, retirement or redemption, a U.S. Holder of the Notes must
also include in income any previously accrued but unrecognized original issue
discount.
Applicable High Yield Discount Obligations. Due to their maturity date,
yield to maturity, and de minimis amount of original issue discount, it is
anticipated that the Notes will not constitute high yield discount obligations
("AHYDOs").
Generally, under Section 163(e)(5) and 163(i) of the Code, a C corporation
that is an issuer of debt obligations subject to the AHYDO rules may not deduct
any portion of original issue discount on the obligations until such portion is
actually paid. A debt obligation is generally subject to the AHYDO rules if
original issue discount is not deductible until paid with respect to any debt
instrument issued by a corporation which (i) has a maturity date which is more
than five years from the date of issue, (ii) has a yield to maturity which
equals or exceeds five percentage points over the applicable federal rate for
the calendar month in which the obligation is issued and (iii) has "significant
original issue discount." Moreover, if the debt instrument's yield to maturity
exceeds the applicable federal rate plus six percentage points, a ratable
portion of the issuing corporation's deduction for original issue discount (the
"Disqualified OID") will be denied. For purposes of the dividends received
deduction under Section 243 of the Code, the Disqualified OID will be treated as
a dividend to the extent it would have been so treated if it had been
distributed by the issuing corporation with respect to its stock. Amounts
treated as dividends will be nondeductible by the issuer, and may qualify for
the dividend received deduction for corporate U.S. Holders, but will be treated
as original issue discount and not as dividends for withholding tax purposes.
U.S. INCOME TAX REPORTING
The Company will report to Holders of the Notes (other than Holders which
are corporations or are other entities included within exempt categories) and
the Service on a Form 1099, which will be furnished to the Holders and the
Service, the amount of any "reportable payments" (including any interest paid
and any original issue discount accrued on the Notes) and any amount withheld
with respect to the Notes during the calendar year.
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Backup Withholding. A Holder of Notes may be subject to backup withholding
at the rate of 31% with respect to interest paid on, original issue discount
accrued on, and gross proceeds from the sale of, the Notes unless (i) such
holder is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A holder of Notes who does not provide the Company or the
applicable reporting entity with his or her correct taxpayer identification
number may be subject to penalties under the Code. The backup withholding tax is
not an additional tax and may be credited against a holder's U.S. federal income
tax liability.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF UNITED STATES FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR U.S. HOLDER OF NOTES IN
LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATION. HOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM
FROM THE PURCHASE, OWNERSHIP, AND DISPOSITION OF NOTES, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of New Notes received
in exchange for Old Notes where such Old Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any commission
or concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus meeting the
requirements of the Securities Act, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed, pursuant to the Registration Rights Agreement, to
pay all expenses incident to the Exchange Offer (including the expenses of one
counsel for all the holders of the Notes as a single class) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon by Arnold
& Porter, Washington, D.C., U.S. counsel to the Company.
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EXPERTS
The combined financial statements of the Company as of December 31, 1994
and 1995, and for each of the three years ended December 31, 1995 included in
this Prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report appearing herein, and have been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of IMPSAT Argentina as of November
30, 1994 and 1995, and for each of the three years ended November 30, 1995
included in this Prospectus have been audited by Deloitte & Touche, Argentina,
independent auditors, as stated in their report appearing herein, and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
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GLOSSARY
Analog: Describes a method of storing, processing and transmitting
information that employs variable and continuous (rather than pulsed or digital)
electrical signals that provide a "representation" or analog of the sound or
image to be transmitted.
Backbone: The core infrastructure of a network. A high-speed transmission
facility or arrangement of such facilities designed to interconnect one central
location to lower speed distribution channels or clusters of dispersed users or
devices.
Bandwidth: The range of frequencies that can be passed through a medium
without distortion. Bandwidth is expressed in hertz (Hz) by subtracting the
lowest frequency in the band from the highest frequency in the band. The greater
the bandwidth, the greater the information carrying capacity of the medium. This
would in turn allow, for example, greater and faster information transfer
between remote sites and the network's host computer.
Bit: A contraction for "binary digit." The smallest piece of data a
computer can process represented as a binary digit 0 or 1. Bits are generally
arranged in groups of eight or sixteen to form a single unit of information
("byte") such as a letter, number or other character.
Bps (Bits per second): A universal measurement of the signaling speed of a
data transmission equivalent to the maximum number of bits that are transmitted
per second.
CAP (Competitive Access Provider): A company that provides its customers
with an alternative to the local exchange carriers by using its own networks to
connect end users to long distance carriers or to interconnect long distance
carriers (special access services), and where authorized, to connect end users
to other end users using dedicated communications paths (private line services).
C-Band: That portion of the electromagnetic spectrum that is the frequency
band range 4-7 GHz and is used heavily for satellite and microwave
transmissions.
Channel: A single path for transmitting electric signals.
Digital: Describes a method of storing, processing and transmitting
information through the use of distinct electronic or optical pulses that
represent binary digits 0 and 1. Digital transmission technologies employ a
sequence of these pulses to represent information, as opposed to continuously
variable analog signals. The precise digital numbers virtually eliminate any
distortion (such as graininess or snow, in the case of video transmission, or
static or other background distortion, in the case of audio transmission).
Fiber Optics: Technology based on thin filaments of glass or other
transparent materials used as the medium for relaying coded light pulses that
represent data, image and sound at extremely transmission high speeds.
Frame Relay: A high-speed, packet-switching protocol for data
transmissions within digital networks at transmission speeds between 56Kbps and
1.544 Mbps. Frame Relay provides about a 300% increase in data throughout,
relative to packet-switched networks using the traditional and more commonly
used X.25 protocol.
Frequency: Usually expressed in hertz (Hz), represents the number of
oscillations per second made by an electronic signal travelling as a radio wave.
The distance between two consecutive oscillations is the wavelength and,
therefore, the shorter the wavelength of a radio signal the higher its
frequency.
GHz (Gigahertz): Approximately one billion hertz.
Hertz (Hz): A unit of measurement of frequency. One Hz is one cycle per
second.
Internet: A global interconnection of thousands of separate computer
networks through high-speed data lines and wireless systems. First established
and controlled by the U.S. Military in the early 1960s, computer access to the
Internet is now available to millions of academic, commercial and individual
users worldwide.
Kbps: Approximately one thousand bits per second.
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Ku Band: That portion of the electromagnetic spectrum that is the
frequency band range 10 to 18 GHz. It is being used increasingly for satellite
transmissions.
MAN (Metropolitan Area Network): A telecommunications network connecting
various user sites within a city.
Mbps: Approximately one million bits per second.
Microwave: A short electromagnetic wave used in the super-high frequency
radio spectrum with frequencies from about 2 to 20 GHz.
Multiplexer: A device that allows two or more users to share a common
physical transmission medium. A multiplexer is usually installed at both ends of
the communications medium, permitting multiplexing of the multiple user inputs
and demultiplexing into multiple output ports.
Packet-Switching: A transmission technique wherein digitized information
is segmented and routed in discrete "packets" each with its own protocol
controls for routing, sequencing and error checking.
Port: A point of access into a computer, a network or other electronic
device.
Private Line: A dedicated communications path directly between end-user
locations (excluding long distance carriers' points-of-presence).
Protocol: Standard rules that govern the format, timing, sequencing and
error control of batches of information exchanged between equipment within a
network.
Protocol Emulation: To be compatible, equipment within a network must
communicate using the same protocol. Protocol emulation technology acts as a
"translator" between equipment that would communicate using otherwise
incompatible protocols.
PTO (Public Telephony Operator): The monopoly providers of public
telephony services.
SCPC (Single Carrier Per Channel): The fixed assignment of transponder
capacity through dedication of overall frequency bandwidth to a single
transmitting earth station.
Transponder: That part of the satellite that accepts the incoming signal,
filters it, converts the incoming frequency to the outgoing frequency, amplifies
it, and relays the signal to the satellite antenna for transmission to the
intended destination.
VSAT (Very Small Aperture Terminal): A satellite ground antenna, typically
between 1 and 3 meters in size, that is typically used in large corporate
wide-area communications networks for point to multi-point or multi-point to
point satellite communications.
X.25: An established and widely used protocol for block transfer between a
host computer and a packet switching network. X.25 was invented for analog
lines, whereas newer, faster protocols such as Frame Relay were designed to run
on less error prone digital fiber connections. The higher error checking
features of X.25 accounts for its slower speed compared to Frame Relay.
126
<PAGE> 128
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
COMBINED FINANCIAL STATEMENTS OF IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
Independent Auditors' Report....................................................... F- 2
Combined Balance Sheets as of December 31, 1994 and 1995 and as of September 30,
1996............................................................................ F- 3
Combined Statements of Operations for the Years Ended December 31, 1993, 1994 and
1995 and the Nine Months Ended September 30, 1995 and 1996...................... F- 4
Combined Statements of Stockholders' Equity for the Years Ended December 31, 1993,
1994 and 1995 and the Nine Months Ended September 30, 1996...................... F- 5
Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995 and the Nine Months Ended September 30, 1995 and 1996...................... F- 6
Notes to Combined Financial Statements............................................. F- 7
CONSOLIDATED FINANCIAL STATEMENTS OF IMPSAT S.A. AND SUBSIDIARIES
Independent Auditors' Report....................................................... F-14
Consolidated Balance Sheets as of November 30, 1994 and 1995 and as of August 31,
1996............................................................................ F-15
Consolidated Statements of Income for the Years Ended November 30, 1993, 1994 and
1995 and the Nine Months Ended August 31, 1995 and 1996......................... F-16
Consolidated Statements of Stockholders' Equity for the Years Ended November 30,
1993, 1994 and 1995 and the Nine Months Ended August 31, 1996................... F-17
Consolidated Statements of Cash Flows for the Years Ended November 30, 1993, 1994
and 1995 and the Nine Months ended August 31, 1995 and 1996..................... F-18
Notes to Consolidated Financial Statements......................................... F-19
</TABLE>
F-1
<PAGE> 129
INDEPENDENT AUDITORS' REPORT
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES:
We have audited the accompanying combined balance sheets of IMPSAT
Corporation and its Combined Subsidiaries, all of which are under common
ownership and common management (collectively, the "Companies") as of December
31, 1994 and 1995, and the related combined statements of operations, changes in
stockholders' equity, and of cash flows for each of the three years ended
December 31, 1995. These combined financial statements are the responsibility of
the Companies' management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined financial position of the Companies as of
December 31, 1994 and 1995, and the combined results of their operations and
their combined cash flows for each of the three years ended December 31, 1995,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Miami, Florida
February 23, 1996
F-2
<PAGE> 130
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 32,135 $ 6,216 $ 93,863
Trade accounts receivable, net......................... 15,647 21,587 25,070
Other receivables...................................... 5,991 6,441 9,186
Prepaid expenses....................................... 4,175 2,662 1,875
-------- -------- -------------
Total current assets.............................. 57,948 36,906 129,994
-------- -------- -------------
PROPERTY, PLANT AND EQUIPMENT, Net.......................... 152,909 199,701 218,094
-------- -------- -------------
NON-CURRENT ASSETS:
License and permit costs, net.......................... 3,056 2,785 2,524
Deferred income taxes.................................. 6,888 7,824 5,543
Other non-current assets............................... 1,883 1,879 6,980
-------- -------- -------------
Total non-current assets.......................... 11,827 12,488 15,047
-------- -------- -------------
TOTAL....................................................... $222,684 $249,095 $ 363,135
======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade.............................. $ 10,933 $ 19,641 $ 15,059
Short-term debt........................................ 44,802 60,335 52,001
Current portion of long-term debt...................... 3,245 37,175 37,410
Accrued liabilities.................................... 3,653 5,538 8,806
Other liabilities...................................... 6,351 6,124 6,386
-------- -------- -------------
Total current liabilities......................... 68,984 128,813 119,662
-------- -------- -------------
LONG-TERM DEBT, Net......................................... 59,437 30,200 159,240
-------- -------- -------------
OTHER LONG-TERM LIABILITIES................................. 6,590 6,243 4,263
-------- -------- -------------
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTEREST........................................... 24,893 28,476 29,985
-------- -------- -------------
STOCKHOLDERS' EQUITY:
Common Stock (IMPSAT Corporation), $1 par value;
51,300,000 shares authorized, issued and outstanding
at December 31, 1994 and 1995 and 77,750,640 shares
authorized, issued and outstanding at September 30,
1996................................................. 51,300 51,300 77,750
Combined subsidiaries -- capitalization................ 13,360 13,360 --
Accumulated deficit.................................... (1,880) (9,297) (27,765)
-------- -------- -------------
Total stockholders' equity........................ 62,780 55,363 49,985
-------- -------- -------------
TOTAL....................................................... $222,684 $249,095 $ 363,135
======== ======== ==========
</TABLE>
See notes to combined financial statements.
F-3
<PAGE> 131
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------------ ----------------------
1993 1994 1995 1995 1996
------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES FROM SERVICES..................... $37,695 $77,679 $105,641 $ 75,324 $ 93,393
------- ------- -------- -------- --------
COST AND EXPENSES:
Direct cost of services............... 22,256 32,999 43,051 28,501 35,470
Selling expenses...................... 3,284 9,714 16,962 11,467 11,703
General and administrative expenses... 3,491 10,467 18,092 13,365 13,124
Reorganization costs -- severance..... 713
Depreciation and amortization......... 6,324 12,874 20,653 14,749 19,193
------- ------- -------- -------- --------
OPERATING INCOME........................... 2,340 11,625 6,883 7,242 13,190
INTEREST EXPENSE -- Net.................... (6,220) (8,231) (15,677) (10,725) (16,849)
NET GAIN (LOSS) ON FOREIGN EXCHANGE........ 1,518 1,352 1,838 (9) 1,166
OTHER INCOME (EXPENSES) -- Net............. (684) 599 511 (543) 1,119
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE TAXES................. (3,046) 5,345 (6,445) (4,035) (1,374)
BENEFIT (EXPENSE) FOR INCOME
TAXES -- FOREIGN......................... 1,428 3,155 740 122 (2,495)
------- ------- -------- -------- --------
INCOME (LOSS) BEFORE MINORITY INTEREST..... (1,618) 8,500 (5,705) (3,913) (3,869)
MINORITY INTEREST.......................... (1,218) (5,464) (1,712) (976) (1,509)
------- ------- -------- -------- --------
NET INCOME (LOSS).......................... $(2,836) $ 3,036 $ (7,417) $ (4,889) $ (5,378)
======= ======= ======== ======== ========
</TABLE>
See notes to combined financial statements.
F-4
<PAGE> 132
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CAPITALIZATION
-----------------------
COMBINED ACCUMULATED MINORITY
COMPANY SUBSIDIARIES DEFICIT TOTAL INTEREST
------- ------------ ----------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992............. $ 25,253 $ (3,672) $21,581 $ 15,697
Additional
capitalization -- Colombia........ 1,163 1,163 403
Initial
capitalization -- Venezuela....... 6,886 6,886 2,296
Net income (loss) for the year...... (2,836) (2,836) 1,218
------------ ----------- ------- --------
BALANCE AT DECEMBER 31, 1993............. 33,302 (6,508) 26,794 19,614
Dividends declared -- Argentina..... (765) (765) (735)
Additional
capitalization -- Venezuela....... 1,650 1,650 550
Net income (loss) for the year...... 3,036 3,036 5,464
Initial capitalization -- others.... 107 107
Initial capitalization -- corp.:
Colombia exchange.............. $12,070 (13,056) 986
Venezuela exchange............. 7,165 (8,536) 1,371
Other exchanges................ 107 (107)
Additional capital
contributions................ 31,958 31,958
------- ------------ ----------- ------- --------
BALANCE AT DECEMBER 31, 1994............. 51,300 13,360 (1,880)(*) 62,780 24,893
Additional
capitalization -- Venezuela....... 1,871
Net income (loss) for the year...... (7,417) (7,417) 1,712
------- ------------ ----------- ------- --------
BALANCE AT DECEMBER 31, 1995............. 51,300 13,360 (9,297)(*) 55,363 28,476
Stock issuance for IMPSAT Argentina
exchange.......................... 26,450 (13,360) (13,090)
------- ------------ -----------
Net income (loss) for the nine
months ended...................... (5,378) (5,378) 1,509
------- ------------ ----------- ------- --------
BALANCE AT SEPTEMBER 30, 1996
(Unaudited)............................ $77,750 $ -- $ (27,765)(*) $49,985 $ 29,985
======= ========= ========= ======= =======
</TABLE>
- ---------------
(*) Includes an appropriation of retained earnings, amounting to $150, $449 and
$1,254 in 1994, 1995, and 1996, respectively, to comply with legal reserve
requirements in Argentina.
See notes to combined financial statements.
F-5
<PAGE> 133
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ (2,836) $ 3,036 $ (7,417) $ (4,889) $ (5,378)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Amortization and depreciation............. 6,324 12,874 20,653 14,749 19,193
Deferred income tax (benefit) expense..... (2,720) (3,483) (936) (364) 2,281
Minority interest......................... 1,218 5,464 1,712 976 1,509
Changes in assets and liabilities:
Increase in trade accounts receivable,
net................................. (11,371) (1,178) (5,940) (2,129) (3,483)
Decrease (increase) in prepaid
expenses............................ 549 (2,724) 1,513 1,707 787
Decrease (increase) in other
receivables and other non-current
assets.............................. 2,978 (4,317) (446) (1,041) (3,075)
Increase (decrease) in accounts
payable -- trade.................... 1,227 3,280 8,444 9,756 (10,821)
Increase (decrease) in accrued and
other liabilities................... 4,525 4,142 1,658 (1,206) 3,530
Increase (decrease) in other long-term
liabilities......................... 4,927 163 (347) 466 (1,980)
-------- -------- -------- -------- --------
Net cash provided by operating
activities..................... 4,821 17,257 18,894 18,025 2,563
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment..... (35,235) (87,023) (66,796) (56,443) (31,062)
License and permit costs....................... (26) (580) (114) -- (24)
-------- -------- -------- -------- --------
Net cash used by investing activities..... (35,261) (87,603) (66,910) (56,443) (31,086)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments of) borrowings from short-term
debt......................................... (8,342) 34,306 15,533 7,449 (8,334)
Proceeds from long-term debt................... 31,588 28,224 8,546 8,204 129,740
Repayments of long-term debt................... (1,444) (3,853) (1,811) (5,236)
Capital contributions.......................... 10,748 34,265 1,871 716 --
-------- -------- -------- -------- --------
Net cash provided by financing
activities.............................. 33,994 95,351 22,097 14,558 116,170
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS...................................... 3,554 25,005 (25,919) (23,860) 87,647
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD... 3,576 7,130 32,135 32,135 6,216
-------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......... $ 7,130 $ 32,135 $ 6,216 $ 8,275 $ 93,863
========= ========= ========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................. $ 6,352 $ 7,358 $ 16,498 $ 12,374 $ 14,451
========= ========= ========= ========= =========
Foreign income taxes paid...................... $ 244 $ 193
========= =========
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND
FINANCING ACTIVITIES:
Dividends declared not yet paid................ $ 1,500
=========
Equipment in transit........................... $ 937 $ 518 $ 264 $ 632 $ 6,239
========= ========= ========= ========= =========
Deferred financing costs....................... $ 4,877
=========
</TABLE>
See notes to combined financial statements.
F-6
<PAGE> 134
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BACKGROUND
IMPSAT Corporation, a Delaware holding company (the "Company"), is a
privately-held corporation which provides and operates private networks of
integrated data and voice telecommunications systems in a number of countries in
Latin America. The Company's principal line of business comprises the provision
of data transmission services for large national and multinational companies,
financial institutions, governmental agencies and other business customers in
Latin America. The Company provides its services through its owned advanced
telecommunications networks comprised of teleports, earth stations, fiber optic
and microwave links and leased satellite and fiber optic capacity.
The Company was formed in August 1994 for the purpose of combining
operating entities in Argentina, Colombia and Venezuela, which were previously
controlled by common ownership. The original operating entity was established in
Argentina in 1990 under the name of IMPSAT S.A. ("IMPSAT Argentina").
Thereafter, operating entities began operations in Colombia in 1992 ("IMPSAT
Colombia") and in Venezuela in 1993 ("IMPSAT Venezuela").
As part of the formation of the Company, a shareholder of the Company
contributed its ownership in the operating entities in Colombia and Venezuela in
exchange for common stock. At the same time, cash was contributed by four
shareholders in exchange for common stock. In July 1996, shareholders of IMPSAT
Argentina exchanged a 51% ownership interest in IMPSAT Argentina for common
stock of the Company. Since the establishment of the Company, new operating
subsidiaries have been created in Mexico, Ecuador, Peru and the United States.
Accordingly, the Company's operating subsidiaries at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
OPERATING
OWNERSHIP INCOME
COUNTRY OPERATING SUBSIDIARIES PERCENTAGE TOTAL ASSETS REVENUES (LOSS)
- ---------- ----------------------------------------- ---------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Argentina Impsat S.A. ............................. 51.0 $165,945 $ 80,346 $14,327
Colombia Colinvertel S.A./Impsat S.A. ............ 74.2 59,929 22,417 4,858
Venezuela Telecomunicaciones Impsat S.A. .......... 75.0 11,192 2,204 (2,106)
Mexico Impsat S.A. de C.V. ..................... 99.9 4,357 12 (1,539)
Ecuador Impsatel del Ecuador S.A. ............... 100.0 4,383 588 (1,177)
Peru Impsat S.A. ............................. 99.6 3
USA Impsat USA, Inc. ........................ 100.0 150 (255)
------------ -------- ---------
Subtotal for operating subsidiaries...... 245,959 105,567 14,108
Parent company and others................ 3,136 74 (7,225)
------------ -------- ---------
Combined total $249,095 $105,641 $ 6,883
========= ======== =======
</TABLE>
In addition, the Company owns other subsidiaries which serve as
intermediaries or provide support functions to the Company and its operating
subsidiaries. They are Resis Ingenieria, S.A. (Argentina) and ISCH Ltd.
(Liechtenstein).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The financial statements for the years ended
December 31, 1993, 1994 and 1995 and for the nine months ended September 30,
1995 are presented on a combined basis by virtue of common ownership, as
described in Note 1. The financial statements for the nine months ended
September 30, 1996 are presented on a consolidated basis as a result of the
exchange for 51% of IMPSAT Argentina described in Note 1. IMPSAT Argentina has
been combined on the basis of its fiscal year-end, November 30. All significant
intercompany transactions and balances have been eliminated.
F-7
<PAGE> 135
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
INTERIM FINANCIAL INFORMATION -- The unaudited combined financial
statements as of September 30, 1996 and for the nine months ended September 30,
1995 and 1996 have been prepared on the same basis as the audited combined
financial statements included herein. In the opinion of management, such
unaudited combined financial statements include all adjustments (consisting only
of normal recurring adjustments) necessary to present fairly the results for
such period. The operating results for the nine months ended September 30, 1995
and 1996 are not necessarily indicative of the operating results to be expected
for the full fiscal year or for any future period.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents are highly liquid
investments, including short-term investments and time deposits with maturities
of three months or less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates market value. Included in
cash and cash equivalents at September 30, 1996 are approximately $30,000 in
funds which the Company placed during the third quarter of 1996 in a trust which
purchased U.S. Government securities. The funds in the trust will be used solely
to satisfy IMPSAT Argentina's 9.5% negotiable obligations due November 1996.
REVENUE RECOGNITION -- The Company provides services to its customers
pursuant to contracts which range from six months to five years but generally
are for three years. The customer generally pays an engineering fee, an
installation charge and a monthly fee based on the number of microsystems
installations. The fees stipulated in the contracts are denominated in U.S.
dollars equivalents. Services are billed on a monthly, predetermined basis,
which coincides with when the services are rendered. No single customer
accounted for greater than 10% of total revenue from services for each of the
three years ended December 31, 1995 and the nine months ended September 30, 1995
and 1996.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are recorded
at cost and depreciated using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements............................................. 20-25 years
Operating communications equipment..................................... 5-10 years
Furniture, fixtures and other equipment................................ 2-10 years
</TABLE>
LICENSE AND PERMIT COSTS -- License and permit costs, such as legal cost,
regulatory fees and application costs incurred to obtain and make functional the
operating licenses in each respective country were capitalized and are being
amortized on the straight-line basis over periods not to exceed ten years. The
Company reviews the carrying value of its license and permit costs on an ongoing
basis. If such review indicates that these values
F-8
<PAGE> 136
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
may not be recoverable, the Company's carrying value will be reduced to its
estimated fair value. The amounts capitalized, by operating subsidiary, are as
follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
IMPSAT Colombia......................................... $3,020 $3,020 $ 3,020
IMPSAT Ecuador.......................................... 287 287 287
IMPSAT Mexico........................................... 293 293 293
IMPSAT USA.............................................. 114 138
------ ------ -------------
Total costs capitalized............................ 3,600 3,714 3,738
Less: accumulated amortization.......................... (544) (929) (1,214)
------ ------ -------------
Unamortized balance..................................... $3,056 $2,785 $ 2,524
====== ====== ==========
</TABLE>
INCOME TAXES -- Deferred income taxes result from temporary differences in
the recognition of expenses for tax and financial reporting purposes and are
accounted for in accordance with Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, which requires the liability method of computing deferred income
taxes. Under the liability method, deferred taxes are adjusted for tax rate
changes as they occur.
DEFERRED FINANCING COSTS -- Debt issuance costs and transaction fees, which
are associated with the issuance of the senior guaranteed notes (see note 7),
are being amortized (and charged to interest expense) over the term of the
related notes on a method which approximates the level yield method. The
unamortized balance of such costs totaled approximately $4,771 at September 30,
1996 and are included in other non-current assets in the accompanying combined
balance sheet. Amortization expense (charged to interest expense) for such costs
for the nine months ended September 30, 1996 was approximately $106.
FOREIGN CURRENCY TRANSLATION -- The Company's subsidiaries use the U.S.
dollar as the functional currency. Accordingly, the financial statements of the
subsidiaries were remeasured. The effects of foreign currency transactions and
of remeasuring the financial position and results of operations into the
functional currency are included as net gain on foreign exchange.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The Company's financial instruments
include receivables, payables, short and long-term debt. The fair value of such
financial instruments have been determined based on market interest rates as of
December 31, 1995. The fair values were not materially different than their
carrying (or contract) values.
NEW ACCOUNTING PRONOUNCEMENT -- In March 1995, the FASB issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. Such long-lived assets
should be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
performing the review for recoverability, entities should estimate the future
cash flows expected to result from the use of the asset and its eventual
disposition. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. The adoption of SFAS No. 121 is not expected
to have a material impact on the Company's combined financial statements.
F-9
<PAGE> 137
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiary, are summarized as
follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
IMPSAT Argentina...................................... $13,944 $17,182 $20,373
IMPSAT Colombia....................................... 2,138 5,046 6,021
IMPSAT Venezuela...................................... 277 304 985
IMPSAT Ecuador........................................ 178 401
IMPSAT Mexico......................................... 7 38
IMPSAT USA............................................ 64
------- ------- -------------
Total............................................ 16,359 22,717 27,882
Less: allowance for doubtful accounts................. (712) (1,130) (2,812)
------- ------- -------------
Trade accounts receivable, net........................ $15,647 $21,587 $25,070
======= ======= ==========
</TABLE>
The Company's subsidiaries provide trade credit to their customers in the
normal course of business. The collection of a substantial portion of the trade
receivables are susceptible to changes in the Latin American economies and
political climates. Prior to extending credit, the customers' financial history
is analyzed.
The activity for the allowance for doubtful account is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------- SEPTEMBER 30,
1994 1995 1996
---- ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Beginning balance........................................ $296 $ 712 $ 1,130
Provision................................................ 416 418 1,713
Write-offs, net of recoveries............................ (31)
---- ------ -------------
Ending balance........................................... $712 $1,130 $ 2,812
==== ====== ==========
</TABLE>
4. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from
local governments for taxes other than income and other miscellaneous amounts
due to the Company and its operating subsidiaries as follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
(UNAUDITED)
<S> <C> <C> <C>
IMPSAT Argentina........................................ $4,012 $2,342 $ 2,969
IMPSAT Colombia......................................... 1,175 2,308 2,976
IMPSAT Venezuela........................................ 487 546 793
IMPSAT Ecuador.......................................... 345 539
Others.................................................. 317 900 1,909
------ ------ -------------
Total.............................................. $5,991 $6,441 $ 9,186
====== ====== ==========
</TABLE>
F-10
<PAGE> 138
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Land................................................ $ 228 $ 1,375 $ 1,375
Building and improvements........................... 14,893 20,501 21,853
Operating communications equipment.................. 152,583 209,317 234,912
Furniture, fixtures and other equipment............. 5,928 9,168 10,917
-------- -------- -------------
Total.......................................... 173,632 240,361 269,057
Less: accumulated depreciation...................... (27,188) (47,155) (65,837)
-------- -------- -------------
Total.......................................... 146,444 193,206 203,220
Deposit on purchase of equipment and in transit..... 6,465 6,495 14,874
-------- -------- -------------
Property, plant and equipment, net.................. $152,909 $199,701 $ 218,094
======== ======== ==========
</TABLE>
The recap of accumulated depreciation is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Beginning balance..................................... $12,381 $27,188 $47,155
Depreciation expense.................................. 12,602 20,268 18,908
Other addition........................................ 2,205
Disposals............................................. (301) (226)
------- ------- -------------
Ending balance........................................ $27,188 $47,155 $65,837
======= ======= ==========
</TABLE>
6. SHORT-TERM DEBT
The Company's short-term debt is detailed as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Commercial paper (12%)................................ $15,000 $ 5,000 $25,000
Short-term credit facilities, denominated in U.S.
dollars;
interest rates ranging from 8% to 18%:
IMPSAT Argentina................................. 19,030 31,808 3,620
IMPSAT Colombia.................................. 1,207 4,616 3,022
IMPSAT Venezuela................................. 3,964 256 597
IMPSAT Ecuador................................... 2,080
Short-term credit facilities, denominated in local
currencies;
local interest rates:
IMPSAT Colombia (23% to 34%)..................... 5,476 14,545 17,626
IMPSAT Venezuela (36% to 40%).................... 125 2,030 2,136
------- ------- -------------
Total short-term debt................................. $44,802 $60,335 $52,001
======= ======= ==========
</TABLE>
The Company has historically refinanced these short-term credit facilities
on an annual basis.
F-11
<PAGE> 139
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT
The Company's long-term debt is detailed as follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
12 1/8% Senior Guaranteed Notes due 2003.............. $ 125,000
Term notes payable:
IMPSAT Colombia; with maturities through 2001;
collateralized by equipment with carrying value
of
approximately $23,000; denominated in:
U.S. dollars (interest rates
8.94% -- 13.13%).......................... $18,942 $23,472 24,437
Local currency (interest rates
35% -- 38.7%)............................. 886 1,008
IMPSAT Argentina (8.4% -- 8.9%), maturing semi
annually through 1998, collateralized by stock
of a
subsidiary and other assets.................... 9,833 6,120 5,247
IMPSAT Venezuela (10.5%), maturing
during 2001.................................... 6,039
9.5% Negotiable Obligations, due 1996................. 30,000 30,000 30,000
Eximbank notes payable (7.125% -- 7.875%), maturing
semi
annually through 1999............................... 3,021 6,775 5,927
------- ------- -------------
Total long-term debt.................................. 62,682 67,375 196,650
Less: current portion................................. (3,245) (37,175) (37,410)
------- ------- -------------
Long-term debt, net................................... $59,437 $30,200 $ 159,240
======= ======= ==========
</TABLE>
The scheduled maturities of long-term debt at December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
DECEMBER
31,
FISCAL YEAR 1995
------------------------------------------------------------------------ -----------
<S> <C>
1996.................................................................... $37,175
1997.................................................................... 8,373
1998.................................................................... 8,821
1999.................................................................... 6,503
2000 and thereafter..................................................... 6,503
-----------
Total.............................................................. $67,375
=========
</TABLE>
Some of the term notes payable for IMPSAT Colombia and IMPSAT Venezuela
contain certain covenants requiring certain financial ratios, limiting the
incurrence of additional indebtedness and capital expenditures, and restricting
the ability to pay dividends. IMPSAT Argentina's 9.5% Negotiable Obligations,
due 1996 also contain similar covenants.
8. INCOME TAXES
For the years ended December 31, 1993, 1994 and 1995, and for the nine
months ended September 30, 1995 and 1996, the benefits (expense) for income
taxes, all of which are for foreign taxes, consist of a current provision of
$1,292, $328, $196, $242 and $214, respectively, and a deferred benefit of
$2,720, $3,483, $936, $364 and a deferred provision of $2,281, respectively. The
foreign statutory tax rates range from 30% to 35% depending on the particular
country. There is no provision or benefit for U.S. income taxes, as the Company
has net operating loss carryforwards. Deferred taxes result from temporary
differences in the capitalization
F-12
<PAGE> 140
IMPSAT CORPORATION AND COMBINED SUBSIDIARIES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONCLUDED)
8. INCOME TAXES -- (CONTINUED)
policies of preoperating costs and net operating loss carryforwards. The
composition of net deferred tax assets is as follows at:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------ SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Preoperating costs:
IMPSAT Colombia.................................. $ 2,495 $ 2,188 $ 1,958
IMPSAT Venezuela................................. 1,926 1,731 1,561
IMPSAT Mexico.................................... (100) (85) (75)
IMPSAT Ecuador................................... 143 135
Net operating loss carryforwards:
IMPSAT Argentina................................. 3,220 3,220 1,235
IMPSAT Colombia.................................. 1,173 2,039 1,973
IMPSAT Venezuela................................. 1,193 1,946 2,391
IMPSAT Mexico.................................... 559 879 1,566
------- ------- -------------
Total deferred tax assets............................. 10,466 12,061 10,744
Less: valuation allowance............................. (3,578) (4,237) (5,201)
------- ------- -------------
Net deferred tax assets............................... $ 6,888 $ 7,824 $ 5,543
======= ======= ==========
</TABLE>
As there is no assurance that the Company will generate sufficient earnings
to utilize its available tax assets, a valuation allowance has been established
to offset deferred tax assets.
9. COMMITMENTS AND CONTINGENCIES
The Company leases satellite capacity with annual rental commitments of
approximately $14,200. In addition, the Company has commitments to purchase
communications equipment amounting to approximately $18,000 and was obligated
under letters of credit amounting to approximately $352 at December 31, 1995.
The Company is a third party guarantor of up to 75% of a $6,000 credit
facility provided to IMPSAT Venezuela by a regional development fund. At
September 30, 1996, the balance outstanding on the credit facility amounted to
approximately $6,000.
In the normal course of business, the Company faces challenges to its
various licenses and rights to operate on an exclusive basis. The Company
vigorously defends such challenges, however, there can be no assurance that
Company will ultimately prevail.
F-13
<PAGE> 141
INDEPENDENT AUDITORS' REPORT
To the Stockholders of IMPSAT S.A.:
We have audited the accompanying consolidated balance sheets of IMPSAT S.A.
and its subsidiaries ("IMPSAT Argentina") as of November 30, 1994 and 1995, and
the related consolidated statements of income, of stockholders' equity and of
cash flow for each of the three years ended November 30, 1995. These
consolidated financial statements are the responsibility of IMPSAT Argentina's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of IMPSAT Argentina at November
30, 1994 and 1995, and the results of its operations and its cash flows for each
of the three years ended November 30, 1995, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE
Buenos Aires, Argentina
February 23, 1996
F-14
<PAGE> 142
IMPSAT S.A. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------- AUGUST 31,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................... $ 514 $ 1,160 $ 44,224
Trade accounts receivable, net.......................... 13,232 16,072 17,580
Receivable from affiliated companies.................... 801 1,286
Other receivables....................................... 4,012 2,342 2,969
Prepaid expenses........................................ 3,610 1,202 925
-------- -------- -----------
Total current assets............................... 22,169 20,776 66,984
-------- -------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET........................... 118,024 140,205 143,057
-------- -------- -----------
NON-CURRENT ASSETS:
Deferred income taxes........................................ 3,220 3,220 1,236
Other non-current assets..................................... 1,091 1,744 1,758
-------- -------- -----------
Total non-current assets........................... 4,311 4,964 2,994
-------- -------- -----------
TOTAL........................................................ $144,504 $165,945 $ 213,035
======== ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade............................... $ 9,721 $ 16,033 $ 9,661
Short-term debt......................................... 34,030 36,808 28,620
Advances from affiliated companies...................... 7,313 3,455
Current portion of long-term debt....................... 3,245 34,190 33,439
Accrued liabilities..................................... 2,426 4,372 3,467
Other liabilities....................................... 4,909 3,841 2,704
-------- -------- -----------
Total current liabilities.......................... 54,331 102,557 81,346
-------- -------- -----------
LONG-TERM DEBT, NET.......................................... 39,609 8,705 7,735
-------- -------- -----------
ADVANCE FROM PARENT COMPANY, LONG-TERM....................... 68,235
-------- -------- -----------
OTHER LONG-TERM LIABILITIES.................................. 6,591 6,244 4,263
-------- -------- -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
MINORITY INTEREST............................................ 9 3 (11)
-------- -------- -----------
STOCKHOLDERS' EQUITY:
Common stock; 5,123 shares authorized, issued,
and outstanding....................................... 3 3 3
Paid-in capital......................................... 26,191 26,191 26,191
Retained earnings....................................... 17,770 22,242 25,273
-------- -------- -----------
Total stockholders' equity......................... 43,964 48,436 51,467
-------- -------- -----------
TOTAL........................................................ $144,504 $165,945 $ 213,035
======== ======== =========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE> 143
IMPSAT S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED NOVEMBER 30, AUGUST 31,
----------------------------- --------------------------
1993 1994 1995 1995 1996
------- ------- ------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES FROM SERVICES..................... $34,672 $63,999 $80,346 $58,352 $62,939
------- ------- ------- ----------- -----------
COST AND EXPENSES:
Direct cost of services............... 13,186 25,420 30,721 20,473 22,878
Selling expenses...................... 1,279 7,027 11,036 8,621 6,845
General and administrative expenses... 1,911 6,947 8,195 6,175 4,998
Reorganization costs -- severance..... 713
Depreciation and amortization......... 5,570 10,719 16,067 11,699 13,894
------- ------- ------- ----------- -----------
OPERATING INCOME........................... 12,726 13,886 14,327 11,384 13,611
INTEREST EXPENSE -- Net.................... (5,453) (4,556) (10,384) (7,607) (9,173)
OTHER INCOME (EXPENSES) -- Net............. (468) (83) 523 (61) 563
------- ------- ------- ----------- -----------
INCOME BEFORE TAXES........................ 6,805 9,247 4,466 3,716 5,001
BENEFIT (EXPENSE) FOR INCOME TAXES......... 3,220 (1,984)
------- ------- ------- ----------- -----------
INCOME BEFORE MINORITY INTEREST............ 6,805 12,467 4,466 3,716 3,017
MINORITY INTEREST.......................... (3) 6 6 14
------- ------- ------- ----------- -----------
NET INCOME................................. $ 6,805 $12,464 $ 4,472 $ 3,722 $ 3,031
======= ======= ======= ========= =========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE> 144
IMPSAT S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCKHOLDERS'
-----------------------------
RETAINED
COMMON PAID-IN EARNINGS MINORITY
STOCK CAPITAL (DEFICIT) TOTAL INTEREST
------ ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1992.................. $3 $26,191 $ 1 $26,195
Net income............................... 6,805 6,805
--
------- -------- -------
BALANCE AT NOVEMBER 30, 1993.................. 3 26,191 6,806 33,000
Dividends declared....................... (1,500) (1,500)
Capital contributions.................... $ 6
Net income............................... 12,464 12,464 3
--
------- -------- ------- --------
BALANCE AT NOVEMBER 30, 1994.................. 3 26,191 17,770(*) 43,964 9
Net income............................... 4,472 4,472 (6)
--
------- -------- ------- --------
BALANCE AT NOVEMBER 30, 1995.................. 3 26,191 22,242(*) 48,436 3
Net income for the nine months ended..... 3,031 3,031 (14)
--
------- -------- ------- --------
BALANCE AT AUGUST 31, 1996 (Unaudited)........ $3 $26,191 $ 25,273(*) $51,467 $(11)
====== ======= ======= ======= ======
</TABLE>
- ---------------
(*) includes an appropriation of retained earnings, amounting to $295, $881 and
$1,254 in 1994, 1995 and 1996, respectively, to comply with legal reserve
requirements in Argentina.
See notes to consolidated financial statements.
F-17
<PAGE> 145
IMPSAT S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED NOVEMBER 30, AUGUST 31,
------------------------------ ---------------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 6,805 $ 12,464 $ 4,472 $ 3,722 $ 3,031
Adjustment to reconcile net income to net cash
provided by operating activities:
Amortization and depreciation............ 5,570 10,719 16,067 11,699 13,894
Deferred income tax (benefit) expense.... (3,220) 1,984
Minority interest........................ 3 (6) 6 (14)
Changes in assets and liabilities:
(Increase) decrease in trade accounts
receivable, net...................... (10,635) 427 (2,840) (810) (1,508)
(Increase) decrease in prepaid
expenses............................. (733) (2,361) 2,408 3,610 277
Decrease (increase) in other receivable
assets and other non-current
assets............................... 3,392 (2,056) 1,017 (2,139) (641)
(Decrease) increase in accounts
payable -- trade..................... (1,501) 4,788 6,048 8,201 (6,635)
Increase (decrease) in accrued and
other liabilities.................... 4,710 1,372 878 (2,375) (2,042)
Increase (decrease) in other long-term
liabilities.......................... 617 162 (347) 466 (1,981)
-------- -------- -------- ------------ ------------
Net cash provided by operating
activities......................... 8,225 22,298 27,697 22,380 6,365
-------- -------- -------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment.... (22,762) (69,832) (37,984) (31,814) (16,483)
-------- -------- -------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments of) borrowings from short-term
debt........................................ (11,807) 30,913 2,778 8,990 (8,188)
(Decrease) increase in advances from/to
affiliates.................................. (553) (248) 8,114 801 (5,144)
Increase in advances from parent company...... 68,235
Repayments of long-term debt.................. (750) (750) (563) (2,602)
Proceeds from long-term debt.................. 32,224 11,378 791 593 881
Capital contributions......................... 6
-------- -------- -------- ------------ ------------
Net cash provided by financing activities..... 19,864 41,299 10,933 9,821 53,182
-------- -------- -------- ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 5,327 (6,235) 646 387 43,064
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD.......................................... 1,422 6,749 514 514 1,160
-------- -------- -------- ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 6,749 $ 514 $ 1,160 $ 901 $ 44,224
========= ========= ========= =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid................................. $ 5,374 $ 3,958 $ 9,208 $ 6,906 $ 7,951
========= ========= ========= =========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Dividends declared and not yet paid........... $ 1,500
=========
Equipment in transit.......................... $ 937 $ 518 $ 264 $ 632 $ 263
========= ========= ========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-18
<PAGE> 146
IMPSAT S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND
IMPSAT S.A. ("IMPSAT Argentina") provides and operates private networks of
integrated data and voice telecommunications systems in Argentina. IMPSAT
Argentina's principal line of business comprises the provision of data
transmission services for large national and multinational companies, financial
institutions, governmental agencies and other business customers in Argentina.
It provides its services through its owned advanced telecommunications networks
comprised of teleports, earth stations, fiber optic and microwave links and
leased satellite capacity. IMPSAT Argentina has two operating
subsidiaries -- Teledatos S.A. and Satelnet S.A. During July 1996, IMPSAT
Argentina became a 51% owned subsidiary of IMPSAT Corporation, a Delaware
holding company (the "Parent Company").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION -- The accompanying consolidated financial statements
include IMPSAT Argentina and its consolidated subsidiaries. All significant
intercompany accounts and transactions and balances have been eliminated.
INTERIM FINANCIAL INFORMATION -- The unaudited consolidated statements as
of August 31, 1996 and for the nine months ended August 31, 1995 and 1996 have
been prepared on the same basis as the audited consolidated financial statements
included herein. In the opinion of management, such unaudited financial
statements include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the results for such period. The
operating results for the nine months ended August 31, 1995 and 1996 are not
necessarily indicative of the operating results to be expected for the full
fiscal year or for any future period.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents are highly liquid
investments, including short-term investments and time deposits with maturities
of three months or less at the time of purchase. Cash equivalents and short-term
investments are stated at cost, which approximates market value. Included in
cash and cash equivalents at August 31, 1996 are approximately $30,000 in funds
which the Parent Company advanced to IMPSAT Argentina during the third quarter
of 1996 (see note 7) and were placed in a trust which purchased U.S. Government
securities. The funds in the trust will be used solely to satisfy IMPSAT
Argentina's 9.5% negotiable obligations due November 1996.
REVENUE RECOGNITION -- IMPSAT Argentina provides services to its customers
pursuant to contracts which range from six months to five years but generally
are for three years. The customer generally pays an engineering fee, an
installation charge and a monthly fee based on the number of microsystems
installations. The fees stipulated in the contracts are denominated in U.S.
dollar equivalents. Services are billed on a monthly, predetermined basis, which
coincides with when the services are rendered. No single customer accounted for
greater than 10% of total revenue from services for each of the three years
ended November 30, 1993, 1994 and 1995 and for the nine months August 31, 1995.
For the nine months ended August 31, 1996, IMPSAT Argentina had one customer
that represented approximately 10.6% of revenue from services.
F-19
<PAGE> 147
IMPSAT S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are recorded
at cost and depreciated using the straight-line method over the following
estimated useful lives:
<TABLE>
<S> <C>
Building and improvement........................................ 20-25 years
Operating communications equipment.............................. 5-10 years
Furniture, fixtures and other equipment......................... 2-10 years
</TABLE>
INCOME TAXES -- Deferred income taxes result from temporary differences in
the recognition of expenses for tax and financial reporting purposes and are
accounted for in accordance with Financial Accounting Standards Board ("FASB")
Statements of Financial Accounting Standards ("SFAS") No. 109, Accounting for
Income Taxes, which required the liability method of computing deferred income
taxes. Under the liability method, deferred taxes are adjusted for tax rate
changes as they occur.
FOREIGN CURRENCIES TRANSLATION -- The translation of these consolidated
financial statements into U.S. dollars has been made following the guidelines of
SFAS No. 52, Foreign Currency Translation. Major operations of IMPSAT Argentina
and its subsidiaries are stated in U.S. dollars. Accordingly, the U.S. dollar
has been designated as the functional currency. Local currency denominated
transactions are remeasured into the functional currency. Accordingly, fixed
assets and stockholders account have been translated into U.S. dollars taking
into account the exchange rate prevailing at each transaction date. Monetary
assets and liabilities are translated using the year-end exchange. Profit and
loss accounts were translated using average exchange rates for the periods in
which they were accrued, except for the consumption of non-monetary assets for
which their respective dollar translated costs were considered.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- IMPSAT Argentina's financial
instruments include receivables, payables, short and long-term debt. The fair
value of such financial instruments have been determined based on market
interest rates as of November 30, 1995. The fair values were not materially
different than their carrying (or contract) values.
NEW ACCOUNTING PRONOUNCEMENT -- In March 1995, the FASB issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of, which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. Such long-lived assets
should be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In
performing the review for recoverability, entities should estimate the future
cash flows expected to result from the use of the asset and its eventual
disposition. SFAS No. 121 is effective for financial statements for fiscal years
beginning after December 15, 1995. The adoption of SFAS No. 121 is not expected
to have a material impact on IMPSAT Argentina's consolidated financial
statements.
F-20
<PAGE> 148
IMPSAT S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable, by operating subsidiary, are summarized as
follows at:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------ AUGUST 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Impsat S.A............................................. $12,465 $15,755 $18,555
Satelnet S.A........................................... 1,462 1,172 1,079
Teledatos S.A.......................................... 17 255 739
------- ------- -----------
Total.................................................. 13,944 17,182 20,373
Less: allowance for doubtful accounts.................. (712) (1,110) (2,793)
------- ------- -----------
Trade accounts receivable, net......................... $13,232 $16,072 $17,580
======= ======= =========
</TABLE>
IMPSAT Argentina provides trade credit to its customers in the normal
course of business. Prior to extending credit, the customers' financial history
is analyzed.
The activity for the allowance for doubtful account is as follows:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------- AUGUST 31,
1994 1995 1996
---- ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Beginning balance......................................... $296 $ 712 $ 1,110
Provision................................................. 416 398 1,713
Write-offs, net of recoveries............................. (30)
---- ------ -----------
Ending balance............................................ $712 $1,110 $ 2,793
==== ====== =========
</TABLE>
4. OTHER RECEIVABLES
Other receivables consist primarily of refunds or credits pending from
local government for taxes other than income and other miscellaneous amounts due
to IMPSAT Argentina and its operating subsidiaries as follows at:
<TABLE>
<CAPTION>
NOVEMBER 30,
---------------- AUGUST 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Impsat S.A............................................... $3,622 $1,929 $ 2,381
Teledatos S.A............................................ 251 424
Satelnet S.A............................................. 390 162 164
------ ------ -----------
$4,012 $2,342 $ 2,969
====== ====== =========
</TABLE>
F-21
<PAGE> 149
IMPSAT S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
NOVEMBER 30,
-------------------- AUGUST 31,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Building installations and improvements.............. $ 11,425 $ 15,583 $ 15,995
Operating communications equipment................... 121,209 153,106 168,225
Furniture, fixtures and other equipment.............. 4,691 6,714 7,627
-------- -------- -----------
Total................................................ 137,325 175,403 191,847
Less: accumulated depreciation....................... (24,712) (40,477) (54,371)
-------- -------- -----------
112,613 134,926 137,476
Deposit on purchase of equipment and in transit...... 5,411 5,279 5,581
-------- -------- -----------
Property, plant and equipment, net................... $118,024 $140,205 $ 143,057
======== ======== =========
</TABLE>
The recap of accumulated depreciation is as follows at:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------ AUGUST 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Beginning balance...................................... $11,790 $24,712 $40,477
Depreciation expense................................... 10,719 16,067 13,894
Other addition......................................... 2,203
Disposals.............................................. (302)
------- ------- -----------
Ending balance......................................... $24,712 $40,477 $54,371
======= ======= =========
</TABLE>
6. SHORT-TERM DEBT
IMPSAT Argentina's short-term debt is detailed as follows at:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------ AUGUST 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Commercial paper (12%)................................. $15,000 $ 5,000 $25,000
Short-term credit facilities, denominated in U.S.
dollars, interest rates ranging from 8% to 15%....... 19,030 31,808 3,620
------- ------- -----------
Total short-term debt.................................. $34,030 $36,808 $28,620
======= ======= =========
</TABLE>
IMPSAT Argentina has historically refinanced its short-term credit
facilities on an annual basis.
F-22
<PAGE> 150
IMPSAT S.A. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONCLUDED)
7. LONG-TERM DEBT
IMPSAT Argentina's long-term debt is detailed as follows at:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------- AUGUST 31,
1994 1995 1996
------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Term notes payable (8.4%-8.9%) maturing semiannually
through 1998, collateralized by stock of a
subsidiary.......................................... $ 9,833 $ 6,120 $ 5,247
9.5% Negotiable Obligations, due 1996................. 30,000 30,000 30,000
Eximbank notes payable (7.125%-7.875%) maturing
semiannually through 1999........................... 3,021 6,775 5,927
------- -------- -----------
Total long-term debt.................................. 42,854 42,895 41,174
Less: current portion................................. (3,245) (34,190) (33,439)
------- -------- -----------
Long-term debt, net................................... $39,609 $ 8,705 $ 7,735
======= ======== =========
</TABLE>
During the third quarter of 1996, IMPSAT Argentina received advances
totalling approximately $68,000 from its Parent Company. These advances bear
interest at 12 1/8% and are due 2003.
The scheduled maturities of debt and credit facilities at November 30, 1995
are as follows at:
<TABLE>
<CAPTION>
NOVEMBER 30,
1995
------------
<S> <C>
Fiscal year:
1996............................................................ $ 34,190
1997............................................................ 3,572
1998............................................................ 3,439
1999............................................................ 1,694
------------
Total........................................................... $ 42,895
==========
</TABLE>
The 9.5% Negotiable Obligations, due 1996 contain certain covenants
requiring IMPSAT Argentina to maintain certain financial ratios and restrict its
ability to pay dividends.
8. INCOME TAXES
The benefit (expense) for income taxes in 1994 represents the carryforward
benefits for operating losses available to the subsidiaries of IMPSAT Argentina.
These benefits are expected to be realized during 1996 and through the nine
months ended August 31, 1996, IMPSAT Argentina has recognized a deferred expense
of $1,984. The statutory tax rate in Argentina is 30%. IMPSAT Argentina's
current provision for income taxes for years 1993, 1994 and 1995 amounted to
$2,041, $2,774 and $1,340, respectively. Such amounts are offset by deferred tax
benefits resulting from the realization of carryforward operating losses.
9. COMMITMENTS AND CONTINGENCIES
IMPSAT Argentina leases satellite capacity with annual rental commitments
of approximately $9,000 through the year 2000. In addition, IMPSAT Argentina has
commitments to purchase communications equipment amounting to approximately
$9,500 at November 30, 1995.
IMPSAT Argentina is guarantor on the $125,000,000, 12 1/8% Senior
Guaranteed Notes Due 2003 issued on July 30, 1996 by the Parent Company.
In the normal course of business, IMPSAT Argentina faces challenges to its
various licenses and rights to operate on an exclusive basis, which it
vigorously defends. There can be no assurance it will ultimately prevail on
these challenges.
F-23
<PAGE> 151
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................. 4
Prospectus Summary.................... 6
Risk Factors.......................... 20
Capitalization........................ 32
Selected Financial and Other Data..... 33
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 38
Business.............................. 49
Management............................ 74
Principal Stockholders................ 80
Certain Relationships and Related
Transactions........................ 81
Description of Certain Indebtedness... 83
The Exchange Offer.................... 85
Description of the Notes.............. 92
Certain United States Federal Income
Tax Considerations.................. 119
Plan of Distribution.................. 123
Legal Matters......................... 123
Experts............................... 124
Glossary.............................. 125
Index to Financial Statements......... F-1
</TABLE>
---------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS EXCHANGE
OFFER), ALL DEALERS OFFERING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT
PARTICIPATING IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
$125,000,000
IMPSAT CORPORATION
12 1/8% SENIOR GUARANTEED
NOTES DUE 2003
PAYMENT OF PRINCIPAL AND INTEREST
GUARANTEED BY
IMPSAT S.A.
--------------------
PROSPECTUS
--------------------
, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 152
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify any persons, including directors and officers, who are
(or are threatened to be made) parties to any threatened, pending or completed
legal action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of their being directors or officers of the
corporation. The indemnity may include expenses, attorneys' fees, judgments,
fines and amounts paid in settlement, provided such sums were actually and
reasonably incurred in connection with such action, suit or proceeding and
provided the director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, in the case of criminal proceedings, provided he had no reasonable cause to
believe that his conduct was unlawful. The corporation may indemnify directors
and officers in a derivative action (in which suit is brought by a stockholder
on behalf of the corporation) under the same conditions, except that no
indemnification is permitted without judicial approval if the director or
officer is adjudged liable to the corporation. If the director or officer is
successful on the merits or otherwise in defense of any actions referred to
above, the corporation must indemnify him against the expenses and attorneys'
fees he actually and reasonably incurred.
Article III, section 10 of the Company's By-laws provides that the Company
shall indemnify its officers and directors to the fullest extent permitted by
Section 145.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C>
3.1.* Restated Certificate of Incorporation of the Company.
3.2.* Bylaws of the Company, as amended.
3.3.* Estatutos of the Guarantor, as amended.
4.1.* Indenture for the Notes, dated as of July 30, 1996, among the Company, the
Guarantor, and The Bank of New York, as Trustee (including form of Note).
4.2.* Placement Agreement dated as of July 31, 1996 among the Company, the Guarantor and
the Initial Purchasers.
4.3.* Registration Rights Agreement, dated July 31, 1996, among the Company, the Guarantor
and the Initial Purchasers.
4.4.* Form of Note (included in Exhibit 4.1).
4.5. Form of Letter of Transmittal.
5. * Form of Opinion of Arnold & Porter as to the legality of the securities being
registered (including consent).
9. * Shareholders Agreement, dated December 16, 1994, among STET International
Netherlands N.V., NEVASA Holdings Ltd., LAIF -- Latin American Investment and
Finance Trust reg., and JASDAN Ltd.
10.1. Form of Exchange Agent Agreement between the Company and The Bank of New York as
Exchange Agent.
10.2.*+ Domestic Data Service Agreement, dated April 7, 1992, between Alpha Lyracom Space
Communications Inc. and Resis S.A., as amended by Agreement dated April 23, 1993; as
amended by Agreement dated October 28, 1993; as amended by Agreement dated April 28,
1994; as amended by Agreement dated November 1, 1994; as amended by Agreement dated
January 9, 1995; as amended by Agreement dated June 1, 1995; as amended by Agreement
dated August 1, 1995; as amended by Agreement dated September 26, 1995.
10.3.*+ Domestic Data Service Agreement, dated May 30, 1991, between Alpha Lyracom Space
Communications, Inc. and IMPSAT, S.A.; as amended by Agreement dated April 7, 1992.
</TABLE>
II-1
<PAGE> 153
<TABLE>
<S> <C>
10.4.* Agreement for Lease of Satellite Capacity, dated November 5, 1993, among
Aerospatiale S.N.1., Alcatel Espace S.A., Alenia Spazio S.P.A., Deutsche Aerospace
AG, Empresa Brasileira de Telecomunicacoes S.A. -- Union Transitoria de Empresas and
IMPSAT S.A.; as amended by Agreement dated February 8, 1994; as amended by Agreement
dated April 1, 1994; as amended by Agreement dated April 7, 1994; as amended by
Agreement dated July 14, 1994; as amended by Agreement dated September 30, 1994; as
amended by Agreement dated December 12, 1994; as amended by Agreement dated January
24, 1995.
10.5.* Agreement for Lease of Satellite Capacity, dated March 27, 1995, between la Comision
Nacional de Telecomunicaciones and IMPSAT S.A.; as amended by Agreement dated May 3,
1993; as amended by Agreement dated May 23, 1994; as amended by Agreement dated May
8, 1995.
10.6.* Agreement for Lease of Satellite Capacity, dated May 8, 1995, between Organizacion
Internacional de Telecomunicaciones por Satelite and IMPSAT S.A.
10.7.* Agreement for Lease of Satellite Capacity, dated December 26, 1995, between Empresa
Nacional de Telecomunicaciones and IMPSAT Colombia.
10.8.* Agreement for Lease of Satellite Capacity, dated August 11, 1994, between
Organizacion Internacional de Telecomunicaciones por Satelite (INTELSAT) and
Telecomunicaciones IMPSAT, S.A.; as amended.
10.9.* Agreement dated December 6, 1994, between IMPSAT, S.A. and Hughes Network Systems,
Inc.
12. * Computation of ratio of earnings to fixed charges.
21. * List of subsidiaries of the Company (incorporated by reference to the "Summary"
section of the Prospectus hereto).
23.1. Consent of Deloitte & Touche LLP, Miami, Florida.
23.2. Consent of Deloitte & Touche, Buenos Aires, Argentina.
23.3.* Consent of Arnold & Porter (contained in its opinion to be filed as Exhibit 5
hereto).
23.4. Consent of Nicholson & Cano.
24. * Power of Attorney (included on the signature page hereto).
25. * Statement of eligibility under the Trust Indenture Act of 1939, as amended, on Form
T-1 of The Bank of New York, as Trustee under the Indenture.
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment requested as to certain portions, which portions were
omitted and filed separately with the Commission.
(b) Financial Statement Schedules
Schedule II -- All schedules for which provision is made in the applicable
accounting regulations of the Commission are omitted because they are not
applicable, or the information is included in the financial statements included
herein.
ITEM 22. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
II-2
<PAGE> 154
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1993;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The undersigned registrant undertakes that every prospectus (i) that is
filed pursuant to the paragraph immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE> 155
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
AND THE GUARANTOR AS CO-REGISTRANT HAVE DULY CAUSED THIS AMENDMENT TO THE
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED, IN THE CITY OF BUENOS AIRES IN THE REPUBLIC OF ARGENTINA,
DECEMBER 9, 1996.
IMPSAT CORPORATION
By: /s/ RICARDO A. VERDAGUER*
------------------------------------
RICARDO A. VERDAGUER
PRESIDENT AND CHIEF EXECUTIVE
OFFICER OF
IMPSAT CORPORATION
Date: December 9, 1996
IMPSAT S.A.
By: /s/ RAFAEL CARCHAK CANES*
------------------------------------
RAFAEL CARCHAK CANES
PRESIDENT
Date: December 9, 1996
*By: /s/ GUILLERMO JOFRE
-----------------------------------
GUILLERMO JOFRE
ATTORNEY-IN-FACT
Date: December 9, 1996
II-4
<PAGE> 156
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below (each, a "Signatory") constitutes and appoints Guillermo Jofre and
Jose R. Torres (each, an "Agent," and collectively, "Agents") or either of them,
his true and lawful attorney-in-fact and agent for and in his name, place and
stead, in any and all capacities, to sign this Registration Statement and any
and all amendments (including post-effective amendments) thereto and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission. Each Signatory further
grants to the Agents, and each of them, full power and authority to do and
perform each and every act and thing requisite and necessary, in the judgment of
such Agent, to be done in connection with any such signing and filing, as full
to all intents and purposes as he might or could do in person, and hereby
ratifies and confirms all that said Agents, or any of them, may lawfully do or
cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------- -----------------
<S> <C> <C>
/s/ ENRIQUE M. PESCARMONA* Chairman of the Board of December 9, 1996
- ---------------------------------------- Directors of IMPSAT
ENRIQUE M. PESCARMONA Corporation
/s/ RICARDO A. VERDAGUER* President, Chief Executive December 9, 1996
- ---------------------------------------- Officer and Director of
RICARDO A. VERDAGUER IMPSAT Corporation
/s/ GUILLERMO JOFRE Vice President, Finance of December 9, 1996
- ---------------------------------------- IMPSAT Corporation
GUILLERMO JOFRE
/s/ JOSE R. TORRES* Vice President, Administration December 9, 1996
- ---------------------------------------- and Chief Accounting Officer
JOSE R. TORRES of IMPSAT Corporation
/s/ ROBERTO VIVO* Director, Deputy Chief December 9, 1996
- ---------------------------------------- Executive Officer and Vice
ROBERTO VIVO President, Marketing of
IMPSAT Corporation
/s/ ALEXANDER RIVELIS* Director and Vice President, December 9, 1996
- ---------------------------------------- International Development of
ALEXANDER RIVELIS IMPSAT Corporation
/s/ LUCAS PESCARMONA* Director of IMPSAT Corporation December 9, 1996
- ----------------------------------------
LUCAS PESCARMONA
/s/ SOFIA PESCARMONA* Director of IMPSAT Corporation December 9, 1996
- ----------------------------------------
SOFIA PESCARMONA
/s/ RENATO DE RIMINI* Director of IMPSAT Corporation December 9, 1996
- ----------------------------------------
RENATO DE RIMINI
/s/ GIROLAMO DI GENOVA* Director of IMPSAT Corporation December 9, 1996
- ----------------------------------------
GIROLAMO DI GENOVA
*By: /s/ GUILLERMO JOFRE Attorney-in-Fact December 9, 1996
- ----------------------------------------
GUILLERMO JOFRE
</TABLE>
II-5
<PAGE> 157
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below (each, a "Signatory") constitutes and appoints Guillermo Jofre,
Jose R. Torres and Richard Horner (each, an "Agent," and collectively, "Agents")
and each or any of them, his true and lawful attorney-in-fact and agent for and
in his name, place and stead, in any and all capacities, to sign this
Registration Statement and any and all amendments (including post-effective
amendments) thereto and to file the same, with all exhibits thereto, and all
other documents in connection therewith, with the Securities and Exchange
Commission. Each Signatory further grants to the Agents, and each of them, full
power and authority to do and perform each and every act and thing requisite and
necessary, in the judgment of such Agent, to be done in connection with any such
signing and filing, as full to all intents and purposes as he might or could do
in person, and hereby ratifies and confirms all that said Agents, or any of
them, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------- -----------------
<S> <C> <C>
/s/ RICARDO A. VERDAGUER* Chairman of the Board of December 9, 1996
- ---------------------------------------- Directors of IMPSAT Argentina
RICARDO A. VERDAGUER
/s/ ENRIQUE M. PESCARMONA* Director of IMPSAT Argentina December 9, 1996
- ----------------------------------------
ENRIQUE M. PESCARMONA
/s/ ROBERTO VIVO* Director of IMPSAT Argentina December 9, 1996
- ----------------------------------------
ROBERTO VIVO
/s/ PEDRO O. MAYOL* Director of IMPSAT Argentina December 9, 1996
- ----------------------------------------
PEDRO O. MAYOL
/s/ RAFAEL CARCHAK CANES* Director of IMPSAT Argentina December 9, 1996
- ----------------------------------------
RAFAEL CARCHAK CANES
/s/ JOSE R. TORRES* Director of IMPSAT Argentina December 9, 1996
- ---------------------------------------- (principal financial officer)
JOSE R. TORRES
/s/ ARCHIMEDE DEL VECCHIO* Director of IMPSAT Argentina December 9, 1996
- ----------------------------------------
ARCHIMEDE DEL VECCHIO
/s/ CLAUDIO ALBANESE* Director of IMPSAT Argentina December 9, 1996
- ----------------------------------------
CLAUDIO ALBANESE*
/s/ JORGE I. MARINE* Manager, Administration of December 9, 1996
- ---------------------------------------- IMPSAT Argentina
JORGE I. MARINE (principal accounting officer)
/s/ RICHARD HORNER* Attorney-in-Fact December 9, 1996
- ----------------------------------------
RICHARD HORNER
*By: /s/ GUILLERMO JOFRE Attorney-in-Fact December 9, 1996
- ----------------------------------------
GUILLERMO JOFRE
</TABLE>
II-6
<PAGE> 158
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ------------------------------------------------------------------------- --------
<C> <S> <C>
3.1.* Restated Certificate of Incorporation of the Company.....................
3.2.* Bylaws of the Company, as amended........................................
3.3.* Estatutos of the Guarantor, as amended...................................
4.1.* Indenture for the Notes, dated as of July 31, 1996, among the Company,
the Guarantor and The Bank of New York as Trustee (including form of
Note)....................................................................
4.2.* Placement Agreement dated as of July 31, 1996 among the Company, the
Guarantor and the Initial Purchasers.....................................
4.3.* Registration Rights Agreement, dated July 31, 1996, among the Company,
the Guarantor and the Initial Purchasers.................................
4.5.* Form of Note (included in Exhibit 4.1)...................................
4.6. Form of Letter of Transmittal............................................
5. * Form of Opinion of Arnold & Porter as to the legality of the securities
being registered (including consent).....................................
9. * Shareholders Agreement, dated December 16, 1994, among STET International
Netherlands N.V., NEVASA Holdings Ltd., LAIF -- Latin American Investment
and Finance Trust reg., and JASDAN Ltd. .................................
10.1. Form of Exchange Agent Agreement between the Company and The Bank of New
York as Exchange Agent...................................................
10.2.*+ Domestic Data Service Agreement, dated April 7, 1992, between Alpha
Lyracom Space Communications Inc. and Resis S.A., as amended by Agreement
dated April 23, 1993; as amended by Agreement dated October 28, 1993; as
amended by Agreement dated April 28, 1994; as amended by Agreement dated
November 1, 1994; as amended by Agreement dated January 9, 1995; as
amended by Agreement dated June 1, 1995; as amended by Agreement dated
August 1, 1995; as amended by Agreement dated September 26, 1995.........
10.3.*+ Domestic Data Service Agreement, dated May 30, 1991, between Alpha
Lyracom Space Communications, Inc. and IMPSAT, S.A.; as amended by
Agreement dated April 7, 1992............................................
10.4.* Agreement for Lease of Satellite Capacity, dated November 5, 1993, among
Aerospatiale S.N.1., Alcatel Espace S.A., Alenia Spazio S.P.A., Deutsche
Aerospace AG, Empresa Brasileira de Telecomunicacoes S.A. -- Union
Transitoria de Empresas and IMPSAT S.A.; as amended by Agreement dated
February 8, 1994; as amended by Agreement dated April 1, 1994; as amended
by Agreement dated April 7, 1994; as amended by Agreement dated July 14,
1994; as amended by Agreement dated September 30, 1994; as amended by
Agreement dated December 12, 1994; as amended by Agreement dated January
24, 1995.................................................................
10.5.* Agreement for Lease of Satellite Capacity, dated March 27, 1995, between
la Comision Nacional de Telecomunicaciones and IMPSAT S.A.; as amended by
Agreement dated May 3, 1993; as amended by Agreement dated May 23, 1994;
as amended by Agreement dated May 8, 1995................................
10.6.* Agreement for Lease of Satellite Capacity, dated May 8, 1995, between
Organizacion Internacional de Telecomunicaciones por Satelite and IMPSAT
S.A. ....................................................................
10.7.* Agreement for Lease of Satellite Capacity, dated December 26, 1995,
between Empresa Nacional de Telecomunicaciones and IMPSAT Colombia. .....
10.8.* Agreement for Lease of Satellite Capacity, dated August 11, 1994, between
Organizacion Internacional de Telecomunicaciones por Satelite (INTELSAT)
and Telecomunicaciones IMPSAT, S.A.; as amended..........................
10.9.* Agreement dated December 6, 1994, between IMPSAT, S.A. and Hughes Network
Systems, Inc.............................................................
</TABLE>
<PAGE> 159
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ------------------------------------------------------------------------- --------
<C> <S> <C>
12. * Computation of ratio of earnings to fixed charges........................
21. * List of subsidiaries of the registrants (incorporated by reference to the
"Summary" section of the Prospectus hereto)..............................
23.1. Consent of Deloitte & Touche LLP, Miami, Florida.........................
23.2. Consent of Deloitte & Touche, Buenos Aires, Argentina....................
23.3.* Consent of Arnold & Porter (contained in its opinion to be filed as
Exhibit 5 hereto)........................................................
23.4. Consent of Nicholson & Cano..............................................
24. * Power of Attorney (included on the signature page hereto)................
25. * Statement of eligibility under the Trust Indenture Act of 1939, as
amended, on Form T-1 of The Bank of New York, as Trustee under the
Indenture................................................................
</TABLE>
- ---------------
* Previously filed.
+ Confidential treatment requested as to certain portions, which portions were
omitted and filed separately with the Commission.
<PAGE> 1
EXHIBIT 4.6
<PAGE> 2
Draft Dated December ____, 1996 Exhibit 4.6
LETTER OF TRANSMITTAL
IMPSAT Corporation
Offer to Exchange
all outstanding
12-1/8% Senior Guaranteed Notes due 2003
for
12-1/8% Senior Guaranteed Notes due 2003,
which have been registered under the
Securities Act of 1933, as amended,
pursuant to the Prospectus,
dated December ___, 1996
_________________
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON January ___, 1997 UNLESS EXTENDED ("THE EXPIRATION DATE)
_________________
THE BANK OF NEW YORK, Exchange Agent
By Mail, Hand or
Overnight Delivery:
The Bank of New York,
101 Barclay Street
New York, New York 10286
Attention: Securities Processing Window
Ground Level Reorganization, 7E
By Registered or Certified Mail:
The Bank of New York,
101 Barclay Street
New York, New York 10286
Attention: Corporation Trust Operations, 7E
By Facsimile: (212) 571-3080
Confirm by Telephone: (212) 815-2742
<PAGE> 3
Delivery of this instrument to an address other than as set forth
above, or transmission of instructions via facsimile other than as set forth
above, will not constitute a valid delivery.
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated, December ___ , 1996 (the "Prospectus"), of IMPSAT
Corporation, a Delaware corporation (the "Company"), and this Letter of
Transmittal (the "Letter"), which together constitute the Company's offer (the
"Exchange Offer") to exchange an aggregate principal amount of up to
$125,000,000 of the Company's 12-1/8% Senior Guaranteed Notes Due 2003 (the
"New Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement of which
the Prospectus is part, for a like principal amount of the issued and
outstanding 12-1/8% Senior Guaranteed Notes Due 2003 (the "Old Notes") of the
Company from the registered holders (the "Holders") thereof.
For each Old Note accepted for exchange, the Holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from July 30, 1996. Old Notes accepted for exchange will cease to accrue
interest from and after the date of consummation of the Exchange Offer. Holders
whose Old Notes are accepted for exchange will not receive any payment in
respect of accrued interest on such Old Notes otherwise payable on any interest
payment date the record date for which occurs on or after consummation of the
Exchange Offer.
This Letter is to be completed by a Holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for
Old Notes, if available, is to be made by book-entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their
Old Notes into the Exchange Agent's account at the Book-Entry Transfer Facility
(a "Book-Entry Confirmation") and all other documents required by this Letter
to the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed
this Letter to indicate the action the undersigned desires to take with respect
to the Exchange Offer.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD
NOTES" BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD
NOTES AS SET FORTH IN SUCH BOX BELOW.
List below the Old Notes to which this Letter relates. If the space provided
below is inadequate, the certificate numbers and principal amount of Old Notes
should be listed on a separate signed schedule affixed hereto.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOX
<PAGE> 4
DESCRIPTION OF 12-1/8% SENIOR GUARANTEED NOTES DUE 2003
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Aggregate Principal
Principal Amount Tendered
Amount (must be in
Names and address(es) of Represented Integral
Registered Holders Certificate by multiples
(Please fill in, if blank) Number(s) Certificate(s) of $1,000)*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
</TABLE>
* Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of 12-1/8% Senior Guaranteed Notes due 2003 will be
deemed to have tendered the entire aggregate principal amount
represented by the column labeled "Aggregated Principal Amount
Represented by Certificates(s)."
If the space provided above is inadequate, list the certificate numbers
and principal amounts on a separate signed schedule and affix the list
to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of 12-1/8%
Senior Guaranteed Notes due 2003. All other tenders must be in
integral multiples of $1,000.
/ / CHECK HERE IF TENDERED OLD NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREIN
DEFINED) ONLY):
Name of Tendering Institution_________________________________________
Account Number________________________________________________________
Transaction Code Number_______________________________________________
<PAGE> 5
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name(s) of Registered Old Noteholder(s)_________________________________
Date of Execution of Notice of Guaranteed Delivery______________________
Window Ticket Number (if available)_____________________________________
Name of Institution which Guaranteed Delivery___________________________
Account Number (if delivered by book entry transfer)____________________
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY (i) if certificates for Old Notes not tendered, or New
Notes issued in exchange for Old Notes accepted for exchange, are to be issued
in the name of someone other than the undersigned, or (ii) if Old Notes
tendered by book-entry transfer which are not exchanged are to be returned by
credit to an account maintained at Depository Trust Company ("DTC").
Issue certificate(s) to:
Name___________________________________________________________________________
(Please Print)
Address________________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security No.)
Credit Old Notes not exchanged and delivered by book-entry transfer to the DTC
account set forth below:
__________________________
DTC Account Number
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 4, 5 and 6)
To be completed ONLY if certificates for Old Notes not tendered, or New Notes
issued in exchange for Old Notes accepted for exchange, are to be sent to
someone other than the undersigned, or to the undersigned at an address other
than that shown above.
Mail to:
Name___________________________________________________________________________
(Please Print)
Address________________________________________________________________________
_______________________________________________________________________________
(Include Zip Code)
_______________________________________________________________________________
(Tax Identification or Social Security No.)
<PAGE> 6
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated below. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Company all right, title
and interest in and to such Old Notes as are being tendered hereby. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent its
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Old Notes with
full power of substitution to (i) deliver certificates for such Old Notes, or
transfer ownership of such Old Notes on the account books maintained by DTC, to
the Company and deliver all accompanying evidences of transfer and authenticity
to, or upon the order of, the Company and (ii) present such Old Notes for
transfer on the books of the Company and receive all benefits and otherwise
exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim when the same are accepted by the Company.
The undersigned hereby further represents that any New Notes acquired in
exchange for Old Notes tendered hereby will have been acquired in the ordinary
course of business of the person receiving such New Notes, whether or not such
person is the undersigned, that neither the Holder of such Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the Holder
of such Old Notes nor any such other person is an "affiliate," as defined in
Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"),
of the Company.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise transferred by
Holders thereof (other than any such Holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary
course of such Holders' business and such Holders have no arrangement with any
person to participate in a distribution of such New Notes. However, the SEC has
not considered the Exchange Offer in the context of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the Exchange Offer as in other circumstances. If
the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of New Notes
and has no arrangement or understanding to participate in a distribution of New
Notes. If any Holder is an affiliate of the Company, is engaged in or intends
to engage in, or has any arrangement or understanding with any person to
participate in, a distribution of the New Notes to be acquired pursuant to the
Exchange Offer, such Holder (i) could not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is a broker-dealer
that will receive New Notes for its own account pursuant to the Exchange Offer,
it represents that the Old Notes to be exchanged for the New Notes were
acquired by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon
<PAGE> 7
the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
This tender may be withdrawn only in accordance with the procedures set forth
in "The Exchange Offer--Withdrawal Rights" section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please issue the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) in the
name of the undersigned or, in the case of a book-entry delivery of Old Notes,
please credit the account indicated above maintained at the Book-Entry Transfer
Facility. Similarly, unless otherwise indicated under the box entitled "Special
Delivery Instructions" below, please send the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
to the undersigned at the address shown above in the box entitled "Description
of Old Notes."
<PAGE> 8
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete accompanying Substitute W-9 on reverse side)
Dated:___________, 1996
X
____________________________ ___________
Date
X
____________________________ ___________
Signature(s) of Owner Date
Area Code and Telephone Number:______________
If a holder is tendering any Old Notes, this letter must be signed by
the registered holder(s) as the name(s) appear(s) on the certificate(s) for the
Old Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a
fiduciary or representative capacity, please set forth full title. See
Instruction 3.
Name(s): ________________________________________________________
________________________________________________________
(Please Type or Print)
Capacity: ________________________________________________________
Address: ________________________________________________________
________________________________________________________
(Including Zip Code)
SIGNATURE GUARANTEE (if required by instruction 3)
Signature(s) Guaranteed by an Eligible Institution: ___________________________
(Authorized Signature)
___________________________________________________
(Title)
___________________________________________________
(Name and Firm)
Dated:________________, 1996
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This
Letter is to be completed by holders of Old Notes either if certificates are to
be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof) and any other documents required by this Letter, must be
received by the Exchange Agent at the address set forth herein on or prior to
the Expiration Date, or the tendering holder must comply with the guaranteed
delivery procedures set forth below. Old Notes tendered hereby must be in
denominations of principal amount of $1,000 and any integral multiple thereof.
Holders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to
the Exchange Agent on or prior to the Expiration Date, or who cannot complete
the procedure for book-entry transfer on a timely basis, may tender their Old
Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution;
(ii) on or prior to 5:00 p.m., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram,
telex, facsimile transmission, mail or hand delivery), setting forth the name
and address of the holder of Old Notes and the amount of Old Notes tendered
stating that the tender is being made thereby and guaranteeing that within
three New York Stock Exchange ("NYSE") trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates for all physically
tendered Old Notes, in proper form for transfer, or a Book-Entry Confirmation,
as the case may be, and any other documents required by this Letter will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) the
certificates for all physically tendered Old Notes, in proper form for
transfer, or Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter, are deposited by the Eligible Institution
within three NYSE trading days after the date of execution of the Notice of
Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other
required documents is at the election and risk of the tendering Holders, but
the delivery will be deemed made only when actually received or confirmed by
the Exchange Agent. If Old Notes are sent by mail, it is suggested that the
mailing be registered mail, properly insured, with return receipt requested,
and made sufficiently in advance of the Expiration Date to permit delivery to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. Any beneficial holder of Old Notes who is not the registered holder and
who wishes to tender should arrange with the registered holder to execute and
deliver this Letter of Transmittal on his behalf or must, prior to completing
and executing this Letter of Transmittal and delivering his Old Notes, either
make appropriate arrangements to register ownership of the Old Notes in such
holder's name or obtain a properly completed bond power from the registered
holder.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Issuer in its sole discretion, which determination
will be final and binding. The Issuer reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Issuer's
acceptance of which would, in the opinion of counsel for the Issuer, be
unlawful. The Issuer also reserves the right to waive any irregularities or
conditions of tender as to particular Old Notes. The Issuer's interpretation of
the terms and conditions of the Exchange Offer (including the instructions in
this Letter of Transmittal) shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
must be cured within such time as the Issuer shall determine. Neither the
Issuer, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old Notes,
nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or
<PAGE> 10
irregularities have been cured or waived. Any Old Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holders of Old Notes, unless otherwise provided in this
Letter of Transmittal, as soon as practicable following the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If less than all of the Old Notes evidenced by a submitted
certificate are to be tendered, the tendering Holder(s) should fill in the
aggregate principal amount of Old Notes to be tendered in the box above
entitled "Description of Old Notes--Principal Amount Tendered." A reissued
certificate representing the balance of nontendered Old Notes will be sent to
such tendering holder, unless otherwise provided in the appropriate box of this
Letter, promptly after the Expiration Date. All of the Old Notes delivered to
the Exchange Agent will be deemed to have been tendered unless otherwise
indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS, GUARANTEE OF
SIGNATURES. If this Letter is signed by the registered holder of the Old Notes
tendered hereby, the signature must correspond exactly with the name as written
on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this letter as there are different registrations of
certificates.
When this Letter is signed by the registered holder or holders of the
Old Notes specified herein and tendered hereby, no endorsements of certificates
or separate bond powers are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder
or holders of any certificate(s) specified herein, such certificate(s) must be
endorsed accompanied by appropriate bond powers, in either case signed exactly
as the name or names of the registered holder or holders appear(s) on the
certificate(s) and signatures on such certificate(s) must be guaranteed by an
Eligible Institution.
If this Letter or any certificates or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must
be submitted.
Endorsements on certificates for Old Notes or signatures on bond
powers required by this Instruction 3 must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchanges Medallion Program (each, an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for
the account of an Eligible Institution.
<PAGE> 11
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Old Notes
should indicate in the applicable box the name and address to which New Notes
issued pursuant to the Exchange Offer and/or substitute certificates evidencing
Old Notes not exchanged are to be issued or sent, if different from the name or
address of the person signing this Letter. In the case of issuance in a
different name, the employer identification or social security number of the
person named must also be indicated. Noteholders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to
such account maintained at the Book-Entry Transfer Facility as such noteholder
may designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name and address of the person signing this
Letter.
5. TRANSFER TAXES. The Company will pay all transfer taxes, if any, applicable
to the transfer of Old Notes to it or its order pursuant to the Exchange Offer.
If, however, New Notes and/or substitute Old Notes not exchanged are to be
delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason
other than the transfer of Old Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted herewith, the amount of such transfer taxes will be
billed to such tendering holder and the Exchange Agent will retain possession
of an amount of New Notes with a face amount equal to the amount of such
transfer taxes due by such tendering holder pending receipt by the Exchange
Agent of the amount of such taxes.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
6. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
7. NO CONDITIONAL TENDERS. No alternative, conditional, irregular or contingent
tenders will be accepted. All tendering holders of Old Notes, by execution of
this Letter, shall waive any right to receive notice of the acceptance of their
Old Notes for exchange.
Although the Company intends to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither the Company, the
Exchange Agent nor any other person shall incur any liability for failure to
give any such notice.
8. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old Notes
have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
9. WITHDRAWAL OF TENDERS. Tenders of Old Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal of a tender of Old Notes to be effective, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent as its address set forth above prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Old Notes), (iii) be signed by the
holder in the same manner as the original signature on this Letter (including
any required signature guarantees) or be accompanied by documents of transfer
sufficient to have the trustee under the Indenture register the transfer of
such Old Notes into the name of the person withdrawing the tender and (iv)
specify the name in which any such Old Notes are to be registered, if different
from that of the Depositor. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes that have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder as
<PAGE> 12
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following the
procedures described above at any time on or prior to 5:00 p.m., New York City
time, on the Expiration Date.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus, this Letter and other related documents may be directed to the
Exchange Agent, at the address and telephone number indicated above.
11. IMPORTANT TAX INFORMATION. Under current federal income tax law, a holder
of New Notes is required to provide the Company (as payor) with such holder's
correct taxpayer identification number ("TIN") on Substitute Form W-9 or
otherwise establish a basis for exemption from backup withholding to prevent
backup withholding on any New Notes delivered pursuant to the Exchange Offer
and any payments received in respect of the New Notes. If a holder of New Notes
is an individual, the TIN is such holder's social security number. If the
Company is not provided with the correct taxpayer identification number, a
holder of New Notes may be subject to a $50 penalty imposed by the Internal
Revenue Service. Accordingly, each prospective holder of New Notes to be issued
pursuant to Special Issuance Instructions should complete the attached
Substitute Form W-9. The Substitute Form W-9 need not be completed if the box
entitled Special Issuance Instructions has not been completed.
Certain holders of New Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. Exempt prospective holders of New Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Company, through the
Exchange Agent, a properly completed Internal Revenue Service Form W-8 (which
the Exchange Agent will provide upon request) signed under penalty of perjury,
attesting to the holder's exempt status. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Company is required to withhold 31%
of any payment made to the holder of New Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
To prevent backup withholding on any New Notes delivered pursuant to
the Exchange Offer and any payments received in respect of the New Notes, each
prospective holder of New Notes to be issued pursuant to Special Issuance
Instructions should provide the Company, through the Exchange Agent, with
either: (i) such prospective holder's correct TIN by completing the form below,
certifying that the TIN provided on Substitute Form W-9 is correct (or that
such prospective holder is awaiting a TIN) and that (A) such prospective holder
has not been notified by the Internal Revenue Service that he or she is subject
to backup withholding as a result of a failure to report all interest or
dividends or (B) the Internal Revenue Service has notified such prospective
holder that he or she is no longer subject to backup withholding; or (ii) an
adequate basis for exemption.
The prospective holder of New Notes to be issued pursuant to Special
Issuance Instructions is required to give the Exchange Agent the TIN (e.g.,
social security number or employer identification number) of the prospective
record owner of the New Notes. If the New Notes will be held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional guidance regarding which number to report.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder
is subject to backup withholding as a result of a failure to report all
interest or dividends or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
<PAGE> 13
tendering holder of Old Notes is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Old Notes are in more than one name or are not in the
name of the actual owner, such holder should consult the W-9 Guidelines for
instructions on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a
TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for"
in lieu of its TIN. Note: Checking this box and writing "applied for" on the
form means that such holder has already applied for a TIN or that such holder
intends to apply for one in the near future. If such holder does not provide
its TIN to the Company within 60 days, backup withholding will begin and
continue until such holder furnishes its TIN to the Company.
<PAGE> 14
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: IMPSAT Corporation
SUBSTITUTE
FORM W-9
PART I--PLEASE PROVIDE YOUR TIN IN THE TIN:_____________________
BOX AT RIGHT AND CERTIFY BY SIGNING AND (Social Security Number or
DATING BELOW. Employer Identification
Number)
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PART II--TIN Applied for//
CERTIFICATION UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me);
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the 'IRS') that I am subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding; and
(3) any other information provided on this form is true and correct.
Signature:_______________________________
Date:_____________________
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF
SUBSTITUTE FORM W-9
<PAGE> 15
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I understand
that if I do not provide a taxpayer identification number by the time of the
exchange, 31 percent of all reportable payments made to me thereafter will be
withheld until I provide a number.
Signature:
-------------------------------
Date: ---------------------
<PAGE> 16
NOTICE OF GUARANTEED DELIVERY FOR IMPSAT CORPORATION
This form or one substantially equivalent hereto must be used to accept
the Exchange Offer of IMPSAT Corporation (the "Company") made pursuant to the
Prospectus, dated December ____, 1996 (the "Prospectus"), if certificates
for the outstanding 12-1/8% Senior Guaranteed Notes Due 2003 of the Company
(the "Old Notes") are not immediately available or if the procedure for
book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach the Exchange Agent prior to 5:00 p.m.,
New York City time, on the Expiration Date of the Exchange Offer. Such form may
be delivered or transmitted by telegram, telex, facsimile transmission, mail or
hand delivery to The Bank of New York ("Exchange Agent") as set forth below. In
addition, in order to utilize the guaranteed delivery procedure to tender Old
Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of
Transmittal (or facsimile thereof) must also be received by the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. Capitalized
terms not defined herein are defined in the Prospectus.
THE BANK OF NEW YORK, Exchange Agent
By Mail, Hand or
Overnight Delivery:
The Bank of New York, 101 Barclay Street, Floor 21 West, New York,
New York 10286
Attention: Securities Processing Window
Ground Level Reorganization, 7E
By Facsimile: (212) 571-3080
Confirm by Telephoned: (212) 815-2742
DELIVERY OF THIS INSTRUMENT TO ANY ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the accompanying
Letter of Transmittal, the undersigned hereby tenders to the Company the
principal amount of Old Notes set forth below, pursuant to the guaranteed
delivery procedure described in The Exchange Offer--Guaranteed Delivery
Procedures section of the Prospectus.
Principal Amount of Old Notes Tendered: If Old Notes will be delivered to
Depository Trust Company, provide
account number.
$__________________
Certificate Nos. (if available):
___________________
Total Principal Amount Represented by Certificate(s):
$__________________ Account Number:____________
<PAGE> 17
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
PLEASE SIGN HERE
X __________________________ _________________________
Date
X __________________________ _________________________
Signatures of Owner(s) or Date
Authorized Signatory
Area Code and Telephone Number: _______________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s)
on certificates for Old Notes or on a security position listing, or by
person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below. If Old Notes will be delivered by
book-entry transfer to The Depository Trust Company, provide account number.
Please print name(s) and address(es)
Name(s): _________________________________________________________________
Capacity: _________________________________________________________________
Address(es): _________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Account Number: _____________________________
GUARANTEE
The undersigned, a financial institution (including most banks, savings
and loan associations and brokerage houses) that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program, hereby
guarantees that the undersigned will deliver to the Exchange Agent the
certificates representing the Old Notes being tendered hereby or confirmation
of book-entry transfer of such Old Notes into the Exchange Agent's account at
The Depository Trust Company, in proper form for transfer, together with any
other documents required by the Letter of Transmittal within three New York
Stock Exchange trading days after the Expiration Date.
<PAGE> 18
Name of Firm: ___________________________________
Address: ___________________________________
___________________________________
Area Code & Telephone No.: _______________________
_______________________________
Authorized Signature
_______________________________
Name (Please Type or Print)
_______________________________
Title
_______________________________
Dated
NOTE: DO NOT SEND CERTIFICATES OR OLD NOTES WITH THIS FORM. CERTIFICATES OF OLD
NOTES SHOULD BE SENT ONLY WITH A COPY OF THE PREVIOUSLY EXECUTED LETTER OF
TRANSMITTAL.
<PAGE> 1
EXHIBIT 10.1
<PAGE> 2
EXHIBIT 10.1
EXCHANGE AGENT AGREEMENT
This EXCHANGE AGENT AGREEMENT (this "Agreement") dated as of December
___, 1996 between IMPSAT Corporation, a Delaware Corporation ("IMPSAT"), and
The Bank of New York, a banking corporation formed under the laws of the State
of [New York, United States] (the "Exchange Agent").
W I T N E S S E T H:
WHEREAS, IMPSAT is offering to exchange (the "Exchange Offer") all of
its outstanding 12 1/8% Senior Guaranteed Notes due 2003 (the "Old Notes"), of
which an aggregate of $125,000,000 in principal amount are outstanding as of
the date hereof, for an equal principal amount of newly issued 12 1/8% Senior
Guaranteed Notes due 2003 (the "New Notes"), on the terms and in the manner set
forth in the Prospectus, dated December ___, 1996 (the "Exchange Offer
Prospectus"); and
WHEREAS, IMPSAT wishes to appoint the Exchange Agent as its agent for
the purpose of administering the Exchange Offer and the Exchange Agent wishes
to accept such appointment.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties agree as follows:
1. Appointment of Exchange Agent; Performance of Duties. IMPSAT hereby
appoints the Exchange Agent as its agent for the exchange of its Old Notes for
its New Notes, and the Exchange Agent accepts such appointment subject to the
terms and conditions contained in this Agreement.
2. Documents. IMPSAT shall provide the Exchange Agent with copies of a
letter of transmittal substantially in the form of Exhibit A attached hereto
(the "Letter of Transmittal"). The Exchange Agent shall request from The
Depository Trust Company ("DTC") no later than the effective date of the
Exchange Offer a Special Security Position Listing of all participants eligible
to participate in the Exchange Offer (the "Participants") and the amount of Old
Notes owned of record by each such Participant; provided, however, that
<PAGE> 3
the Exchange Agent shall not be responsible for any changes in the Participants
or of the beneficial ownership of the Old Notes during the Exchange Offer. The
Exchange Agent shall make copies of the Letter of Transmittal available to
Holders (as such term is defined in the Letter of Transmittal) and the
Participants upon requests directed to The Bank of New York, Corporate Trust
Administration, 101 Barclay Street, Floor 21 West, New York, New York 10286 by
registered or certified mail or by overnight courier.
3. Exchange Agent Responsibilities. The Exchange Agent shall examine
the Letters of Transmittal (or a facsimile thereof) and other documents
received by it or ascertain that (a) each Letter of Transmittal is completed
and duly executed in accordance with the instructions therefor and (b) any
other document required by the instructions accompanying the Letters of
Transmittal is completed and duly executed in accordance with such
instructions. Except as otherwise provided in this Paragraph 3, Old Notes shall
not be deemed to be properly tendered unless all of the foregoing requirements
are met prior to the Expiration Date (as defined in the Exchange Offer
Prospectus). The Exchange Agent shall take all steps as it shall deem
reasonable and appropriate to cause the person tendering Old Notes pursuant to
the Exchange Offer to correct any defect that exists in any Letter of
Transmittal or accompanying document. In the event that the Exchange Agent is
unable to cause the correction of any such defect, the Exchange Agent shall
promptly send to IMPSAT any Letter of Transmittal or other document or copies
thereof containing any defect therein, which in its judgment would prevent
acceptance thereof, together with a request for instructions as to actions to
be taken with respect thereto in accordance with Paragraph 8(f) of this
Agreement. All questions with respect to the duties of the Exchange Agent under
this Paragraph 3 will be determined by IMPSAT, which determination shall be
final and binding for the purposes of this Agreement. IMPSAT reserves the
right, if it so elects in its discretion, to waive the failure of any delivery
of Old Notes, Letter of Transmittal or other document pursuant to the Exchange
Offer to comply with any requirement of this Paragraph 3 of the Letter of
Transmittal. IMPSAT reserves the right to terminate or, prior to the Expiration
Date, amend the Exchange Offer as provided in the Exchange Offer Prospectus. If
notified by IMPSAT of termination of the Exchange Offer, the Exchange Agent
shall promptly return all tendered Old Notes to the tendering Holders. If
notified by IMPSAT of an
- 2 -
<PAGE> 4
amendment of the Exchange Offer, the Exchange Agent shall follow the reasonable
instruction of IMPSAT contained in such notice to the extent consistent with
this Agreement. Each day upon which the Exchange Agent receives one or more
Letters of Transmittal, the Exchange Agent shall provide IMPSAT with a written
account of the following information: (1) the number of properly tendered Old
Notes submitted that day; (2) the cumulative number of properly tendered Old
Notes submitted and not properly withdrawn through such day; (3) the number of
Old Notes covered by defective tenders submitted that day; (4) the number of
Old Notes which are submitted that day pursuant to the guaranteed delivery
procedures contained in the Letter of Transmittal; and (5) the cumulative
number of Old Notes covered by uncorrected defective tenders as of such date.
4. Acceptances and Exchange.
(a) At any time after the Expiration Date (as defined in the
Exchange Offer Prospectus), upon receiving a notice from IMPSAT directing the
exchange of properly tendered Old Notes, the Exchange Agent shall, as agent of
IMPSAT and subject to all the conditions of the Exchange Offer, accept for
exchange all Old Notes properly tendered in accordance with this Agreement
which are not properly withdrawn prior to the Expiration Date (as defined in
the Exchange Offer Prospectus). Thereafter, unless notified otherwise by
IMPSAT, the Exchange Agent shall continue to accept for exchange all Old Notes
which are properly delivered to the Exchange Agent pursuant to Notices of
Guaranteed Delivery (as defined in the Exchange Offer Prospectus) by shall not
accept any other Old Notes for exchange.
(b) Following such acceptance of Old Notes, the Exchange Agent shall
promptly present all such Old Notes to the registrar with instructions to cause
such Old Notes to be marked as "cancelled" in the name of IMPSAT in the
appropriate registers. The Exchange Agent promptly shall notify The Bank of New
York, as Registrar and Transfer Agent for the New Notes (in such capacity, the
"Registrar") of (A) the names of the Holders on whose behalf Old Notes have
been so presented and the number of Old Notes so presented on behalf of each
and (B) the instructions for delivery of New Notes provided in the Letters of
Transmittal submitted by each such Holder. The Exchange Agent shall from time
to time request the Registrar to issue such New Notes as are required for
delivery hereunder.
- 3 -
<PAGE> 5
5. Assignees; Signatures. If a New Note or beneficial ownership
thereof is to be delivered to, or reflected on the records of the Depository
Trust Company ("DTC") as belonging to, an assignee of the Holder or beneficial
owner of the surrendered Old Notes, the assignee of the Holder or the
beneficial owner shall pay to the Exchange Agent the amount of any transfer
taxes applicable to such transfer unless satisfactory evidence of the payment
of such tax, or exception therefrom, is submitted.
The signature (or signatures, in the case of any Old Notes owned by two
or more joint holders) on a Letter of Transmittal must correspond exactly with
the name(s) appearing on the records of the Registrar.
6. Records. The Exchange Agent shall maintain, on a continuing basis,
in addition to the information required by Paragraphs 3 and 4 hereof, a record
showing the following: (i) the names and addresses of all Holders who have
tendered Old Notes for exchange and of all Holders to whom New Notes will be or
have been issued or to whose DTC account New Notes will be or have been
credited, (ii) the face amount of Old Notes held by each such Holder, and (iii)
the face amount of Old Notes tendered by and New Notes to be issued to each
such Holder. Upon the request of IMPSAT, the Exchange Agent shall provide
IMPSAT with a report setting forth the information maintained pursuant to this
Paragraph 6, together with such other information as may from time to time by
reasonably requested.
7. Fees. IMPSAT shall pay all reasonable out-of-pocket expenses of the
Exchange Agent for postage, stationery, printing, telephone, facsimile, telex
and other similar items (other than those specifically described below) and the
reasonable fees and disbursements of legal counsel to the Exchange Agent
incurred in rendering services hereunder at cost, pursuant to monthly invoices
from the Exchange Agent. In no case, however, unless agreed to in advance by
IMPSAT, shall the payment of IMPSAT of the fees and disbursements of legal
counsel to the Exchange Agent exceed the sum of _________________. In addition,
IMPSAT shall pay such fees as IMPSAT and the Exchange Agent may agree in
writing from time to time.
8. Limitation of Duties. As Exchange Agent hereunder the Exchange
Agent:
- 4 -
<PAGE> 6
(a) shall have no duties or obligations other than those specifically
set forth herein;
(b) will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness of any
Old Notes or New Notes or any Letter of Transmittal or other document deposited
with or delivered to the Exchange Agent hereunder or any signature or
endorsement in connection therewith and will not be required to and will not
make any representation as to their validity, value or genuineness;
(c) shall not be obligated to take any legal action hereunder which
might in the judgment of the Exchange Agent involve any expense or liability
unless the Exchange Agent shall have been furnished with indemnity acceptable
to it;
(d) may rely on and shall be protected in acting upon any certificate,
instrument, opinion, notice, letter, telegram or other document or security
delivered to the Exchange Agent without gross negligence, bad faith or without
misconduct to be genuine and to have been signed by the proper party or parties;
(e) shall not be liable for any action taken or omitted by the
Exchange Agent, or any action suffered by it to be taken or omitted, without
gross negligence, bad faith or willful misconduct on its part, by reason of or
as a result of the administration of its duties hereunder, and it may rely on
and shall be protected in acting upon the written instructions of any person
reasonably believed by it to be a proper officer or representative of IMPSAT
relating to the Exchange Agent's duties hereunder;
(f) may apply to IMPSAT for written instructions with respect to any
matter arising in connection with the Exchange Agent's duties and obligations
arising under this Agreement, and the application by the Exchange Agent for
written instructions from IMPSAT may, at the option of the Exchange Agent, set
forth in writing any action proposed to be taken or omitted by the Exchange
Agent with respect to its duties or obligations under this Agreement and the
date or dates on or after which such action shall be taken, and the Exchange
Agent shall not be liable for any action taken or omitted in accordance with a
proposal included in any such application on or
- 5 -
<PAGE> 7
after the date specified therein (which date shall not, without IMPSAT's
consent, be less than five business days after IMPSAT is deemed to have
received such application) unless, prior to taking or omitting any such action,
the Exchange Agent has received written instructions from IMPSAT in response to
such application specifying the action to be taken or omitted. The right
conferred by this Paragraph 8(f) shall be restricted by the requirement of
Paragraph 3 hereof that, with respect to defects in any Letter of Transmittal
or accompanying document, the Exchange Agent shall take such steps as it shall
deem reasonable and appropriate to correct the same before applying to IMPSAT
under this Paragraph 8(f) for instructions; and
(g) may consult counsel satisfactory to the Exchange Agent and IMPSAT,
and the opinion of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion of such counsel.
9. Court Orders. If any property subject hereto is at any time
attached, garnished or levied upon under any court order or in case the
payment, assignment, transfer, conveyance or delivery of any such property
shall be stayed or enjoined by any court order, or in case any order, judgment
or decree shall be made or entered by any court affecting such property or any
part thereof, then and in any such event the Exchange Agent is authorized, in
its sole discretion, to rely upon and comply with any such order, writ,
judgment or decree which it is advised by legal counsel of its own choosing is
binding upon them, and, if it complies with any such order, writ, judgment or
decree, it shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance even through such
order, writ, judgment or decree may be subsequently reversed, modified,
annulled, set aside or vacated.
10. Indemnification. IMPSAT agrees to indemnify the Exchange Agent and
hold it harmless from and against any loss, liability or expense (including
reasonable counsel fees and expenses) incurred by the Exchange Agent without
gross negligence, bad faith or willful misconduct on its part arising out of or
in connection with the admiration of its duties and any action taken or omitted
to be taken hereunder and otherwise in connection with the Exchange Offer and
against any stock transfer or other tax. The Exchange Agent agrees to
-6-
<PAGE> 8
indemnify IMPSAT and hold harmless from and against any loss, liability or
expense (including reasonable counsel fees and expenses) incurred by IMPSAT as
a result of gross negligence, bad faith or willful misconduct on the part of
the Exchange Agent arising out of or in connection with the administration of
its duties and any action taken or omitted to be taken hereunder and otherwise
in connection with the Exchange Offer.
11. Amendments. This Agreement may be amended only by an instrument
in writing executed by the parties hereto or their successors and assigns.
12. Reports; Notices. All reports, notices, applications (including
applications for instructions in accordance with Paragraph 8(f) hereof) and
other communications required or permitted hereunder shall be in writing and
shall be deemed given when addressed and delivered by facsimile transmission
(confirmed by telephone call), which delivery may be followed by delivery by
hand or overnight delivery service, to the address for the party set forth
below or at such other address as a party may furnish by like notice to the
other parties hereto:
If to IMPSAT:
IMPSAT Corporation
Alferez Pareja 256
1107 Buenos Aires, Argentina
Attn: Mr. Guillermo Jofre, Vice President,
Finance
Facsimile Number: (582) 362-5030
With a copy to:
Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
Attn: Neil M. Goodman, Esq.
Facsimile Number: (202) 942-5999
If to the Exchange Agent:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Attn: Corporate Trust Administration
Facsimile Number: (212) 571-3080
- 7 -
<PAGE> 9
Delivery of a notice sent by facsimile transmission shall be deemed to
be effective 24 hours after delivery has been confirmed by telephone.
13. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original but both of which together
shall constitute but one agreement.
14. Termination. This Agreement shall terminate on [December 31,
1996], or on such earlier date as may be agreed in a signed writing between
IMPSAT and the Exchange Agent. Upon termination, copies of all information
maintained by the Exchange Agent for IMPSAT under this Agreement shall be
delivered to IMPSAT as soon as practicable following IMPSAT's request for such
information. The right of the Exchange Agent to be reimbursed for out-of-pocket
expenses as provided in Paragraph 7 and the indemnification provisions of
Paragraph 10 hereof shall survive termination of this Agreement.
15. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, IMPSAT Corporation and The Bank of New York have
duly executed this Agreement as of the date first set forth above.
IMPSAT CORPORATION
By:
-------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
-------------------------
Name:
Title:
- 8 -
<PAGE> 1
EXHIBIT 23.1
<PAGE> 2
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 2 to
Registration Statement No. 333-12977 of IMPSAT Corporation of our report dated
February 23, 1996, appearing in the Prospectus, which is part of such
Registration Statement.
We also consent to the reference to us under the headings "Summary
Financial Data," "Selected Financial and Other Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Miami, Florida
December 9, 1996
<PAGE> 1
EXHIBIT 23.2
<PAGE> 2
EXHIBIT 23.2
[DELOITTE & TOUCHE LETTERHEAD]
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 2 to Registration
Statement No. 333-12977 of IMPSAT Corporation of our report on the
consolidated financial statements of IMPSAT S.A. and its subsidiaries, dated
February 23, 1996, appearing in the Prospectus, which is part of such
Registration Statement.
We also consent to the reference to us under the headings "Summary Financial
Data," "Selected Financial and Other Data" and "Experts" in such
Prospectus.
DELOITTE & TOUCHE
Buenos Aires, Argentina
December 9, 1996
<PAGE> 1
EXHIBIT 23.4
[NICHOLSON y CANO ABOGADOS LETTERHEAD]
December 6, 1996
Securities and Exchange Commission
Division Of Corporate Finance
450 Fifth Avenue, N.W.
Washington, D.C. 20549
Re: File No. 333-12977 -- Pre-Effective Amendement
No. 2 to Registration Statement on Form S-4 of IMPSAT Corporation
Ladies and Gentlemen:
In connection with the Pre-Effective Amendment No. 2 to
the Registration Statement on Form S-4 of IMPSAT Corporation (the "Registration
Statement"), to be filed under the Securities Act of 1933, as amended ("1933
Act"), we hereby consent to the reference to us under captions "Available
Information" and "Risk Factors -- Holding Company Structure: Effective
Subordination of the Notes" in the Prospectus forming a part of the
Registration Statement. In giving this consent, we do not thereby admit that
we are within the category of persons whose consent is required under Section 7
of the 1933 Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ MARIA FRAGUAS
----------------------------
Maria Fraguas
